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People and Projects
Developers Are Dumping Inventory
Opportunity knocks for real estate vulture funds.
 “Sellers will begin dumping inventory,” predicts Yizhak Toledano, CEO of Sky Development in Aventura. |
Taking advantage of Florida’s depressed residential market, Universal Venture Fund in March purchased 116 newly built spec homes in Coral Lakes, a 72-acre community in Cape Coral, paying $13.5 million to Tousa Homes Florida.
O.J. Buigas, manager of Private Equity Group, a Fort Myers private equity investment firm that controls the fund, is selling the homes starting at $86,900.
Buigas declined to be interviewed, but market analyst Jack McCabe, principal of McCabe Research & Consulting in Deerfield Beach, says, “He got the creditors to agree to sell at a 40% discount across the board. Since then, virtually all the homes have been sold, indicating there are buyers out there for Florida real estate, but at the right price.”
For the past two years, private equity funds, hedge funds, real estate investment trusts (REITs) and other opportunistic investors have been looking for similar bargains in the Florida residential market. However, McCabe and other observers say there’s still a wide price gap between potential buyers and sellers.
“Many of the vulture funds are not realistic about pricing,” says Michael Lerner, president of MCZ, a Chicago developer with multifamily residential projects in south and central Florida. “Nobody has lowered their prices to what the institutions would like to pay.”
McCabe, who has been advising institutional investors, says major lenders have not come to terms with today’s market conditions and taken write-offs on the value of their loans. “There are billions of dollars at stake out there, and it may take the bank examiners and federal regulators stepping in to move things off the books.”
Craig Studnicky, president of ISG in Aventura, says there will be many non-performing real estate projects “hitting the wall” soon, especially in the Miami area, which has the highest oversupply of new units in the state.
“There are some highly leveraged loans maturing this summer, and with today’s capital markets, sellers will begin dumping inventory,” says Yizhak Toledano, CEO of Sky Development in Aventura, who thinks this fall may be the right time to start acquiring distressed properties in both the commercial and residential sectors. Toledano teamed with the principals of condo conversion company SunVest to create a real estate opportunity fund. He is aiming to generate $350 million to buy commercial and residential properties with a holding period of three to five years.
“No one has a crystal ball as to when the bottom will occur,” Toledano says. “It’s better to acquire real estate assets at a good price and hold for the long run. There’s no exit tomorrow.”
