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Texas Fund Pays $181 PSF For West Palm Beach Condo Tower
Remaining units at CitiPlace South Tower purchased by institutional investor
The buyer, a newly formed Delaware corporation led by Gulfstream Capital Partners with Vero Beach, Fla.-native Frank G. Howard Jr., paid nearly $64 million on Nov. 9 for 305 units in the 20-story tower located near the Palm Beach County Convention Center, the CityPlace open-air mall, and the Raymond F. Kravis Center, according to the Palm Beach Post.
"Gulfstream Capital paid a premium for nice product that happens to be in Downtown West Palm Beach," said Peter Zalewski, a principal with the Bal Harbour, Fla.-based real estate consultancy Condo Vultures® LLC. "The real appeal of CityPlace South Tower is that it offers an institutional buyer the ability to acquire nearly three-quarters of the inventory in a fractured condo tower. New York hedge funds have dubbed that 'tonnage.' The challenge will be on the individual resale side of the bulk transaction as the one-off transactions during the last six months have averaged about $250 per square foot.
"That's a healthy spread but we are not sure if it is nice enough for institutional-
In selling CityPlace South Tower, the owner, a Florida entity ultimately controlled by Canada's Bank of Nova Scotia, sold for a price that is millions less than the amount the units were taken back for in August 2009 as part of a $120 million certificate of title transfer from the project's ultimate corporate developer, the Related Group.
The Bank of Nova Scotia - also known as ScotiaBank - filed a notice of default against the developer in May 2008 some two years after providing a $134.7 million construction loan in July 2006, according to Palm Beach County records.
In August 2009 an amended judgment in the amount of $113.4 million in principal and an additional $6.6 million in interest in favor of a Bank of Nova Scotia entity was obtained from Palm Beach Circuit Court Judge Meenu Sasser, according to government records.
Before the handover, the Related Group had sold 47 units for $23.6 million, or $428 per square foot, according to the soon-to-be-published Condo Vultures Official Condo Buyers Guide To Downtown West Palm Beach and Palm Beach Island™.
After the handover, the Bank of Nova Scotia-controlled entity was able to sell only 67 units for nearly $19 million, or $259 per square foot, in the 15 months of owning the project before unloading in bulk, according to Official Condo Buyers Guide™.
Gulfstream Capital has been scouring the Florida market for distressed real estate assets.
Nearly a year ago, Gulfstream Capital paid $23 million for 440 units in Jacksonville, Fla. At the time, a Gulfstream Capital spokesman said the plan was to spend between $200 million and $500 million on distressed U.S. real estate between 2010 and 2012, according to the Dallas Business Journal.
In that same Dallas Business Journal article, Gulfstream Capital was said to have an "operating partner" relationship with The Lynd Co. of San Antonio, Texas.
The Lynd Co. made news headlines in South Florida last month in October when its high bid of $146 million, or $196 per square foot, for the construction loan for the Everglades on the Bay project in Greater Downtown Miami was passed over by a consortium of lenders led by Bank of America.
New York City-based Rockwood Capital was selected by Bank of America to buy the Everglades on the Bay construction loan secured by about 672 units for $142 million, or $191 per square foot, according to a recent CondoVultures.com report.
The CityPlace South Tower transaction is the first major bulk deal to occur in the Downtown West Palm Beach since the first quarter of 2009 when a Norwegian group purchased The Whitney for $144 per square foot. That same quarter a Pennsylvania businessman paid $165 per square foot for 26 units in The Edge condominium, according to the Condo Vultures® Bulk Deals Database™.
To date, there have been nearly 70 bulk deals for 10-units or more of new construction or completely renovated condo product since July 2008. The buyer have paid nearly $1.9 billion for more nearly 7,500 units with nine million square feet, according to CondoVultures.com.
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Condo Vultures® LLC is a Bal Harbour, Fla.-based consultancy and publishing company focused on collecting, analyzing, and communicating intelligence on the South Florida real estate market.