Miami Bulk Buyer Resells Bal Harbour Condo Units at 524% Premium

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According to a new report from Condo Vultures, a South Florida bulk buyer that acquired 51 condo-hotel units in the ultra-luxury One Bal Harbour complex has resold 76 percent of the original portfolio to an investment group for a 524% premium.

Miami-based OBH Investment Properties Inc., with Adam D. Cohen as the authorized signatory, purchased 39 units with more than 30,700 square feet of space for nearly $12.1 million, or $393 per square foot, in a deal that transacted on Feb. 24, according to the report based on an analysis of Miami-Dade County records.

"The One Bal Harbour condo-hotel bulk deal caught the attention of a lot of people in the summer of 2009 when it originally traded for $63 per square foot given the price and quality," said Peter Zalewski, a principal with Bal Harbour, Fla.-based Condo Vultures, LLC. "We are expecting a similar response given the resale price achieved. There is no question that a five-fold premium on the retrading of bulk product is going to create a lot of anxiety among those bulk buyers who had a chance to buy but flinched."

In June 2009, the original bulk buyer, Elcom Condominium LLC with Jorge Arevalo and Thomas Sullivan, paid $2.6 million, or $63 per square foot, for nearly 41,050 square feet of condo-hotel space in the 2008 project overlooking Baker's Haulover Inlet connecting the Atlantic Ocean to the Intracoastal Waterway in exclusive Bal Harbour, located between Miami Beach and Sunny Isles Beach.

Arevalo and Sullivan were able to pick up the units from WCI Communities, which was unloading luxury product along the South Florida coast in an effort to emerge out of bankruptcy.

At the time of the original bulk purchase in June 2009, Arevalo and Sullivan - the same principals of Elcom Condominium LLC - completed a second transaction where they purchased the common areas of the One Bal Harbour condo-hotel complex for an additional $12 million under the Florida entity Elcom Hotel & Spa LLC, according to a Condo Vultures report.

The all-in purchase price for the condo-hotel units and the structure's common areas worked out to $14.6 million. If the all-in purchase price is divided into the condo-hotel unit square footage, the blended average is $356 per square foot excluding any value associated with the common areas that Elcom Hotel & Spa LLC still owns.

To date this year, Arevalo and Sullivan have not only sold the 39-unit block to OBH Investment Properties Inc. but also three additional units for a combined $2.04 million, or $728 per square foot. Overall, Elcom has generated $14.1 million in condo-hotel unit sales for an average of $421 per square foot.

Arevalo and Sullivan still have nine units remaining with more than 7,500 square feet, according to the report.

As part of the OBH Investment Properties bulk purchase of the 39 condo-hotels, the entity has entered into a "resort access fee covenant" with Elcom Hotel & Spa LLC. Under the terms of the agreement, OBH Investment Properties "shall pay to Elcom a fee equal to $36 for every day that the unit is occupied," according to Miami-Dade County records.

The per night fee cannot go down but does increase annually based on inflation defined as the "Consumer Price Index," according to the covenant.

Many hotels strive to achieve a 75 percent overnight occupancy rate annually, industry watchers said.

Bulk buyers have completed more than 80 transactions for 10.3 million square feet for a combined price of $2.3 billion since July 2008. At the end of the 2010, bulk buyers had resold 24 percent of the acquired inventory at a premium of $51 per square foot, according to the Condo Vultures.

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