Miami Beach's Troubled Caribbean Condominium Tower Now Reselling Remaining 94 Units at 40% Markup

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(MIAMI, FL) -- According to a new report by Condo Vultures, the New York investment group that purchased the construction loan on the 94 remaining units in the troubled Caribbean condominium in Miami Beach is reselling the units at a minimum markup of 40 percent.

The bulk buyer, 3737 Caribbean Group LLC with Leon and Alfonse Melohn of Melohn Properties in New York City and Michael Konig, has sold a combined 35 units in the 107-unit, two-tower complex on Collins Avenue in Miami Beach for $31 million, or a blended average of $584 per square foot. Many of the remaining 59 units with 102,000 square feet of space are said to be under contract.

The bulk buyer is reported to have paid between $50 to $55 million, or $323 to $355 per square foot respectively, for the Caribbean condominium construction note from the original lender, the failed Corus Bank. The original developer, Caribbean Group Owner LLC with David Christa of Victor, N.Y., subsequently relinquished the deed to the bulk buyer shortly after the note purchase was completed on Aug. 27, 2009, according to the South Florida Business Journal.

"The Caribbean condominium is proving to be the deal that got away for scores of bulk buyers," said Peter Zalewski, a principal with the Bal Harbour, Fla.-based Condo Vultures, LLC. "Many of the buying groups scouring around for a deal had the chance to purchase the Caribbean note but did not go forward for whatever reason.

"Now that the new condo inventory is dwindling as more than three-dozen bulk deals have closed, many buying groups are having to recalibrate their models, especially given the early success with the Caribbean."

The Caribbean is a combination of a completely retrofitted six-story Art Deco building with 35 units and four cabanas on the north side of the property, and a new 19-story glass tower with 68 units on the south side of the site. The neighboring properties are a combination of new towers and old residential buildings in serious need of renovations, according to the Condo Vultures.

Prior to the note sale, the original developer of the Caribbean had only sold 13 units in the South Tower for a combined $21.4 million, which works out to an average of $867 per square foot.

Since the note sale, the new owner has been able to sell 23 units in the South Tower for $25.8 million, which works out to $619 per square foot. There have also been 12 sales in the North Tower for $5 million, which is an average of $451 per square foot, according to a Condo Vultures.

The new average sales price represents a cash-on-cash increase of 65 percent excluding the expenses involved with obtaining the deed, finishing up any incomplete construction, real estate commissions, and all carrying costs.

At least 40 bulk deals (seven of the transactions were strictly note sales) with nearly 3,200 units have closed in South Florida since July 2008 at a price of more than $900 million, according to the Condo Vultures.

Many of the recent bulk buyers, especially in Greater Downtown Miami, have implemented strategies to retrade the product immediately on a retail basis to individual buyers.

Condo Vultures is currently in the midst of a study to calculate the average premium being achieved by those bulk buyers who are attempting to retrade their recently acquired condo product, Zalewski said.

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