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MIAMI, June 10 /PRNewswire/ — Condo Terminators, a specialty consulting group of Morningside Mortgage Corporation, in Bay Harbor Islands, Florida, has completed the filing process for Florida’s first mass short sale of a failed condominium conversion on June 9 at the Sunset Lake Villas Condominium in Margate, Florida. This project is expected to lead a wave of Condominium Terminations, resulting in mass short sales of failed condominium conversions, reversion to apartment buildings, and the debut of a new legal instrument, the Plan of Termination.
Sunset Lake Villas is majority owned by Anthony Galeotafiore, Managing Member of AJG Realty LLC development group of Bethpage, New York. Sree Reddy, Esq., LLM, of the Miami law firm Roth, Reddy PA, drafted the Plan of Termination and represented the Developer at today’s proceedings.
Condo Termination was “the only way out,” said Galeotafiore. “After all of the units we sold fell into foreclosure, all of the unit owners moved away or rented units without paying HOA dues. Nobody is financing condos, but apartment buildings are bankable.”
Condo Terminators provided specialty business advice to the Developer and transactional advisory services to his council and accepts projects for these services throughout the state of Florida.
“Condo Termination transactions are the only way to resolve Florida’s real-estate slump and protect the rights of homeowners, banks and the value of our tax base,” says Condo Terminators President Grant Stern. “The Condo Termination law is meant to cut through the tangle of lawsuits and provide fair resolution to the parties of interest, outside of court.”
For questions and further information, please visit http://www.condoterminators.com or contact Grant Stern directly at 305.219.0326 or email@example.com or Anthony Galeotafiore, President of AJG Capital of Bethpage, NY, at 516-933-3507 or firstname.lastname@example.org.
This press release was issued through eReleases(R). For more information, visit eReleases Press Release Distribution at http://www.ereleases.com.
SOURCE Condo Terminators
The sun has set on a failed condominium conversion project called Sunset Lake Villas in Margate, another sign of the times in the wreckage of the real estate bust.
The latest owner of a loan on the conversion project voted to terminate the condominium association, one of the region‟s first such terminations under a Florida statute revised in 2007.
In the past, condo terminations mostly occurred after severe hurricane damage or insurance loss. The new statute envisioned more terminations occurring because of economic loss.
At Sunset Lake Villas, values had plummeted since 44 units were put on the market several years ago. Only 11 of them had sold, for about $195,000 each, and all of those slipped into foreclosure. Now, the only comparable sales place value at about $20,000.
“Basically, this condo termination forcesa short sale,” said attorney Sree Reddy of Miami Beach-based Roth Reddy, P.A., which represented the note holder, Bethpage, N.Y.-based AJG Realty LLC.
Lenders that are in the process of foreclosing on the few remaining units not owned by the developer will be paid off at whatever fair market value for those units are.
“And, yes, they would be taking almost a 90 percent haircut on that,” Reddy said.
Sunset Lake Villas is majority owned by Anthony Galeotafiore, managing member of AJG. It will now go back to being an apartment complex. Galeotafiore was able to vote 80 percent of the associations votes, meeting the threshold set by law for termination.
In a news release about the termination, Galeotafiore said it was “the only way out” of the morass the project has landed in.
“After all of the units we sold fell into foreclosure, all of the unit owners moved away or rented units without paying HOA dues. Nobody is financing condos, but apartment buildings are bankable,” he said.
The state Division of Florida Condominiums, Timeshares and Mobile Homes must still approve the termination.
It’s “very challenging” Michael A. Furshman, a partner with the Association Law Group in Miami, saidtermination is often difficult to pull off, but has been used sporadically.
“One of the big hiccups is the mortgage holders must also vote to terminate. That is a moving target,” he said. “It‟s not only getting all the owners and lenders, it‟s getting them at the same time. You‟ve got to get everybody at one moment in time to agree. It‟s very challenging.”
Grant Stern, president of Bay Harbor Islands-based-Morningside Mortgage,handled some of the termination process at Sunset Lakes Villas as a consultant for AJG. He believes the current economics of the condo market will force more condo terminations soon. Morningside has a division called Condo Terminators and a website, CondoTerminators.com, in anticipation.
“Condo termination is the only way to resolve Florida‟s real-estate slump and protect the rights of homeowners, banks and the value of our tax base,” Stern said. “The condo termination law is meant to cut through the tangle of lawsuits and provide fair resolution to the parties of interest, outside of court.”
The vote to terminate the condominium was held June 9. Notices had been sent toall parties involved and posted on doors of the units.
Reddy said there‟s a 90-day period during which the termination can be contested.
“What happens now is there are a few units in some stage of foreclosure. Those will be paid off by a trust,” he said. “The end result should be a property with clean title. The property is basically in a trust, which functions for the benefit of the primary shareholders.”
Reddy said AJG originally intended to sell condo units, but found it was easier to get Federal Housing Administration financing for the entire project as an apartment building.
By Paul Brinkmann
Back in the boom especially in south Florida, we had seen how converters turned old rental apartment buildings into condominiums, selling the fixed-up units at a premium to buyers priced out of new luxury developments. Some 520 Florida rental complexes were converted to condo in 2005 and 635 in 2006, state records show. The housing market’s collapse halted the conversion craze, sending many projects into distress as financing and buyers evaporated. Therefore, condo conversions are failing from one end of the country to the other. We have successfully implemented a new game plan that can turn these failed endevours into extremely profitable opportunities.
By MARILYN ALVA, INVESTOR’S BUSINESS DAILY
Posted 05:38 PM ET
Like a lot of investor-developers, Anthony Galeotafiore tried his luck converting Florida apartments to condominiums during the housing boom.
In the bust, he’s doing the opposite as a condo terminator. The method he’s using could help salvage many of today’s troubled condo conversions, real estate professionals say.
It helped Galeotafiore rescue his investment in a $4 million apartment complex in Broward County.
“I spent two years with this deal being the death of me, and now it’s going to be one of the best assets I have,” he said.
Back in the boom, Galeotafiore had seen how converters turned old rental apartment buildings into condos, selling the fixed-up units at a premium to buyers priced out of new luxury developments.
Some 520 Florida rental complexes went condo in 2005 and 635 in 2006, state records show.
But the housing market’s collapse halted the conversion craze, sending many projects into distress as financing and buyers evaporated.
“Condo conversions are failing from one end of the country to the other,” said housing analyst Jack McCabe of McCabe Research & Consulting. “It started in South Florida.”
Galeotafiore’s 1972-vintage rental complex became one of them.
At first things had gone well for Galeotafiore, managing member of Bethpage, N.Y., development group AJG Realty. By early 2008 he had sold 11 of the 44 units in Margate, Fla., at $195,000 each. But the housing market collapse saddled him with the rest of the units and a $2.6 million remaining bank loan he couldn’t pay. By 2009 a two-bedroom unit appraised at just $15,000.
Galeotafiore drew up a new game plan, deciding that a condo termination was his ticket out. He’s turning the property — Sunset Lake Villas — back into a legal rental via a state-approved condo termination process.
It’s time-consuming. In terminations, a trust is set up to pay any debts and liens. Unit owners become beneficiaries of any proceeds from the sale of the property.
A written termination plan is required. So is an OK by 80% of the voting interests of a condo complex. A ‘no’ by just 10% can scuttle plans.
“The best way to do a termination is to have a building where less than 10% of individuals own units; then nobody can block it,” said real estate attorney Jennifer Drake of Becker & Poliakoff in Fort Lauderdale.
Galeotafiore wasn’t too worried. In September he started buying some units out of foreclosure, for about $18,000 each. He now has control of 39 of the 44 units in his complex.
The other five headed toward foreclosure over a year ago. None of their owners challenged a termination vote June 9, putting the reversion on track to happen 90 days hence.
Several mortgages were 10 times a unit’s value, so it’s “basically a massive short sale,” said Grant Stern, president of Morningside Mortgage in Bay Harbor Islands, Fla., Galeotafiore’s adviser.
Stern foresees a new wave of condo terminations at buildings ripe for bulk short sales, such as Sunset Lake.
The idea “is ahead of the curve,” said Condo Vultures principal Peter Zalewski, in Bal Harbour, Fla. If successful, “the industry will probably embrace it as an exit strategy — the project suddenly becomes much more attractive for an investor.”
Galeotafiore plans to seek a multifamily housing loan at half the 12% interest rate he’s paying on a new $1 million loan he wrangled.
Rentals have renewed appeal, with the median condo price in the area down almost two-thirds since 2007.
“If we have 44 units at $1,000 a month, that’s almost $600,000 a year in gross income potential,” he said. “And if expenses are $200,000, you can see what kind of net income the building can produce.”
Galeotafiore has already hired a property manager, who signed leases on 35 units at $1,000 a month.
Condo terminations are cropping up in other states where condo conversions occurred, such as New York and California, says Orest Tomaselli, CEO of National Condo Advisors, a project-approval service. But Florida is really ground zero for conversions and their troubles.
“They’ve crashed harder than the new-condo market,” McCabe said. “Right now in Miami, Orlando and Fort Myers, you can buy a condo conversion for less than a new car.”
Stern thinks terminations make sense for failed conversions, especially those “heading for Class D.”
Mortgage payment delinquencies, especially rife in older conversions, are “the number-one problem in our business right now,” said Paul Kaplan, managing director of KW Property Management & Consulting.
Mortgage delinquencies pressure operating budgets. In some Florida conversions, more than half of owners are behind and associations can’t pay for lawn-cutting, cleaning and pool care. Remaining owners suffer special assessments, which can push them over the edge into foreclosure.
Condo terminations aren’t new. They were a legal necessity for South Florida complexes destroyed by Hurricane Andrew in 1992. Pre-boom, terminators bought older beach condos to raze and rebuild.
“A lot of Sunny Isles, including the six Trump Towers, were built on this kind of terminated condo project,” Zalewski said.
But terminations have a different purpose now, he says: “The condo terminations will be for a bulk buyer to reduce carrying costs and operate the product as a rental.”
Galeotafiore is looking forward to better days at Sunset Lake.
“It’s a performing asset that will be a long-term cash cow,” he said.