Article Courtesy of The Tampa
Tribune
By SHANNON BEHNKEN
Published March 25, 2008
TAMPA - When the foreclosure filing came last month,
developer Fida Sirdar determined the only way to save The Place at
Channelside condominium was to file for bankruptcy reorganization.
It was either that, he said, or hand the keys over
to the bank and walk way.
"Generally, people think bankruptcy means the
project is down the tubes," said Sirdar, of Key Developers Group LLC.
"But if we didn't believe in this project's future, it would be
stupid for us to get into this bankruptcy and waste everyone's time,
including our own."
About a half-mile away, the developers of The Towers
of Channelside are fighting for success, too. They also filed for Chapter
11 bankruptcy protection in January, after Wachovia cut off the company's
credit.
Just last week, the developers of 472-unit Tampa
Condo II filed to reorganize under bankruptcy. Announced in May 2006, the
51-story condominium project could have been among the city's tallest
buildings, replacing a parking lot at Washington and Morgan streets in
Tampa's downtown.
And the developers of Trump Tower Tampa say they too
may soon be filing for bankruptcy, if they don't secure construction
financing for the luxury tower this week.
All these projects have something else in common:
vanishing buyers. Developers say buyers either wouldn't close because the
market had changed or couldn't close because they no longer qualified for
loans. Others were speculators or just lost hope in the projects.
The bankruptcies signal how tough the market is.
They represent the beginning of the fallout from an overbuilt condominium
market in Tampa, real estate experts say - but in the long run, the
filings could actually save the buildings and make the market more
affordable.
"Developers have been hanging in there and
trying to make it work, but their cash flows are depleting," said
real estate lawyer David Carter with Carter & Lyons. "There's
going to be a lot of failures."
Some of the condominium projects in trouble are
nearly complete, and buyers have already moved in. There are between 150
and 200 people living in the 257 units in the twin Towers, across the
street from the Channelside Bay Plaza complex. Buyers at The Place at
Channelside have closed on one third of its 245 units.
Watching Prices Drop Is Painful
The bankruptcy filings worry some buyers concerned
about their own financial futures. They blame developers in lawsuits for
not finishing their projects on time, leaving them with units that aren't
worth what they agreed to pay a few years ago when the condominium market
was red hot. Some have filed lawsuits seeking to get out of their
contracts and to get their deposits back.
Bonnie Dealva, who purchased a unit in The Place, is
not suing but said it's difficult to watch the units drop in value. If the
contractors had finished the building on time, she said, more buyers would
have closed before the market tanked, and the building would be better
off.
Dealva said she loves her condominium but decided
not to live there because the building feels empty. The Channel District
didn't turn out to be the vibrant area she thought it was, she said. She's
leasing out her place and renting an apartment near Rocky Point.
Another buyer at The Place, Gerald Confield, had
contracts on two units. He said he was able to get 60 percent of his money
back on one unit and went through with the purchase of another one. He
said he hopes to lease out the unit until the market improves.
For buyers who have already moved in to their units,
there are several problems they may encounter.
The main worry is whether condominium association
fees, used to pay for maintaining and insuring the building, get paid by
the developer, said Carter, the lawyer.
A project's bankruptcy doesn't directly affect a
condominium owner, he said. But if the developer or lender subsequently
stops paying association fees, he said, all the owners could wind up
paying higher fees to cover the unsold units. Fewer fees could mean less
money to pay for pool maintenance or common areas.
Other things to worry about include falling property
values and high numbers of renters.
"If a condo gets too many renters, the building
can deteriorate," Carter said, noting that renters don't always care
for the building as owners do. Also, he said, there are so many units for
rent that owners are cutting prices to compete, driving down values.
Carter's firm has represented downtown condominium
buyers trying to get out of their contracts and said their quests have
been successful because of "flaws" in contracts. For example,
most of the developers' contracts promised completion by a certain date,
and missed it.
Scott Newberger, who contracted to buy a condominium
in Towers of Channelside, wants out. He said he was asked to close on his
purchase in October but refused because the building was not finished. He
said he was concerned the developer could run into trouble, file for
bankruptcy and not finish it.
Newberger is trying to get his money back. The
building is complete now, but he said he already had to make other housing
arrangements and is no longer interested in it.
Credit Gone, Only 1 Option
Richard Sacchi, a partner in Towers of Channelside
LLC, said his company at one point had contracts on every unit in the two
buildings. Then the market soured and buyers, often investors who wanted
to flip their units, started dropping out.
The lender, Wachovia, cut off the developer's credit
and wouldn't extend the repayment structure of the loan, Sacchi said. The
only option to turn the financial troubles around was to file for Chapter
11, he said.
There are 85 to 90 units left to sell, he said.
"We fully expect to come out of this on the
other side," Sacchi said.
Buyers benefit somewhat from the bankruptcy filing,
Sacchi said, because the developer has set aside enough money to pay
association fees for four to five years.
Jack McCabe, owner of McCabe Research &
Consulting in South Florida, follows Florida's condominium market and said
he expects more lenders to cut off credit, as Wachovia did in Tampa.
"Wachovia seems to be taking a more rigid
stance on payment due dates for condo developers," he said.
"Others have been continually postponing due dates, as they want to
see the developers close and make as much money as possible."
The bankruptcies, as bad as they sound, could end up
helping the projects survive, McCabe said. "A lot of people think
this is the kiss of death, but a lot of developers do this so they can
reorganize debt and resurface."
McCabe thinks too many condominiums were built too
quickly in downtown Tampa, but over time, he said, units will fill up, and
downtown will be a better place.
Just two years ago, more than 30 condominium
projects were planned for the city's core. Many of those developers have
canceled plans because of the sluggish market. Others forge ahead.
A handful opened last year, and developers of
SkyPoint on Ashley Drive are well under way on a second tower, Element.
Even developers who ran into trouble still believe in downtown's future.
Take Sirdar, whose company built The Place. He plans
to start construction on two more projects next year.
"I look at Tampa as a great opportunity,"
Sirdar said. "We are very hopeful that the market will start to
stabilize later this year. Like the windfall didn't last, the doom and
gloom won't either."
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