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September 2, 2010 |
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| February 25, 2009 |
By: Polyana da Costa |
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hen it came to funding condominium construction in South Florida, there were few lenders as aggressive as New York-based iStar.
And now that the condo bubble has burst, iStar is moving just as aggressively to shed its troubled assets and foreclosed projects.
The publicly traded finance company, which has more than $1 billion of loans scheduled to come due over the next seven months, has been unloading properties at substantial losses.
“They are in need of capital,” said David Chiaverini, a BMO Capital Markets analyst who covers iStar. “They are trying to balance their liquidity needs.”
iStar executives did not respond to several requests for comment.
Late last year, iStar took a $16 million loss on the sale of 5.65 acres near Brickell Avenue when it sold the lot for $41.3 million. The developer, Kevin Reilly, who gave back the property to the lender in May 2008, owed the lender about $58 million.
iStar also took a $19 million loss on the sale of 141 foreclosed units at the Whitney in Downtown West Palm Beach. After taking a deed in lieu of foreclosure valued at $43 million, the lender sold the units for about $170,000 per unit, or $24 million.
It recently agreed to a short-sale on the Bermuda Cay condo conversion project in Boynton Beach. iStar allowed the developer to sell 107 units in the failed conversion for about $7 million when it was still owed about $20 million of the original $35.3 million.
And iStar continues to negotiate potential sales of projects before the developers end up in foreclosure.
That is the case with 1060 Brickell, a 576-unit condo project by Imico Brickell. iStar, which lent the developer $153 million to construct the twin towers in 2006, is negotiating a bulk sale of the 346 unsold units of the development, according to a source familiar with the deal who did not want to be identified. According to county records no foreclosure suits have been filed against the project but at least one unpaid contractor has filed a lien.
Imico Brickell is managed by New York-based Extell Development. A woman who answered the phone at the company said the company could not comment because it was no longer in control of Brickell 1060.
Miami-based BayBridge Real Estate is marketing units in 1060 Brickell for sale. Adam Greenberg, president of BayBridge, confirmed he is marketing the property on behalf of the developer but declined further comment on 1060 Brickell.
BayBridge also is working on a short sale of a failed 180-unit condo conversion project in Tampa, where iStar is the lender.
“We had a number of offers on the Tampa property and iStar is considering one of them,” he said.
A couple weeks ago, iStar sold the mortgage note on the Paramount Beach condo site in Sunny Isles Beach for an undisclosed amount to Sunny Isles Property Holdings, a company managed by Carlos Mattos, according to Miami-Dade County records. The lender, which had provided about $32 million to developer Sunny Isles Development, filed a foreclosure suit on the site in December 2008.
A call to Mattos was not returned by deadline.
iStar’s exposure
iStar, one of the lenders with the highest exposures in South Florida’s condo development market, was “very bullish in the go-go days in financing condo projects, said Steven Beauchamp, president of Mangrove Advisory Group in Fort Lauderdale.
“They have a disproportionate amount of loans in the condo finance business,” Beauchamp said. “Now they are trying to unload because they need to raise capital.”
BayBridge’s Greenberg said that despite iStar’s recent discounted sales, he does not believe the lender is acting out of desperation.
“The smart lenders are not showing desperation but a willingness to work deals that make sense,” Greenberg said. “They are very smart about not wanting to be in the REO business. They are basically saying, ‘this is what it’s worth now, do we want to get back that money and redeploy the capital or wait for it to be worth possibly less than that in a few months?’ ”
The Whitney condo sale, he said, was a good deal for iStar despite the loss.
“For this market they got a really good price on it,” Greenberg said.
Robert Given, a broker at CB Richard Ellis who represented iStar in the Whitney sale, said the lender is taking a more proactive approach than many other lenders.
“They are systematically approaching their dispositions,” he said. “A lot of the other lenders are using internal sources to market their properties, which is not as effective.”
Given, who also is marketing two condo projects in Orlando for iStar, declined further comment.
iStar has at least three other projects with pending foreclosures in South Florida, including the site of the Marina Grande in North Miami Beach; a 5.5-acre site near Brickell Avenue owned by Midtown Equities; and the Marina Oaks in Fort Lauderdale.
iStar also is the lender on the Coconut Grove Residences, a 64-unit high-end residential project in Fort Lauderdale.
The project is not in foreclosure, but there are several liens against the developer filed by unpaid contractors. A source said iStar and the developer were recently negotiating a discounted bulk sale of the remaining units but the deal fell through. The lender opted to work with Coconut Grove Ltd., headed by Fort Lauderdale attorney Ronald Matriana, which owns the project.
In 2005, iStar lent about $74 million to Coconut Grove Ltd. for the construction of the project. Coconut Grove has closed on the sale of about 22 units. The units for sale range from $750,000 to $5 million.
Mastriana did not return a call and an e-mail request for comment.
In recent months, iStar has filed foreclosure suits through out the country, including against a 203-room hotel in Hawaii — which iStar is now auctioning — and mixed-used properties in New York. The lender is owed about $100 million from one New York project.
Many of iStar’s troubled properties were inherited when the lender purchased Freemont Investment and Loan in May 2007 for about $1.9 billion. Freemont had loaned millions of dollars in construction loans through out Florida.
iStar didn’t go into the deal blind. At the time of the purchase, iStar estimated Freemont had about $840 million in non-performing loans.
iStar shed some of the loans inherited from Freemont and they have since gone into default.
In April of 2008 iStar sold a $25 million loan to AmTrust Bank on the Landmark at Doral, a mixed-use residential project. AmTrust Bank has a pending foreclosure on the project against EB Developers.
iStar also sold a $6.5 million mortgage on the 54 unsold units at Altos de Miami condominium in Miami’s Little Havana neighborhood to Glen Royal Parkway Acquisition last year. The property was foreclosed on earlier this month. The defendant was Altos de Miami.
Given today’s economic climate, lenders are realizing it’s better to write down the tainted assets and dispose of them, rather than watch the market decline further, said Howard Taft of Cohen Financial.
“The Miami condo market is going to get worse before it gets better,” he predicted.
iStar still has a lot of loans in South Florida, including a $245 million senior loan it issued to Boymelgreen Developers in 2007 for the completion of the 306-unit Marquis condominium and hotel in downtown Miami. The Africa Israel Group has taken over the project from Boymelgreen. The loan is due in February 2010 and can be extended up to a year, according to a source familiar with the project.
iStar also is owed about $26 million by Pedro Martin, developer of the 600 Biscayne condo tower. The loan was to mature last year and the lender granted the developer an extension. The loan comes due in October of 2010.
iStar (SFI) shares were trading at $1.07 on Tuesday, up from 98 cents on Monday. Over the last year the stock has ranged from $23.21 to 66 cents per share.
Despite iStar’s push to shore up its portfolio, BMO Capital’s Chiaverini said he has not been recommending iStar stock to investors. On Thursday, iStar will announce it’s fourth quarter results.
“I’m modeling for a loss of 86 cents per share,” he said. “There’s a downside risk to this number given how difficult the fourth quarter turned out to be for other financial companies.”
________________________
iStar debt coming DUE
March: $206 million unsecured note
April: $119 million secured-term loan
September: $300 million secured-term loan, $350 million line of credit and $490 million unsecured note
Polyana da Costa can be reached at (561) 820-2065. |
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