South Florida condo owners have it tough these days . Condo assessment fees have gone up nearly 60% in both Miami-Dade and Broward counties, and special assessments have added onto financial costs. To top it off, structural integrity reserve studies are due Dec. 31 and, depending on when a condominium approves its budget, associations will have to start saving for their reserves in 2025 or 2026.
Condo buyouts were on the rise this year — and they can represent an escape to some burdened owners, but a threat to those who could be forced to leave their homes. Condo buyouts or terminations happen when 80% of condominium owners agree to sell to a developer. A deal can move forward unless 5% of owners vote against the deal.
The Miami Herald spoke with three real estate experts who are at the forefront of these deals, including real estate developer Ian Bruce Eichner; real estate analyst and Condo Vultures founder Peter Zalewski; and Siegfried Rivera partner Lindsey Lehr. The three weighed in on why condo terminations are becoming more popular and the telltale signs a condominium is ripe for redevelopment.
Zalewski said condo buyouts represent an exit route for communities struggling to keep up with rising costs. Once the properties are redeveloped, they also provide future buyers with a new building with — hypothetically speaking — zero structural issues, special assessments or recertification headaches.
“These buildings are obsolete because they’re inefficient,” Zalewski said.
After the deadly collapse of the Champlain Towers South in Surfside in 2021, developers went on a buyout frenzy. At the time, many condo owners worried about the structural integrity of their own buildings and were more willing to entertain conversations to sell out.
Developers welcomed those conversations, especially for any condominium sitting on beachfront or bayfront land. Eichner, for example, is chasing the 12-story Four Winds Condominium at 9225 Collins Ave., in Surfside, offering $141 million to its 144 unit owners. “ These are inherently invaluable pieces of land,” he said.
Lehr said she now works on an average of six condo termination deals per year in Miami-Dade, Broward, Palm Beach and Monroe counties. Before the Surfside condo collapse, the average had been just two or three deals per year.
Lehr said many unit owners are concerned about where they’ll move if they agree to a termination. It’s hard for them to find a similarly sized residence in the same neighborhood with the same views in today’s housing market.
“ I see benefits on both sides. It’s an opportunity for those communities unable to fund reserves and perform some of these necessary structural repairs. At the same time, I feel for those owners unable to stay in their homes,” Lehr said. “Even though developers are paying a premium to purchase units in these buildings, even with the financial gain realized in these sales, it’s difficult for the unit owner to get another oceanfront unit. With skyrocketing real estate prices in Miami, it’s difficult to find something remotely comparable.”
Some developers, Zalewski said, are now holding out to see the impact of the structural integrity reserve studies and if the requirement to bolster savings will push associations and unit owners over the edge in the next two years.
“Timing is so critical. The challenge is if these people wait too long, they might have to wait until we start building again,” Zalewski said, referring to the end of a five- or seven-year real estate cycle where developers slow down developing new inventory because of an oversupply. “It’s better to leave money on the table and then get out as opposed to squeeze every nickel and then try to get out.”
For those looking to move forward with a condo termination — and those who worry that a takeover of their building is on the horizon — developers are looking for very specific characteristics.
Here are the seven things Eichner, Lehr and Zalewski said developers look for when zeroing in on a condo termination:
A surface parking lot
This indicates land is being underutilized. Most newer buildings have parking garages to maximize the building’s footprint.
Concrete balconies with railings
A condominium with concrete balconies with railings implies the association lacks the funding to renovate and install ones with glass, a fresh and modern look owners these days often want.
Fewer than 100 units
Condo buyouts require 80% consensus and the explicit objection of less than 5% of unit owners. Developers who have attempted to buy out larger buildings have often faced hurdles and delays because of unwilling owners, and fewer of them are willing to enter into those negotiations.
Path of least resistance to terminate
Condo terminations can be a complicated process, and developers like Eichner prefer if fewer votes are needed to approve a termination.
“ That’s the single biggest issue,” Eichner said, adding that his ideal state requirement would be 75% approval needed. The more votes required, the more likely it is that a deal falls through because of some residents dissenting and voting against the deal.
The submission statement in a condominium act — a document stating the responsibilities and rights of the developer, association and owners — will often define what percentage of votes are needed to approve a buyout. If the document includes Kaufman language — “as it exists on the date here of and amended from time to time” — that means the current law requiring 80% of approval stands. However, Lehr said, if 5% of residents come forward and vote against the termination, then the deal can disintegrate.
That exact situation played out at Biscayne 21 in Edgewater, spoiling what a development team believed to be a done deal. Ever since, developers have been much more conscious in moving forward in situations where a condominium act requires majority approval or creates any gray area.
Zoning regulations in a given municipality
Developers prefer communities like the city of Miami, Zalewski said, over those with more restrictions and regulations like the city of Miami Beach. Developers often aim to build as densely as possible to cover their costs — land, labor, loans — and still make a profit. The more freedom that zoning provides them, the better and more profitable the project can be.
“You’re thinking how many units can I build, what are my profit margins, and work backwards,” Zalewski said.
Location, location, location
Waterfront remains gold. The most preferred sites are those on oceanfront sand, then anything on the bay on islands connecting the mainland to the beach. Sites on the mainland with bay views are third in the pecking order and, finally, sites on the river such as in Fort Lauderdale’s Las Olas neighborhood or Miami’s Miami River area.
Zalewski says that condos east of I-95 are on his radar.
“It has to do with the public, city feel. When we go west, there’s no urgency,” Zalewski said. “People in Europe don’t dream about having a condo in Kendall. They want to wake up in the morning on a barrier island.”
Age matters
Developers look for buildings often at least 30 years old, Lehr said, since it’s more likely those condominium associations face high condominium assessment fees, special assessments and looming reserves. Zaleswki calls these “vintage” properties.
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