Wednesday, May 24, 2006

Let Them Eat Cake! ( in Fort Lauderdale)

We all remember the French Revolution and the story of Marie Antionette. Her famous, or infamous, quote has been the benchmark used to depict a disconnected elitist class out of touch from the society it governed.

Another famous saying is that history repeats itself. Fast forward to 2006 South Florida. The dubious honor of bestowing the first Bigdaddy Putz Award goes to our very own Fort Lauderdale Mayor Jim Naugle.

When asked recently about the housing affordabilty crisis in South Florida, his heiness Jim bellowed, " I'm supposed to subsidize some schlock sitting on the sofa and drinking a beer, who won't work more than 40 hours a week?" Naugle told the South Florida Sun-Sentinel last week, voicing opposition to a city plan that would force developers to build some affordable units or pay extra fees. "I deny that there is a problem."

"That's easy for him to say. King James, whose Rio Vista neighbors include captains of industry and trust fund beneficiaries, bought his home on the New River for $362,500 in 1996. Today, that kind of cabbage won't even get you a teardown shack in parts of his city."

Doing his best Joe McCarthy impersionation, King James further orated, "It's the developer and the person who buys a higher-priced unit that will be subsidizing them, and I think that's wrong," Naugle said. "It's government interfering with the marketplace and that's Karl Marx."

"The person who's working 60 hours to get ahead and making $90,000 a year is going to subsidize the person who's working only 40 hours a week and making $60,000," Naugle said."

"So now I'm a `schlock' because I only work 40 hours a week?" Michele Stadler, a full-time working mother, wrote city commissioners and Naugle by e-mail. "To insinuate that by not working more we are lazy is really a disgrace. He needs to take that silver spoon ... and look at the reality of life here in Fort Lauderdale and how it has changed in the last five years from the [perspective] of the middle class."

"Naugle said plenty of affordable housing options are around, just maybe not the single-family homes of people's dreams. He also said they should find jobs they love, not be "stuck on working 40 hours a week," and hold off on having children until they are in a better financial position."It's good to be a gatherer and build a nest before having a family," Naugle said. "That's what I did. I waited. Let's get people thinking about that."

Thanks to my wonderful wife for finding this article. Have a nice piece of cake honey.

Tuesday, May 02, 2006

Boom to Bust

We are hearing of many condo's and in South Florida either converting back to apartments, halting construction, or going bankrupt as reported in this story.

In less than six months after being converted from low income housing to high priced condos, millions of dollars are lost and the lender goes bust.

"Lender USA Commercial Mortgage Co. and its related companies — better known as USA Capital — filed for Chapter 11 bankruptcy protection in Nevada on April 14. The filing follows a Securities and Exchange Commission investigation of how the company and its affiliates financed construction projects.

"Up until last week, we had no inkling that anything was wrong," said Virgil Birgen of Nevada, who, with his wife, invested $150,000 to build Sail Club at Clear Lake. About 200 people from across the country gave Nevada-based USA Capital or a sister company money to fund the four-tower, 590-unit luxury high-rise on Executive Center Drive.

Here's how it worked:
People placed their money with the company, usually in increments of $25,000, $50,000 or $100,000. The company bundled the investments into trusts worth millions of dollars.
The money then was loaned to developers, usually for a short time, and usually for very high rates: 17 percent was not uncommon. That allowed USA Capital to pay returns of as much as 13 percent.

Formerly a 186-unit apartment complex housing mostly low-income families, Lake Pointe Villas changed hands in January 2005. Homes for America Holdings Inc. announced plans to raze the apartments and start fresh with condo towers, lofts and town houses ranging from the $300,000s to more than $800,000.

One apartment building has been leveled, but two others remain open, their ovens and water heaters pulled from the wall. A refrigerator stands in the middle of one parking lot, an abandoned portable toilet is in another. Mattresses rotted to their springs lie on the ground. Windows are broken. Yellow flowers have begun to grow up the side of 20-foot-high piles of rock and sand left undisturbed since Christmas.

"This caught us all by surprise.... USA Capital is a source we have used for many years on a number of different projects."

Investors said they weren't aware of progress — or the lack of it — at Sail Club, or any other projects.

But their checks from USA Capital with the promised returns always came. Bankruptcy court filings suggest that investors got paid even when USA Capital didn't get money from developers to pay investors. In theory, without money from developers, money should not have been available to pay handsome double-digit returns.

"We have always gotten paid," said an investor in the local property who asked that her name not be used. But when she recently asked to withdraw her $100,000, there were weeks of delays. Then the company went into bankruptcy court.

"I didn't get anything back," she said.

Monday, May 01, 2006

Million Dollar Lemons

As told in today's Palm Beach Post, How do you sell a $6.2 million spec house in a chilly market?

"Two months away from putting the finishing touches on a 3240 N. Flagler Drive manse, brothers Richard and Mark Poncy are advertising... a $6.2 million glass of lemonade

Comes with a free home.

The eye-catching ploy may or may not work — Richard Poncy said that as of Friday they had yet to get a nibble — but Poncy, who is brokering the property, isn't worried.

"The market is definitely on the down side," he said, "but this home would be hard to duplicate," given its Intracoastal location and a dearth of similar high-end construction.

Spec homes — shortened from "speculative" and built without a definite buyer — range from the 600 midprice homes Pulte Homes Inc. (NYSE: PHM) had in its inventory as of the most recent fiscal quarter to Addison Development's 2005 sale of a $33.6 million, 34,000-square-foot Palm Beach home.

Are those rarefied high-end deals impervious to fluctuations in the rest of the market?

"We are getting more activity than we have had all winter," said Beverly Knight, who is marketing an $18.9 million oceanfront property just south of Boca Raton.

One possible reason: Some corporate executives get their annual bonuses in the springtime.

Which is why the high price of lemonade may get a little higher when work on the Flagler Drive property's five bathrooms and four baths wraps up.

Says Poncy of the current $6.2 million price tag: "We're actually thinking about raising it."