Vulture Funds with $30 Billion Seeking Bottom of Florida Condo Market
Companies named in Bloomberg report have local connections.
Palm Coast, Florida – September 4, 2008 – A Bloomberg report by Bob Irvy today posits that a recent purchase of distressed condos in Miami signals the near bottom of the condo market. (full report) More interesting to Palm Coast, Florida residents and others who watch real estate developers is the name of the buyer of those condos; Lubert-Adler, in partnership with Related Group of Florida. Why? The Ginn connection, that’s why. And there are other local connections too.
The Ginn Connection: Philadelphia-based Lubert-Adler is Bobby Ginn’s financial partner, reportedly owning 50% of the company and 80% of each project. Two Ginn related entities are the focus of negotiations with a group of private investors fronted by Credit Suisse to negotiate a restructuring of a $675 million credit facility that is currently in default. (story) The two entities are:
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Ginn-LA CS Borrow, LLC
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Ginn-LA Conduit Lender, Inc.
Hint: LA is Lubert-Adler and CS is Credit Suisse
The Related Group Connection: A recent press release states, "Earlier this year, Related Group of Florida and Lubert-Adler jointly created a $1 billion investment vehicle that would target mortgages and multi-family real estate assets with value enhancement potential." The private Miami-based Related Group of Florida is a multi-family and luxury condominium developer. Related, headed by founder Jorge Pérez, is also among a group of companies rumored to be looking at buying out some of the Ginn holdings that are under the CS credit cloud.
"The Related/Lubert-Adler Investment Fund commenced formal operations in the second quarter of this year. The initial four transactions include over 500 condominium units located across Florida that were purchased at significant discounts from prior pricing levels." Some are the same condos cited in the Bloomberg article.
Who sold the condos to the Related/Lubert-Adler Investment Fund? They were sold by none other than the Related Group and their partner in the project, Atlanta-based Cousins Properties Inc., which built the 54 condo tower. Cousins Properties also has a local connection. They are jointly developing a 6,300 acre tract owned by Rayonier that was recently annexed into the City of Palm Coast, in Flagler County. (story)
These are not the first circular financial references in the Palm Coast area. The Pennsylvania State Teachers Pension Fund directly funded Lowe’s Ocean Hammock development (including the Ocean Hammock Golf Course), cashing out when Lowe sold the project to Centex, only to find itself back in the project when Ginn bought the Ocean Hammock Golf Course and Inn from Centex. It turns out that the pension fund is also a large investor in Lubert-Adler, Ginn’s investment partner.
And the wheel goes round and round.
Taxing situation
The motivation for investors to buy condos at reduced prices by the mass is logical. They see the increase by selling them individually to retirees. The properties would only end up in forclosure if a mass buyout did not happen. Each time they recapitalize the investments for tax purposes, as the tax laws allows. They certaily see the bottom of the market, as that is how they justify the purchase as a profitable venture. The fact of weither it is the bottom of the market can only be determined by the rate the resales occur. If they have sales and show profit, they were right. If they don’t they have at least taken the tax loss and put off foreclosure. They are controlling the market by buying in quantity and selling the oportunity to buyers to get in at these rock bottom prices, which sell the properties, as only they can do, because they own so many units. It’s the old "it takes money to make money" theroy at work.