Related Group affiliate buys loan on troubled Boynton Beach condo [The Palm Beach Post, Fla.]By Alexandra Clough, The Palm Beach Post, Fla.McClatchy-Tribune Information Services
Dec. 12--The Related Group of Miami now is in control of the construction loan backing the troubled Promenade condominium, the Boynton Beach property that has come to symbolize the condo real estate bust in Palm Beach County.
An affiliate of the prominent Miami-based developer on Dec. 5 purchased the property's $122 million note from a group led by Wells Fargo Bank, according to records filed in Palm Beach County Circuit Court.
Real estate sources say Related paid less than half the value of the construction loan. A foreclosure auction for 323 unsold condo units is set for Thursday . However, no other bidders are expected to top the $122 million loan amount, so the property likely will remain in Related's hands, the sources said. Related is expected to take title to the property Thursday from developer Boynton Waterways Investment Associates in what sources describe as a "friendly foreclosure."
The construction loan's sale puts Related in charge of the mammoth condo and frees the property from the uncertainty that has surrounded the Promenade since its inception.
"Having (Related) going into it will make a marked improvement (of the condo) when it comes to the perception of future buyers," said Jack McCabe, chief executive of McCabe Research & Consulting in Deerfield Beach.
The Promenade, which began construction in 2007, once was heralded as the start of a major building boom in downtown Boynton Beach. But then the recession hit and other planned condos faded away.The 318-unit, 14-story, twin-tower complex is located at the corner of Boynton Beach Boulevard and Federal Highway. Only 72 of the 318 condo units sold. The project also includes 77 unsold hotel condo hotel units.
Sales began in May 2010, during the depth of the recession, with prices starting at around $160,000. Higher priced units facing east have stunning views of the Intracoastal Waterway and the ocean. The condo features a 5,000-square-foot clubhouse, an Olympic-length lap pool and even a putting green. But despite the views and amenities, selling proved to be tough due to market conditions and initial difficulty in obtaining Fannie Mae approval, which makes the project more appealing to mortgage lenders.
In 2011, the condo's lender, Anglo Irish Bank of Dublin, sold its portfolio of bad loans, including the Promenade construction loan, to Texas-based Lone Star, a private equity fund. Wells Fargo Bank entered the picture earlier this year to service the loan. Following an August foreclosure action by Wells Fargo against Boynton Waterways, a final judgment of $121.3 million was awarded to Wells Fargo on Oct. 23.
Canyon-Johnson Urban Funds, a real estate company that includes basketball great Earvin "Magic" Johnson, considered purchasing the note as recently as November, but the deal died late last month.
Related instead prevailed, and the note was sold Dec. 5 to a Related affiliate, according to records filed in the Wells Fargo Bank foreclosure lawsuit.
According to court records, the note was sold the note to PRH Boynton Beach LLC, whose mailing address is PRH Investments LLC in Miami. PRH Investments, which has the same address as the Related Group, lists its manager as Perez Ross Holdings LLC, state records show. Jorge Perez and Miami Dolphins owner Stephen Ross are partners in the Related Group, with Perez serving as chairman and chief executive.
Calls to Related's were not immediately returned. An attorney for PRH Boynton Beach LLC also did not return a phone call seeking comment.
Joseph Good, a retired real estate broker and former investor in the Promenade, said the purchase by Related makes sense.
Buying the note for less than half its value gives Related "a much lesser basis, and that should enable them to do something with" the condo, he said. "While I don't think the demand is significant for condominiums in downtown Boynton Beach, the value is so much less than replacement costs it's not an unsmart move," Good added.
McCabe went even further, calling it "an excellent acquisition...This may be one of the last great bulk buys. It's a nice building."
In Palm Beach County, Related Group has built a number of condominiums, including The Moorings in Lantana, Marina Village in Boynton Beach, and numerous condos in West Palm Beach, such as CityPlace South Tower and The Prado.
Related currently is seeking approval from the city of West Palm Beach to build two massive condo towers on North Flagler Drive. The company also has been building new condos in Miami-Dade County. Additionally, Related has been buying distressed properties in South Florida, too.
McCabe said it will be interesting to see what Perez plans to do with the Promenade. He may opt to place some units in a rental program, as is the case now, or he may actively market them for sale. Or he may choose to do a little of both, he said. "Why have them sit empty when they can make a profit if you rent them?"
Perez' advantage, McCabe added, is his network of buyers from Latin America and Europe. With prices ticking up dramatically in Miami-Dade County for condos, don't be surprised if Perez markets the Promenade to foreign buyers, McCabe said.
(c)2012 The Palm Beach Post (West Palm Beach, Fla.)
Visit The Palm Beach Post (West Palm Beach, Fla.) at www.palmbeachpost.com
Distributed by MCT Information Services