Property values rising – what we have seen

By July 16, 2012

Photo via Haute Living

Property values rising – what we have seen
By Alan J Kluger
Over the last few weeks, the Miami Herald and the DBR have been writing about rising real estate values. At KKSKL, we have been involved in numerous disputes arising out of failed development projects. When the lawsuits started in 2009 and 2010, property values were in the toilet and people were looking to get out quickly and minimize their exposure. Well nothing moves that quickly in Miami, so here we are in 2012 and the litigation is still going but the tone has changed.
One of my clients, a developer, was sued in 2009 by a buyer who had manufactured a series of “defaults” to terminate the contract because the property was no longer worth the amount the buyer had agreed to pay. Three years later, the case is still going but the buyer is trying to negotiate a deal to buy the entire project!
In other instances, during the worst days of the recession, my developer clients were facing foreclosure from banks or from hedge funds who bought the note at a discount and were seeking to collect. The negotiations were very tough in a down market but a large number were ultimately successful with hedge funds realizing a small profit or the banks settling for huge discounts off the mortgage face.
The South Florida real estate climate has drastically changed. Hedge funds that buy heavily discounted debt are no longer willing to take a small profit. Today, those same funds would rather own the property, which in their calculation increases in value every day. The mezzanine lenders who previously bought out the institutional first mortgage holders, are no longer seeking to buy out the senior lenders, instead foreclosing on the property and partnering with developers to create real estate projects. What a difference three years makes!