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<\/p>\nAs developer-led condo buyouts pick up across South Florida, high-profile blowups offer examples of the pitfalls to avoid and the lessons learned in deals gone wrong, developers and brokers said at Bisnow\u2019s South Florida HOA and Condo Association Series event Thursday.<\/p>\n
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\n Bisnow\/Chloe Gallivan\n <\/p>\n
\n Harbor Condominium’s Ismael Santana, Douglas Elliman’s Jessica Julian, Blanca Commercial Real Estate’s Cary Cohen, Deco Capital Group’s Greg Togel and Haber Law’s David Podein\n <\/p>\n
Understanding the fine print in condo associations’ bylaws and declarations as well as\u00a0communicating and building trust while courting unit owners are critical, they said.<\/p>\n
“I think it’s always important to learn from things that went poorly,” Gregory Togel, principal of\u00a0Miami Beach-based developer Deco Capital Group, said onstage at the Design Center of the Americas<\/a> in Dania Beach.<\/p>\n The\u00a0most infamous example of a deal gone bad is Two Roads Development’s attempt to redevelop the Biscayne 21 condo tower in Miami’s Edgewater neighborhood. The developer purchased the majority of units in 2022 with plans to turn the tower\u00a0into a branded luxury condo project.<\/p>\n The condo\u00a0association\u00a0then voted to lower\u00a0its voting threshold, from 100% to 80%, to terminate the 13-story building’s condo association \u2014 a prerequisite for demolition. Two Roads then proceeded to empty out the building and prepare to knock it down.<\/p>\n But 10 residents who hadn’t sold their units\u00a0filed a lawsuit<\/a>\u00a0in 2023 to block the\u00a0project, accusing\u00a0Two Roads of illegally lowering the termination\u00a0threshold. An appeals court sided with the holdouts<\/a>, and the state’s highest court declined to hear the developer’s appeal.\u00a0<\/p>\n In January, Miami-Dade Circuit Court Judge Thomas Rebull ruled that the developer\u00a0had to restore the waterfront building<\/a>\u00a0to its May 2023 condition. Two Roads took out $150M in loans for the purchase and now estimates it might cost $65M for repairs<\/a>. Two Roads sued the holdouts last month in an attempt to avoid having to perform the work, the Miami Herald reported<\/a>.<\/p>\n The ordeal underlines\u00a0the risk of\u00a0a common development strategy: quietly buying units in an older building one by one in the hopes of eventually owning enough to kick off development.<\/p>\n “Everything is speculative until you hit the termination threshold,” Togel said. “Every association has a set of laws about what voting rights for terminating condos are. Until you hit that threshold in terms of the number of people in the building that want to sell, it is speculative.”<\/p>\n Deals like this have\u00a0highlighted the\u00a0fears of drawn-out litigation<\/a>, leaving many hesitant to pursue condo buyouts and terminations, even as more condo owners are staring down huge repair bills they might struggle to pay.<\/p>\n \n Bisnow\/Chloe Gallivan\n <\/p>\n \n Overton Construction and Consulting’s Paul Overton, Epic Forensics & Engineering Inc.’s Ben Messerschmidt, Campany Roofing’s Rene Rodriguez, AKAM Property Management’s Alex Argento and Brickell Homeowners Association’s Ernesto Cuesta\n <\/p>\n The Biscayne 21 developers got snagged on a technicality, and the mistake was\u00a0seeking to change the termination threshold from 100% to 80% without\u00a0all of the condo owners present, Togel said.<\/p>\n “In my opinion, Biscayne\u00a021 is a little bit of a special case in that declaration, the document that’s basically a contract between and amongst all unit owners,”\u00a0Haber Law equity partner David Podein said.\u00a0“That declaration had some special language.”<\/p>\n In another spoiled deal, Related Group and 13th Floor Investments attempted to buy out the Castle Beach Club, an oceanfront condo building\u00a0constructed in 1966, but couldn’t secure enough unit owners to sell.<\/p>\n Terra swooped in a year and a half later,\u00a0securing agreements with\u00a0the majority of unit owners but\u00a0going head to head with three owners\u00a0that\u00a0controlled multiple units.\u00a0Its offer ultimately expired<\/a>, another developer’s sunk cost.<\/p>\n At\u00a0a certain\u00a0point, the\u00a0numbers to make a development work no longer make sense, Togel said. A major takeaway has been\u00a0heightened\u00a0sensitivity\u00a0to residents throughout the process.<\/p>\n Many have lived in their units for decades and enjoy the proximity to their grandkids and their place of worship. For others, the homes are paid off and they can’t afford a mortgage on a new home.<\/p>\n<\/p>\n