MIAMI-An Israeli investor has purchased the 19 remaining units at a 30-unit fractured condominium in Coconut Grove, a few miles from downtown Miami, in a short sale for $2.5 million or $138 per square foot. The developer, Grove Developers LLC, whose managing member is FadhiBahri, owed US Century Bank, a Doral-based bank, $3.9 million and in January, the lender filed a foreclosure suit.

The original sales price for the first 11 units at South Two Seven Lofts Condominium was an average of $444 per square foot according to Bal Harbour-based Condo Vultures, LLC, a real estate research company. The buyer of South Two Seven Lofts Condominium, 27 Grove LLC, is a Miami-based company whose principal is Meir Srebernik who is chairman of Israel-based Matav-Cable Systems Media.

“With hard and soft costs of about $180 to $220 per square foot in South Florida for low-rise construction,” says Jack McCabe, CEO of McCabe Research and Consulting in Deerfield Beach, ” the $138 square foot figure represents a considerable loss for both the developer and lender.

“In a lot of cases, the first 70% of unit closings goes to pay the lender and the next 10% to 25% usually goes to pay secondary liens, such as bridge loans, and equity partners,” says McCabe. “The remainder (of the proceeds) is what  the developer gets,” he says, “although in a lot of cases, the developer makes money off of construction fees and puts a minimum amount of his own money in the project.”

There are two ways to acquire a property, says McCabe. “If you buy it in a short sale from a bank, you can make an offer,” for less than the amount of the mortgage, he says.  This is easier for the bank, because it doesn’t have to go through the foreclosure process which could take 12 to 18 months, says McCabe. In this case, the buyer purchased the 19 units at a 36% discount off the face value of the loan that the developer owed the bank, he says.

Some of the condominium units off the water, when they have been sold in bulk, have gone for as low as $110 to $126 per square foot, says McCabe. In contrast, the average price for bulk buys in downtown, where many of the units are on the water, runs between $200 and $220 per square foot, he says. The Coconut Grove property is not on the water.

“Most owners of new condominiums rent for less than the monthly operating expenses,” says McCabe. “But after paying $138 per square foot in Coconut Grove, the buyer may be able to rent out units at a positive cash flow and sell them at a later date for a profit,” he says.