W South Beach deception alleged - South Florida Business Journal:
W South Beach deception alleged
Several unit buyers at the W South Beach are clamoring for their deposits to be returned, alleging developers deceived them into believing there were to be more units, larger units or a second pool at the chic 420-unit condo-hotel.
The problems at the W reflect the dismal market for condo-hotels and the latest wrinkle in the ongoing flood of buyer rescission cases making their way through Florida courts.
“The biggest problem at the W right now is the values have declined so substantially, and nobody will lend on that,” said Dennis Freeman, a Miami Beach attorney handling one of the cases.
Lawsuits are alleging several adverse changes to the property in an attempt to collect the full 20 percent deposit back, a major challenge in today’s market. The project is held by a company called 2201 Collins Fee LLC, and ultimately by New York-based TriStar Capital and RFR Realty.
A lawsuit, filed in federal court by real estate investor Kamyar Kadivar and three other buyers, alleges that the developer reduced the number of units to 411 from 523 without revising the calculations for how much of the total property the units represent. The percentage of ownership is used to calculate maintenance fees. The suit also makes a more common allegation against condo-hotels: that the project represented the unregistered sale of securities.
Another lawsuit, by a buyer called Cadillac Investment Partners, alleges that the buyer received a smaller unit than was promised, that the unit included a door to the adjacent unit that was not previously disclosed, and that developer reduced the number of trees planted outside and eliminated a second pool from the outdoor space to expand restaurant facilities. The Kadivar suit and the Cadillac Investment suit were both filed in federal court in Miami. Several other buyer rescission lawsuits have been filed in Miami-Dade County Circuit Court.
Kadivar and his co-plaintiffs – who put down deposits of $264,380 and $165,180 – are trying to get back deposits from a January 2006 contract.
“I think the developer may have a tough time with the Kadivar case,” said Palm Beach County attorney Gary Nagle, who has handled several buyer rescission cases recently. “There’s a breach of contact claim, and a possible material and adverse change. It’s an especially difficult time for condo-hotels, even to find financing for them.
Data released March 10 by Condo Vultures shows that, as of Dec. 31, only 42 of 408 units in the W South Beach condominium have closed, at an average of $1.8 million a unit, or $1,806 a square foot. The overall gross revenue generated from selling 10.3 percent of the units is $73.6 million.
Condo Vultures principal Peter Zalewski said nearly 1,450 of the 5,600 new condominium units developed in Miami Beach’s trendy South Beach neighborhood in the last seven years are still unsold.
Zalewski said Miami Beach’s reputation as a long-term good investment, fueled by international demand, may result in some reluctance to drop the price.
“The non-negotiable prices are a shock for a lot of prospective buyers,” Zalewski said.
Attempts to solicit a comment about the recent lawsuits from the W, its ownership and its attorneys at Greenberg Traurig in Miami by press time were not successful.
