The website CondoFlip.com, launched as a listing site for flipping pre-construction and converted condos, boasts bubbles are for bathtubs. But today’s condo market is becoming quite frothy and sharks have caught the scent of blood in the water.
CondoFlip.com recently added three big panic buttons to its home page: one green, one yellow and one red. By pushing the red button, condo sellers agree to give up their deposits and sell their properties for 6% below what they paid for it. The red button also is aimed at developers who have unsold pre-construction condo units and need to sell the land.
Yes, the days of the quick condo flip are over and many markets like South Florida, Las Vegas and San Diego are over-saturated with product. Supply and demand eventually will come back into equilibrium and the for-sale market will normalize. McCabe Research & Consulting CEO Jack McCabe thinks that will happen in around three years. He launched McCabe Acquisitions LLC last year to capitalize on low-hanging fruit he predicted would be ripe for the picking starting this year. McCabe recently entered a strategic alliance with a $4 billion private equity fund with plans to acquire $600 million to $700 million in distressed for-sale residential assets over the next three years.
“There are several very large pools of money looking for a place to park,” explains McCabe. “And there are strong opportunities, both short- and long-term, to find bargains in certain markets that have appreciated the most over the past few years.” The fund is targeting entire condo projects and blocks of condos that are unsold. “We’ll offer property owners the opportunity to get out from under a failing project before they are foreclosed on,” says McCabe. But he notes foreclosures and REOs just might be the best buys.
McCabe also is talking with mezzanine lenders, who are getting nervous that developers may default on their primary loans. McCabe recently toured several projects financed in part with mezz debt and is putting together proposals that will offer those secondary lenders an exit strategy. McCabe added, “I’ll be speaking with at least three or four other companies in the next couple of weeks that are between $12 billion and $123 billion in size.” Clearly, for McCabe Acquisitions LLC and other such funds, business looks good.
