Florida Commercial News - Land, Development, Building, Business

Earlier this month, we shared the perspective of national Mortgage Bankers on the commercial real estate market in 2013. Now, in this news release of the week, is a similar perspective from another group of industry experts:   the National Association of Realtors together with the Real Estate Research Corporation, and Deloitte, giving more good news about the future of commercial real estate in Florida and elsewhere:

Commercial Real Estate Investors Eager to "Turn the Page," According to New Outlook Report

CHICAGO - Frustrated by continued uncertainty, a sluggish recovery, and a challenging investment environment, investors generally appear eager to put the past behind them and adjust to the new normal, as outlined in Expectations & Market Realities in Real Estate 2013—Turn the Page, a new annual report published jointly by Real Estate Research Corporation (RERC), Deloitte, and the National Association of REALTORS® (NAR). According to the report, investors appear to realize that this environment will likely be with us for the foreseeable future, and that adjustments may need to be made to maximize commercial real estate investment performance and yield in our continuing slow-growth economy. 

The three organizations have drawn on their respective capabilities to examine the economy, capital markets, and commercial real estate property markets; to thoroughly assess and analyze existing research; and to offer an outlook for commercial real estate for 2013 and beyond. Findings indicate that the economy is expected to improve only modestly in 2013, with the budget deficit, tax increases, and cuts in government spending expected to continue the economic uncertainty. In general, capital remains available for commercial property investments, but the discipline for capital has been inching upward and is becoming more selective. The report also carefully analyzes and offers an assessment of the office, industrial, apartment, retail, and hotel property sectors, as well as for commercial real estate as an asset class, for 2013. 

“It is time to stop waiting for the economy and the investment environment to get better. This is it—this is the new normal—and we need to turn the page on the past and make the adjustments needed to be successful for the balance of this decade,” stated Kenneth Riggs, Jr., chairman and president of RERC. “Investors are facing the challenges ahead, and commercial real estate continues to be an attractive investment for a variety of reasons in this economic climate.” 

“Moderate positive and stabilizing trends in commercial real estate markets are expected to add value to institutional portfolios as we turn the page to the next chapter of the real estate cycle,” noted Matthew Kimmel, principal and U.S. real estate sector leader for Deloitte Financial Advisory Services LLP. “Overall the office, industrial, retail, apartment and hotel property sectors are expected to experience various elements of slow fundamental increase and growth.”

The group expects the commercial real estate recovery to continue throughout 2013. “A pent-up demand for commercial property space has been developing with the nearly 5 million net new job creations in the past three years,” noted Lawrence Yun, Ph.D., NAR chief economist. “That demand steadily reaching the market, combined with little new construction, will likely help lower vacancy rates and push up rents.”

This week, as the nation prepares to hear President Obama give the State of the Union Address, Florida Governor Rick Scott has already given Floridians information on the State of our Sunshine State, in his budget proposal which is described below in our release of the week.  

For details on the budget proposal, check out the pdf online that outlines the budget in a document that has graphs, pie charts, and assorted facts and figures to support the Governor's recommendations to the Legislature.  

Note: this is biggest budget ever proposed for Florida.

Florida Families First: 2013-2014 Budget Propsed by Florida Governor Rick Scott

Introduction from Governor Rick Scott 

“Florida Families First,” our executive budget for 2013-2014, reflects not only the progress we have made in reducing the size and cost of state government but our continued focus on creating jobs, improving education and keeping the cost of living low for all Floridians. This budget will continue our progress on reducing business taxes, investing in K-12 education, making higher education more affordable and creating an environment that encourages job creation. 

In the four years before I took office, Florida lost 825,000 jobs, unemployment more than tripled – from 3.5 percent to 11.1 percent, and state debt increased by $5.2 billion. Since I took office, we have supported the creation of around 200,000 private sector jobs. Florida’s unemployment rate has declined to 8 percent. We have also eliminated over 2,300 onerous regulations, reduced government positions by over 12,000, and streamlined the permitting processes for businesses. We also reversed the 20-year trend of billion-dollar increases in state debt and paid down state debt for the first time since 1994 at a rate of $1 billion each year for the last two years. 

Over the last two years, we made the tough choices to get our economy back on track. Through cost-savings efforts, we were able to cut taxes and eliminate regulations on businesses to help them succeed and create more jobs. As a result of our work over the last two years, we have created an environment where Florida’s private sector was able to create thousands of jobs. We are also now among the best states in the country for our drop in our unemployment rate. Florida’s economy is back on track. 

The nation is taking notice of our economic turnaround. The nation’s top CEOs now rank Florida the second best state in the nation for business. We have a $24 billion trade surplus, no personal income tax, we are on our way to eliminating the business tax, and our weather and beaches attract 90 million tourists a year. The National Chamber Foundation recognized us for having the number one talent pipeline, and the National Council on Teacher Quality said Florida has the most effective teachers in the nation.

 I ran for Governor of Florida because I wanted to keep the American Dream alive for my children, my grandchildren and all future generations of Floridians. My message is simple – everything we do in government must be focused on helping families pursue their dreams by getting a great job and accessing a quality education. Growing up, my family struggled financially and we moved a lot. My parents took different jobs to afford to pay the bills. My father was a bus driver and a truck driver. My mom worked as everything from a hostess in a Chinese restaurant to a clerk at JC Penney’s. We didn’t have a fancy house or nice cars, but what I got from my parents was better than that. They taught me that the American Dream is real – and that only in this country can you start anywhere, work hard and sacrifice, and make your dreams come true. I know that the opportunity to get a quality education and find a great job is key to this success. 

In everything we do in government, I ask, “How will this impact a family making less than $50,000 a year?” That is around half of the families living in Florida today, and that was also my family growing up. This budget puts Florida Families First because it is focused on helping Florida families get a great job and a quality education. Now that our economy is back on track, it is time to invest in these two important priorities in order to drive our economic growth forward. 

My Florida Families First 2013-2014 Recommended Budget includes $18.47 billion in total funding for K-12 education, an increase of $1.25 billion, or 7.3 percent, for K-12 public schools. This increase represents per student funding of $6,799, an increase of $412, or 6.45 percent, over the current fiscal year. State funding for K-12 education totals $10.7 billion - the highest state funding level in history. Included in this historic total is $480 million to support $2,500 pay raises for Florida’s K-12 teachers, plus the cost of associated benefits. 

Additionally, my Florida Families First 2013-2014 Recommended Budget focuses on building up our state’s manufacturing sector by eliminating the tax barriers on manufacturers who buy equipment. Florida’s current manufacturing tax policy puts our state at a competitive disadvantage because most states do not force manufacturers to pay taxes on the purchase of equipment or require them to adhere to regulations for tax exemptions. We want more manufacturers to move to Florida, and this budget proposes to save manufacturers $141 million (of which $115 million is recurring state funds) so we can eliminate the taxes on manufacturing equipment. 

I am proud of what we have accomplished already in the areas of jobs and education, but there is much work left to do. As long as even one Florida family is struggling to find work or access a great education, our work is not done. This year, we will build on our successes through strategic investments that put Florida Families First.  

Image: Florida Governor's Mansion (Wikimedia Commons)

This morning, Florida's Attorney General Pam Bondi announced that Florida - along with another 45 state Attorneys General have made a bargain with Lender Processing Services, Inc. (LPS) which ends the investigations in "robosigning" of real estate documents by LPS and its subsidiaries, LPS Default Solutions and DocX, with a settlement involving LPS paying millions in settlement proceeds and the entry of a consent judgment by each Attorney General in their state's case against the mortgage servicer.

LPS is based in Jacksonville, and moved into the national spotlight early on in the Foreclosure Housing Crisis:  for details, check out our earlier post "Defining RoboSigning: What Exactly is Robosigning - and Why is Everyone So Upset About It?"  LPS is a national leader in real estate financing in this country, and has been for years.  Its primary service is technological:  it helps banks and mortgage servicing companies with all the paperwork and documentation in real estate transactions, and for this reason it became caught up in the ForeclosureGate scandal involving "robosigned" documents.

The consent judgment will provide for new measures to be implemented by LPS in its documentation services. For Florida, that judgment will also bring with it millions of dollars in settlement proceeds to the State of Florida. 

“This settlement reflects the efforts of the states to work together to remedy the widespread abuses occurring in the residential mortgage industry in the past few years,” stated Attorney General Pam Bondi. “The proposed judgment holds LPS and its subsidiaries accountable and requires reforms that ensure the proper handling of residential mortgage-related documents.” 

Meanwhile, LPS has also issued a news release this morning.  However, while an announcement will surely be coming regarding this national settlement, today's news from LPS looks to the future, which LPS believes to be sunny.  According to LPS Applied Analytics Senior Vice President Herb Blecher:

“Though still a long way off from the historic level of originations that preceded the mortgage crisis, 2012 was the strongest full year of originations we’ve seen since 2007,” Blecher said. “Volumes were up approximately 34 percent year over year, with about 8.6 million new loans originated. And, while the majority of these new loans were government-backed – 84 percent in 2012 as compared to just over 50 percent at the peak – the trend over the last four years does suggest a slowly resurgent non-agency lending market.”

From Bondi's release, here are the changes that LPS will be required to make, some of which we can assume will have costs passed on to LPS's banking clientele:  

• Prohibits LPS (including DOCX) from engaging in the practice of surrogate signing of documents;
• Ensures that LPS has proper authority to sign documents on behalf of a servicer, if in fact it is signing documents;
• Requires LPS to accurately identify the authority that the signer has to execute the document and where that signer works;
• Prohibits LPS from notarizing documents outside the presence of a notary and ensures that notarizations will comply with applicable laws;
• Prohibits LPS from improperly interfering with the attorney-client relationship between attorneys and services;
• Prohibits LPS from incentivizing or promoting attorney speed or volume to the detriment of accuracy;
• Requires LPS to ensure that foreclosure and bankruptcy counsel or trustees can communicate directly with the servicer;
• Requires LPS to have enhanced oversight and review of processes over third parties it manages, including those entities that perform property preservation services;
• Prohibits LPS from imposing unreasonable mark-ups or other fees on third party providers’ default or foreclosure-related services;
• Requires LPS to establish and maintain a toll-free phone number for consumers concerning document execution and property preservation services (including winterization, inspection, preservation, and maintenance); and
• Requires LPS to modify mortgage documents that require remediation when LPS has legal authority to do so and when reasonably necessary to assist a consumer or when required by state or local laws.

The states that are in agreement here, and sharing the $120 million settlement proceeds:  Florida, Alabama, Alaska, Arizona, Arkansas, California, Connecticut, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and the District of Columbia.

Florida's economy is being widely monitored, and the Federal Reserve Bank of Philidelphia is among those experts who are analyzing current economic data and forecasting how Florida will fare in the New Year.  News from Tallahassee and the Office of Florida Governor Rick Scott is that things are very sunny these days in the Sunshine State, according to the latest reports -details here in the News Release of the Week:

Gov. Scott: Federal Reserve Index Projecting Growth Highest Since 2005

(January 4, 2013) -- Today, Governor Rick Scott highlighted a recent national index which projects that Florida’s economy will continue to experience growth in 2013 at a pace higher than any point since 2005. The Federal Reserve Bank of Philadelphia’s State Leading Index report shows that Florida’s economy should grow by 1.7 percent during the first half of 2013. This growth rate is the strongest since August 2005, when the rate was 1.98 percent, and is up significantly from December 2010’s rate of 0.95 percent.

Governor Rick Scott said, “With Florida entering a new year, I’m confident that we’ll continue our progress in creating an economic climate that grows jobs for Florida families. As unemployment decreases, businesses expand and the housing market improves, we’re on our way to making Florida the best place in the world to do business – and even though we have more work to do, Florida’s economy is on the right path.

The Federal Reserve Bank of Philadelphia produces monthly leading indexes for each of the 50 states. They include variables that lead the economy including state-level housing permits and unemployment insurance claims among others.

The Mortgage Bankers Association is a national association serving that segment of the financial industry in this country that deals in both residential and commercial real estate financing.  It has its headquarters in Washington D.C., but the MBA has connections with literally every segment of the American financial industry and its analysis and reports are respected as being sound.  

So when the Mortgage Bankers Association releases information regarding how the commercial real estate industry is doing from a financial perspective, industry insiders stop to consider what the MBA is opining.

“Commercial and multifamily mortgage borrowing slowed in the third quarter,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “Even though low interest rates continue to make borrowing extremely attractive, a moderate pace of commercial property sales transactions and a continued drop in the volume of commercial mortgages maturing limited the overall amount of commercial mortgage loans originated.”

This week, the Mortgage Bankers Association released its latest findings on how commercial real estate financing is doing in the United States right now by analyzing what happened in the 3rd Quarter of 2012.  Here's what the Mortgage Bankers Association found, among other things:

• Commercial mortgage originations fell 17% from 2nd Quarter 2012 to 3rd Quarter 2012. 
• Commercial mortgage originations fell 7% comparing 3rd Quarter 2012 to 3rd Quarter 2011.
• Most popular form of commercial real estate for financing remains multi-family properties (no surprise to anyone here in South Florida).
• Loan origination dollar volumes for retail properties fell 35% from 2nd Quarter 2012 to 3rd Quarter 2012.
• Loan origination dollar volumes for office properties fell 24% from 2nd Quarter 2012 to 3rd Quarter 2012.
• Loan origination dollar volumes for health care properties fell 33% from 2nd Quarter 2012 to 3rd Quarter 2012.
• Loan origination dollar volumes for hotel properties fell 8% from 2nd Quarter 2012 to 3rd Quarter 2012.
• Commercial bank saw a jump of 44% in commercial mortgage loan volumes from 3rd Quarter 2011 to 3rd Quarter 2012.

The important thing for South Florida to remember when considering these numbers is that this is a national report, and what may be true for the United States overall in a broad brush may not jive with what Florida, especially South Florida and the Miami metroplex, is experiencing.  

Things are different for our neck of the woods than they are in other parts of the country.  For better and for worse - we're the state that has made history in foreclosure numbers - and Florida commercial real estate may be doing much differently than this national overview suggests.  Still, these numbers are important to Florida and reveal something we all know:  it's still a struggling economy out there for commercial real estate interests.  

Office buildings in South Florida are not tenant-driven any longer, according to the latest reports for the second quarter of 2012: building owners and those interested in investing in office space as a real estate investment got some good news this month. 

In the past, tenants could ask - and get - things like free rent and other cushy concessions, but now the worm may have turned and tenants may now be faced with landlords asking for higher rents and not as ready to make concession deals.  Consider the following:

1.  The Sun Sentinel is reporting that highrise office buildings like CityPlace Tower in West Palm Beach have over 90% occupancy.  

2.  A 2012 Report by Cushman & Wakefield for the second quarter of this year shows Broward County's overall vacancy in the second quarter at 16.7% and Palm Beach County's vacancy at 20%.

3.  The latest market report from Jones Lang LaSalle finds major renewals of office leaseholds in Miami, with GlobeSt.com using the report's Norwegian Cruise Line’s 199,000-square-foot renewal as as an exmaple of corporate tenant retention gaining in strength here in South Florida.  Moreover, office tenants are touring the Miami real estate market for space, GlobeSt giving examples of accounting firm Marcum LLP; Morrison, Brown, Argiz & Farra; and HomeServe USA.

4.  Finally, the CoStar Group is reporting that South Florida's office building vacancy rate was down over the previous quarter in 2012, with net absorption totaling positive 689,344 square feet. They report tenants in 2012 that include:

• Citrix Systems for 54,902 square feet at Park Center;
• University Of Miami Bascom-Palmer for 52,205 square feet at Crossroads 3; and
• State Farm Mutual Automobile Insurance for 50,000 square feet at Convergys at Westpoint Centre.  

CityPlaceTower in West Palm Beach is 90% Occupied.

The Federal Reserve Board has taken information provided by all twelve (12) of the Federal Reserve Districts as of May 25, 2012, and put all this data together in one Summary of Commentary on where our economy is at right now.  You may know this as the Beige Book for June 2012. 

Here's a Short Synopsis of what you will find in the complete Federal Reserve Board’s Summary of Commentary (read it here):

1.  Manufacturing

Manufacturing continued to expand, and most Districts reported gains in production or new orders. The only exceptions were from the Philadelphia, Richmond and St. Louis Districts, where factory activity was mixed or had softened slightly. Growth was seen in the following in one or more of the Districts:

• auto and steel manufacturing
• semiconductors and high-tech equipment
• aircraft and parts
• agricultural and construction equipment
• industrial machinery
• food
• pharmaceuticals
• petrochemicals
• construction-related products
• lumber and wood products

2.  Consumer Spending

Retail spending was flat to modestly positive in nearly all Districts. Growth was seen in the following in one or more of the Districts:

• household goods
• apparel
• automobiles 

3.  Travel and tourism

Reports from most Districts pointed to continued strength in travel and tourism, bolstered by both the business and leisure segments. Favorable spring weather spurred tourism in the Minneapolis and Kansas City Districts. Time-share rentals were strong in the Richmond District, and foreign visitors boosted activity in Florida.... Growth was seen in the following in one or more of the Districts:

• restaurants
• food service
• business travel
• convention bookings
• hotel bookings
• hospitality-related projects

4.  Nonfinancial Services

Demand for nonfinancial services was generally stable to slightly stronger since the previous report.  Growth was seen in the following in one or more of the Districts:

• information technology
• healthcare services
• professional and business services(e.g.,accounting, engineering, advertising, and legal)
• advertising sales
• freight transportation
• railroad contacts

5.  Real Estate and Construction

Activity in residential real estate markets improved in most Districts since the previous report. Growth was seen in the following in one or more of the Districts:

• apartment market
• multifamily construction
• home sales
• Commercial construction
• Commercial leasing
• Build-to-suit construction
• speculative industrial projects
• hotels / luxury hotels
• higher education projects

6.  Banking and Finance

Stronger loan demand in energy, healthcare, and commercial real estate.  Growth was seen in the following in one or more of the Districts:

• capital spending loans
• stronger mortgage lending
• commercial real estate loans
• auto loans.

7.  Agriculture and Natural Resources

Agricultural conditions generally improved since the previous report. Growth was seen in the following in one or more of the Districts:

• corn
• winter wheat
• hog and cattle
• Energy activity remained robust, with drilling expanding further in the Cleveland, Atlanta, Minneapolis, Kansas City, and Dallas Districts. 

8.  Employment, Wages and Prices

Hiring was steady or showed a modest increase. Reports of hiring were most prevalent in the manufacturing, construction, information technology, and professional services sectors.  Price inflation was modest across most areas of the country.   

Last December, we wrote on the constitutional challenge made by the Town of Yankeetown, Florida, to portions of the Florida Community Planning Act with the resulting settlement which included proposed legislation that would amend the Community Planning Act to deal with some of the concerns pointed out by Yankeetown. 

Back then, Florida Senator Mike Bennett spearheaded this resolution with Senate Bill 842 as an amendment to Florida Statute 163.3167 - but that's not the end result, the passage of SB842.

Instead, SB842 was substituted with legislation that came out of the Florida House, e.g., HB 7081; HB 7041; and HB 7075 as well as companion bill SB 922, all of which were passed by the Florida Legislature and are now effective Florida law (or will be in a matter of weeks).

2012 Changes to the 2011 Florida Reforms to Growth Management and the Florida Community Planning Act

The Yankeetown constitutional challenge was officially dismissed off the Leon County docket in April 2012.  As for what changes this lawsuit and other discussion of the FCPA has caused in the Florida Legislature this year, such as HB 503 which we've also been monitoring, here are the bill summaries as shown by the Florida Legislature - more on HB 503 later this week:

HB7081 Bill Summary

This bill makes a number of modifications and clarifications to ch. 2011-139, L.O.F., the Community Planning Act (act). Modifications include fixing cross-references, updating outdated language, and removing provisions throughout the statutes that the act made obsolete such as references to the twice-a-year limitation on adopting plan amendments that no longer exists and references to the evaluation and appraisal report that no longer is required.

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Here's good news for Florida - a new research study finds that the Florida economy as a whole is getting better, news carried by media outlets like the New York Times.  More here in our "news release of the week." 

To get the actual study, you will need to email Comerica at www.comerica.com/econsubscribe and subscribe.

Here from the Comerica Bank out of Dallas:

Florida Economy Rises In March, Reports Comerica Bank's Florida Economic Activity Index

DALLAS, May 23, 2012 /PRNewswire/ -- Comerica Bank's Florida Economic Activity Index increased in March, rising four points to a level of 109.5. The March index reading is 29 points, or 36 percent, above the index cyclical low of 80.6. The index averaged 107 in the first quarter of 2012, eight points above the index average for all of 2011.

"Florida is gaining economic momentum, as shown by the uptick in our Florida Economic Activity Index for March. Real estate conditions are gradually firming, as buyers take advantage of the very high affordability in residential markets," said Robert Dye, Chief Economist at Comerica Bank. "Tourism activity is picking up and that is helping to stabilize the state economy. However, cuts in federal spending are dragging on the Florida economy as the space shuttle program fades into the history books. A weaker global macroeconomic environment may limit international interest in Florida real estate this year."

The Florida Economic Activity Index consists of seven variables, as follows: nonfarm payrolls, exports, sales tax revenues, hotel occupancy rates, continuing claims for unemployment insurance, building permits, and airline passenger deplanements. All data are seasonally adjusted, as necessary, and indexed to a base year of 2008. Nominal values have been converted to constant dollar values. Index levels are expressed in terms of three-month moving averages.

In addition to Boca Raton, East Boca Raton, Fort Lauderdale, Naples, Orlando, Palm Beach Gardens, Singer Island, Sarasota, Stuart, Wellington and Weston, Fla., Comerica (NYSE: CMA) locations can be found in its headquarters state of Texas, as well as in Arizona, California and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico.

SOURCE Comerica Bank

RELATED LINKS

http://www.comerica.com

Source: PR Newswire (http://s.tt/1czTx)

HB1013 in the Florida Legislature has been closely monitored by many in the Florida real estate industry (check out our earlier post from February 2012 for details) and now, it's a done deal.

Last week (on April 27, 2012), Florida Governor Rick Scott signed HB 1013 into law, and it becomes effective on July 1, 2012. You can read Governor Scott's transmittal letter here. 

What does HB1013 Do, and Why Are So Many Against It?

This new law changes implied warranties for construction of residential properties - like the many condominiums here in Florida.  HB1013 limits implied warranties for a new home by stating in Florida legislation that these warranties do not extend to defects in things like roads and drainage improvements. 

This helps Florida builders and Florida real estate developers because they can now point to Florida legislation as a shield when HOAs (homeowners' associations) assert claims against the builders for infrastructure issues. 

It says something that Governor Rick Scott signed this bill into law this week; after all, there were lots of folk asking that Governor Scott veto HB1013.  Consider their arguments as presented here:

1. Today's editorial in the SunSentinel, entitled "Developers get costly break;" and

2. Last week's story in the Miami Herald, "Homeowners want Scott to veto bill that forces them - not developer - to pay neighborhood repairs."

As for the persuasive arguments that helped convince Governor Scott to sign this legislation, check out "Action Alert: Lower Costs for Business by Preventing Frivolous Lawsuits – Urge Governor Scott to Sign HB 1013," by the Florida Chamber of Commerce. 

What about the Lakeview Reserve case?

Back in 2010, the Fifth District Court of Appeals here in Florida issued its opinion in Lakeview Reserve Homeowners v. Maronda Homes, Inc., 48 So.3d 902 (Fla. 5th DCA 2010),  and by doing so, the Florida court ruled that implied warranties of developers and builders of residential properties did extend to the subdivision infrastructure areas like roads, sewers, drainage, etc. -- in HB1013, Florida law is returned to the status quo that existed before this decision.

In essence, the Florida Legislature and the Florida Governor have told the Florida Courts that nope, Florida warranty law isn't going to get new boundaries in this current economic crisis. 

And that's good news for Florida real estate. 

With all the media focus on investors both foreign and domestic targeting Miami real estate development, not enough hats may be tipping toward what is happening over in Orlando, Florida and particularly in the Orlando area's Lake Nona community.

It's a big deal and not enough people are appreciating what is happening in this part of Central Florida.  That's too bad because it's not only good for the Central Florida economy, it's a noble effort that helps people all over the world both now and into the future.  Literally.

What is happening in Orlando's Lake Nona?

Lake Nona, for those involved in Florida real estate development, is home to Lake Nona's Medical City, which is becoming an internationally recognized biotech mecca for medical resources, both research and treatment, including:  

VA Medical Center - at a projected cost of $665 million, a new 1.2 million square foot medical center is being constructed at Lake Nona by the Department of Veterans' Affairs, and will include a multispecialty outpatient clinic along with 134-inpatient beds, 120-community living center beds, a 60-bed domiciliary as well as the necessary administrative/ support services.  In January 2012, the construction milestone of completing the VA Med Ctr warehouse was met.  (Go here for future milestone updates.)

Nemours Children's Hospital - one of the few free-standing children's (pediatrics) hospitals being built in this country, scheduled to open this year. 

University of Central Florida Health Sciences Campus - Up and running in 2010, the medical school provides world-class facilities, including the Harriet F. Ginsburg Health Sciences Library; a 5,300-square-foot Microscopy Lab; a premier Anatomy Lab; an 198,000 square-foot facility for biomedical researchers (the Burnett Biomedical Sciences building); and three Biosafety Level 3 laboratories.

MD Anderson Orlando Cancer Research Institute - a regional location for the world-wide respected cancer treatment hospital, The University of Texas MD Anderson Cancer Center in Houston, this facility has been operating in the Orlando area since 2003.

Sanford-Burnham Medical Research Institute - Home to two technology centers Conrad Prebys Center for Chemical Genomics and the Translational Research Institute as well as its Diabetes and Obesity Research Center, the internationally recognized Sanford-Burnham (formerly Burnham Institute), chose Orlando's Lake Nona area for the site of its east coast facilities and has been operating in Florida since 2009.

University of Florida Academic & Research Center -  Breaking ground in October 2010, the University of Florida expansion into the Lake Nona medical community provides an 100,000 square-foot facility that beginning this year, will allow UF students the chance to work alongside some of the best scientists in the world in the neighboring facilities of the Sanford-Burnham Medical Research Institute.

These are the biggies of this growing biotech medical hub, but there are more that are being built and more that are being planned.  Consider this:

Recently, the Orlando Sentinel did provide coverage for last month's grand opening of the 54,000 square foot Florida Hospital – Sanford Burnham Translational Research Institute for Metabolism and Diabetes (TRI),  designed by Flad Architects, which will be dedicated to the study of diabetes, obesity, and the metabolic origins of cardiovascular disease both from a laboratory environment as well as a coordinated hands-on patient treatment facility. 

With all the negative chatter about banks and foreclosure, casinos and gambling, state government lessening protections on environmental issues and more ... it's great to think about the good that is being done right now in Central Florida and how real estate investment and development is involved in these noble enterprises.

We should all be appreciating what is happening in Lake Nona right now.  It's a good, good thing. 

Last month, we posted about the white paper that US Federal Reserve Chairman Ben S. Bernanke submitted to Congress (read it here, along with the full text of that Federal Reserve white paper) and all the reactions to his submission. Some think the Fed Reserve Chairman is going too far, with Bernanke exceeding the limits of his authority with what he's suggesting to Congress and essentially promoting in his speech last week.

Because Bernanke's speech to the International Builders Group of the National Association of Homebuilders on February 10, 2012, was taken point by point from Bernanke's arguments to Congress. 

At least everyone can agree that Bernanke is a man with a mission.

In essence, Ben Bernanke is arguing that the Federal Reserve system is being hampered in its efforts to jump start the American economy because the U.S. Housing Industry is not cooperating. Specifically, the Federal Reserve Chairman is pointing fingers at the weak mortgage lending present in Florida as well as the rest of the country.

Weak mortgage lending means a weak housing market, which is a big problem for the Federal Reserve these days.  A problem to be solved. 

Bernanke Didn't Talk Money to the Builders, He Talked Housing

After acknowledging a fact that everyone in the real estate industry, if not the country at large, understands - that record low interest rates on home mortgages are not igniting home sales - Bernanke moved to suggestions for getting things moving. 

Things like having government entities (land banks) take on home ownership thru donations of homes; buying of homes; and selling of homes, as well as having the power to clear up title questions.

Result?  Many who are currently facing foreclosure in Florida may never move from their home; however, they may change from being "owner" to "tenant" with the government taking on the responsibility of home ownership.  In the future, will the government sell that home back to the tenant who was facing foreclosure as a home owner?  Probably - but that's one of the big issues here: once the government owns the real estate, some are concerned that the government won't let go.

Here is the full text of Federal Reserve Chairman Ben Bernanke's speech in Orlando last Friday (click to view the entire speech), entitled "Housing Markets in Transition," as it was presented at the National Association of Homebuilders' International Builders Show:

The economic recovery began more than two years ago, but it doesn't feel like much of a recovery for many Americans--certainly for those of you who depend on the housing sector for your living, as well as for the millions of others who have seen their home values plummet or lost their homes through foreclosure. Though some progress has been made in reversing the losses in jobs and income sustained during the recession, the pace of expansion has been frustratingly slow and the unemployment rate remains very high by historical standards. The state of the housing sector has been a key impediment to a faster recovery. In the typical economic recovery, a resurgent housing sector

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The beginning of 2012 is bringing lots of different forecasts relating to economic recovery in South Florida, and most of us agree that a sustainable recovery can only come after a turn around in the housing industry.  Now, there are those who are proposing creative ways to boost housing and get things moving forward.

Like Federal Reserve Chairman Ben Bernanke.

This week, Bernanke released his Big Idea for Housing:  let banks move lots of those Real Estate Owned properties sitting on their books after foreclosures have been completed into an income-producing column on their books:  rental properties.

Read Bernanke's white paper here. 

It was sent yesterday to the Senate's Committee on Banking, Housing and Urban Affairs and it's spreading like wildfire among news analysts and industry leaders. Some are calling Bernanke's idea a "game changer." 

Banks are sitting on a tremendous number of homes and paying the expense of their maintenance: why not rent them out and get some money coming in?  Sounds great to a lot of people.  And for many segments of our industry, this may provide an answer, but it is not positive news for everyone.  If banks begin to throw their inventory of homes into the rental market, there may be adverse effects to others in the real estate and construction industries. 

In Florida, Renting is Looking Good - for the Construction Industry

The Fiscal Times reports that real estate developers are already forecasting an increased popularity in renting as opposed to home ownership.  Projects in development in Florida and elsewhere for multi-family dwellings are booming in today's bad economy: they are being built at three times the rate of single family homes.  

Here in South Florida, apartments are especially popular in real estate development circles.  As the Fiscal Times notes, we're already aware of development of around 4000 rentals in Fort Lauderdale, Hollywood, and Plantation alone.

It's not good news for those interested in planning and building these new multi-family homes to hear that banks are about to put "For Rent" signs all across the community in front of single family homes.  With the right rent, many families will opt for those homes instead of renting an apartment. 

Mr.. Bernanke's "Game Changer" may not be great news for everyone in South Florida after all. 

Right now, the Florida Legislature is on holiday break but soon it will be back in session up in Tallahassee working on one of the biggest jobs to be undertaken:  finalizing the casino bill legislation to allow limited and supervised gambling in Miami and other parts of Florida.

To monitor that legislation, Senate Bill 0710, follow SB-710's site page at the Florida Senate.

Media Takes Notice of Encouraging Economy Boost Due to Genting's Arrival in Miami

The New York Times covered what's happening here in the Miami area with a recent article entitled, "South Florida Poised for Birth of Casino Gambling," which delves not only into the status of Genting's Resorts World Miami and the future of casinos in South Florida, but also points out what we've been discussing for awhile now:

Genting's entry into the Miami metroplex commercial real estate economy has had an almost immediate, positive impact.  Included in the NYT coverage are examples like:

1.  Miami World Center

You can view a very sleek website for Miami World Center online already, even though the "city within a city" has yet to break ground.  Technically, this project has been in the works since November 2008 and predates Genting's Resorts World Miami, but as the NYT reports, Genting has reinvigorated the project with its promise of an economic boost.  

2. Miami Beach Convention Center

The Miami Beach Convention Center may be getting a nice renovation - and expansion - as the local Powers that Be paid Arquitectonica for a study of what it will take to makeover the place. Steve Wynn was interested in footing the bill to redo the Center if he could build his own casino nearby (a big hint, hint to Tallahassee).  

Miami Beach has hit a stumbling block for the moment here, since their Board of Supervisors voted down the proposal to allow gambling there.  Is it over?  We'll see.  

Economic Predictions

Right now, the economists are still doing their statistical studies and crunching their numbers before issuing their opinions on gambling casinos impacting South Florida.  

However, a big group of businesspeople in a number of industries have taken the floor to state their take on things and how this will help them and their people.  For more, watch this video where the Associated Industries of Florida held a press conference to make their opinion known:

[This post is the third in a series discussing the Foreign Account Tax Compliance Act (FATCA) and its impact upon foreign investment and development in South Florida and the United States as well as efforts both locally and in other countries to stop FATCA.]

[This post is a revised version where FATCA was misapplied regarding IRS Proposed Rulemaking REG-146097-09.]

The Internal Revenue Service is proposing a new regulation (see IRS Proposed Rulemaking REG-146097-09) that will allow the IRS to force American banks to collect information on interest paid to their nonresident alien depositors and thereafter, to report that deposit interest information to the IRS.  Read the entire proposed regulation in its entirety here. 

What would the IRS do with this non-citizen deposit interest information?  

According to Congressman Charles Boustany (R-La), "[I]t is my understanding that the IRS seeks this new authority to help foreign governments collect their own taxes abroad."  That's right - just as FATCA is seeking to force foreign banks to report American deposit information of their depositors, the IRS is seeking to have American banks share foreigner's deposit information with the IRS, too.  It's the flip flop of FATCA, as it were. 

On September 27, 2011, Congressman Charles Boustany (R-La) wrote his letter to the Secretary of the Treasury Department (i.e., the boss of the Internal Revenue Service) in his official capacity as the Chairman of the Oversight Committee of the Ways and Means Committee of the House of Representatives.  Boustany gives Secretary Timothy Geithner a month to respond to the letter.

Read Boustany's letter in its entirety here.  Surfing the web this morning, we could not find any response by the Treasury Department - or the Executive Branch - to Congressman Boustany's correspondence. 

Boustany, in his role as a Committee Chairman, has officially asked the Internal Revenue Service to stop implementation of the IRS regulation and instead to provide Congress with facts and figures to support not only its policy goals but its authority under the law to take these actions. 

His October 11, 2011, deadline is getting close to 60 days old. What will happen next? We don't know.

[Thanks to New Zealand reader Marvin Van Horn for letting us know about Congressman's Boustany's letter and giving us the expat's perspective on this issue (more on expats later in this series) and to UK reader Alan Jones on the need to revise our earlier post.]

To recap, FATCA was passed as part of President Obama's jobs bill, the HIRE Act of 2010. What FATCA does is attempt to curtail perceived tax evasion through new regulatory requirements on foreign banks and financial institutions. In sum, the federal government has instituted requirements through FATCA that require foreign financial institutions to assist them in identifying U.S. taxable assets in other countries through such things as providing details regarding accounts at their institutions that are held by Americans. 

For details about what FATCA is requiring of foreign banks and financial institutions, read the second post in our series. 

In 2011, shortly after the landmark legislation was signed into law by Governor Rick Scott, a lawsuit was filed by the Town of Yankeetown, Florida, challenging the Florida Community Planning Act as being unconstitutional for among other reasons, allegedly being unconstitutionally vague. The State of Florida moved to dismiss the complaint. From the Leon County Clerk's docket:

Plaintiff seeks declaratory relief, alleging that HB 7207/Chapter Law 2011-139 is unconstitutional because it contains more than one subject and has a misleading title as an act relating to trust funds when the act includes a preemption prohibition on certain referendum and initiatives; and because it contains an unconstitutional delegation of authority to the Florida Department of Community Affairs to determine vague and undefined terms.

On November 9, 2011, a proposed settlement between the State of Florida and the municipality was presented to the court, which would result in an exception to the Act’s application when localities had charter provisions authorizing certain referenda in place on the date that the Act became effective. While the settlement must be approved by both the Governor of Florida and the Florida Legislature, an amendment to the Act itself that would make the settlement provisions part of the Act itself has already been proposed.  

Introduced by Senator Mike Bennett as SB 842, it will amend Florida Statutes Section 163.3167 to read, among other things:

“[A]ny local government charter provision that was in effect as of June 1, 2011, for an initiate or referendum process in regard to development orders or in regard to local comprehensive plan amendments or map amendments, may be retained and implemented.”

Senator Bennett’s proposed amendment to the Community Planning Act does other things, as well as disposing of the Town of Yankeetown’s concerns. From the Florida Senate’s overview, this amendment includes:

Repealing provisions relating to the powers and duties of the Secretary of Community Affairs and functions of the Department of Community Affairs with respect to federal grant-in-aid programs; replacing references to the Department of Community Affairs with state land planning agency; repealing provisions relating to the Urban Infill and Redevelopment Assistance Grant Program; deleting provisions relating to the Coastal Resources Interagency Management Committee; deleting provisions excluding a municipality that is not a signatory to a certain interlocal agreement from participating in a school concurrency system; replacing references to the Department of Community Affairs with the Department of Economic Opportunity; deleting requirements for interlocal agreements relating to public education facilities, etc.

 

This proposed legislation may be tracked online.

[This post is the second in a series discussing the Foreign Account Tax Compliance Act (FATCA) and its impact upon foreign investment and development in South Florida and the United States as well as efforts both locally and in other countries to stop FATCA.]

FATCA (the Foreign Account Tax Compliance Act) will become effective in 2013 unless action is taken, and as discussed earlier in this series, there are a tremendous number of critics of FATCA that believe it is harmful to a wide range of interests, not the least of which is economic stability and recovery in South Florida and elsewhere.

Why Was FATCA Passed in the First Place? Money.

The purported reason for Congress to pass FATCA was to enhance the ability of the federal government to gather taxes due on assets that are sitting in foreign accounts.  Congress passed the legislation as part of the HIRE Act (Hiring Incentives to Restore Employment Act), all for the reason of collecting revenue for the federal coffers.  It's an international tax collection effort aimed at perceived tax evasion through overseas accounts.

What Does FATCA Do?

One basic thing that FATCA does is require that financial institutions, American or foreign, anywhere in the world, provide the Internal Revenue Service with account information for any U.S. clientele with $50,000+ in their account.  Which means that the U.S Government is trying to make its tax collections more effective by having banks file information with the IRS and not just the taxpayer.

However, FATCA isn't a simple tax collection procedure.  FATCA will require major alterations to the way business is done by both foreign and domestic enterprises - and that's the problem. 

FATCA, for example, will force every foreign bank to report all of its U.S. account holders to the Internal Revenue Service (regardless of account balance); afterwards, FATCA mandates that these foreign banks  impose a 30% tax on all payments or transfers to these U.S. account holders who refuse to identify themselves. Any foreign bank that doesn't want to do this will be penalized by the federal government through  withholding of interest and dividends for U.S. sources as well as withholding of gross proceeds from the disposition of U.S. securities, etc.

If FATCA does become effective in 2013 (that's one year, one month, and a few days from now), then a huge number of corporations are going to have to make lots of internal changes in order to comply with this new law. Huge numbers of changes. 

Change is expensive. While this type of imposed change is never welcomed with open arms by companies, FATCA requirements are hitting businesses at an especially bad time: internal changes in frameworks, procedures, operations, etc. are expensive in time and money.  

That's not all.  Accounting firms like Delotte and Ernst and Young are already offering their services to provide "compliance risk assessment" and evaluations of systems and how these internal systems will need to be changed in order to meet FATCA's requirements for withholding and reporting.  Which means not only the expense of the changes themselves, but the additional expense of hiring a firm to evaluate and recommend what those changes need to be. 

Given today's economic climate, forcing additional expenditures in already tight corporate budgets in order for the federal government to collect more tax dollars is not setting well with lots and lots of businesspeople.  Companies in all kinds of industries and in all parts of the world are against FATCA and what it means to their bottom line.

Growing Concern for FATCA's Impact on Investment and Trade

Several months ago, Forbes published an interesting take on FATCA in its June 21, 2011 online edition, written by Forbes contributor Daniel J. Mitchell and entitled "Why Obama's FATCA Law Is A Threat To Business Growth."

There, it's first pointed out that FATCA was passed alongside draconian legislation requiring 1099s to be filed by every U.S. business (from solo proprietorships to the largest corporations) for any vendor with whom they did $600 of business (or more).  That was egregious, and this law was nixed.  No one is going to have to jump through that 1099 for $600+ hoop after all. 

However, FATCA - which Forbes describes as a mere "international version of Obamacare’s 1099 scheme" - remains alive and well and since it's impacting foreign business operations much more than those here at home, Congress hasn't heard the outcry against its unfairness as easily as it heard the 1099 - $600 protests. 

Foreign Companies May Respond By Cutting Off American Investment Rather Than Comply With FATCA

Forbes warns that FATCA is so much trouble that it may mean that foreign financial institutions could decide that the easiest change for them will be to ignore all those offers for help from Ernst and Deloitte and instead, just stop doing business in America.  No U.S. investment, no FATCA worries.

Seems like an option that any sensible foreign business would be pondering, doesn't it? 

Add to this, an article (referenced by Forbes) from Great Britain's Financial Times published in June 2011 entitled "US demains tax tolerance of foreign financial groups," where country after country after country is identified as being at the minimum upset and all the more often outraged at this American legislation.

The outrage against FATCA continues to grow.  For some, it's cost.  For others, it's putting them between a rock and a hard place, since FATCA requirements fly in the face of their own jurisdictions' privacy laws.  There are other bases for foreign criticism, too.  Things like a feeling of being disrespected, as they ask why should other countries be required to act as indirect tax collection agents for America?

Meanwhile, we're starting to see what FATCA will mean if it's not repealed.  This week, Ascentric announced its decision: it's not going to be doing business with Americans because FATCA is not worth the effort.

Next in the series, more details on FATCA and what it means to Americans including businesses in South Florida.

In today's Housing Wire, there's news that a deal has been reached in the Big Bank - AG Settlement of ForeclosureGate issues and the numbers seem to jive with the earlier reporting in the New York Times by Gretchen Morgenson (see our earlier post for details). 

Sounds like the tracks are being repaired and the financing industry train is about to get back on the tracks, right?  Maybe not.

Today, just as Ally Financial announced its $210 Million loss in the third quarter of 2011, its Chief Executive Officer, Michael Carpenter, stated publicly that Ally Financial is not happy with the proposed settlement and Ally Financial is NOT going to make that deal with the AGs because it's not good business for Ally.

That's right: Ally Financial appears to have thrown down the gauntlet and announced Ally is ready for a courtroom battle rather than take the deal that is being described in the New York Times and Housing Wire.

Why?  Ally Financial doesn't like the numbers.  Ally's CEO is telling Ally investors that it's Ally's position that the settlement, as it stands right now, is not in the best interests of its shareholders and while this decision may mean incurring legal fees, Ally sees the "aggravation" of a legal fight as a better alternative that signing off on the AG proposal.  

Ally Points Out the Duty to Foreclose Placed Upon Banks

And, here's the key.  As CEO Carpenter points out in his statements to the press, financial institutions that are in the mortgage business have a duty to foreclose when mortgages are delinquent for a set period of time. 

The banks have a legal duty to do so; they answer to their shareholders.  Where would we be right now if these mortgage servicers had just sat back and refused to foreclose on the defaulting loans? 

ForeclosureGate was not the result of evildoing greed: it was the result of banks (and their lawyers and servicing companies) being blindsided by the HUGE, unprecedented number of loans that went belly up.  For whatever reason, people stopped making their home loan payments and the banks were left between a rock and a hard place: they are fiduciaries to their shareholders, after all.

Ally Financial Ready for the Courtroom?

Ally Financial seems to have done its homework here, purporting to have reviewed its foreclosure cases for exposure in the ForeclosureGate mess.  Out of 25,000 foreclosure cases Ally reviewed, it found that each case had a mortgage that had been delinquent for at least one year.  

Therefore, after a year with no payments on the loan, Ally is revealing its defense to any lawsuits that might be filed against it:  it was fulfilling a legal duty to foreclose because the home owners had stopped paying on their loan contract.  Period.

Will the other Big Banks follow Ally's lead?  Will the state AGs just start suing?  Will everyone calm down and get back to the table and iron out a deal? 

It's too soon to tell.  However, one thing's for sure:  one of the reasons cited by Ally Financial for its $210,000,000 loss this quarter is a decline in its mortgage servicing rights valuation.  It's a leaky boat right now. 

Miami-Dade County Commissioners learned a lot more about the proposed new Resorts World Miami this week, as Genting's proposed casino resort was discussed in detail at a Commissioners' meeting.  Proponents and critics alike were there to put their two cents' worth into the debate about casinos being built in Miami.  Specifically, the three resort casinos currently being proposed in Tallahassee with Genting's casino the one that has all the details all ready to go.  Genting's got a plan, Genting's already moving ahead.

Genting's Resorts World Miami Will be HUGE

Genting is sharing lots of information about its Miami project, much like a proud new mother shares photos of her baby.  Just check our their video (below).  Amazing stuff.

And, at the Commissioners' meeting this week, Genting shared:

• Resorts World Miami is estimated to cost $3.8 billion to complete
• Resorts World Miami will be bigger than any Vegas hotel or casino
• Resorts World Miami is expected to create "tens of thousands" of construction jobs in the short term and "tens of millions" of tourist dollars in the long run
• Genting will issue casino debit cards to its guests for use at restaurants, shops, etc. in the surrounding area (i.e., non-Genting establishments)
• Resorts World Miami is expected to have 5200 hotel rooms (compare this with the MGM Grand at 5044)
• Resorts World Miami plans include two casinos in two different parts of its project, one almost twice as big as the other.  8500 slot machines are included along with 50 restaurants. 
• It is targeting a higher-stakes gambler (more "whales" for Miami).
• Resorts World Miami will be the biggest casino resort in the world - if the plans are okayed by the Powers That Be. 

Bigger than Vegas?  Bigger than anything else in the world?  That's real estate development in a big way and its impact on our economy will be staggeringly positive. Now and later. 

Genting is good for Miami. 

Watch what Genting is planning here:

For investors in Mexico, Israel, Brazil, Canada, or elsewhere, considering real estate investment in South Florida, there is a local resource that should prove very helpful to them: the Miami Downtown Development Agency.

The MDDA is a governmental entity; however, it is an independent agency of the City of Miami that is overseen by a Board of Directors made up of three public appointees and twelve downtown Miami property owners, residents and/or workers.  The directors set policy, and the MDDA's work is then spearheaded by its Executive Director.  The MDDA gets its money from a special property tax.

The Mission of the Miami Downtown Development Agency

According to its website, the MDDA seeks to "... grow, strengthen and promote the economic health and vitality of Downtown Miami. As an autonomous agency of the City, the Miami DDA advocates, facilitates plans and executes business development, planning and capital improvements, and marketing and communication strategies. We commit to fulfill our mission collaboratively, ethically and professionally, consistent with the Authority’s public purpose."

It fulfils this mission by undertaking certain tasks, including the following which are very helpful to those investigating Miami as a possible investment or development site: the MDDA provides an Information Clearinghouse for Downtown Miami as well as undertaking market research & data collection for the downtown Miami area. 

Go here, and find trend analysis for economic trends, visitor trends,and trade trends, for example.  But there's much more. 

The Downtown Miami Master Plan -- The Epicenter of the Americas

Included among its efforts is the 2025 Downtown Miami Master Plan, described on the agency's site as "... a 15-year roadmap for enhancing the livability and quality of life in Downtown Miami. The plan is to serve as a benchmark for encouraging investment by both the public and private sectors, with the goal of transforming Miami’s urban core into the “Epicenter of the Americas.”

"The approved Master Plan combines new land use and planning guidelines, as well as outlines a number of proposed projects, some of which are already underway. The final plan is the culmination of existing studies, as well as a series of Miami DDA Board workshops, public forums, and stakeholder meetings designed to gain a better understanding of existing conditions and gather the best and most sustainable ideas for revitalizing Downtown Miami.

"The Master Plan outlines five core goals for Downtown Miami (bounded at the South end by SE 15th Rd. and on the North by NE 22nd St.; on the West by I-95 and on the East by Biscayne Bay):

• Enhance Downtown Miami’s standing as the business and cultural epicenter of the Americas
• Leverage the City’s beautiful and iconic tropical waterfront
• Elevate Downtown’s grand boulevards to prominence
• Create great streets and community spaces throughout the district
• Promote transit and regional connectivity

You can download an Executive Summary of the Master Plan here. 

Other Information Available Through the MDDA

The Miami Downtown Development Agency is also a resource for other important information, needed by developers and investors considering the Miami area.  For example, the MDDA provides:

1.  A Study of Residential Market Trends – Q2 2011 (download pdf here)

Commissioned by the Downtown Development Authority and prepared by Goodkin Consulting - Focus Real Estate Advisors, LLC Strategic Alliance, this report presents a statistical update of key residential market trends in the downtown area including monthly residential sales activity (closings), price trends, residential leasing velocity and foreclosure activity.

2. Analysis of Miami Demographics (download pdf here)

Within the MDDA Area of 1.7 Square Miles, there was a population in 2010 of 71,000 with a daytime population over twice that, of 194,000, and the area includes 18.6 Million Sq. Ft. of Office Space and 6,096 Hotel Rooms.

For more information, please surf through the MDDA website or email me for more details. 

Genting Malaysia has closed many of its land deals and debuted its plan for Resorts World Miami, a new $3 billion mega-resort located in downtown Miami (part of it in the old Miami Herald building, part in the Omni) with news that it's moving fast:  Genting developers see doors opening as soon as next year for the hotels, condos, restaurants and other amenities. 

We're already posted about Resorts World Miami and what it means to Miami.  It offers a unique opportunity for South Florida's renewal, and signals economic recovery - even a new prosperity for our community. 

After all, Genting won't be a development in a vacuum: other symbiotic and even parasitic developments will be popping up around Resorts World Miami.  That's a given.  (To check out the details surrounding Resorts World Miami, check out Genting's new website on the planned development.)

So, it's no surprise that some would be concerned at all this fierce activity.  Lots of things will be happening now, and fast.

Miami Powers that Be are justifiably concerned about how Genting's new economic bombshell - as well as the expected additional developments  - will work with what is already here: particularly, the cultural arts facilities that exist in the area.  So much so that the non-profit entity The Town Square Neighborhood Development Corporation is now focusing its efforts on working out the infrastructure kinks (traffic, parking, etc.) that Genting's bringing to the party.  Adrienne Arsht Center's Michael Eidson and Parker Thomson are involved here, along with developer Armando Codina and architect Cesar Pelli.  

Cautiously, and rightfully so, they're turning a watchful eye on Resorts World Miami. Their hope: another Lincoln Center, but this one in Miami not NYC. 

It's too bad that some in Miami haven't been so gracious to Genting.

Others are not so welcoming.  Luther Campbell in the Miami New Times comes right out and challenges the new development in an opinion piece entitled, "Genting casino will kill Miami and Miami Beach." Campbell argues that Genting will keep its visitors on Genting property - that tourists who come will be lured to stay (and spend) only on Genting property, and that Miami Beach and other nearby restaurants and attractions will not only not benefit, but also suffer by having their tourist base drawn to the Genting project. He also argues that the jobs Genting brings are all low paying service jobs, because the casinos will be operated by experienced employees Genting imports from other states, with experience running gambling tables.

 It just does not make sense. A project like Genting's will bring all kinds of jobs - from construction jobs, to development jobs, to service jobs, to jobs for those who will run the hotels, restaurants, and retail establishments.  There is, by the way, no downside to bringing lots of service jobs to Florida - we need the jobs.  Plus, it is hard to believe that tourists who come to Genting won't also be drawn to our beaches, to the Everglades, and to the many nearby attractions that make Miami a world class city. We are all likely to benefit.

The Miami Herald published a piece on Tuesday by Michael Putney, "Genting deals winning hand for Miami," where, after researching the specifics of the deal and Genting's background, including that of its CEO, Mr.. K.T. Lim,  Putney ultimately supports the project (even though there are some comparisons in the article to con men and Ponzi scammers like Scott Rothstein and David Paul).

What brought trust to Putney?  First, that Genting has already invested so many hundreds of millions of dollars here already, just to buy land.  (The Miami Herald spot for $236 million, for example.) Second, that Genting's been hiring locally, getting Floridians to do their work here - Putney points out that  Arquitectonica is doing sculptural design.

Third, Genting's got a track record of success with this sort of thing.  Resorts World Miami isn't Genting's first rodeo.  They've got successful examples of similar types of developments all over the world. 

Is It Wise to Already Be Biting the Investor's Hand That Is Feeding Our Economic Recovery?

Genting is well aware that it may be single-handedly instituting a local recovery here and still, its plans and behavior have been gracious and considerate of local interests.

Billions of dollars are coming into Miami.  Now.  Infrastructure concerns?  Of course.  Water, electricity, traffic, roads, parking.  Wow - lots of work.  And work means jobs.  Jobs.  Right now, as well as later.

Genting has revealed its big plan for Miami, and it's turning lots of heads. As well it should, because we may have just heard the magic words that will release our local community from being under its current dark economic spell. 

Foreign Developer Announces Details of New, Huge Tourist Mecca In Resorts World Miami

Yesterday, Genting pulled back the curtain on its plans for a mixed-use development named Resorts World Miami, and it includes taking the Omni Center and neighboring land to construct not only restaurants, bars, and such but a real, live casino to open as soon as a year from now.  If Genting can get the okay to operate a casino in downtown Miami, of course.

Many believe that the Genting Group (officially, Genting Malaysia Bhd., operating casinos worldwide from its Southeast Asia headquarters) will succeed in obtaining a gambling license for its shiny new project from the Florida Powers That Be.  That will only increase the pull of this new tourist destination for visitors across the country as well as across the globe. 

This is a very, very big deal.  Genting will be spending $3 billion here in Miami to develop and build its Resort World Miami project.  The waterfront resort, according to the latest Genting release, will have four (4) hotels (5200 rooms) with two (2) condo towers (1000 units) and (wait for it)... a lagoon on the roof that is estimated to span 3.6 acres.  There will be a convention center, and Resorts World Miami will have the largest ballroom in the United States.

All this is happening very fast.  We've just learned that the Genting Group bought one mortgage note on the Omni last week, pulling the property out of foreclosure.  Soon thereafter, Genting purchased the remaining mortgage note, giving it control of the Omni Center.   

Genting had made news earlier this year when it bought the property that housed the Miami Herald for so many years (see our earlier post, "Foreign Investors Announce Big New Miami Land Development: Genting Malaysia Spend $236 Million for 14 Acres in Downtown Miami.") 

It's Redevelopment Like This Which Will Bring South Florida Back to Sunny Economic Days

Genting's projection include the creation of 15,000 construction-related jobs as well as 30,000 permanent jobs from its development.  These, of course, are projections tied only directly to Genting.  There will be many other jobs that are created as the ripples of this economic tidal wave crest in downtown Miami.

Consider this:  the U.S. Department of Commerce tracks and measures local economies and it has recently released its tallies for Florida (see the GDP Tables here).  According to Tuesday's information, in South Florida (including the Miami metroplex), real estate is tops, government is next, and trade/finance comes in third as contributing to our economy. 

However, you have to consider that within those numbers are foreign and domestic visitors -- and when you do, as calculated by the Miami Herald, you've got around 15% of the local economy which brings tourism into second place right behind real estate. 

Genting's project is right in the big middle of those numbers.  Genting will be coattailed by others seeking to profit from overflow from Resorts World Miami or to compliment the resorts' offerings. 

Yes, this is a very big deal.  And through tourism investment and real estate development, South Florida may be back on the road to prosperity. 

On Tuesday, Pultizer-Prize winning journalist Gretchen Morgenson's article "Attorney General of N.Y. Is Said to Face Pressure on Bank Foreclosure Deal," was published in the New York Times and the next day, the New York Times published its editorial,"It's a Flawed Settlement," opining that the New York AG should persevere in his fight against this deal getting done. 

The firestorm this has sparked is still spreading across the country. 

Why? It may end up being the death knell to the national attorneys general ForeclosureGate settlement with the nation's biggest mortgage lenders - which would have a significant impact on Florida.

In her expose, Ms. Morgenson reveals that Obama Administration has been pulling its Executive Branch strings to get the Attorney General for the State of New York, Eric Schneiderman, to stop resisting the finalization of the AG - Big Bank Deal. 

According to Ms. Morgenson's investigations, the NY Attorney General as well as some of the other Attorneys General involved in the negotiations with the lenders, are not too keen on the current deal sitting on the table because it would bar their states from going after the banks under their state laws, including specifically alleged illegalities that occurred during the sales of mortgage-backed securities.  Joining these AGs in their opposition to the proposed deal are various consumer advocate groups and the like. 

Their position:  the deal lets the banks walk with merely a hand slap and it bars the states from instituting their own actions against the lenders. 

The New York Times story reveals that behind the scenes, White House representatives have been contacting the NY Attorney General as well as these consumer  advocates and others who share Mr. Schneiderman's concern - trying to convince them to get Eric Schneiderman to go along with the proposed deal.  And according to Ms. Morgenson, the White House calls began after officials from the Big Banks asked Shaun Donovan, Secretary of Housing and Urban Development, to help get the contrary NY Attorney General in line. 

Mr. Donovan did admit to the NYT that he had discussed the deal with Mr. Schneiderman - but his position was that he was motivated by a need to help troubled homeowners, not banks. 

What Is On The Table?

The top prosecutors from all fifty states and representatives of the federal government have negotiated with the major lenders involved in the ForeclosureGate crisis to find a settlement agreement that would rectify improprieties that have resulted from widespread activities that include robosigning and false filings (including forged real estate documents and the like).   

In March 2011, basic terms of the proposed deal were released by the group, where big national lenders (e.g., Bank of America, Citi, JPMorgan Chase, Wells Fargo) would pay approximately $20 billion into a fund that would be used to help homeowners who had been harmed by the foreclosure crisis.  In exchange for the money, the lenders would receive releases -- and that's the problem: how big should those releases be?

The deal on the table has each state's attorney general agreeing to release the lenders from any other claims based upon the bad acts addressed in the negotiations (robosigning, etc.).  The lenders would be freed from future lawsuits in exchange for putting the billions of dollars into the fund. 

Here's Where It Hits Florida - Banking Business Is Needed Here

It's true that Florida may have substantial claims against these lenders -- claims that former Florida Attorney General Bill McCollum began investigating last fall (see our discussion "Real Estate Transactions: Florida Attorney General Spearheading Foreclosuregate Investigation - All Other State Attorneys General May Follow Bill McCollum's Lead.")  It's also true that counties have lost significant filing fee revenue, etc., from the ForeclosureGate practices that they'd like to get back (see last week's post, "Suing MERS: Calif Case Reaches Supreme Court and States, Counties Pursue Claims for Lost Fees - But Whose Pockets Would Pay Their Damage Claims?")

However, these prosecutions would seek to bring more money from the lender's pockets into the government's pockets for distribution as the state or county entity saw fit.  Meanwhile, as the Federal Reserve's Kathryn Wilde points out, these lenders are the very same banks that Florida citizens (and elsewhere in the country) depend upon not only as depositors but as home buyers and businesspeople who need solid banking business upon which they can depend. 

What the NYT reveals may be accurate, but in the bigger picture, does this help Florida?  How much money is in the lender's pockets and by taking that cash in claims filed by the government(s), how free will those lenders be to participate in the crucial role of getting Florida's economy out of its dire straits?  Banks aren't bottomless pits of cash - and if they are forced to pay federal settlements, state claims, county claims, both as direct defendants and as indirect defendants (i.e., MERS ownership), then how long does that keep South Florida down?

The news this week is filled with various articles discussing the new foreclosure statistics that have been released for the second quarter of 2011 by RealtyTrac, covering the rate of national foreclosure filings where Florida has always been vying for one of the top spots. 

Just where do we stand, here in South Florida, in recovering from the Foreclosure crisis? 

1.  Mortgage Rates are at Record-Breaking Lows (If You Can Qualify)

This morning, USA Today reports that mortgage rates are extremely low - even at record lows - which means mortgage money is cheap for those who can meet the current standards for getting a home loan.  That's not many people right now. 

Just how low are those mortgage rates?  According to USA Today, we're seeing 5.82% for a fixed mortgage rate.  This is great news for those with solid income streams and high credit ratings. 

2. RealtyTrac Quarterly Reports Show Florida Still Hurting - But Gives Some Encouraging News for the Country

RealtyTrac's latest reports (covered by several media stories) keeps Florida in the lead as the state with the highest rate of mortgage loan delinquencies.  Florida is number one with 13.91%; Nevada is a close second at 13.04%; and California comes in at third with 7.83%.  Notice that Florida is close to double the delinquency rate of California. 

According to Consumer Affairs, reviewing the totality of RealtyTrac's reports as they were released this week actually hints at light at the end of the tunnel.  RealtyTrac is reporting that foreclosures were at a 44-month low in July 2011.  Foreclosures were down 35% from July 2010 to July 2011 nationally.

Sounds hopeful, until you consider that national numbers don't reflect the reality that different states are suffering more than others from the Foreclosure Crisis - and Florida has been one of the hardest hit. 

Consumer Affairs does point out that according to RealtyTrac,

1. There were a total of 22,377 Florida properties with foreclosure filings in July, down six percent from June and down 57 percent from July 2010;
2. Initial default notices and scheduled auctions in Florida were both down on a monthly and annual basis in July; and
3. REO (bank-owned properties) activity increased 8% from June 2011 but was still down 55 percent from July 2010.

3.  We Can't Get Distracted by False Hope in Falling Foreclosure Filings

Put that together, and Floridians are still having trouble making their mortgage payments and there are still a lot of foreclosure filings happening here in the Sunshine State, though banks seem to be foreclosing less. 

However, the falling foreclosure numbers are in many ways false hope.  The banks still have tremendous shadow inventories - large numbers of homes on their books that are not appearing in MLS - and now, banks are wary of foreclosing because of continued allegations of robo-sigining. As RealtyTrac's CEO James J. Saccacio explains:

Unfortunately, the falloff in foreclosures is not based on a robust recovery in the housing market but on short-term interventions and delays that will extend the current housing market woes into 2012 and beyond.

4.  Where We Stand in August 2011

Florida, particularly South Florida, is still in a real estate crisis and experts predict it will take a couple of years for Florida to win its battle over this downturn.  For those who can afford to buy real estate here, particularly those foreign investors in Israel, Brazil, Mexico, and Canada, this may be extremely good news. 

Looks like there are going to be lots and lots of good bargains here in beautiful South Florida for those with the wherewithal to purchase them. 

Meanwhile, Florida homeowners are still facing underwater mortgages (or the possibility of one, as fair market values decrease) and Florida lenders are still fighting both ForeclosureGate defense issues as well as the cold reality that they've got lots of homes on their books just setting there, and lots more that may be added if delinquencies continue to rise. 

Watch the RealtyTrac Video Synopsis of its July 2011 Foreclosure Report here:

This week David Streitfield's article, "Affluent Buyers Reviving Market for Miami Homes," was published in the New York Times -- which can only mean even more potential investors in Miami real estate will be aware of the inticing deals to be had here in South Florida for beautiful, oceanfront condos in one of the most cosmopolitan of cities. 

Word of Mouth for Miami Real Estate Bargains Is Good for Florida

In his article, Mr. Streitfield points out that the current ForeclosureGate situation -- where lenders are setting on their inventories and moving slow on pending and possible foreclosures because of robo-signing legality concerns -- has actually benefited the Florida real estate market because supply has shrunk ... and investors from other parts of the country and other parts of the world are taking advantage of the properties here, where local buyers are finding it hard to find lending. 

Brazil, Mexico, Latin America, Canada and Israel Are All Buying South Florida Real Estate

Bottom line, while the banks set on that real estate inventory and don't offer many home loans, foreign investors (as we've been discussing - those from Brazil, Mexico, and Israel among other countries) are coming to town and finding great real estate deals to be had - either for second homes, or rental investments. 

It's true that it is a great time to invest in Florida real estate if you have the funds to do so.  Bargains on very beautiful property abound right now.

However, as we've discussed before - the Shadow Inventory looms.  The banks are sitting on a lot of property - condos, homes, lots, etc. - that is not listed in the MLS and isn't for sale now.  Vacant properties that locals recognize because they have popped up everywhere. 

What will happen to that Shadow Inventory?  Rumors are that the federal government wants to find ways to rent those properties. 

What happens to the banks and home loans to Americans?  That's a more difficult question to answer. 

Tuesday's news of a Reuters expose that robosigning (and other forms of faulty and flawed foreclosure procedures) is still happening not only went viral among the financial and real estate industries, it has caught the attention of Congress. 

(For details on what robosigning involves, see our earlier post, "Defining RoboSigning: What Exactly Is RoboSigning and Why Is Everyone So Upset About It?")

As we noted on Tuesday, if extensive robosigning and other forms of impropriety are indeed continuing in the Florida real estate arena, much less on a national scale, then this is extremely serious and could have severe, negative ramifications on Florida's attempts to escape and recover from our Great Recession.  To have Congress investigating may alone have a negative impact on our financial community; however, that horse has already left the barn. 

Today, in BusinessWeek, it is reported that Senator Sherrod Brown (D-OH), chairperson of the Financial Institutions and Consumer Protection Subcommittee, has announced that his  subcommittee will hold a hearing to investigate this robo-signing allegation. 

The Senate's Financial Institutions and Consumer Protection Subcommittee is one of several subcommittees of the powerful Banking, Housing and Urban Affairs Committee of the United States Senate. 

Over in the House of Representatives, Representative Maxine Waters (D-CA) has voiced her concerns to the press and as a senior member of the House Committee on Financial Services, it's to be expected that her committee will also be looking into robosigning and current foreclosure practices in the country today. Representative Waters also looks to be putting pressure on the Executive Branch, telling the media that since the Office of the Comptroller of the Currency, or the OCC, is legally the federal regulator for banks, the OCC has a duty to investigate the situation.

Yesterday, Representative Waters released her letter to the Chairman of the Federal Reserve Board, Ben Bernanke; the Acting Comptroller of the Currency, John Walsh; and the Acting Chairman of the Federal Deposit Insurance Corporation, Martin Gruenberg (review the actual correspondence online here), which is joined by eleven of her colleagues in both the House and Senate, calling for an immediate investigation into the robosigning situation.  Here is the text of Representative Waters news release and call to arms:

Washington, Jul 20 -

“Recent news reports indicate that ‘robo-signing’ and other improper, and potentially illegal, practices continue unabated despite mortgage servicers pledging to regulators months ago that they would stop,” Congresswoman Waters noted. “It’s clear that, despite claims that they take these issues seriously, the banking regulators have failed to put an end to these predatory practices. It is therefore essential that documents submitted by banks to regulators regarding their mortgage servicing practices be made public, so that Congress and the public can hold servicers accountable.

"Enforcement actions were initiated by federal regulators because of the “robo-signing” scandal from last year, which revealed many servicers were wrongfully foreclosing on homeowners and not following existing foreclosure procedures and laws. Robo-signing is when banks falsely swear that they have reviewed property documents that are necessary to foreclose on a homeowner’s house. Recently both the Associated Press and Reuters reported that despite regulators’ assurances to the contrary, illegal robo-signing allegedly remains rampant in both foreclosure and non-foreclosure cases.

"The request for disclosures is also based upon concern over the fact the consultants performing foreclosure reviews have conflicts of interest since they are chosen by the mortgage servicers they are hired to investigate and have done past or future business with those same mortgage servicers. Members of Congress are requesting public release of Engagement Letters, Action Plans, Foreclosure Reviews, and other plans, policies, or processes submitted by mortgage servicers or third-party servicers to ensure that abuses in foreclosure practices are not being ignored by the review process.

“When the consumer protection performance reviews of banks are being conducted by outside consultants hand-picked by the banks themselves, I must question the regulators’ process. We need to shine more light on this issue to hold both the servicers, and their regulators, accountable,” Congresswoman Waters said.

"When news reports on robo-signing surfaced in November 2010, Congresswoman Waters immediately wrote to major mortgage servicers and the regulators of servicers asking for a foreclosure moratorium pending a comprehensive examination of servicer practices. Congresswoman Waters also held the first Congressional hearing in the House on robo-signing and wrongful foreclosures in November 2010, and she continues to press banking regulators for more aggressive action on servicing fraud.

The letter is signed by Representatives Frank, Ellison, Grijalva, Watt, Clay, Gutierrez, Miller (NC), Brown, Kaptur, Schakowsky, and Woolsey. The companion letter in the Senate has been signed by Senators Blumenthal, Franken, Akaka, Begich, Sanders, Cantwell, Tester, Rockefeller and Sherrod Brown. 

Brazil's economy is doing well, perhaps better than it's ever been before.  Brazil's unemployment rate in April 2011 was 6.4%, an all-time low record. Its economy is growing, its citizens are confident in their country's future. 

Brazil's economy is currently the 9th largest in the world.

Why Brazil Likes South Florida - Bang for their Real

And here's a big fact for South Florida:  in the past three years, the Brazilian real has gained 39% in value against the U.S. dollar - which means that coming to Miami and spending those reals gets the Brazilian buyer a lot more bang for their buck. (Import tariffs and sales taxes are other factors that make shopping in Brazil significantly more expensive than shopping in South Florida for many brand items.)

Consider this:  in a recent story covering Brazilian tourists flocking to South Florida, the Miami Herald gave an example of one pair of running shoes that cost six times more in Brazil than they do at a local Orlando shoe store. 

In fact, in that same story we learn that in 2010 Brazil-Florida trade increased by almost a third as Brazilians discovered South Florida’s bargain prices and ease of access.  Most of these purchases are in South Florida, where (in comparison to Tampa, which has no nonstop flights to/from Brazil) the Brazilian airline TAM offers nonstop flights to/from Miami and Orlando and American Airlines has 52 weekly flights from Miami to five different cities in Brazil.

Today, Brazil spends more reals in the Sunshine State than anywhere else in the United States.  Over one-third of the condos sold in downtown Miami today are being sold to Brazilians. 

Brazil's Growing Interest in Real Estate Investment and Development in South Florida

We post earlier about Brazilians buying more and more South Florida real estate, and it seems savvy for Florida real estate professionals to recognize and welcome Portugese-speaking Brazilians as potential investment partners, buyers, and more.  This should only increase in the future.

Long-Term Relationship Between Brazil and South Florida

However, given that the average retirement age for men in Brazil is 54 and for Brazilian women, 51, and the fact that there are some economists who are predicting that Brazil will have some economic trouble in the future (including inflation) unless some things change, it would seem that South Florida may well be a true Mecca for smart Brazilians looking for a safe retirement haven where their reals will have the most clout. 

Times are tough in Florida and many things are being done in both the public and private sectors to fight and win against the "Great Recession."  This week, news has started trickling in that suggests some light at the end of the tunnel.  Consider this:

1.  From the Naples News, we know that several developments will be proceeding in South Florida with homes projected to be ready for sale in 1 -5 years.  These include:

• Hacienda Lakes in Collier County (plan approved by the Southwest Florida Regional Planning Council)
• Alico West in Lee County (plan approved by county and state officials); 
• Sabal Bay in Collier County (approvals in process);
• Big Cypress in Collier County(approvals in process).

2.  The Naples News also reports that well known developer The Ronto Group has requested a ten year extension on its huge planned development on Bonita Beach Road to gain back the extra time at the end of the project that had been lost in the lull brought on by the recession. 

Moving back the deadline brings things back to a status quo as development chugs forward on The Rondo Group's planned development of a huge golf course and residential community.  Rondo representatives are telling the media that lots of homes are going to be built within the next year in their new Bonita Beach Road project.

3. Up in Jacksonville, commercial interests are seeing a big spurt as the Florida Times Union reports that it's a go for a new "superport" to be built,  a bookend to Keystone Industries' recently debuted shipping terminal over in Talleyrand.  

The new development wll be ten times the size of the Talleyrand terminal and it will have a manufacturing plant that will bring new jobs to the area (in addition to all that cargo work that will need workers to be hired).  This means literally thousands of new jobs in the long run for this area after the project is built, and lots of jobs in the short terms as construction begins on the new Superport. 

Some South Florida homeowners are discovering a huge jump in their property insurance premiums, so high in fact that Susan Salisbury reported in the Palm Beach Post this week about Florida real estate owners getting bills that show a 150+% increase from last year's property insurance. 

Florida's Increasing Property Insurance Pricing - Up, Up, Up

In 2010 and again in 2011, the Florida regulators that oversee insurance companies operating in the state have approved rate increases in property insurance for Florida homeowners.   The Palm Beach Post story reports that Florida's biggest insurance company, the non-profit, government-run Citizens Property Insurance, has legally increased its rates by 10% each year.  Approximately 20 other Florida insurance companies have rate increase proposals under consideration before the state regulators right now.  Expectations are that they will be approved. 

Why Is This Happening?

It's often pointed out by insurance companies that rate increases are needed after the carriers are hard hit by claims resulting from natural disasters, like the hurricanes that Florida must face periodically. In 2005, for example, Florida insurance companies were paying out an enormous amount of claims after two hurricanes hit Florida within months of each other,  Hurricane Dennis and Hurricane Wilma, and this on the heels of 2004's record year of three hurricanes targeting Florida's shores:  Hurricane Charlie, Hurricane Ivan, and Hurricane Jeanne.

Florida is known for its history with dangerous hurricanes: the state's location makes it particularly vulnerable to damage by these huge storms' high winds and flood waters.  Within the state, certain areas are at higher risk of hurricane than others; for example, while Miami has a 1 in 6 chance of being hit by a hurricane, Jacksonville has a much lower probability of 1 in 100. 

However, others are also pointing to Senate Bill 408 which Governor Rick Scott signed into law in May 2011. Senate Bill 408 allows for expedited processing of "insurance for insurers" costs, and includes the ability to require Florida homeowners to pay in advance for repairs caused by hurricane damage (and other property damage) and then get paid reimbursement by their insurance company.

While critics point to SB 408 as another example of Governor Scott's favoritism toward business interests, the reality of fake insurance claims being made after natural disasters precipitated the new law.  Insurance companies were being faced with far too many phony claims -- asking that insureds pay for repairs and then ask their insurance company pay them back is designed to stop those fake insurance claims from being filed.

Read the full text of the new law SB 408 here.

What This Means to Florida Real Estate Investors From Latin America, Brazil, Europe, Canada, Australia, Mexico, and Elsewhere

The idea of buying a vacation home or rental investment - like a condo on a beach near to Miami's cosmopolitan metroplex - is a dream that is becoming reality not only for many Americans, but for more and more foreign investors (especially from Brazil and Latin America).  Florida is happy to have this global interest - and the local economy needs the boost that these foreign investments bring to the economy, both in the long and short run.

However, nothing is perfect and anyone investing in the beauty of South Florida needs to be aware that they are entering Hurricane country, with all that can mean.  Locales accept the need for insurance, and when the time comes, lots of lumber to board up windows along with runs to the grocery to stock up on milk and bread.  It's something that comes with being so near to the ocean waves. 

Still, this property insurance increase should be a consideration for those real estate investors looking at Florida real estate as a bargain, and it's conceivable that these hikes might dampen their enthusiasm somewhat - especially since there's no guarantee that property insurance costs will not increase again next year.

With ink barely dry on the Community Planning Act, savvy foreign investors are flocking to Florida and its real estate investment opportunities.  In the same month that Resort World Miami was announced by Malaysian investors, Condo King Jorge Perez and his well-known firm, The Related Group, revealed their new partnership with International Sales Group, helmed by Philip Spiegelman and Craig Studnicky. 

Jorge Perez Knows Real Estate, Florida, and Latin America

You may remember Jorge Perez: in 2005, TIME magazine him one of the 25 most influential Hispanics in the United States; in 2007, Forbes magazine named him one of the 400 Richest Americans, and in past years, his Related Group was routinely named as one of the largest Hispanic-owned businesses in the USA, although current economic factors have found Related Group no longer on that list in 2010.

The new partnership between the real estate developer and the international brokerage will operate under the name "Related ISG" and their efforts are targeting the South Florida condo market for interested buyers in Mexico, Central America, and South America.

First, they will be promoting a Hollywood, Florida, condo project at Apogee Beach (ground breaking set for early 2012) where condominium homes in the 22 story oceanfront building will be marketed primarily to Latin American buyers.  

That's right: Florida is getting an influx of cash from foreign sources, as we've been predicting for awhile now.

Condo King's Dedication to Bringing Latin American Clients Into South Florida Real Estate Gets National Attention

The Wall Street Journal considers Related's financial package to be "unconventional" because it will ask buyers to pay over 80% of their condo's building expense during construction - lots more cash that Americans are used to considering, even at a 20% down payment.  

Related's proposal? Buyers must provide 20% down payment; 20% when building commences, and another 40% during the construction process.   That's right: by the time the new owners move into their new home, they've only got 20% left to pay before they own the condo outright.

However, this is "unconventional" only to American ears.  In other countries, this isn't a bizarre request at all.   Most Latin American real estate is sold in this staggered payment system; Related's targeted foreign buyers are not going to find the proposal "unconventional' in the slightest. 

Already, More Future Related Condo Projects Slated for South Florida and Latin American Buyers

Related has already bought the land and released its plans for four condo projects in the Miami area, using the same financial strategy and marketing the same Latin American buyers:

1. A small condo building with around 250 units to be constructed next to Related's 500 Brickell project and called "My Brickell;"

2. A condo project designed by Mexico's renowned architect Enrique Norton in the same area as My Brickell, this with 300+ units;

3. A 400+ unit waterfront condo in Midtown Miami; and

4. The above-described Apogee Beach condominium project in Hollywood, Florida.

Prediction: More and More Foreign Investment Comes to Florida Real Estate Developers

Jorge Perez is just one of many business savvy folk who are seeing opportunity in the crisis Florida faces in this current recession.  With the current Florida lawmakers and their goals of making Florida more business-friendly, as evidenced by the recent Growth Management Reforms, Latin American investors will be finding great opportunities here in South Florida, a beautiful and cosmopolitan locale with a shared heritage, language, art, religion, and culture.

Jorge Perez is one of the pioneers leading the way. 

Today, hundreds of new laws are effective here in Florida having been signed into law by Florida Governor Rick Scott, demonstrating a controversial and concrete attempt by Florida lawmakers to resolve the state’s current economic crisis and promote a turnaround. 

This was done with the state bringing in $3,800,000,000.00 less in revenue than it had the previous year (yes, that is $3.8 billion); without raising taxes; and without closing hospitals, schools, or cutting back on health care. 

From the Florida Senate News Release of May 31, 2011:

• State spending cut by over $3 billion
• Not one penny of taxes or fees were increased
• Over $300 million in tax reductions benefited property owners and small businesses. Medicaid, the biggest cost in the state budget, was reformed with a billion dollars in savings. Highly effective teachers will be paid more, chronically ineffective teachers will lose tenure
• Florida state workers, like those in 49 other states, will contribute to their own retirement, ending a practice of taxpayers subsidizing 100 percent of public pensions.
• Expanded educational benefits for children with disabilities
• Second Amendment rights protected against local government interference
• Public funds won’t be used for elective abortions
• Golden parachutes and phony bonuses prohibited for public employees
• “Smart Cap” prohibiting state taxing and spending from rising faster than family income
• 1,100 regulations on small businesses eliminated

From the 2011 Legislative Session Report released by the Florida Senate on May 31, 2011, here are the laws passed from Florida Senate bills into law that impact Florida real estate and/or Florida land development. This, of course, does not include legislation originating in the Florida House that became law this week

(Go here for the complete Florida Senate press release and full list of Florida Senate bills that became law.)

Oil Spill Economic Recovery Act

(passed as SB 2156)

This major legislation is designed to help coastal Northwest Florida recover from the economic consequences of the Deepwater Horizon Oil Spill.  The bill provides that three fourths of all fine and settlement monies paid by B P or other responsible parties coming to the State of Florida would be used to benefit Escambia, Santa Rosa, Okaloosa, Walton, B ay, Gulf, Franklin and Wakulla counties.

The legislation also provides a preference for Northwest Florida in the use of state economic development programs and tax incentives for the next three years.  The bill calls for a multi-state cooperative agreement among Gulf states to monitor industry safety practices and influence federal policies regarding offshore oil and gas exploration and includes a $30 million appropriation to help expand and attract businesses, create jobs and diversify the region’s economy.

Elimination of Government Agencies, More Jobs in the Private Sector

(passed as SB 2156 and HB 143)

As Chairman of the Senate Appropriations Committee with jurisdiction over transportation, tourism, trade and economic development, Senator Gaetz championed legislation to eliminate the Florida Department of Community Affairs, eliminate the Agency for Workforce Innovation, and eliminate the Office of Tourism, Trade and Economic Development.

This bill achieves $8.6 million in recurring savings by eliminating job-killing functions of the Department of Community Affairs and overlapping unnecessary functions of other state government agencies.  The legislation turns over more authority and responsibility for planning to local governments and simplifies permitting for businesses and individuals.

A streamlined Department of Economic Opportunity will be a one-stop for businesses and local EDCs seeking state support for job creation activities.  The current protracted and complicated approval process is vastly simplified with the Governor given more latitude to approve projects and attract new businesses.

Under this legislation, the state is doing more to encourage private sector job creation.  To promote tourism, VISIT FLORIDA funding is increased from $26,647,961 to $34,899,209.  The Quick Action Closing Fund, used to close deals to bring higher paying jobs to Florida, is increased from $16 million to $42 million.  Commercialization of public research – or bringing university-level research to market with products that can be made in Florida – is funded at $10 million, up from $2 million.  Funding in the amount of $5 million is provided to promote our state’s military bases and the hundreds of thousands of jobs linked to the bases. The state’s ports will be improved with a $117 million appropriation, including widening the Port of Miami to accept larger ships following the expansion of the Panama Canal.  Overall, the economic development, trade, tourism and transportation budget is increased from $6.1 billion to $6.7 billion.

Support for Military and Veterans

(passed as HB 1141, HB 95, and HB 227)

Florida-based military members deployed in war zones don’t have to pay property taxes during the months they are deployed.  Families of members of the military killed in action and families of law enforcement and firefighters who died in the line of duty are given free lifetime entrance passes to Florida parks.  Uniformed military and overseas voters are permitted to use a federal write-in ballot to ensure that all military votes are counted in all elections.

Constitutional Amendments

The only way the state constitution can be amended is if 60 percent of the voters agree.  Constitutional amendments may be proposed either by petition or by a super majority vote of the Legislature, but in either case, voters at the next general election must approve any changes.

This session, among others, four proposed constitutional amendments will be on the November, 2012, general election ballot:

1.       Cap on Taxing and Spending (passed as SJR 958) Called “Smart Cap,” this proposal would limit revenues collected by state government to only the amount collected the previous year, plus an annual adjustment based on a combination of population growth and inflation.  This provision would stop legislators from using inflated revenues in good times to expand government and spend more.

2.       Health Care Freedom (passed as HJR 1) This provision protects Florida citizens from the “Obama-Care” federal mandate to purchase health coverage dictated by the federal government.

3.       Cap on Non-Homestead Property Taxes, Elimination of “Recapture Rule” (passed as HJR 381) This proposal would prohibit local governments from increasing property taxes by more than 5 percent per year on non-homestead property.  Current law limits non-homestead tax increases to 10 percent per year. The constitutional provision also allows the Legislature to prohibit increases in the assessed value of homestead and non-homestead property if the just value of the property decreases.  This would in effect repeal the controversial “recapture rule.”

4.       Disabled Veterans Property Tax Discount (passed as SJR 592) SJR 592 would grant partially or totally disabled veterans an enhanced property tax exemption on their homesteads.

Of note: Special Budget Provision/Septic Tanks

Provision placed within the new budget laws that protects December 2010 moratorium on the unpopular septic tank mandate objected by so many Florida property owners.  During the regular session of the Legislature, Senator Evers, with Senator Gaetz’s support, then sponsored SB 168, which would have permanently repealed the mandate.  Unfortunately, Senator Evers was unable to pass his bill.  Therefore, Senator Gaetz placed in SB 2002, the state budget, a provision which prohibits the Department of Health from implementing the mandate – in other words, the moratorium continues.

Now that the Florida Legislature has overhauled state laws that controlled and curtailed the activities of land developers in Florida - laws that await the Governor's approval, and which for the most part will become effective almost immediately upon his signature since they are budgetary in nature - Floridians are coming to grips with what this may mean for their local communities. 

In the Miami-Dade and South Florida areas, environmentalists have pushed for law after law designed to block urban growth in order to protect perceived dangers to nearby wetlands, farmlands, and the Everglades.  With the 2011 legislation, things will change.

Now, the state will not be the entity blocking real estate development - those controls have been turned over to local communities and left to federal oversight.  The Florida Legislature hopes that this freedom to move will help real estate markets, commercial and residential, both in development and in later transactions, all with the goal of salvaging the depressed Florida ecomony. 

What's appearing on the horizon?  New development, new jobs, an economic boost - hopefully

Already, the Miami Herald is reporting about the revival of a plan for a "suburban town" to be built west of Homestead, based upon 2008 plans that got shelved after the economy went south and state powers-that-be challenged the need for the development.  Lennar, one of the country's largest homebuilders, is attached to this project.  One example.

In an interview given to Jennifer LeClaire at GlobeStreet.com yesterday, Terry Stiles, Chief Executive Officer of the Stiles Corp., provided his input on what will be happening in South Florida now that the Growth Management Laws have been changed. 

According to developer Terry Stiles, among other things:

1.  Stiles Corp. is very interested in the Miami-Dade County area right now; the company is investing over $120 million here in office, retail, and mixed-use projects.

2. As we've discussed earlier, right now there is an intersection of low construction costs and bottom-dollar property, so it's a good time for developers and investors to grab up good deals.  Stiles agrees with this viewpoint, and believes that multifamily projects are particularly "hot" right now.

3.   The other target for Stiles is grocery-anchored retail shopping centers, he's very focused on the viability of these projects in South Florida right now. 

4.  Stiles also opines that land use in Florida is more "redevelopment" than development of raw land, since there is not that much pristine, raw land left in the state.  

Florida Growth Management Laws Overhaul Will Not Wreck the Environment

Stiles provides another example of how important regulation is in the real estate industry, because  redevelopment changes must be approved by the various agencies in charge of land use.  The more that agencies are involved, the more time and money must be committed to the project. 

Consider this: the outcry by environmentalists about the dangers of urban sprawl escalating with the Florida Growth Management Law Overhaul seems to be missing the mark here, and Stiles is making a good point.

Redevelopment Isn't Increasing Sprawl

It's not sprawl to redevelop land that has already been developed.  It's making the best use of land that has already been developed for use by humans -- and maximizing that use for current needs.  Which means more jobs, short term and long term, and more money flowing into our area, short term and long term.

Sure, the Miami Herald has provided one example of farmland that may be replaced by homes; however, that's not going to be the majority of development projects that will spring up as a result of the actions that the Florida Legislature (and presumably, Governor Scott) took this month. 

The economy of Miami-Dade and South Florida looks a lot brighter now that this Overhaul has been done.  At least, it's looking brighter to people like Terry Stiles, and that's a good thing. 

Florida's Growth Management Laws are a series of statutes passed during times of a booming Florida economy, designed to control growth within Florida communities including protecting the environment and discouraging urban sprawl.  They include:

1. Environmental Land and Water Management Act of 1972 (Florida Statutes 380.012 -380.07)
2. Florida Water Resources Act of 1972 (Florida Statutes 373)
3. Florida State Comprehensive Planning Act of 1972 (Florida Statutes 186.001)
4. Local Government Comprehensive Planning Act of 1975 (amended in Florida Statutes 163.3161)
5. State and Regional Planning Act of 1984 (Florida Statutes 23.01-.015,160.002-.076 - now appearing as 186.001 et seq. )
6. Local Government Comprehensive Planning and Land Development Act of 1985 (Florida Statutes 163.3161)
   

Changing Times, Changing Laws: The Florida Growth Management Laws Are Overhauled

The Florida Legislature ended its 2011 legislative session this month by passing big changes to these longstanding growth management laws in a dedicated effort to free land developers throughout the State of Florida from burdensome statutory requirements.

The real estate industry - developers, investors, lenders, and the like - welcomed these changes.  Environmentalists did not.  Many of the conservationists in Florida and across the country fear that the 2011 overhaul to the Florida Growth Management Laws will doom species and habitats, such as the vulnerable Florida wetlands. 

What has the Overhaul of the Florida Growth Management Laws Really Done?

The changes are designed to spur economic development in a state sorely in need of it.  Florida needs land development for all that it brings with it:  an infusion of revenue, an increase of jobs. 

Land development will bring short term and long term economic growth to Florida.  This isn't something that anyone is disputing. 

Problem was that there isn't that much land development happening in Florida these days.  We're in a slump (and that may be an optimistic description).  How to turn this around? 

From the perspective in Tallahassee, this is done both by repealing regulations that placed monetary burdens on land developers as well as removing state involvement in community decisions, moving those resolutions to the local government.  For example, the doors to the Florida Department of Community Affairs have been closed, and developers are no longer mandated by the state to build parks, roadways, or schools whenever they plan and build a new development. 

New laws were passed just as old laws were being amended or abolished during this overhaul.  These included freeing land developers trying to get water permits.  A new law (HB 993) removes the requirement that developers prove to the Powers That Be that their proposed project would not harm the environment, lessening their costs, and instead places the burden of proving there will be harm on anyone challenging the project. 

Will the local communities just pass the same measures for their jurisdictions?  No.  Under the new laws, local Powers That Be will not be allowed to mimic previous regulations that were established at the state level.  Counties and municipalities cannot, for example, set impact fees on commercial development until 2013.  

This is not the end of efforts to encourage and promote Florida land development.  However, what has happened this month with the Florida Growth Managment Laws' overhaul is a great beginning.  These efforts are not just important to land developers, they are critical to moving the Florida economy forward.

In yesterday's Sun Sentinel, Michael Mayo's column covers the latest developments in the growth management bills pending before the Florida Legislature, suggesting that one new law (HB 7129/ SB1122) should be labelled the "Build, Baby, Build Act" and not the officially proposed title of the "Community Planning Act." 

The "Build, Baby, Build Act" Likely Will Become Law Soon. 

We've been monitoring the path of HB 7129/SB 1122 through the Florida lawmaking process. For details, including links to read the proposed language and following their status, read our earlier post. 

News coverage of the proposed legislation is also getting lots of column inches.  It's a big deal, and lots of its opponents are very vocal, and very adept at getting their voices heard.

Mr. Mayo's criticism of the "Build, Baby, Build Act" warns that its passage may return our Sunshine State to "... our development Dark Ages, " which he and others have defined as life in Florida prior to the passage of the 1985 Growth Management Act.  He quotes one activist as predicting that this new law, if enacted, will flush conservation in our state down the toilet, leaving land developers to run amok -- presumably intent upon destroying every bit of natural beauty they can find.

Beware of Doomsday Predictions

Perhaps Florida doesn't have the luxury right now of pondering the "what ifs" because of what is staring us in the face today.  These doomsday predictions are simply that: predictions, suggestions, worries, fears. 

The truth is that this legislation is being considered as part and parcel of the Florida lawmakers' focus on the Florida budget.  It's all about money and the cruel reality that Florida doesn't have any -- and that for the many Americans, our economy is dealing with a depression (yes, depression; not recession - see the latest Gallup poll).

It's a difficult time and action is needed to get us out of this mess.  These laws aren't being discussed, drafted, and passed because anyone is desperate to destroy anything.  These laws are being created because we've got to get moving in order to stop the economic destruction we've already experienced.

Build, Baby, Build?  Yes.  You betcha. 

It's not a surprise to anyone that the new Governor of Florida is a fan of deregulation, and that  lawmakers in Tallahassee have been proposing a series of laws aimed at deregulating Florida land development that conform to Governor Rick Scott's vision of less government for a better economy. 

It's also no surprise that lots of people are very concerned about what this hands-off approach will mean for Florida's future -- just read through the comments to our recent posts concerning the proposed deregulation of travel agencies, landscape architects, and the like to get a gist of what's going on here. 

Proposed Laws Will Deregulate Florida Land Development:  HB 7129 and SB1122

This month, proposed legislation is traveling through the Florida Legislature that has lots of conservation groups very upset because these laws, if they become a reality, will substantially deregulate land development in Florida. There are active campaigns to stop this from happening.

HB 7129 and SB 1122 are the two versions of this new deregulation legislation, and you can read the full text of these proposed laws online:

Read HB 7129 - and follow its progress through the Florida Legislative process here.

Read SB 1122 - and follow its progress through the Florida Legislative process here.

These two bills do not propose the exact same legislation.  Admittedly, each offers some sweet stuff for developers that consider themselves to be heavily regulated by Florida laws today.

The House version, for example, would cut back on state review of local land use decisions (e.g., those that currently halt development in the wetlands) and it would free counties to approve development plans whenever they choose to do so (right now, they can only do this biannually).  The House Bill also frees land developers from some of the burden of having to pay for the defined cost of urban sprawl (concurrency) of roads, parks, etc.

What Do The Proposed New Laws Do For Florida Land Development?

Governor Scott and his followers take the position that removing 25-year old growth management laws will free private enterprise to move forward, boosting the local economy in various ways - including creating more jobs for out of work Floridians.

We need jobs.  Land development generates jobs: building, construction,  surveying, engineering, etc., and after that, work in the various concerns that have been created: salespeople, waitpersons, valets, office workers, teachers, and more.  Less law will mean more incentives for investors to develop commercial properties here in Florida -- and residential ones, as well.  

This is necessary for Florida's economy.  No one is really debating that Florida's economy needs help, and needs help badly. 

However, conservationists are terrified of the aftermath if the proposed deregulation becomes law. 

Environmentalists point with fear at what might happen to the Florida Everglades.  National groups, like the Sierra Club, are worried that deregulating Florida land developers will effectively erase protections that have been in place for over two decades -- and that precious natural resources are being sacrified because of economic panic. 

They are instituting campaigns (write your representative type stuff) to thwart the deregulation proposals.  To learn more about their position, read the opinion piece published in the Palm Beach Post by a representative of 1000 Friends for Florida.  To report that the opposition is riled up is an understatement.

New Laws Don't Stop Regulation -- Cities and Counties are Free to Regulate Development in Their Area

However, what is missing in the fight is recognition that the proposed laws do not mean a free-for-all for land developers in this state.  Instead, consider this:

1.  the proposals may help environmentally in some situations, because current laws that attempted to protect against urban sprawl in the past actually pushed land development into rural areas where there was less legal regulatory protection, causing an invasion of development into pristine natural areas that might otherwise been left alone.

2.  the proposals simply release the state from some legal oversight burdens; the ability of local counties, cities, etc. to regulate land development remains.  Some areas may even become more regulated as a result of these new laws if the community is willing to enact statutes and regulations to protect the local area.

Water as a limited resource here in Florida may seem ludricrous to many -- after all, the state is literally surrounded by water: there's the Atlantic Ocean; there's the Gulf of Mexico.  And then, Florida is blessed with lots of internal waterways, too.  Beautiful rivers like the Alafia. 

There's no desert here.  To consider that Floridians might face a problem of water scarcity seems irrational, right?  Except it's true.  The lack of good, clear, usable water is a growing concern for our state.  It's a big deal.

Florida Legislature Already Promoting Conservation and Reuse of Water

The Florida Legislature has passed laws that serve to protect and promote water throughout the state.  Florida Statute 403.064, for example, provides: 

(1) The encouragement and promotion of water conservation, and reuse of reclaimed water, as defined by the department, are state objectives and are considered to be in the public interest. The Legislature finds that the reuse of reclaimed water is a critical component of meeting the state's existing and future water supply needs while sustaining natural systems. The Legislature further finds that for those wastewater treatment plants permitted and operated under an approved reuse program by the department, the reclaimed water shall be considered environmentally acceptable and not a threat to public health and safety. The Legislature encourages the development of incentive-based programs for reuse implementation.

The Problem of Reusing Water - Treated Sewage Water is Still Sewage

In the Sun Sentinel this week, reporter Larry Barszewski covers the issues of water reuse in a story entitled, "Water reuse is South Florida priority."  In particular, the article focuses upon efforts to increase the amount water reuse in South Florida - which is well behind other areas of the state in H2O conservation.

There are two main reasons for Florida to use treated sewage water for things like watering the local baseball fields: (1) conserving water available for us to drink, cook with, etc., and (2) protecting our waterways - particularly the Atlantic Ocean - from the impact of wastewater being dumped into their flow. 

As the Sun Sentinel points out, lots of folk aren't too keen on sewage, no matter how clean it may be at the point of reuse. 

Nevertheless, here in South Florida, the time has come for treated sewage water to be implemented into all our lives.  While other parts of the state reuse up to 75% of their sewage water, Miami-Dade and Broward Counties are currently using almost zip of their available wastewater.   That's going to change.

The Florida Department of Environmental Protection is going to see to it.  The Florida DEP has its own water reuse agency, dedicated to maximizing the reuse of sewage water throughout the state.  Legal deadlines have already been established, with 2025 the absolute deadline, statewide.

The Water Reuse Program in Florida will be forcing land development as well as private citizens throughout South Florida into the reuse of treated sewage water.  It is seen as being in the best interests of the state, and we must all work together toward that end.

For more on the Florida Water Reuse Program, check out ProtectingOurWater.org.

The inventory of homes held by financial institutions in Florida and across the country was labeled by writer Carla Fried for CBSMoneyWatch last week as one of the main reasons for the housing market to be in a much more serious condition than many realize.  In her article entitled, "Why the Housing Market is Three Times Worse Than You Think," Ms. Fried discusses the Shadow Housing Inventory currently held by banks but not officially up for sale.  It's bad news.

Held in Limbo: the Shadow Housing Inventory

According to the CBSMoneyWatch article, which relies in part on information from CoreLogic, almost 2,000,000 homes (1.8 million is the estimate) are sitting on bank books in some kind of limbo.  These are properties that have been foreclosed upon already, as well as those that are somewhere in the legal process of being foreclosed upon, or home loans where the mortgage has gone at least three months without a mortgage payment, but the bank hasn't started the foreclosure paperwork yet.  None of them are up for sale.  They're just sitting there, on the bank's balance sheets in various categories.

Fear of Litigation Balancing Against Financial Burden of Unprecedented Real Estate Inventory

Meanwhile, in courthouses across the country, judges are mad and getting madder about the documentation that they are being asked to approve by bank lawyers.  Consider this article in the SunSentinel yesterday, "Fed-up judges crack down on foreclosure disorder in courts,"where reporters Christine Stapleton and Kimberly Miller of the Palm Beach Post summarize the exasperation of judges in dealing with ForeclosureFraud issues. 

Here in Florida, judges are actually penalizing banks for flawed foreclosure documentation by issuing court orders cancelling the mortgages and essentially giving the defaulting homeowners their real estate free and clear.  It's winning the lottery for folks who have been sitting in homes and not making mortgage payments for months and months. 

Banks Trying to Handle Massive Amounts of Reneged Mortgages Getting Labelled the Bad Guys

Read these media reports and others, and you get the idea that for many, these banks are wrongdoers because they have failed to file formally correct foreclosure lawsuits, or they are blocking a future economic recovery because they are holding these 2,000,000 homes from the seller's marketplace. 

You can't win for losing in the mortgage arena.  And this isn't good for anyone. 

Banks relied on lawyers to get foreclosures completed in record numbers not because they saw this as their optimal choice.  Mortgages were not being paid.  People stopped paying the banks on their notes, and this ultimately left banks with little alternative but to try and get the collateral to lessen the losses they were accumulating.  That collateral was a home. 

In this unprecedented wave of unpaid notes -- breached contracts -- the banks were doing their legal duty to minimize their vulnerability by foreclosing on the homes that backed the notes.  This is what the contracting, breaching homeowner agreed would happen if they failed to pay their mortgage.  No surprise, draconian tactics here.

Now, because of reliance on legal foreclosure farms like David Stern, the idea that banks are hesitant to sell that Shadow Inventory shouldn't surprise anyone.  This is the risk-averse thing to do, and until banks get some relief here, it's what we should expect financial institutions to do. 

Answer? Recognize that this problem started with loanholders breaching their deal, not with banks donning black hats and capes. Work to help these vital financial institutions out of this Catch 22.  

Last week's post about the Florida Legislature considering massive deregulation as a budgetary strategy resulted in lots of discussion and commenting - and rather than respond to each item individually, we're providing the following information so anyone with a strong opinion on this issue can give that opinion where it counts: to their representatives in the Florida Legislature itself.

To get the email or phone number or mailing address of your representatives in the Florida Senate and the Florida House of Representatives, go here and input either your zip code or your mailing address. 

The Florida Deregulation Bill Moves Forward - Track it as HB 5055

In our earlier post, the bill was gaining momentum in the House but it was still in subcommittee.  Now, it's official over 300 pages and it's HB 5055, which you track online at the government website. 

On Friday, it moved to the Economic Affairs Committee of the Florida House. You may also want to contact those serving on the Florida Economic Affairs Committee.   

Read the text of this proposed law here.  Here is the summary of what this bill intends to do, according to the Florida House (the official description of the proposed law):

Deregulation of Professions and Occupations: Deletes provisions establishing DBPR's Division of Florida Condominiums, Timeshares, & Mobile Homes, Florida Board of Auctioneers, Board of Employee Leasing Companies, Board of Landscape Architecture, Board of Professional Geologists, & Board of Professional Surveyors & Mappers, Motor Vehicle Repair Advisory Council, & Regulatory Council of Community Association Managers; deletes provisions for regulation of yacht & ship brokers, auctioneers, talent agencies, community association managers, athlete agents, employee leasing companies, home inspectors, mold assessors & remediators, professional surveyors & mappers, persons practicing hair braiding, hair wrapping, or body wrapping, interior designers, landscape architects, professional geologists, professional fundraising consultants & solicitors, water vending machines & operators, health studios, ballroom dance studios, commercial telephone sellers & salespersons, movers & moving brokers, certain outdoor theaters, certain business opportunities, motor vehicle repair shops, sellers of travel, contracts with sales representatives involving commissions, & television picture tubes; revises name & membership of Board of Architecture; revises license classifications of public lodging establishments; deletes DBPR's authority to enforce & ensure compliance of certain provisions relating to condominiums, cooperatives, vacation plans & timeshares, & mobile homes.

Of importance, since this bill is considered to be budgetary in nature it will not need to follow the more well known path of substantive legislation - which means it can get passed a lot faster than the substantive proposals. 

If you want to have your opinion heard by the Powers that Be, then speak now, speak soon -- the proposed effective date of this bill is July 1, 2011. 

A bill that would remove the State of Florida from overseeing and regulating a wide variety of business activities is moving through the Florida Legislature right now -- and it's so comprehensive that even the industry leaders currently subject to agency oversight are denouncing the proposed law as bad for Florida. 

As reported in today's Orlando Sentinel in a story by Jason Garcia entitled, "Some industries balk at giant deregulation bill in Florida House ," the bill is big - it's 281 pages long, and even lots of businesses don't like it.

Garcia reports that over 30 representatives (lobbyists and others) have gone before the House Business and Consumer Affairs Subcommittee to give their testimony of how bad things could get if the Florida state government were to exit the building in these various industries.  Even Disney had a man go before the committee, warning of land fraud temptations without Florida's oversight of time shares. (Disney's big into the time share condo business.)

What the Deregulation Bill Proposes to Do

It's a budget cutting manuever that would take the State of Florida out of the business of overseeing and regulating 25+ professions and industries operating for profit in this state -- including home inspectors, time-shares, condos, landscape architects, professional surveyors, professional mappers, and other real estate related industries as well as businesses like auto mechanics and travel agencies. 

For example, here's what is being considered regarding architects.

Architects - Currently, an Architect business must be licensed by the state, unless exempt from licensure, in addition to the requirement that the individual be licensed. Persons currently exempt from licensure include anyone who makes plans and specifications for, or supervises the erection, enlargement, or alteration of:

1. Any building upon any farm for the use of any farmer, regardless ofthecost of the building;

2. Anyone-family or two-family residence building, townhouse, or domesticoutbuilding appurtenant to any one-family or two-family residence, regardless of cost; or

3. Any other type ofbuilding costing less than $25,000, except a school,auditorium, or other building intended for public use, provided that theservices of a registered architect shall not be required for minor school projects.

The proposal is to eliminate business license equirements for sole proprietorships for individuals licensed as Architects.

Florida isn't new to deregulation -- Governor Crist made lots of headlines in 2009 regarding the extent that the State of Florida would regulate the commercial insurance industry.  There was also lots of controversy over the extent that Florida should or would oversee the telecommunications industry in the state.

However, with the new shift in power up in Tallahassee, and Governor Scott's stated intention to run the State of Florida like a business, wide-spread deregulation like this may not face the big fight that it has seen in past years. 

Deregulation From a Land Development Perspective

Land developers often find state regulations to be time-consuming and expensive, but all reputable real estate professionals still respect the reality that there are those that push the edge of the envelope (or go past it) for the sake of profit.  No one wants to open the door to a free-for-all here in Florida, just because the state is in economic hard times.

So, is this massive deregulation good for Florida?  Many respected business professionals think not.  Consider what's being done here.  Specifically, the government would be hands-off regarding the following industries:

1. Athlete Agents

2. Auctioneers

3. Auctioneer Apprentices

4. Barbers

5. Body Wrappers

6. Business Opportunities

7. Cattle Owners with Officially Registered Brands

8. Charitable Organizations

9. Community Association Managers/Finns

10. Condominiums and Cooperatives

11. Dance Studios

12. Employee Leasing Companies

13. Hair Braiders

14. Hair Wrappers

15. Health Studios

16. Home Inspectors

17. Interior Designers

18. Intrastate Movers

19. Landscape Architects

20. Manicurists

21. Mobile Home Lots

22. Mold Related Services

23. Motor Vehicle Repair Shops

24. Professional Geology

25. Professional Surveyors and Mappers

26. Rooming Houses

27. Sellers ofTravel

28. Specialty Salons (Manicurists, Pedicurists, Nail Extensions)

29. Talent Agents

30. Telemarketing

31. Timeshares

32. Yacht and Ship Brokers

33. Television Tube Labeling (HB 4013 by Eisnaugle-Reported Favorably by BCA

Subcommittee on 2/8/11)

34. Contract Commissions (HB 4023 by Plakon- Reported Favorably by BCA

Subcommittee on 2/8/11)

35. Water Vending Machines (HB 4009 by Workman- Reported Favorably by BCA

Subcommittee on 2/8/11)

Florida laws dealing with aspects of real estate development are found throughout various sections and chapters of the Florida Statutes.   For a ready online reference, here is a list of links to the full text of various Florida laws that are commonly applicable in land development projects.

Title to Property

Quieting Title - Chapter 65

Leases

Landlord and Tenant - Nonresidential Properties - ss. 83.001-83.251

Landlord and Tenant - Residential Tenancies -ss. 83.40-83.682

Landlord and Tenant - Self-Service Storage Space - ss. 83.801-83.809

Mobile Parking Lot Tenancies - Chapter 723

More on the following page....

Continue Reading

Yesterday, Bruce Berkowitz and his partner Charlie Fernandez at Fairholme Capital Management, L.L.C., resigned in a big way from St. Joe Company, after serving only six weeks on the St. Joe Board. 

Here, from the filed with the Securities and Exchange Commission (read the full filing here):

Item 4 is hereby amended and supplemented with the following:

Bruce R. Berkowitz and Charles M. Fernandez, Managing Member and President, respectively, of Fairholme, have withdrawn their names from consideration to serve on the Issuer’s slate of directors for the Issuer’s upcoming Annual General Meeting and have resigned from the Issuer’s board of directors (the “Board”), effective as of February 14, 2011.

On February 14, 2011, Mr. Berkowitz and Mr. Fernandez sent the following email to the Board:

Directors of St. Joe:

The two of us have discussed the situation at St. Joe and its nominating and governance process. We will not stand for re-election except as part of a Board where a majority of the directors are committed to shareholder value, pay for performance, and effective corporate governance.

After working with the current Board over these past weeks, we have concluded that the current Board is not in a position to propose such a slate of directors.

Accordingly, we withdraw our names from consideration by the Nominating and Governance Committee for election at the Annual General Meeting, and we resign from the Board of St. Joe effective immediately.

Bruce & Charlie

Some analysts are wondering what's going on here; for instance, Roger Nachman at Benzinga questions Berkowitz's motivation for making this move in an article published shortly after the resignation was made public, "Why is Bruce Berkowitz Resigning From St. Joe?"  He's discussing the stock price activity as well as chatter that Berkowitz felt stymied in the ability to move forward with St. Joe.

Over at the Wall Street Journal's Deals blog, coverage is focusing on what the reaction is, thus far, to the Berkowitz resignation.  Shira Olive writes a post, "St. Joe Takes a Stand Against Bruce Berkowitz," that details the initial corporate reaction to the Berkowitz curve ball and possible repurcussions. 

As WSJ points out, it's strange to have a big stockholder like Bruce Berkowitz (he owns 30%) to jump on the corporate board -- and it's also unusual for a company to do something that might offend its majority stockholder.  And, Mr. Berkowitz might not like the corporate knee-jerk reaction yesterday: 

Here, the official press release that St. Joe Company issued yesterday (go here to read the full text):

"Fairholme's statements and actions surrounding the resignation of its representatives from the Board of The St. Joe Company, after having served for only six weeks and while the St. Joe Governance and Nominating Committee was reviewing their proposed nominees, are not in the best interest of all St. Joe shareholders. While on the Board, Fairholme's representatives had advised the Company that they substantially agreed with the business plan and approved the exploration of strategic alternatives.

The St. Joe Board has always been committed to strong corporate governance, to protecting shareholders' interests and to creating superior results for the long-term. On February 8, 2011 we announced that our Board has retained Morgan Stanley & Co. Incorporated to serve as financial advisor as we explore a wide range of options to enhance shareholder value. While there can be no assurance that any changes or transaction will result from this process, we believe it is an important step for the Company."

St. Joe Company is important to the State of Florida.  With ownership of over 576,000 acres, St. Joe is the second-largest land owner in Florida, and it's been actively involved in the Florida economy since the early 1930s.  It's a big player in Florida land development and what happens to St. Joe has a ripple effect throughout the rest of the state. 

The new blood that Berkowitz was bringing to St. Joe was seen by national investors as well as real estate analysts as a good thing.  The events this week aren't smooth sailing for St. Joe, and Berkowitz's departure is not only curious but concerning. 

What is the rest of the story here? Perhaps we'll know more within the next couple of weeks - more than the current email/SEC filing vs. press release challenges that we're all watching play out right now.  One thing we do know: something big happened here to make Berkowitz walk.  What that means to St. Joe Company is unclear - for now.

Sheila Bair chairs the Federal Depository Insurance Corporation ("FDIC") and has since since June 2006, when she was appointed for a five year term by President George W. Bush.  (Sheila Bair is also serving a term on the FDIC's Board of Directors which will end in 2013.)

For many, Sheila Bair's biggest role involves overseeing and salvaging banks that are going under.  Watching the FDIC today usually means watching the news for what banks have failed this week. 

The FDIC Failed Bank List

The FDIC Failed Bank List keeps track of banks that are taken over by the FDIC, which comes in as receiver -- it's a scary list for most at this juncture and many are watching the 2011 FDIC Failed Bank List to see just how many banks fail in 2011 (there have been 11 bank failures so far this year - all in January 2011). 

FDIC Chair Sheila Bair Also Player in Financial Reform

However, FDIC Chair Sheila Bair is also a key mover and shaker in finance and lending practices in this country.  Right now, for example, she is calling for Mortgage Servicers to fork up the necessary funding to establish a Mortgage Servicer Foreclosure Commission that would investigate complaints from consumers regarding these companies and would have the power to resolve these disputes with money provided by the mortgage servicing companies. (If this sounds familiar, it should: it's analogous to the British Petroleum model.)

Sheila Bair is also pushing for the Dodd-Frank Act's risk retention rules to be expanded to incorporate mortgage servicers.  No news here that banks and others involved in the mortgage business are not happy with this proposal.  She advanced this proposition a couple of weeks back during a speech to the Mortgage Bankers Association (see link to full text of her speech, below). 

Rebutting FDIC Chair Sheila Bair's Position on the Mortgage Industry - Maybe She's Wrong

However, rather than go through the details here on why Ms. Bair may not be right in her approach, read the excellent itemized rebuttal of Thomas Brown of Bankstocks.com where he takes her speech, paragraph by paragraph, and points out key issues that include:

• the problem with the mortgage crisis in our country is not how the mortgage notes were serviced, but the fact that borrowers stopped paying on their notes - in massive numbers.  This unprecedented number of home loan defaults forced the financial industry to deal with a new and unique crisis; 
• many of these mortgages were given to folk that should not have been given a home loan, and would not have received financing in prior years; and
• the finance industry views the true crisis as occuring in 2008 and here in 2011, the issue is how to clean things up and move forward.  The massive defaults have already hit. 

Read FDIC Chair Shiela Bair's speech to the Mortgage Bankers Association's January 2011 Summit on Residential Mortgage Servicing for the 21st Century here. 

For an excellent resource on the details of the Dodd-Frank Act, refer to the Law Librarians' Society of Washington, D.C.'s online resource here. 

Banks beware.  If other states follow the lead of decisions being made in Massachusetts, then an onslaught of litigation resulting from ForeclosureGate in Florida, and elsewhere, is inevitable. 

First, the Massachusetts ruling in Ibanez goes against Wells Fargo and US Bancorp.

Earlier this month (January 7, 2011), the highest appellate court in the State of Massachusetts, its Supreme Judicial Court, released its opinion in the case styled U.S. BANK NATIONAL ASSOCIATION, trustee vs. ANTONIO IBANEZ, Cause No. SJC-10694, opining that financial institutions Wells Fargo and US Bancorp had wrongly foreclosed on two homes since when they sold these properties at foreclosure sales in July 2007, neither bank could substantiate their legal title or ownership of the properties at the time of the sale.

Here, the two banks filed suit against the defaulting properties, in an abundance of caution after making the mistake of first publishing their foreclosure notices in the wrong newspaper. Defendant Ibanez did not respond to this lawsuit (at first) and defaulted because he was not living at the property and was not aware of the filing.

Read the complete Ibanez opinion here.  Perhaps most telling is the language (and attitude) presented in the concurrance of Justice Cordy (joined by Justice Botsford):

I concur fully in the opinion of the court, and write separately only to underscore that what is surprising about these cases is not the statement of principles articulated by the court regarding title law and the law of foreclosure in Massachusetts, but rather the utter carelessness with which the plaintiff banks documented the titles to their assets. There is no dispute that the mortgagors of the properties in question had defaulted on their obligations, and that the mortgaged properties were subject to foreclosure. Before commencing such an action, however, the holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order. Although there was no apparent actual unfairness here to the mortgagors, that is not the point. Foreclosure is a powerful act with significant consequences, and Massachusetts law has always required that it proceed strictly in accord with the statutes that govern it. As the opinion of the court notes, such strict compliance is necessary because Massachusetts both is a title theory State and allows for extrajudicial foreclosure.

The type of sophisticated transactions leading up to the accumulation of the notes and mortgages in question in these cases and their securitization, and, ultimately the sale of mortgaged-backed securities, are not barred nor even burdened by the requirements of Massachusetts law. The plaintiff banks, who brought *656 these cases to clear the titles that they acquired at their own foreclosure sales, have simply failed to prove that the underlying assignments of the mortgages that they allege (and would have) entitled them to foreclose ever existed in any legally cognizable form before they exercised the power of sale that accompanies those assignments. The court's opinion clearly states that such assignments do not need to be in recordable form or recorded before the foreclosure, but they do have to have been effectuated.

What is more complicated, and not addressed in this opinion, because the issue was not before us, is the effect of the conduct of banks such as the plaintiffs here, on a bona fide third-party purchaser who may have relied on the foreclosure title of the bank and the confirmative assignment and affidavit of foreclosure recorded by the bank subsequent to that foreclosure but prior to the purchase by the third party, especially where the party whose property was foreclosed was in fact in violation of the mortgage covenants, had notice of the foreclosure, and took no action to contest it.

Second, the Massachusetts High Court Agrees to Hear Bevilacqua

Usually, the rulings of the Massachusetts Land Court are reviewed by a mid-level appellate court before the case ever appears before the Judicial Supreme Court of that state.  However, this high court has the ability to choose to hear cases directly from the lower courts, bypassing intermediate review, and this month the court has done this in an Ibanez-related case, now before it as Cause No. 10880 and styled Francis Bevilacqua v. Pablo Rodriguez.

In Bevilacqua, a real estate investor bought residential property at a foreclosure sale and thereafter renovated it into four condominiums, which he sold.  Here, Francis Bevilacqua filed suit against the original property owner (who was foreclosed upon) in an attempt to clear his title (and presumably, defend against the predictable condo owners' suits). 

Land Court Judge Keith Long ruled against him, opining that US Bancorp had improperly foreclosed upon Mr. Rodriguez thereby leaving Mr. Rodriguez with full legal title and the bank with the ability to merely quitclaim whatever interest it had in the property to Mr. Bevilacqua at the foreclosure sale.  Similarly, Mr. Bevilacqua could not transfer any legal title in the four condos to their purchasers: he had no legal title to convey since it remains, in the opinion of Judge Long, with Pablo Rodriguez.

From Judge Long's opinion:

Plaintiff Francis Bevilaqua holds no title to the property at 126-128 Summer Street in Haverhill. That title is held by defendant Pablo Rodriguez. What Mr. Bevilaqua has is a quitclaim deed from US Bank, N.A., which conducted an invalid foreclosure sale on the property (it was not the holder of the mortgage at the time the sale was noticed and conducted as required by G.L. c. 244, § 14) [Note 1] and thus acquired nothing from that sale. See US Bank v. Ibanez, 17 LCR 202 (Mar. 26, 2009) & 17 LCR 679 (Oct. 14, 2009) and cases cited therein. US Bank therefore had nothing to convey, and its purported conveyance to Mr. Bevilaqua was a nullity. See Bongaards v. Millen, 440 Mass. 10 , 15 (2003).

Despite this, Mr. Bevilaqua now seeks to create a full, fee simple title in himself — quite literally, something from nothing — through the “try title” procedure of G.L. c. 240, §§ 1-5. He cannot do so, for the reasons set forth below. Accordingly, his complaint is DISMISSED in its entirety, with prejudice.

[Analysis omitted from quote.]

For the foregoing reasons, the plaintiff’s claims are dismissed in their entirety, with prejudice. Judgment shall enter accordingly. [Note 6] I have great sympathy for Mr. Bevilacqua’s situation — he was not the one who conducted the invalid foreclosure, and presumably purchased from the foreclosing entity in reliance on receiving good title — but if that was the case his proper grievance and proper remedy is against that wrongfully foreclosing entity on which he relied.

If the property owners who defaulted on their loans still own this real estate, then what?  The ramifications of this as a reality are overwhelming: what impact on their income tax? what happens to the new owners' tax deductions?  Can they be evicted? Where is the title insurance exposure here? 

The truth is that financial institutions were faced with an unprecedented number of people not paying their home loans.  In response, mistakes were made.  Unscrupulous service providers (apparently including law firms) became involved and got greedy.

However, rulings that hold to traditional land law (however understandable) are not recognizing the unique circumstances these financial institiutions faced, to deal with as best they could.   The number of bank failures in this country is high and growing higher: you can monitor the FDIC Failure List here.

In 2010, 143 banks failed after 2009 saw 140 banks fail.  So far, 7 banks (including the First Commercial Bank of Florida in Orlando) have failed this month. 

The ramifications of a weakening financial system being met with this new line of cases cannot, and should not, be ignored.  

In the midst of all the gloom and doom predictions for Florida's economy this year, it's important to remember what John F. Kennedy pointed out so many years ago (paraphrasing here): the Chinese character for crisis is the same as it is for opportunity. 

And as 2011 begins, Miami is seeing lots of innovative, creative real estate deals being done.  Consider these two examples of our bright real estate future:

The Miami Tower Sale

Consider, first of all, the $106,000,000 that clients of Chicago's global commercial brokerage firm Jones Lang LaSalle just paid for the Miami Tower.  It's not clear in today's news coverage exactly who the new owners are -- but one wonders if they're a part of the international investors bringing their money into the local economy since Jones Lang LaSalle is known for its global clientele, serving real estate needs in over 60 countries. 

It's a beaut, this skyscraper designed by I.M. Pei, always beautifying the Miami skyline with its capacity to change colors through a complexity of exterior lighting.  It's more than just another office building: the Miami Tower is somewhat of a beloved landmark for Miamians. 

But here's the good news, economy-wise: it sold.  And, it reportedly sold for almost an 25% higher price than its previous purchase price back in 2003.  That's good real estate news anytime - but it's amazing stuff here in the first few weeks of 2011. 

The Downtown Macy's 20K Lease

Meanwhile, its not just sales that are being made here in Miami: the downtown Macy's has announced that it has entered into a commercial lease of its ground floor to Miami developer Barlington Group. 

And last Thursday, the Barlington Group debuted its big plans for this street space to the Miami City Commission:  reportedly, there will be a Jazz & Blues Lounge (run by the owner of Miami's Transit Lounge) along with what is hoped to be the first of a chain of coffeehouses by Kana Cuban Coffee and assorted restaurants, cafes, and entertainment spots filling up the 20,000 square feet of leasehold. 

It the first week of Florida's new governor Rick Scott being in office he's making news already -- and this includes his appointment of Billy Buzzett as secretary of the Department of Community Affairs. 

Check out Buzzett's background on his LinkedIn page and you'll find that after getting his law degree back in the 1980s, Billy Buzzett has been involved in Florida real estate development for many years - and currently serves as the vice-president of strategic planning for the St. Joe Company. 

Good background for the man who will now be Florida's new Big Kahuna of land planning. 

St. Joe Company, currently the state's second largest private landowner, has a long history here in Florida, going back to the 1930s.  Built on the foresight of Edward Ball, brother in law of Alfred I. duPont, the company is known for pulling part of the state out of the Great Depression with employment at its Port St. Joe Paper Mill and having ecological challenges afterward from the paper mill's impact on the surrounding ecosystem. 

Today, its efforts focus on four areas of real estate development:  residential, commercial, rural, and forestry.  Explore the company website, and you can find all sorts of related, diverse development interests -- things that have all sorts of commercial complexities that Buzzett will bring with him in his new job.  Accordingly, Buzzett is bringing a developer's mind to state government. 

Buzzett's appointment is good news for Florida - especially in this economic climate.  We're all the better for it. 

This week, the Sun Sentinel reports that real estate experts are predicting 2011 to be another gloomy year for Florida real estate, hopefully with a turnaround coming in mid-2012.  (This forecast coming primarily from Lewis Goodkin and Moody's Analytics.)  Which may help explain why the South Florida real estate market seems to be growing in international popularity.

For example, the Manchester Evening News had an article of interest to its British circulation this week: right now, Florida real estate appears to be a bargain for our English friends.  Why?

The British interest rates are holding steady at a low rate, while Florida real estate prices continue to slide.  And these folk know a good deal with they see one.  Apparently Manchester's Bridging Finance alone has loaned the British pound equivalent of $3,080,714 since June 2010 to British investors seeking to buy property here in the United States (with lots of those deals here in Florida): this is almost 25% increase in foreign investment in just one year's time. 

Joining with the European investors are savvy buyers from Central and South America.  The Toronto Star reported recently on this Florida foreign investment trend.   Canadians are buying here.  Australians are, too. 

There is a lot of foreign interest in South Beach condos especially -- and a reported focus on those priced now between $50,000 - 100,000.  Miami Today reports a 62% increase in downtown Miami condo sales from January - September 2010. 

It's not just residential condos that are being scooped up by foreign investors, either.  Carlos Slim, Mexico's famous mogul, just had his Grupo Carso SAB buy Florida hotel property. 

Is this bad news or good?  There are those that will argue both sides.  However, it's an obvious reality that these global investors are bringing investment money into the local economy, and these properties otherwise might well be setting there vacant and blindingly red on American balance sheets.  Given the predictions that the Florida real estate market is not booming back in 2011, international investment here has to be seen as a good thing. 

It's definitely a 21st Century tactic, and Bank of America is on the move:  news reports today are covering the financial institution's proactive internet move as being novel - usually, an entity is trying to promote its brand, not buy up domain names that would serve only to disparage it.  What's going on? CNBC estimates that over 300 derogatory web addresses have been registered by the bank; the Wall Street Journal gives the number at 439. 

Bank of America has been buying control of domain names that might be used to criticize it.  Names that include not only the corporate brand, but is directors and officers (Mr. Moynihan being its Chief Executive Officer) such as:

• BrianMoynihanBlows.com - owned by Bank of America
• BrianMoynihanSucks.com - owned by Bank of America

Why do this?  Because of the continued rumors that early next year, Wikileaks will toss out to the masses tons of confidential Bank of America data.  Whether or not this has been confirmed by Julian Assuage is debatable; the reality that Bank of America is taking the possibility serious is not. 

How successful this effort will be remains to be seen - perhaps this event will turn out to be another example of closing the barn door after the horse is gone.  After all, as the Wall Street Journal points out (and some might say, invites someone to use):

• BankofAmericaSucks.com is online as a forum
• ihatebankofamerica.com is owned by someone but it's not online as a site yet
• BofAisEvil.com was reported as available (for just $9.95 a year) by WSJ -- checking just now at WhoIs, it's been taken.  Surprise, right?

Yesterday, Garrison Keillor lovingly acknowledged the 1947 dedication of Florida's Everglades National Park by President Truman in his Writer's Almanac - including a brief history of the Everglades themselves, and the many atttempts to capture its rich beauty, including those by naturalist Archie Carr, author Peter Matthiessen, and Florida's own Zora Neale Hurston, who wrote this in Their Eyes Were Watching God (1937):  

"To Janie's strange eyes, everything in the Everglades was big and new. Big Lake Okechobee, big beans, big cane, big weeds, big everything. Weeds that did well to grow waist high up the state were eight and often ten feet tall down there. Ground so rich that everything went wild. Volunteer cane just taking the place. Dirt roads so rich and black that a half mile of it would have fertilized a Kansas wheat field. Wild cane on either side of the road hiding the rest of the world. People wild too."

The Florida Everglades are well known to Floridians, in no small part due to the fights that have gone on for decades over who gets to use and control the rich wetlands: years before the Civil War (in 1858), there were already legal battles over building the canals necessary for drainage and land development. 

Today, over half of the Florida Everglades has been adapted for human use: we're using it for agricultural purposes, or as urban areas.  The fight continues over that other half, and there doesn't seem to be an end in sight: the juxtaposition of land development against the interests of conservationists over best use of the Everglades guarantees courtroom battles for years to come.  For example:

The United States Supreme Court just declined writ on November 29, 2010, in a case where the petitioners sought High Court review of the federal Clean Water Act's impact on the question of whether water managers can pump water from a canal into a lake without a permit in Friends of the Everglades v. South Florida Water Management District (10-196). 

And, as we discussed in an earlier post, the Florida Supreme Court just announced its ruling in the well-publicized U.S. Sugar litigation, allowing the use of bonds by the South Florida Water Management District in the government's land purchase.

Development vs Conservation: What Does the Future Hold?  Consider the Tamiami Trail

Just last year, the American Recovery and Reinvestment Act of 2009 provided almost a billion dollars ($96 million) toward restoration of the Everglades.  Part of this legislation will result in a bridge to substitute for the Tamiami Trail, a road running alongside the northern border of the Everglades National Park which has been controversial since the Tamiami Trail blocks water from getting to the south. 

The road itself connects Tampa with Miami, and is the last 275 miles of roadway along U.S. Interstate 41. Famous among Floridians and tourists alike, the Tamiami Trail is its own tourist mecca; for example, it is featured in Fodor's Travel Guide.  What happens when the bridge replaces the road? Who knows - and who knows if we won't be seeing future litigation on the impact here, brought either by conservationists or developers whose interests are harmed by this change.

Meanwhile, construction of the mile long bridge has already begun.  In 2010, the State of Florida proposed an additional 5+ miles of bridges be added to the Tamiami Trail.   

Meawhile: Happy Anniversary, Everglades National Park.

The South Florida Business Journal tips its hat to the growing scrutiny Florida attorney David Stern is receiving from the national media in an article describing Intercoastal water taxi tours combining treks past disbarred attorney Scott Rothstein's Las Olas Isles homestead, seized after his $1+ billion Ponzi scheme was discovered, with Stern's yacht (the "Misunderstood") and his own $15 million landmark waterfront mansion. 

Throwing Stern's name alongside Scott Rothstein with Rothstein's now infamous and rogue reputation may make good copy - who wouldn't like a tour of Stern's waterfront property? - but it's premature.  Stern has not been found guilty of wrongdoing, although as the "Foreclosure King" of Florida, odds are high Stern faces a tough fight to not become the poster boy of Florida Foreclosuregate. 

In fact, that shoe may have already dropped, considering the following media coverage over the past week (this is a scant selection of the thousands of newstories covering David Stern and available online):

• The Sun-Sentinel reports that David Stern's firm has been responsible for 20% of Florida's foreclosures (although no dates or time periods are given here). 
• Today's online edition of the Wall Street Journal covers both Fannie Mae and Freddie Mac taking their loan files from the Stern law firm.  The article describes the physical removal of client files as a "rare step" for Freddie Mac to take. 
• CNN, in an article last week headlined "Are some law firms cutting corners on foreclosures?" describes Stern's firm as being under investigation by Bill McCullom, Florida's Attorney General, along with several other law firms.  Stern's attorney then is quoted denying wrongdoing on the part of his client, a quote sandwiched between the earlier information and statements that Stern employees in deposition testimony reported that they were signing foreclosure documentation so fast that they barely knew the names of the parties involved - the story then jumping from this statement to a description of "robo-signing."
• ABCNews interviewed a former Stern Law Firm employee, paralegal Tammie Lou Kapusta, quoting her prediction that this was just the "tip of the iceberg," in an October 13, 2010 article entitled "Florida Foreclosure Lawyer Investigated for Questionable Practices: Multimillionaire Attorney David Stern Amassed Fortune Foreclosing on Homes," again quoting Jeffrey Tew in his defense of David Stern's operations mid-way, in a scant number of words when compared to the length of the article as a whole.

Trial by Media of Attorney David Stern - Is He Just the First Among Many in ForeclosureGate?

What is happening here is not unique to this new national foreclosure story: trial by media is a known cultural event in our country, where individual guilt or innocence is determined by the public at large and covered by the media long before there is any trial on the merits. 

The point here is not whether or not David Stern is a greedy lawyer or a dishonest one.  Maybe David Stern steals candy from babies and kicks puppies for sport.  I do not know David Stern personally.  Here's the point: a trial by media is happening here.  Surely this wave will not stop with one Florida law firm; banks, other lawyers, trust companies, and others are all vulnerable to this type of exposure. Why?

There is a huge segment of our society that is angry about the number of foreclosures that have happened in the past few years, seeing it as the demise of the American Dream, and there exists another large contingent that is concerned that inaccurate foreclosure methods may result in a long, damaging ripple effect upon the housing industry and indeed, the national economy. 

The Irony of Trial by Media in Foreclosure Gate Coverage: Pot Calling the Kettle Black

These are legitimate concerns.  However, in the hurry to point fingers and scapegoat evildoers, what are we losing?  In this trial by media, isn't there circumvention of legal, procedural protections -- the very thing that Stern et al are being charged with as wrongdoing? 

Bottom line, in the bigger picture, is what we are seeing here a more invasive problem in our society than robo-signing foreclosure documents?  This is something that deserves some thought.