Condo Market Struggles to Succeed with Fractured, Failed Projects

Consider Southwest Properties, a Halifax, Nova Scotia–based apartment owner of about 1,250 units, which began investing in U.S. multifamily in 2009. As part of its strategy, the company targeted new construction bulk condo deals and has purchased four so far in Florida for a total of 628 units, operating them as rentals until the for-sale market returns. In February, Southwest acquired 224 units (out of 240 total units) in Tower II of the Oasis Grand project in Fort Myers, Fla., estimating that it received a discount of 33 cents on the dollar in terms of construction, land, and soft costs. While Southwest couldn’t reveal the price, public records peg it at $35.9 million. Indeed, for the past two years, Southwest has found significant bargains in the fractured and failed condo market. Unfortunately, those deals may not be around much longer. “There’s a limited time for these kinds of deals, and in South Florida, that time has passed,” says Omar Del Rio, vice president of acquisitions for Southwest. “You’re still able to purchase below replacement value, but you’re no longer getting 50 cents on the dollar or below. Right now, the prices are almost like retail.”