By ALEXANDRA CLOUGH
Palm Beach Post Staff Writer
Thursday, June 21, 2007
BOCA RATON — In the clearest sign yet that the region's real estate boom has ended, Miami-based Ocean Bank confirmed Wednesday that it has filed a $50 million foreclosure action against the developers of a Boca Raton condo conversion.
The foreclosure may be the largest filed in Palm Beach County since the red-hot residential real estate market began cooling early last year. And analysts say it's a precursor of things to come as the lenders who fueled the frenzy with easy-to-get loans continue to tighten the purse strings.
"It's probably just the tip of the iceberg, the first of many more to come over the next couple of years," said Jack McCabe of McCabe Research and Consulting in Deerfield Beach.
Ocean Bank said NRW Development LLC, a South Florida real estate development firm, and six individuals owe $50 million on a condo conversion known as Villa Mare Beach & Yacht Club Residences, a 40-year-old apartment complex formerly known as Oceanview/Lakeview apartments.
In the lawsuit, filed June 1 in Palm Beach County Circuit Court, Ocean Bank seeks the property and personal guarantees from the six investors.
"We have filed a foreclosure action against NRW Development ... to protect the bank's interests in two Boca Raton properties," Terry J. Curry, chief credit officer of Ocean Bank, said in a statement. "Of the $60 million which Ocean Bank lent to NRW, $50 million remains outstanding. We anticipate resolving this matter."
The bank would not comment further.
Among those being sued: Hernan Gleizer, chief executive of Re/Max Bestseller Realty in Aventura, and Ricardo Djmal and Ricardo Weinstein, two investors in The Whitney condominium in West Palm Beach.
The Whitney's developer, Enrique Dillon, said the condo is not affiliated with Villa Mare.
None of the borrowers could be reached for comment Wednesday.
Ocean Bank is Florida's largest independent commercial bank with $5.9 billion in assets, and lent millions of dollars on condo projects in South Florida - which now has a glut of condo units hitting the market. Ocean Bank does not have Palm Beach County offices.
In March, the Federal Deposit Insurance Corp. issued a cease-and-desist order in which Ocean Bank agreed to reduce and monitor loans to condo conversions and land development. The bank also agreed to review the collateral backing commercial loans of more than $10 million, and to limit the level of credit to any borrower granted without bank board approval.
The enforcement action came too late for the NRW loan, however.
The Ocean Bank lawsuit says NRW and six other borrowers stopped paying on the loan in December, only seven months after NRW borrowed the $60 million to pay $57 million for the property.
NRW had planned to create Villa Mare out of the two aging 80-unit, five-story buildings, the last major rental complex on the Boca Raton waterfront. The apartments sit on a side street known as Sweetwater Lane that runs from the Intracoastal Waterway to the ocean, south of Spanish River Boulevard.
Units were to be priced between $311,000 and $1.2 million.
But even that sweet location wasn't enough to guarantee success, especially when NRW plunked down so much to buy the two-building complex.
It's tough to make the numbers work when you're paying $356,250 per unit, McCabe said.
Even when the sale took place last year, "we questioned that deal," he added. "The price may have been too high."
Now Ocean Bank has a giant hole in its $4.5 billion loan portfolio, bad news for a bank with past-due loans creeping past the $208 million mark.
Ken Thomas, a Miami banking analyst, called the bad NRW loan "a big issue" for Ocean Bank, especially given the rare enforcement action issued by the FDIC.
But Thomas said Ocean Bank can handle the hit. The bank posted a profit of $19.1 million for the quarter ended March 31.