INTERNATIONAL
ibis club naples Colin Murphy says Torcana has
adopted a dual strategy to tackle the distressed market. First of all, Torcana targets distressed developers, and negotiates bulk discounts on pre-tenanted properties that it can then market to its investors. Secondly, it sources and purchases a range of foreclosed and short sale properties at substantial discounts – sometimes as low as 20 per cent of the peak price – targeting a small number of communities. These can be refurbished, tenanted, and resold as investments to high net worth investment buyers. Even after Torcana’s costs have been taken into account, the eventual buyers will enjoy a 65 per cent discount.
The boTTom line According to Torcana, industry figures show foreclosed properties selling for an average USD 94,500 and short sales for an average USD 75,000 – well below the average for regular resale properties of USD 145,000. That’s a clear opportunity for the cash investor. But the gap between foreclosed and regular properties is closing as the market begins to stabilise, and inventory is beginning to tighten as oversupply is gradually absorbed by the market. Colin Murphy says that while in
2006 the market all but collapsed, and “from 2006 to 2008 it was bloody mayhem,” with builders going bust and huge amounts of distressed stock coming on to the market, supply is much lower now. There are fewer builders left to go bankrupt – most who survive are well capitalised – and the economy is recovering. Inventory has declined from 26,000 properties in February 2008 to 15,000 in December 2010, and it is getting far more difficult to get hold of distressed properties.
“Finding high quality, pre-
tenanted, developer owned and highly discounted stock in nice neighbourhoods is very hard work,” Murphy says. David Cox agrees. “At one point, in Miami, Tampa, and Orlando, you had six years of excess inventory in the market,” he says, “but not any more; the number of available properties has dropped quite markedly.” Getting good quality properties is
also not easy. Most Florida properties are in communities, which depend on regular payments from their residents for the upkeep of common areas. High default levels can lead to the infrastructure being poorly maintained, which in turn means those properties which are let out tend to attract lower quality tenants, creating a vicious circle. “It’s imperative that you’re in a well managed community,” Cox stresses.
‘The gap between foreclosed and regular
properties is closing as
the market stabilises.’ colin murphy TorcAnA
IBIS CLUB, NAPLES, FLORIDA Stunning apartments starting at £35,000, net yields from 7-9 per cent. Prices are currently 20 per cent of their previous values.
“A lifeTime invesTmenT” A major factor affecting British buyers’ readiness to consider Floridian property is the exchange rate. David Cox says buyers shouldn’t be put off, “This is a lifetime investment opportunity. I’m investing a small amount, getting rent, and waiting for value recovery, and if that happens, I’m tripling my money. If you see property prices tripling, is it likely that the dollar will fall enough to wipe that out?” Still, with all the difficulties UK
SIESTA LAGO, ORLANDO. Prices discounted by up to 70 per cent with net rental yields of around 8.5 per cent. 15 minutes from Orlando l Airport. Prices from £37,000.
agents will encounter does it make sense to consider selling US properties to their clients? Certainly contacts and expertise in sourcing the property are vital but David Cox points out that companies like Property Frontiers work with a number of agents, and both IFAs and agents which have strong bases of high net worth clients should consider working with a larger company to offer clients the chance to invest in Florida. “For smaller agents to work with a company that has stock could be an interesting proposition,” he says. “We can bring a fully packaged, explained and judged investment opportunity that they can put in front of their clients.” While it may not be easy to find
supply, it’s difficult to envisage Florida’s value potential being completely realised in the next five years – inventory is tightening, but prices are likely to rise only gradually, given a generally gloomy view of the prospects for the US. So it’s not too late for investors to enter the market – but if agents want to do so, they will need to move quickly while the opportunities for major deals are still there.
siesta lago orlando
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PROPERTYdrum MAY 2011 51
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