Written by smacke01 on December 1st, 2010

Ladies and Gentlemen, we finally have a sales comp involving a warehouse condo deal that was foreclosed on by a bank, and not just any bank.

Here is the building with the condo unit:

Heyday High Flier

The unit was a 5,962 sf showroom warehouse space with excellent frontage on I95, just north of Gateway Blvd.  The building is a great building built in 2003 and is a perfect example of the outrageous pricing warehouse properties were fetching during those times.  The unit was bought in March 2003 for $462,000 or $78/SF.  The next three years is when the real estate market went from sizzling hot to out of control, frothy, and bubbleiscious.   This unit was bought in October 2006 for $1,240,000…….that’s $208/SF!!!!!

Now for anybody that can do basic arithmetic, that’s a 170% increase in value over a 3 year period.  Talk about insane market.  I know for a fact the rents were not doubling and tripling as quickly to justify these sale prices.  That’s the telltale sign things are getting out of whack.  Dumb money was flooding the markets, including the warehouse properties.  To give you an idea of how insane this number is, high rise condos on South Beach with Ocean views 30 stories up are selling for $130/SF today.  This warehouse sold for $200/SF…a warehouse.

Now for the crème on top, guess which bank made the $1,000,000 loan on the property?  If you need a hint, think the namesake bank that melted down in late 2008 that opened all our eyes to the house of cards we had all built.  That’s right; Lehman Brothers was down here doing warehouse loans.

Good Old Lehman Brothers

The South Florida industrial market might be entering the next phase of the real estate cycle.  This unit was foreclosed on by some remnant entity of the failed Lehman Brothers and was recently bought by an investor.  The investor paid about $70/SF, a 66% decrease in the price paid in 2006.

Million Dollar question: Despite the huge discount from the frothy high, did he still pay too much?  Can he find a 6,000sf industrial user? How long will that take?  When are banks going to start selling all the other REO warehouse condo units they own?

If you are in the market for buying a warehouse condo unit as an investment or the home for your business, call me.  I would love to discuss your options and give you my opinion on the current conditions.

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This entry was posted on Wednesday, December 1st, 2010 at 2:52 am and is filed under Brokers, Commercial Real Estate, Industrial Market Conditions, Owners, Sale/Lease News, South Florida, Tenants, Warehouse Condo Units, Warehouse Space. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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