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Unhappy Investors Filing Lawsuits Against Florida Condo-hotel
 Developers; Some Unit Values Decline 25% Plus in Last Year

By Doreen Hemlock, South Florida Sun-SentinelMcClatchy-Tribune Regional News

Aug. 5, 2008 - The Trump International Hotel & Tower project on Fort Lauderdale beach Monday became the latest condo-hotel development to face a legal battle from an unhappy investor.

John Taglieri, of Nahant, Mass., filed a lawsuit asking for his $146,000 deposit back and other damages, alleging that he was misled into signing a contract for a $730,000 unit in 2005. He claims the condo-hotel was marketed to him as an investment but never registered as a "security" and that the venture was not completed on time, according to a 36-page document filed in Broward County Circuit Court.

Developer SB Hotel Associates LLC could not be reached for comment.

The suit comes amid a slowdown in condo-hotel sales in South Florida amid a nationwide credit crunch and real estate slump.

Developers began aggressively selling condo-hotel units in the late 1990s as a way to raise cash and help finance hotel projects. Many buyers liked the flexibility to use the units and also, rent them out through a hotel pool. Investors jumped into the market as real estate soared early this decade, eager to earn returns on rising home values and hotel rates.

But the bubble burst in 2006, with no quick turnaround in sight, analysts said.

"We've overbuilt in the condo-hotel market," said Jack McCabe, president of McCabe Research and Consulting, a Deerfield Beach real estate firm. "There's lot of litigation. Some people are walking away in fear that units will be cheaper than what they agreed to pay. And those who do want to close are finding that financing is very difficult."

McCabe estimates prices on condo-hotels in South Florida have dropped like condos, down as much as a third in the past year.

Median prices for condos in Palm Beach County fell 24 percent and in Broward County 20 percent in June from a year earlier, according to the Florida Association of Realtors.

Condo-hotel sellers can attest to the woes.

Joel Greene, president of North Miami Beach-based Condo Hotel Center, said he sometimes handled 20 inquiries a day for purchases at the peak of the condo-hotel boom from 2004 to 2006. Now, he handles maybe four or five inquiries, even though he offers far more units worldwide on his Web site in countries including the United States, Panama, Dominican Republic and United Arab Emirates.

Greene predicts a turnaround eventually -- but not from speculators. He said condo-hotels make sense for buyers seeking a vacation home, hassle-free rentals and reasonable appreciation on their properties. Too many speculators had jumped in, "blinded by greed," he said.

"Don't buy condo-hotels for strict investment, for cash flow or returns," Greene said. "Put money with a Merrill Lynch for that."

Jared H. Beck, the Miami lawyer representing buyer Taglieri, said his client agreed to buy into a Fort Lauderdale beach condo-hotel because it was marketed to him as a "fantastic investment," with an emphasis on potential returns and links to real estate mogul Donald Trump. The 298-unit project was to be finished last year but has yet to open, he said.

Beck said his client couldn't easily find another buyer to pay $730,000 for his unit today.

"The bottom has fallen out of the condo-hotel market," Beck said. "And it's going to be difficult for some time."

Doreen Hemlock can be reached at or 305-810-5009.

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To see more of The South Florida Sun-Sentinel or to subscribe to the newspaper, go to http://www.sun-sentinel.com/.

Copyright (c) 2008, South Florida Sun-Sentinel

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