The commercial real estate crisis will not be a wave, but a tsunami that will dwarf the subprime mortgage crisis.
The 5-foot alligator lurking in the algae-green waters of the community swimming pool was not the worst thing code-enforcement officers have found in recent years at AAA Apartments in Cocoa.
Bathrooms infested with mold. Walls with gaping holes where air conditioners had been ripped out. Garbage and trash strewn about the 52-unit complex. The city began issuing code-violation fines in 2007, back at the beginning of the housing slump, and the apartments’ co-owners soon owed the city $1.8 million — more than three times the current list price of the property, and enough money to motivate the now-former co-owners to try bribing a code-enforcement officer.
AAA Apartments, now bank-owned, may be an example of things to come. As home foreclosures continue to mount throughout Central Florida, code-enforcement officers say apartments, condominiums and other commercial buildings are being abandoned by their owners and repossessed by banks in growing numbers.
“The coming wave is the commercial foreclosures,” said Mike Rhodes, code-enforcement division director for the city of Orlando.
Trepp LLC, a New York-based provider of commercial-mortgage information, recently reported seven Orange County apartment properties as being in foreclosure: Mallard Cove Apartments, Orlando; Cornerstone Apartments, Orlando; Nob Hill Apartments, Winter Park; Seville Place Apartments, Orlando; Woodbridge Apartments, Winter Park; Windover of Orlando, Orlando; and Oak Cluster West Apartments, Orlando.
Orlando’s code-enforcement officers are already dealing with about five foreclosed complexes, including Willow Bend Apartments, scene of numerous shootings in recent years. Rhodes said the city has levied about $2 million in fines on that property, which is off Silver Star Road in the city’s northwest corner and is worth a small fraction of the fines outstanding against it. A prospective buyer has offered to purchase the complex and settle the fines for $100,000, but though the code-enforcement board was willing, the owners declined the deal, Rhodes said.
He said that, although enforcement boards generally want to recover something for the time and money they spend on such cases, they are usually willing to negotiate large fines, particularly when the fines and liens surpass the property’s value.
“Everyone wants to see property moving forward, but the city has invested a lot of time on these,” Rhodes said of problem cases such as Willow Bend. “Cities are faced with either making a deal to get something positive going, or the property sits while the banks grind through a pretty nasty foreclosure.”
As the fines mounted at AAA Apartments in Cocoa, that complex became a “major eyesore,” said Nancy Dresser, Cocoa’s deputy director of community development. The city charges $110 to $250 for each day that violations go unaddressed.
In AAA Apartments’ case, the “liens started in 2007, and the owners decided they weren’t going to do anything to fix it, and the fines just added up,” Dresser said. Issues included holes in ceilings and backed-up plumbing.
April 04, 2010|By Mary Shanklin, Orlando Sentinel
Source: The Orlando Sentinel