JV Snaps Up Distressed Condo Development in Daytona

Daytona Beach, Fla.–Florida’s condominium market took a nosedive a few years ago along with the rest of the for-sale housing market, leaving a bevy of newly developed properties, like the $240 million Marina Grande on the Halifax in Daytona Beach, Fla., nearly empty and their owners in a credit crunch-induced financial pickle. However, many able investors see the upside to acquiring such distressed assets, and a joint venture involving Tarpon Partners L.L.C. and Glenmont Capital Management L.L.C. has done just that. The partners purchased the first mortgage debt on MG on the Halifax’s remaining 414 unsold residences for $60 million and, in a deed-in-lieu of foreclosure agreement with the mezzanine lender that controlled the borrower, acquired the entire 486-residence luxury waterfront property. All told, Tarpon and Glenmont shelled out $180 million.

Tarpon Partners is an affiliate of The Swerdlow Group, which co-developed MG on the Halifax. The new joint venture has allowed the company to return to its project. In addition to the two 25-story residential towers, the Tarpon/Glenmont team’s acquisition included the 15,000 square feet of unoccupied retail space in the two buildings and land designated for MG on the Halifax’s second phase, which will add two towers containing another 486 condos.

The future looked quite rosy for the condominium development when construction commenced. Contracts were signed for 319 of the 486 residences, but with the collapse of the housing market, only 72 of those contracts actually closed.

With an improving economy and favorable interest rates, signs of life are beginning to return to the condominium market in Daytona Beach; however, with 414 vacant two- and three-bedroom upscale residences on their hands, the new owners still have their work cut out for them. Yet, they are not intimidated.

“What’s fascinating about this opportunity is that 70 percent of the units sold at over $300 per square foot at the peak of the market, but we are going to release a group of them at half of that price,” Joseph C. Smith, founding principal of Glenmont, tells MHN. “Brand new condos are trading at that price now. MG on the Halifax is one of the nicest projects in Daytona, so we feel good because a lot of buyers liked this property at twice the price. At $150 per square foot it is underpriced for the market considering the projects selling at $150 per square foot are not high-rises, they are not Class A and they don’t have the same high-end amenities that are at MG on the Halifax.”