Troubles hit real estate at the high end

Real estate news By Christine Haughney
March 11, 2007

Until now, deep-pocketed Wall Street tycoons and foreign investors benefiting from a weak dollar seemed to be holding up the luxury real estate market even as the low-end fractured. But there are signs that some high-end real estate developers are also being hit by the slowdown.

A condo-hotel developer who partnered with celebrities to sell luxury perches from Miami to Chicago let the mortgage on the Royal Palm Hotel in South Beach, Florida, expire on March 2. The missed deadline places another luxury condo project into the hands of bankers specializing in troubled mortgages. Jack McCabe, a real estate consultant in Deerfield Beach, Florida, said there would be more troubles for developers, lenders and title insurance companies. "This is the first of what will probably be several high-end developers who had a number of luxury projects," he said. "We're going to see some where the banks take them back. We're going to see some sold to other developers. We're also going to see a lot of litigation."

The developer, Robert Falor, planned to turn 160 of the Royal Palm's more than 400 rooms into condo hotel units with a Maxim-themed bar operated by Cindy Crawford's husband, Randy Gerber, in the same complex. According to a recent report by the rating agency Standard & Poor's, Falor, whose company is Robert Falor Investments, did not sell any condos and has put the hotel up for sale. As a result, the agency lowered its rating on the commercial mortgage-backed security — a type of bond — that the Royal Palm's mortgage had been placed into by Credit Suisse. Falor let his $109 million mort- gage mature without any payment or refinancing.

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