Developer Zaps $150M Luxury Condominium Project in Miami

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Developer Zaps $150M Luxury Condominium Project in Miami February 17, 2006 By Hortense Leon, Southeast Correspondent The 1390 Brickell Bay condominium tower, which was planned for a one-acre site near Miami's posh Brickell Avenue, has joined a growing list of doomed luxury projects. The 49-story, 364-unit development has become a casualty of a faltering market, characterized by stiff competition, ever higher construction costs, a shortage of labor and materials and the new-found thriftiness of lenders. In addition, the developer succumbed to the wrath of mother nature, which inflicted several hurricanes on South Florida last summer and fall. Kenneth Baboun, president of the BBB Group, originally estimated the project, which was 90 percent sold out, to cost $90 million. According to reports, however, that figure rose more than $150 million. Baboun has notified buyers that he was returning their deposits plus interest. Inexperience of the developer is another contributing factor to the failure of some condominium projects today, Michael Cannon, managing director of the South Florida office of Integra Realty Resources, told CPN this afternoon. Baboun is the 25-year son of Jose Baboun, who is a member of a family-run, residential and commercial development firm in Mexico. "Lenders and equity investors are very nervous unless a developer has a large profit margin and an experienced team," Cannon said. Also, regulators are instructing lenders to diversify their lending activities away from a preponderance of large loans to condominium developers, he said. The 1390 Brickell Bay project (rendering pictured) was conceived in January 2004, but the building was redesigned in the spring 2005, Schwartz said. Although ground-breaking was scheduled for last summer and the previous four-story building on the site was demolished, "We never began construction," he said. The developer was in talks with several lenders, but never was approved for a construction loan. Schwartz said that he did not know the amount of the loan the developer was seeking, nor the total losses which were sustained in trying to get the tower off the ground. The developer had hired two heavy hitters for the 1390 Brickell Bay project--Bernard Zyscovich, a Miami architect, and Fortune International, a Brickell Avenue real estate broker to do the sales and marketing