Developer Tibor Hollo Helped Build Miami

An epic condo bust can't burst his bubble.

Also in Broward County, his company developed two Wag's Restaurants — a now-extinct chain owned by Walgreens.

All told, he has accounted for more than 55 million square feet of real estate.

Yet the past 12 months have ranked among the toughest in Hollo's 55 years as a developer. He has sold only about 38 percent of the condos in his multimillion-dollar Opera Tower, which opened last year. To stay above water on the building, he's renting out the rest of the units for as low as $950 a month.

For 55 years, Hollo has begun his day with a swim in Biscayne Bay.
Michael McElroy
For 55 years, Hollo has begun his day with a swim in Biscayne Bay.
Hollo's firm handled the rehab of the landmark Kenann Building at Oakland Park Boulevard and Federal Highway.
C. Stiles
Hollo's firm handled the rehab of the landmark Kenann Building at Oakland Park Boulevard and Federal Highway.

It's much worse for other developers who took out higher loans and presold fewer units. Condo owners and developers, desperate to get the cash flowing to keep mortgages and construction loans intact, are trying everything: giving away Lambor­ghinis and Mini Coopers with purchases, slashing prices in half, selling units in bulk packages to vulture firms or equity groups.

Condo owners who bought at the top of the market, meanwhile, steam while their neighboring units are rented out at pennies on the dollar and their condo associations struggle to scrape together enough cash to keep basic services such as garbage collection and maintenance. Many now owe more on their mortgages than their condos are worth; others have simply succumbed to foreclosure.

Hollo shakes his head and raises his voice above his usual smoky low register as he names those to blame for the latest mess: Wall Street tycoons, Palm Beach's Bernie Madoff, and bad investors. Even when he's angry, Hollo drips with congeniality, punctuating his jokes with a booming laugh and illustrating his points with personal stories from a long life.

The ones most at fault in this bust, he says, are the inexperienced and the unscrupulous who flocked in droves to the region during the middle of this decade as subprime loans, lax oversight, and outright fraud pumped America's housing bubble to increasingly absurd heights.

"There are lots of professional developers in the industry, and some of them are very good," Hollo says. "But there are also lots of what I call 'dentists from New York' who don't know a damned thing. They could see people were making money here, so they buy land and they jump into business without knowing anything."

South Florida's condo market followed the nationwide housing frenzy that gripped the United States after the post-9/11 mini-recession ended in 2002. With mortgage giants Fannie Mae and Freddie Mac throwing around loans like party favors and banks following their lead, housing prices exploded. The area's bubble was one of the six or seven largest in the country, with homes appreciating by more than 80 percent between 2001 and 2006.

As housing prices spiked, towering cranes climbed like kudzu from West Palm Beach to Miami. For four years, between 2002 and 2006, every "dentist from New York" with a few million to invest backed a project here. Construction began on dozens of new luxury condo high-rises, some with as many as a thousand units. Every week — sometimes every night — developers threw waterfront galas studded with celebrities and soaked with free champagne and cocktails while stunning architectural renderings of their grand plans flashed on movie screens.

It wouldn't last.

With a nearly audible pop, the housing bubble collapsed nationwide in late 2006. For South Florida's condo projects, the effect was devastating. Many had secured bank financing by preselling units to investors, who bought as many as they could while the market was rising, with plans to flip them. When credit disappeared, reams of those investors defaulted or lapsed into foreclosure.

"It was the perfect storm of hype, fluff, and optimism, coupled with greed, avarice, and fraud that artificially inflated values and produced this overdevelopment," says Jack McCabe, a real estate consultant and researcher.

Today, only a handful of new towers in South Florida have sold more than 80 percent, and some have sold less than half, according to Lucas Lechuga, a realtor who compiles condo closings on his website. Several are still trying to unload more than three-fourths of their condos.

"I still think there's another round of foreclosures to come," Lechuga says. "We have another year, until the end of 2009, before we hit rock bottom. And then prices still aren't going to improve for a long while."

Among the 21 condo buildings opened in the past two years that Lechuga has tracked, Hollo's Opera Tower has the fourth-lowest percentage of condos sold. But Hollo says he has weathered the storm thanks to the lessons he learned in the past.

For one, his firm — Florida East Coast Realty — tackles only one project at a time and takes out comparatively low 40 percent bank loans. Many developers borrow at 80 or 90 percent of the cost of their project. The result of this prudent financing, Hollo says, is that he can rent units in the tower until they sell and still make his loan payments.

There are no public records to confirm Hollo's cash flow. But no liens have been taken out against his company or the Opera Tower project, and he has never filed for bankruptcy. Real estate experts say his explanation of how he has survived the bust sounds reasonable. "Tibor's been through this process so many times," McCabe says, "it's possible he foresaw the crisis."

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