Despite boom, condo can't get off ground

When developers Michael Gold and Robert Wohl launched plans several years ago for a sleek high-rise condominium called ICE, the project on Biscayne Bay appeared to be a can't-miss.

But in a cautionary tale demonstrating the risks of buying a preconstruction condo and the pitfalls developers face in building one, Gold and Wohl told buyers late last month that work on the tower stopped in December.

They added ominously in a May 25 letter: There are ``serious concerns about the viability of the project.''

Amid concerns that investors and speculators are fueling a real estate bubble, many observers suspect some high-rise condos may not even be built. Instead, increased construction costs, a limited supply of subcontractors, skittish lenders -- or even some developers' inexperience -- may erase potential towers.

Longtime Miami real estate attorney Matthew B. Gorson predicts half of the projects announced will be built -- but beyond that is unclear.

''There will be some natural selection in the marketplace,'' said Gorson of Miami's Greenberg Traurig, who is not involved in ICE. ``It will obviously be more difficult for people who have not properly planned for the high inflation in construction costs, making a number of projects economically unviable.''

According to a stream of letters Gold and Wohl sent to buyers in the past three years, which The Herald obtained, skyrocketing construction costs translated into other woes for ICE. The problems have left the developers of the highly anticipated project scrambling to keep it afloat.

''We encountered unforeseen dramatic cost increases as we began work on the project,'' Gold and Wohl explained to buyers in their most recent letter, dated May 25. ``As a result, our bankers required us to seek additional financing. Because of the delays in finding a new equity partner, certain of our subcontractors withdrew from the project, and we suffered a further round of cost increases.''

COSTLY DEBACLE

For buyers, who plunked down 20 percent deposits and expected ICE to be taking shape now, the episode may amount to a costly debacle. A down payment on a unit in a different project may have appreciated significantly in the last three years because of Miami's soaring real estate values.

''I don't know what I will do,'' said Roberta Quinn, a retired schoolteacher from New York who planned to live in ICE. ``I have talked to a lot of other [buyers]. Some are thinking about litigation, some are thinking about just taking their money back. I don't know. We had such faith in Michael.''

Gold was contacted but declined to be interviewed. Calls to Wohl were not returned. Neither is considered a prominent developer in South Florida.

After throwing lavish condo parties and erecting multimillion-dollar sales centers touting luxury living, other developers also have stumbled amid rising building costs.

Last year, for instance, Cabi Developers canceled buyers' reservations -- which weren't binding, like a contract -- at the Everglades on the Bay condo on Biscayne Boulevard so it could raise prices to cover higher-than-expected construction costs. A Miami Beach condo, Bentley Bay, which was years late and over-budget, emerged from bankruptcy last month -- in that case the judge allowed the developer to raise prices.

Some contend ICE's predicament, in which buyers have binding contracts for units, may become more common.

''This may not be a unique situation,'' said veteran real estate lawyer Brian L. Bilzin of Miami's Bilzin Sumberg. ``When developers are going to lock in contractors, they are getting prices significantly higher than when the units were first sold to buyers.''

At its outset, ICE appeared destined for easy success.

The project is slated to go up on prime bayfront land at 701 NE 31st St. in Miami's Edgewater neighborhood. Chad Oppenheim, among Miami's hottest architects, was tapped to design the building. Majestic Properties, a leading South Florida real estate brokerage of new condos, marketed and sold the luxury units. And the now-usual tactics of parties and slick marketing campaigns were employed to sell condos as the epitome of style and luxury.

Calls made to Jeff Morr, who heads Majestic Properties, and architect Oppenheim were not returned... (more)