After collapse, condo dwellers who shirk fixes might reap a windfall
A 1964 Miami Beach condo tower was vacated by city order and faces a developer buyout and demolition after failing for years to complete required repairs.
Faced with a deadline to make major repairs and resistance from residents unwilling or unable to pay spiraling maintenance bills, the majority of condo board members at Miami Beach’s aging La Costa tower elected to take the easiest way out: They punted.
Year after year, former residents and board members say, the La Costa board majority — with practically no financial reserves and little will to raise millions of dollars for seriously overdue repairs — authorized only minimal patchwork while longstanding and severe structural, concrete and electrical deficiencies visibly worsened.
The city of Miami Beach, one former board member says, was content to look the other way. The city issued extension after extension, he said, even though the board skipped the required 40-year recertification for the 1964 oceanfront building entirely, then failed for years to undertake the necessary work to complete it after sailing past its 50-year anniversary.
In the end, 17 years of neglect and deferred maintenance and the cost of massive repairs proved too much for La Costa’s 120-plus condo owners to overcome.
Last month, the 15-story building was vacated by emergency order of the city of Miami Beach and faces demolition. A developer who bought out most of the condo’s owners has plans to build an ultraluxury
tower in its place and is suing a group of holdouts to force them to sell.
The consequences that unspooled at the tower could
serve as an object lesson for the scores of older South Florida coastline condos that
face emergency inspections and potentially steep repair bills in the wake of the collapse of the Champlain Towers South condo in Surfside. The tragedy claimed 98 lives.
The experience at La Costa offers some potential solutions to those issues, including the advantages of buyouts of outdated condos whose market value might not justify the imposition of large special assessments. Even before the collapse, some developers bought out older condos to redevelop on prime waterfront locations in Brickell, Edgewater and Surfside, while many of the supersized towers in Sunny Isles Beach were the result of buyouts and dissolution of small, obsolete condos.
Real estate experts say such deals will likely become far more common, especially if Miami-Dade County requires more frequent inspections and earlier recertifications for condos, or insurance companies worried about another Surfside jack up rates or drop coverage for buildings whose owners fail to properly maintain them.
If Hurricane Andrew in 1992 led to sweeping changes in building codes and quality of construction across Miami-Dade, the Champlain Towers collapse will force an equally consequential reckoning for scores of older condos like La Costa, said prominent Miami condo-market analyst Peter Zalewski. Many of these properties sit on valuable land on barrier islands and Biscayne Bay and developers are eager to buy them out, he added.
“This is the next inflection point,” said Zalewski. “The scrutiny, regulations and guidelines that will follow Surfside will change the condo market in South Florida dramatically.”
La Costa’s buyout illustrates one way in which these forces could play out in South Florida’s aging condos.
But it’s also a warning that there are few easy fixes and numerous legal, human and economic hurdles to clear for owners of deteriorated condos. It’s uncertain, for instance, what recourse unit owners whose boards have neglected repairs might have under current condo law, though owners in one building that was vacated for safety reasons after the Surfside tragedy are suing their condo association.
Meanwhile, complicated and confusing changes to condo regulations and court rulings on condo terminations can make bulk buyouts a fraught and uncertain undertaking for developers and unit owners, experts say. Developers who pay over-market prices but fail to persuade enough owners to sell might get stuck with units not worth what they paid for them. And buyout offers can exacerbate tensions among residents already in disagreement over paying for repairs.
“It’s a very complicated process that takes a substantial amount of time,” said condominium-law expert Martin Schwartz, of the Miami firm Bilzin Sumberg. Schwartz has handled terminations but is not involved in the La Costa case. “It’s a bit like what happened at Champlain Towers. There are people who want to pay an assessment
and people that don’t want to pay the assessment. That’s condominium life. You can’t get anyone to agree on anything.”
At La Costa, the end came just as a newly elected board majority finally decided to get serious about repairs, hired an engineer, instituted a special assessment and borrowed several million dollars — an amount that former board members and residents said was nonetheless clearly insufficient for the work that needed to be done.
Then, following the June 24 Surfside collapse, the city of Miami Beach belatedly took firm action: Its building official ordered emergency inspections of La Costa in July. In August, the city ordered everyone out after troubling reports from a pair of engineers working for the condo. One report indicated a portion of the garage and pool deck, structurally separate from the residential tower, was in danger of falling in. Both engineers concluded extensive repairs at the residential tower needed to be undertaken within 30 days.
But it was too late for La Costa.
By then, a developer offering big money had swooped in to buy most of the units from sellers eager to get out from under impending assessments and the prospect of units rapidly losing their market value. The 116 willing sellers made out unusually well, cashing out by May, just before the Surfside calamity. Some sold their units for as much as twice the market value.
But it has left a mess for others. Some 15 holdouts who refused to sell, now effectively evicted by city order, had to find places to live without receiving anything in return for their former homes. Now, they have been taken to court by Miami developer Mast Capital and principal Camilo Miguel to force them to sell. The holdouts say in court filings that Miguel improperly sought to terminate the condo to force them out.
Dania Valdes, 65, has owned a one-bedroom unit at La Costa since 2002. Valdes claims she and other holdouts have been victims of “bullying” by the developer. Valdes said she feels she and other unit owners were pressured into
selling for less than what the overall condo property is worth.
“They made life impossible for those who didn’t want to sell until they became desperate and had no other solution,” Valdes said.
One former longtime La Costa resident and board member, Emilio Canasi,
60, says he reluctantly opted to sell his unit to
Mast at a substantial premium. He contends the condo association and Miami Beach share in the blame for what happened.
After skipping the required 40-year recertification, the condo board decided to embark on a 50year recertification in 2016, two years after the building passed its half-century mark, Canasi said — a sequence confirmed by city records. A repair plan was approved in 2017, city records show, after the city belatedly cited the building for failing to complete its 40-year recertification. But the plan was never completed. The board did only minor work to keep the recertification permit going, Canasi said.
“The old condo association was playing this game with the city of not really doing anything and asking for extensions, extensions, extensions,” Canasi said. “The building deteriorated, and I was part of that board. And I got out of the board, because I saw that I was being overruled on everything. I said, you know what, I don’t want to be part of the board because, if sh-t hits the fan, and it will hit the fan, I don’t want to be accused that I was part of the decision-making.”
After the Surfside collapse, he said, “our city of Miami Beach started looking
around at all the buildings and La Costa had an open permit to do the 50year certification for about six years. I think they said, ‘Where are you with this?’ And nothing had been done. Zero. Nothing. Nothing.”
The building’s worrisome condition and the prospect of ever-mounting repair costs meant that, like him, many owners saw no better option than selling when Mast came knocking, he said.
“I never intended to sell. But, unfortunately, the building deteriorated in such a way that it would have required an enormous amount of money to put it together. And the offer that came in was substantially higher than it was worth,” said Canasi, who moved in June to a smaller but newer condo at the 20-year-old Blue and Green Diamond towers on the beach just to the north with the proceeds of the sale of his La Costa unit to Mast. “I loved my old unit. I wish I still had it. But I’m happy that I sold. I got quality of a building in exchange for the size of my unit.”
Miguel, meanwhile, is not waiting for the courts to decide about La Costa.
He has submitted to the city a plan by OMA, the firm of Dutch superstar architect Rem Koolhaas, to replace La Costa and its modestly valued units with an ultra-luxury tower that will boast creative design features to make it highly resistant to rising seas and larger storm surges — two of the biggest threats to the longevity of older, lowlying condos along South Florida’s coastline.
The plan by OMA’s New York office for the narrow lot calls for an elongated building composed of seven interlocked, diamondshaped towers that present a slim profile to Collins Avenue and the beach. In one of several innovative features designed to adapt to climate change, the building’s first floor would be placed at 13 feet over base flood elevation, higher than rules now require, and the second at 29 feet. That would allow for the first floor to be raised if the city lifts Collins Avenue in response to higher seas.
But its 100 units — fewer but larger than La Costa’s 131 units — will be financially far out of reach for the vast majority of Miamians.
The plans for the new tower, which meet existing zoning rules and require no variances, will get only one public review, before Miami Beach’s Design Review Board, which has final approval power barring an appeal. City planning and zoning officials have recommended approval. On Sept. 10, the developers received a deferral from the board until Oct. 5.
At La Costa, the situation has gotten so sticky that few people involved, with the exception of some willing sellers, will talk publicly about it.
The city released public records after a request from the Miami Herald, but its building official, Ana Salgueiro, declined a request for an interview through a city spokeswoman. Miguel, the developer, issued a terse “no comment” through a public-relations representative and did not allow two prominent attorneys representing him to speak to reporters.
Miami engineer DenisSolano, who prepared a troubling evaluation last year for the condo board, did not return a message left at his office. The lawyer for the holdouts also declined an interview request and asked reporters not to contact his clients. The one holdout interviewed, Valdes, spoke with the Herald before the lawyer advised his clients not to speak to the press.
Experts in real estate and condo law say the difficult circumstances at La Costa are likely far from unique.
Already, post-collapse inspections have led to the emergency evacuation of a handful of condos and apartment buildings in Miami-Dade. As MiamiDade County and municipal building officials respond with extreme caution to even the smallest threat of structural and other safety hazards in older residential and commercial buildings, there’s likely more evacuations to come.
Half of the 139 condos that Zalewski found sit on barrier islands in MiamiDade will be facing recertification within the next decade, the analyst said. He predicts that many of them, deteriorating and occupied by older people, will find it financially taxing if not unfeasible to do the work necessary to bring them up to code amid sharpened scrutiny by insurers and municipal building departments.
As more condos where maintenance and repairs have been put off face often-staggering bills and assessments, the experts also expect they will increasingly become targets for developers looking to buy everyone out, especially at a time when demand for condos has skyrocketed but supply is sharply limited given that South Florida coastlines are all but built out.
Developers who had turned away from the coast because they thought there was no land left to build on will come back in droves in search of deals with a potentially huge profit margin, Zalewski predicts. And cities will likely be happy to help them so as to rid themselves of deteriorating buildings and the enforcement headaches that they represent, Zalewski added, as well as to glean the higher taxes that new towers will bring.
“They will put the gun to condo owners’ heads and say, either bring it up to code or we’re going to force everyone out,” he said. “People will be forced to sell.”
That won’t mean buyouts are an easy way out, however.
The buyout tactic until now has been relatively uncommon, in part, because of the difficulty of persuading large numbers of residents to sell, which typically requires negotiating individually with unit owners. But shifting and often unclear targets set under state law for dissolving condos have made it even more complicated in recent years, experts say.
Three condo-termination thresholds have been in place since 1976, but which standard applies can depend on when and how condo declarations were written. A recent court decision in a Sunny Isles Beach case further muddied the waters, experts say.
“We’re living with a statute that makes it very difficult to terminate. It’s a ridiculous standard,” said Schwartz, who stressed he’s not familiar with the particulars of the case at La Costa. Schwartz is among a number of condo lawyers urging the state Legislature to ease and clarify rules on condo dissolutions.
“It’s unfortunate because it’s really the best way out for these people,” said Schwartz, who wrote an op-ed piece for the Miami Herald on the subject.
To be sure, a buyout can handsomely reward longtime condo owners with large premiums over the usually modest market values for units built decades ago in buildings that lack the space, design pizzazz or amenities common in newer towers. At La Costa, many of the owners were investors who were renting out units and were happy with Mast’s offer and what they saw as a winning business proposition.
Mast and a high-profile investment partner, Miami Beach-based Starwood Capital, created an affiliate for the buyout, 5333 Collins Acquisitions LP, and spent a median of $950,000 on the one- and two-bedroom units at the site, according to figures on the MiamiDade property appraiser’s website. Mast’s total purchase cost, including common areas, came to just over $100 million.
While the individual purchase prices might have represented a premi
um over market values, Valdes contends the total buyout figure represents a “ridiculous” underpayment given the underlying land value of the condo’s nearly 2.5 acres.
By comparison, she notes that the smaller Champlain Towers site, which depending on how it’s measured is 1.27 acres or 1.88 acres, has been valued at $120 million.
One seller said Mast began approaching unit owners as long as four years ago but didn’t find many takers until it significantly upped its offer last year. That’s just as a newly elected condo board was embarking on developing a plan to finally make some critical repairs, said Paul Siska, a business executive who with his wife owned a unit at La Costa since
2000 until selling to Mast.
With recertification overdue, little in the way of condo cash reserves to cover the cost, “major issues” with the building and a substantial offer for a unit that they bought when it was relatively cheap, the financial calculation was practically a no-brainer for the couple.
Siska and his wife, Tatiana, who live in a house that they bought on nearby Normandy Isle in 2009, sold the unit that they kept as an investment rental for $1.1 million to the Mast affiliate this year, the Miami-Dade tax assessor’s website shows. They paid $289,000 for the unit in 2001, the records show.
“One of the problems that we had, historically, is that it didn’t have any reserves,” said Paul Siska, who served on the condo board for several years. “And so it was always an issue with repairs and maintenance in La Costa. And the repairs, and the issues that were not addressed, were building up all the time.
“The building needed a major amount of repairs to meet the 50-year certification. We made an assessment for about, I think, six or seven million. But that didn’t include a lot of things. So, on the one hand, you had this offer that was probably 60%, 70% above market at the time. And on the other hand, you had the prospect of continuing to own a condo that was going to be a money sinkhole.”
Unlike Valdes, Siska had only good things to say about Mast.
“I will say that the buyer, Mast Capital, was extremely transparent. And extremely … forthcoming and professional in the way they presented everything,” he said.
One issue, he and other willing sellers said, is that older units and buildings might never recoup the value of money invested in repairs because of outdated facilities, layouts and a lack of amenities.
Then there is the impact of rapidly worsening climate change, one of the factors that investigators are looking at in the Champlain Towers collapse.
Some have questioned whether saltwater intrusion could have accelerated foundation deterioration. Low-lying buildings along the beaches and waterways, often with underground or partly underground parking garages, are increasingly vulnerable to rising seas and increased storm surge due to the warming climate and retrofitting them would be massively costly, if even physically possible or feasible.
The choice to sell wasn’t easy for Lucia Delgado, 60, an owner and resident of La Costa for two decades. She and her husband, Celso Delgado, were saddened to leave friends of many years, she said. But when the percentage of owners who agreed to sell rose above 50%, she added, their attorney advised them to do so as well. And facing a collective multi-milliondollar special assessment already in place and more likely to come, plus an offer more than twice what they paid for their condo, they took it.
After renting at La Costa for several years, the Delgados paid $500,000 for a two-bedroom, 1,500square-foot unit in 2014, Miami-Dade tax records show. They sold to the
Mast affiliate for nearly $1.23 million and purchased a 1,490-square-foot, two-bedroom unit at the 20-year-old Green and
Blue Diamond towers just north on the Beach oceanfront.
“We kind of saw the writing on the wall,” Lucia Delgado said. “So we sold and, lucky for us, we were able to buy at a place that is 40 years newer. The numbers spoke, you know?”
John Pabone, 68, hesitated about selling and still has mixed feelings about doing so. He wishes he could have stayed at La Costa and in Miami Beach. But though he believes the Surfside collapse likely helped Mast get the city to vacate the building, he’s in hindsight certain he made the right financial decision and is glad he had already agreed to sell by then.
Pabone had the unit under a sale contract with Mast for a year and a half, closed in March and moved out in early August, he said. Although the developer had given everyone six months to find a new place to live, he said the Surfside collapse and the new inspections precipitated his moving out faster than planned. He ended up in Fort Lauderdale, in a place that he bought with the proceeds of the La Costa unit sale.
“I was selling because I got the right price for it,” he said, but added: “We had to move out abruptly. … I think it was an opportune time to get rid of everybody all at the same time due to the collapse of the other building … [But] I wanted to sell. Thank God that I sold before this. I think it was a godsend that we were out at that time.“
But real-estate experts caution that the formula really only works well for condos on waterfront sites in sought-after areas. La Costa, which sits at the southern end of the famed condo canyon along Collins Avenue, fits that description. Demand for waterfront luxury living by wealthy buyers means developers can readily afford generous buyout offers because they can realize mammoth profits from redeveloping. The sellout from a building like the one that Mast is proposing in place of La Costa is likely to be in the hundreds of millions of dollars.
It’s a different story in inland areas or places where local zoning rules sharply limit the scale of new construction.
In areas where the formula can work, experts and affordable-housing advocates note, there is another problem. The multimillion prices for new luxury towers contribute to the ultra-gentrification of the Miami-Dade shoreline, where older buildings are usually the only ones that most people can afford to live in. At a time of a worsening affordable-housing crunch in Miami-Dade, the demolition of older condos for new luxury buildings reduces affordable options and pushes lower-income people inland, sharpening geographic inequality.
The buyout trend could in some cases also offer a perverse incentive: Some owners in older buildings, hoping to sell to a developer, might band together to lure one, and would have little reason to support special assessments for repairs that other owners might favor.
A complication comes from the complex, and even bewildering, rules that
apply to condo terminations. Applicable rules depend on language in a condo’s declaration — the laws that govern the condo — and which version of Florida’s condo termination law was in effect when a declaration was written, among other factors.
Florida condo laws first adopted in 1976 established a threshold of unanimous, 100% agreement of owners to terminate, unless a declaration stated otherwise.
That was lifted in a short-lived 2007 reform designed to make such buyouts easier by lowering the threshold to 80% of condo ownership. That is calculated based not on how many units a buyer holds but on the percentage of interest in the condominium assigned to each individual owner. Just 10% of naysayers could block termination.
The reform applied retroactively, even if a condo’s declaration carried a different threshold.
In 2014, though, that reform was largely reversed by the Legislature after many condo owners were forced into bulk sales at prices lower than what they owed the bank on units during the real estate crash, Bilzin’s Schwartz said.
Rules now in place tighten the standard so that only 5% of naysayers can block a termination.
But a subsequent court decision blurred the lines. The court ruled that the 2007 rule could not override the standard laid out in a condo’s declaration, making it difficult to determine in many cases which threshold applies, Schwartz said.
Just which rules apply is the gist of the litigation between Mast Capital and the 15 holdouts. The developers’ lawyer, John Shubin, argues in court filings that what applies is the condo’s own declaration from 1997, which says 80% of ownership is sufficient for termination, and that termination is automatic given that Mast controls nearly 90%. Mast filed a notice of termination with the county dated July 27. Since May, according to the attorney for the holdouts, Mast created a new board to wind down affairs.
But attorney N. Fraser Schuh of Hallandale Beach argued for the holdouts that it’s current law that applies, with 5% of no votes holding just over 11% of ownership constituting a legal veto of the proposed termination. Schuh also argues in a court filing that Mast flouted legal requirements that a plan for termination be filed and approved by the state.
The La Costa tower, built as rentals and converted to condos in 1997, was typical of the basic concrete construction of its day, but boasted some relatively large two-bedroom units, typically at 1,500 square feet. Though squeezed in between two other highrises on a narrow lot, it sits directly on the beach and offered unimpeded views across Indian Creek because no buildings occupy that opposite side of Collins. Miami-Dade property appraiser records show someone could score a place on the beach for a relatively modest $300,000 as recently as 2017.
The problem was the maintenance, said Canasi, the former board member and La Costa owner, who bought his condo in 2012. There was spalling and cracking in concrete columns and exterior walls that became more alarming by the year. Elevators that didn’t work for weeks at a time because they were so old that parts were hard to find. An electrical system needed full replacement.
Canasi said he stepped down from the board in frustration after several years of service because he was consistently voted down when he pushed for repairs to be addressed comprehensively.
The La Costa board could not buck residents and investor-owners who balked at any increase in maintenance fees, he said— a dynamic that experts say is a common one.
“When you live in a building that is old, and most of the people there lived on fixed incomes, and you want to continue to run to be on the board — how do you make those people happy? By not raising their maintenance fee,” Canasi said.
In 2020, after Canasi opted not to run again, a mostly new board came in determined to change that old dynamic, he said.
The association hired a Miami engineer, Denis Solano of SolVer Structural Partnership, who found the residential tower riddled with serious concrete and structural deficiencies. Another engineer found similar deterioration in La Costa’s parking garage, which is structurally separate from the condo tower and supports the pool and amenities deck, Solano wrote in a letter to the city this year. He did not respond to a phone message left with an assistant.
So extensive was the work needed that Solano said the tower would have to be vacated while repairs were under way. The letter doesn’t mention cost.
But former board members and residents say the amount raised by the new board was not nearly enough. Facing rising costs and attractive offers from the developers, most owners decided to sell.
“No matter how much money you were going to put into it, it was still a 60-year-old building, it still didn’t have the amenities of these new Brickell buildings, and was never going to appreciate in order to put in $100,000,” Canasi said.
For Canasi and many others, it was a happy ending despite lingering reservations. But it has not been so for others, he concedes.
“The people who didn’t sell are not happy with the rest of us. I understand them,” he said. “They don’t want to sell, but now the city closed the building. And I think they think that the people who bought it instigated all of this. Now, I don’t think they’re looking at it intelligently, or they’re looking at it with an emotional eye. I feel sorry for those people who didn’t sell because I think they’re going to get the short end of the stick here.”
The condo brought SolVer back in July when the city ordered inspections after Surfside. Solano found the situation had deteriorated further since the previous year. Though he found the tower was safe to occupy, he recommended that repairs start immediately and the tower be vacated in the meantime. At the time, he noted, only 16 units out of 124 were still occupied.
Two weeks later, the new, Mast-appointed board hired a second engineering firm, the Miami office of national powerhouse Thornton Tomasetti, which is working with OMA’s architects on a Washington, D.C., project. The second engineer largely concurred with Solano but urged evacuation by Aug. 16. A Thornton Tomasetti engineer also found a corner of the pool and recreational deck over the separate parking garage was in danger of partial collapse. Shortly after, the city posted orders to vacate at La Costa’s lobby entrance.
The Surfside collapse, Zalewski said, will likely lead to more cases like La Costa and a new boom in condo development east of Interstate 95.
But those condos will be purchased not by locals but by wealthy investors, parttime residents or foreign buyers looking to capitalize on the location. The flip side, he said, is that as developers focus east again, the development that has fueled the resurgence but also the gentrification of neighborhoods such as Little Havana and Little Haiti might wane.
“Developers will focus back east, on the barrier islands and the bay,” he said. “The good news is, everyone who thought there was no more oceanfront land now realize there is more land to be had, in the form of condo terminations.
“It’s going to be busy. Real busy.”