Corus Swept Up in Florida Condo Undertow

Buyer cancellations in the Miami market will only get worse, says Jack McCabe, head of McCabe Research and Consulting. He expects walk-aways from new condo projects and deposits will reach 30% to 50% of sales through 2008 in the South Florida counties of Miami-Dade, Broward and Palm Beach.

"Corus is really in trouble," McCabe says. "The walk-away rate we are going to see is on more-expensive condos, primarily half a million [dollars] and above," where Corus has large exposure, he says.

For its part, Corus has said it is partially cushioned by the fact that its initial loan exposures target about 55% to 65% of a condo project's gross sellout value (the original sales prices on a contract, not closing, basis).

Morgan finds fault with Corus' claim. If prices collapse, all bets are off, he says.

"I am predicting condos in less-desirable areas will sell for 25 cents on the dollar. Corus has several properties that will fail," Morgan says.

A major problem in evaluating Miami pricing is that so few projects have actually closed for sale. Lenders who underwrote condo projects relied on sellout values that were provided to them by the aggressive developers, McCabe says.

Litmus Test

One major litmus test for Jade Ocean and other projects set to finish construction in coming years is One Bal Harbour, a project that homebuilder WCI Communities(WCI - Cramer's Take - Stockpickr) is planning to finish by October.