But Honey, It’s a Trump!

florida real estateIf you’ve ever been to Hollywood, Florida (half an hour north of Miami Beach), you’d think it was a dump (at least, that’s what my wife says). The town sits on five to six miles of Atlantic Ocean beach, riddled with old motels, old condominiums, and just about every else old.

A few developers have tried to build tall, skyscraper-type full-service condominiums on the beach in Hollywood and Hallandale (the first town south), I assume because the land is cheaper than rare beach front parcels in Miami, Bal Harbor or Sunny Isles. But it’s not all negative; the Diplomat Hotel has been successful with its new property in Hallandale.

About a year ago, my wife and I took a leisurely Sunday afternoon drive up to Hollywood from Miami. And there it was…a beautiful, tall and contemporary condominium building right smack on the ocean in Hollywood, Florida…none other than Trump Hollywood. A stunning, 200-unit luxury condo project. This building is gorgeous. The units were being sold in the range of $900,000 to $7.0 million.

But no more.

News broke late last week that the developer, Related Group of Florida, has lost the property in a 225-million-dollar foreclosure. Donald Trump simply licensed his name to the building. Only 25 units in the building were sold. What was once marketed at $600.00 per foot will likely be available soon for $200.00 to $300.00 a foot. Great deals.

A classic real estate story: Market booms, developer builds beautiful building in the wrong area, developer loses the property, lenders take haircuts, and new buyers come in to pick up great condo deals significantly below construction cost.

Never one to give up on a good deal, all weekend, I was after my wife to get down to Hollywood, Florida, to see some units in the building, Trump Hollywood. But my wife is not interested.

I say, “Honey, it’s a Trump, with all the Trump quality of built-in wine cellars, sub-zero fridges, “Miele” appliances, and breathtaking ocean views.” She says, “I don’t like the area. It is in the middle of nowhere. I’m not going there.”

And she’s right. The old real estate adage, “location, location, location” becomes “stupid, stupid, stupid” during real estate booms.

Michael’s Personal Notes:

This morning came the news; Ireland has become the second euro country to seek aid from the European Union. Who will be next? Portugal, Spain, Italy? More importantly, is the euro a currency of the past? I think it is. But the nail on the coffin for the euro will only come once Germany pulls away from the euro and goes back to its own currency.

The smartest woman standing this morning has to be the former Prime Minister of England, Margaret Thatcher. She swayed Britain from adopting the euro as a currency because she believed that, in the long term; the euro would not be able to reflect the interests of so many diverse countries. She was very, very right.

Where the Market Stands; Where it’s Headed:

The Dow Jones Industrial Average opens this week up 7.4% for 2010. Throw in the index’s dividend yield 2.5%, and, if all else remains unchanged, stocks will be up about 10% for 2010. Not as good as a return as 2009, but a respectable return in a year that could have easily resulted in a double-dip recession.

For 2011, I’m concerned about a faltering greenback, rising U.S. debt and rising domestic interest rates. But, for now, with corporate America still delivering strong profits, with the holiday season looking like the best in three years for retailers, I’m still bullish on stocks.

What He Said:

“Starting two years ago, I was writing how the housing boom would go bust and cause the U.S. economy to suffer sharply. That’s exactly what is happening today. From what I see happening in the U.S. economy, I’m keeping with the prediction I made earlier this year: By late 2007/early 2008, the U.S. will be in a homemade recession. Hence, I expect housing prices to continue declining, soft auto sales, soft consumer spending, and a lower stock market.” Michael Lombardi in PROFIT CONFIDENTIAL, August 15, 2007. You would have been hard pressed to find another analyst predicting a U.S. recession in the summer of 2007. At the time, the stock market was roaring, with the Dow Jones Industrial Average hitting its all-time high of 14,164 in October of 2007.