Eye on Corus Bankshares (Part III)

| About: Corus Bankshares (CORS)

There was nothing languorous about the atmosphere of tropical Miami during that memorable summer and autumn of 1925. The whole city had become one frenzied real-estate exchange.

Yes, the public bought. By 1925 they were buying anything, anywhere, so long as it was in Florida. One had only to announce a new development, be it honest or fraudulent, be it on the Atlantic Ocean or deep in the wasteland of the interior, to set people scrambling for house lots.

A lot in the business center of Miami Beach had sold for $800 in the early days of the development and had resold for $150,000 in 1924. For a strip of land in Palm Beach a New York lawyer had been offered $240,000 some eight or ten years before the boom, and in 1923 he finally accepted $800,000 for it.

It began obviously to collapse in the spring and summer of 1926.

By 1928 Henry S. Villard, writing in The Nation, thus described the approach to Miami by road:

"Dead subdivisions line the highway, their pompous names half-obliterated on crumbling stucco gates. Lonely white-way lights stand guard over miles of cement side- walks, where grass and palmetto take the place of homes that were to be .... Whole sections of outlying subdivisions are composed of unoccupied houses, past which one speeds on broad thoroughfares as if traversing a city in the grip of death."

In 1928 there were thirty-one bank failures in Florida; in 1929 there were fifty-seven.

By the middle of 1930, after the general business depression had set in, no less than twenty-six Florida cities had gone into default of principal or interest on their bonds.

The cheerful custom of incorporating real-estate developments as "cities" and financing the construction of all manner of improvements with "tax-free municipal bonds," as well as the custom on the part of development corporations of issuing real-estate bonds secured by new structures located in the boom territory, were showing weaknesses unimagined by the inspired dreamers of 1925.

That was from Only Yesterday: An Informal History of the 1920's, written by Frederick Lewis Allen in 1931.

Corus is the lender on 85 loans in the Southeastern U.S. for a total of 25,601 units. Of those deals, 68 are in Florida totaling 21,451 units.

Make sure you see these pictures of the Miami condo construction boom.

We had a debate going on in the comments section about CORS exposure to condos.

I prepared the following graphs regarding CORS deals in the SE region.

Corus chart 1

This is computed by calculating the average loan amount per unit for every CORS deal in the southwestern U.S. It would seem that the CORS loan size skews toward small amounts per unit.

The next graph illustrates that much of the skew comes from condo conversion loans. Excluding conversions, the average loan per unit is higher.

Corus chart 2

Corus chart 3

More bad news about the Miami condo glut:

"Boca Developer is considering a bulk sale of unsold units at three South Florida projects... New York-based Cabot Investment Properties has signed a letter of intent to pay $168 million for 236 units at Marina Grande in Riviera Beach, Peninsula II in Aventura and Oaks I at Biscayne Landing in North Miami.

Under the proposal, many of the units would be rented following the bulk sale with the idea of later trying to sell them when the residential market improves.

Cabot would purchase the units at a rate of $342/sf, which is much less than it would cost to build the same buildings at current construction prices, according to the documents outlining the proposal."

See the rest of this HBB post about Miami, which also says "Florida’s Miami Dade County has a 31-month supply of existing condos on the market."