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Vultures Rising


ISSUE:  Spring 2011
Miami's condo market is finally on the rebound, but are high-risk investors setting us up for another fall?

On a recent October afternoon in downtown Miami, the same week the robo-signing scandal triggered a nationwide moratorium on foreclosures (a brief reprieve for homeowners, a vindication for their attorneys, and a harbinger of economic paralysis for pundits), I met up for a Sunday drive with Peter Zalewski, a condo-slinger whose company, Condo Vultures, has been feeding on the remains of Miami’s real estate implosion. The day was mild, a spotless sky, mythically blue, with a sea breeze brushing the air—the climate around which an entire economy was invented. We drove along Brickell Avenue in Zalewski’s Hyundai Sonata, the sunroof peeled open for a better view of the towers that loomed behind the palms along the street. You could see the bay in flashes in between the architecture. 

The drive served as a kind of economic perpwalk, basically chronological, a corridor of booms and busts that began near the Rickenbacker Causeway and angled north along the water, past the bright, white hulks of the 1980s, then up toward the Miami River, where taller, more slender, extravagant high-rises stood as testament to this most recent frenzy. We hooked a right and pulled over in front of the St. Jude Church, a small, handsome Gothic dwarfed by a dark-glass monolith just across the street. We got out. Zalewski, dressed with a waiter’s simplicity—starched white shirt with a white T-shirt underneath, black pants, his trademark ensemble—pointed here and there and named the buildings, named their developers and countries of origin. He began to quantify any tower we could see, naming the cost per square foot to build it, the price at which it sold during the boom, the percentage drop since, the number of units in foreclosure, the number being rented out. Then he spread his fingers and jammed them downward, like banging a piano. 

“This is the pit,” he said, meaning downtown. “New York City, Chicago—they have their trading pits. This is our pit, this is where we get to trade. I’m buying or I’m selling, that’s all it is. You want to trade pork bellies, go to Chicago. You want to trade Fortune 500 stocks, go to New York. You want to trade real estate, come to Miami.” He sucked on his cigarette. “I mean, what’s the difference between a condo and a pork belly?” he asked, then shrugged. “Not that much.” 

Pork bellies. It was exactly the kind of unglamorous comparison that distinguished Zalewski from virtually everyone else selling real estate in Miami, a blunt assessment that matched his lack of flash—his Hyundai, his wardrobe, his blue-collar attitude. The name Condo Vultures alone exercises a frankness that even today, after so much carnage in South Florida, where more than half a dozen banks have disappeared after $3 billion in losses, is an anomaly among agents and developers trying to sell a city to itself. 

Taking a couple of hours on a Sunday afternoon to spit statistics at me was, for him, a form of relaxation, like chanting a mantra. Plus, it was a welcome distraction from bigger things on his plate. For nearly a year he’d been trying to broker a bulk deal—the sale of many deeply discounted condominiums at once—on a building known as Everglades on the Bay: two towers just shy of fifty stories high, with two pools and a spa on the eighth floor, all of which reflected precious little of the drama between the developers, Cabi Downtown, and Bank of America as they clawed their way through a contentious bankruptcy. The Everglades was one of the largest projects of the boom, and the first big bankruptcy of the bust. It would also be the biggest bulk deal in the city—over six hundred units in all—and offered real bragging rights for the agent who could broker it. Zalewski’s edge was in knowing the Everglades better than anyone—better, even, than the people who were hired to sell it in the first place. 

The proof, he insisted, was in his “white papers,” the highly prized report that quantifies a building through a matrix of factors (number of units, square footage per unit, number sold, number in default, etc.), which Zalewski had prepared long before the building’s failure, which he anticipated through obsessive number crunching. This is where Zalewski found his niche in the crisis ecosystem, by quantifying every condo project built in downtown Miami during the boom, as well as all the condos built before it—34,000 units in 170 buildings dating back to 1963—so that investors looking to scavenge distressed real estate could cut through a developer’s hype and get a true sense of what a struggling condo is worth. Zalewski lives in a condo on Miami Beach, “but I’m on the sand only about three times a year.” Instead he relaxes by running numbers. “I love databases,” he said. “I love spreadsheets. I love data collection. I love to assemble and look for trends based on historical information—anything numbers oriented, anything statistical.” 

It is his grasp and packaging of those numbers that has made Condo Vultures such an odd phenomenon of the bust, stubbornly more than just a shtick. Through his hustling of data on Miami’s condo market, Zalewski has become one of the more intriguing characters in Florida’s real estate saga, a regular forecaster of its direction, a speaker at Chamber of Commerce luncheons and real estate panels, explaining where the market is and predicting where it’s headed. Other agents might broker bigger deals, in offices with much better views, but Zalewski has invented his role as an aggregator of Miami’s condominiums, warts and all, vying to make Condo Vultures Miami’s version of Case-Shiller, Moody’s, and CoreLogic, the temples of housing data whose numbers steer the market. With thousands of condos in his database, numbers at his fingertips, data at the ready, Zalewski has capitalized on a national trend: the rise in public awareness of—and public reliance on—purveyors of niche-market stats. Much like Trulia, Zillow, and RealtyTrac, Condo Vultures has been transformed by the crisis into a vital source of housing-market information, because in real estate—especially in real estate in crisis—data is power. And by virtue of his Midwestern hucksterism and his analytical stamina, Zalewski has found a way to both sell what he knows about Miami real estate and sell real estate by advertising what he knows. 

To see Zalewski’s data in action, I showed up one morning at a café just a few doors down from the Condo Vultures office in Bal Harbor, where he and one of his managers, Frank Thomas, were meeting with the CEO of a Canadian hedge fund. The Condo Vultures office is, in essence, just an address, a short L-shaped hallway flanked by empty offices, where thirty agents drop in from time to time to make a few calls, pick up leads, record videos for the website, and sort through junk mail. 

Hence the utility of the French café. The young Canadian and his young lawyer, a local real estate attorney, showed up dressed fashionably casual—the lawyer in a bright polo, the Canadian in jeans and a blue delicate shirt, delicate wire glasses and yarmulke. 

Zalewski has an unassuming manner. Nothing about him advertises a hint of wealth, least of all his indispensable plastic clipboard case he keeps stuffed with spreadsheets. He is affable, seizes any opportunity to laugh aloud. And he talks fast. Over tea and espressos, an innocent question from the Canadian—“How long have you guys been scouting Florida?”—triggered a drilling monologue in Zalewski’s Chicago porridge of sour vowels, which included this mission statement: “We’re taking a Wall Street approach to residential, so instead of mom and pop driving around with white walled tires on the Cadillac showing you how great the granite is, let’s take a commercial approach, pull together the data and give Wall Street the ability to go in and assess the market very quickly. And instead of advertising, we take the money and stick it in R&D, so we’re very comfortable and aware of what’s available and how to get your hands on information. We capture that data on a daily basis.” 

The Canadian proceeded gently with his questions. He was interested in bulk—where should he look? 

“Outside of Miami,” Zalewski said. “The Miami chapter will be closed when the Everglades trades. And as soon as that deal’s gone, the only thing you’re going to have left are blocks of condos here and there, no really big deals in one building. It’s all getting played out. Broward County, West Palm Beach, that’s really the next play.” He sat up. “Think of it this way,” he said. “When a fund manager flies into Miami International, goes down to South Beach, gets in his hotel and looks out this window, anything he can see is effectively gone. Anything he can’t see is where the play is. That’s where we come in. We’re good in the weeds.” 

There was something in the absoluteness of this prognosis that reeked of the sell, a hammering approach. I couldn’t tell what effect it was having on the Canadian as he stirred his tea. 

Had he considered Orlando? 

“I never really built an appetite for Orlando,” the Canadian said. 

Was his company conservative? Were they gunslingers? 

“It depends, it depends,” said the Canadian. “We just want to see the return. And we’re patient. What I’m looking for is good location.” 

Location, cap rates, successor-developer vulnerabilities, tonnage, assignment clauses, blending-out: this was the language of condo courtship, and as the tea turned cold and the espresso dried in the cup, Zalewski rattled off the price-per-square-foot on buildings with names like Mint, Jade, and Epic, and eventually returned to the wisdom of West Palm Beach. “There, on a bulk basis, you’re talking about a hundred and forty dollars a foot. On a retail basis that stuff is worth two hundred a foot.” 

The entire conversation, Zalewski kept his slender black clipboard case at his fingertips. Now he flipped it open and began shuffling through the papers stuffed inside. Every page was some type of spreadsheet or graph, some table of numbers, and his shuffling through it seemed a bit disheveled, like a rushed homework assignment barely cobbled together before the bell. 

Zalewski, head down, asked them, “You’re looking for a trophy for the portfolio?” 

“I’m looking for great returns,” the Canadian said. “And I don’t have an issue with bite-sized. It can be something small.” 

“How small, ten units?” He kept shuffling. “No. I just bought one unit at the yacht club.” “How open are you to risk?”

The Canadian paused, thought about it, then nodded. “I like risk, provided it makes sense. Calculated risk.” 

“Calculated,” Zalewski promised. “Very, very, very calculated.” 

Finally he found the paper he was looking for. He shut the box and leaned in. Forty-five minutes into breakfast, here was the pitch. “I’m going to give you some big picture scenarios,” he said. “And I know this works. I know it works.” 

The Canadian set down his spoon: “Shoot.” 

Florida was born from the dreams of carpetbaggers. It owes its modernity to bankruptcy and speculation, to the bargain-basement price at which a Philadelphia sawmaker named Hamilton Disston bought four million acres of swamp in 1881 and promised to drain it; to the cut-rate deals on the defunct railroads snatched up by Henry Plant and Henry Flagler, both Yankee industrialists, whose railroads and hotels were invitations to future investment. The twenty-first century simply includes a more varied cast of gleaners: Germans, Brazilians, Italians, Portuguese, Mexicans (80 percent of downtown Miami real estate is owned by foreign nationals). Then there are Canadians, who spent $2 billion on foreclosures in Florida last year, the second largest group of buyers behind Americans themselves. 

And for all its shameful history, carpetbagging is a very American form of reinvention. For Zalewski, the epiphany that led to his transformation came while working as a banking columnist for Miami’s Daily Business Review. He admits he wasn’t the savviest writer, but he worked hard to understand the landscape, spending days pulling dockets at the clerk of court’s office, sifting through the numbers for a story, hustling bank presidents for quotes, building his Rolodex. He even got his mortgage-broker’s license—“not to do mortgages,” he says, “but to understand what the hell they were doing.” 

During the housing boom, Zalewski and his editor, Eddie Dominguez, were on the front lines of Miami’s real estate hysteria, when a couple dozen T-cranes swung along the waterfront and construction dust choked the city, coating the bay with a chalky film. And as projects came onto the scene, the launch parties reached deeper absurdities. Beautiful people were the common denominator, accented by a developer’s bold stroke: acrobats tumbling in the lobby…another lobby transformed into jungle…Vespa raffles…BMW raffles…diamond raffles…giraffes, alligators, panthers.… In the midst of these strange days, in the spring of 2005, during brainstorming sessions with Dominguez, a natural question arose: among the condos sprouting outside their window, rising on the $10 billion in loans that pumped up the skyline, which banks were vulnerable if the projects failed, and for how much? 

To get an answer, Dominguez turned Zalewski loose on county records, which they used to cross reference addresses, company names, and dollar amounts for all condo projects between I-95 and the ocean, “where all the big money was,” Dominguez says. They knew the cycle was ending, and that the majority of buyers putting down 20 percent deposits were investors who were more than willing to walk away if the market turned even slightly south. But in running the numbers, says Dominguez, “we were astounded by how concentrated the debt was in so few banks. Until we counted it, we really didn’t have an idea of just how much money was involved. And the question was: the music is going to stop, who’s going to be left holding? And it became clear that it was these allegedly savvy lenders, and you had to wonder why they were holding such big stakes in so many condos that were coming out so late. It was an orgy, and everyone was trying to get as much out of it as they could. The numbers showed it.” 

Between 1963 and 2002, twelve thousand condominiums were built in downtown Miami; between 2003 and 2010, twenty-two thousand condominiums were built. The city’s inventory tripled in just seven years—eighty-two buildings in a sixty-block stretch. But new condos rarely if ever show up on the MLS—the Mortgage Listing Service, a database which realtors use voluntarily to both sell property and keep track of what’s been sold. By comparing an asking price to the sales price of nearby properties listed on the MLS, both the buyer and the seller can get an objective sense of what a fair price is. With new condominium projects, there is no obligation to use the MLS, which means there is no backstop to keep a buyer’s enthusiasm—or a seller’s overconfidence—in check, no objective way to determine whether a price is fair or foolish. This meant that during the boom, word of mouth was the only gauge. Meanwhile, because of how the developer’s loan is structured, the sale of each condominium is tied to repaying the loan, and not necessarily part of the public record until many months later, when property taxes are collected and reported. 

This was the informational vacuum—and, subsequently, the entrepreneurial epiphany—Zalewski discovered during his months of combing through public records for the Review. “There were patches,” he says. “You couldn’t get a handle on what was out there. All you knew was that there was a bunch of stuff being built.” 

In the meantime, he says, developers filled the informational void with hype. 

They hired sales teams, usually working out of a model unit, to hawk the product—and keep the prices artificially high. “It was all being inflated through press releases,” he says. “It was this price, it was that price, and the price was changing by the day, by the week, by the month.” What’s more, because of the haste with which the buildings were being built, and the lack of record to hold developers accountable, there were plenty of cases in which what was promised—in press releases, in architectural models, at parties—was different than what was being delivered. Olympic pools were built short; two towers were reduced to one; eleven towers ended up as three plus a dog park. One Ft. Lauderdale project promising access to the ocean skimped on the boat slip that would facilitate the jaunts. Through this formula of hype and mystery, developers were able to control the message—and by controlling the message they controlled the price. “That’s how you can sell a project with three hundred units in three days and raise the price so rapidly,” Zalewski says. 

“This was all to the advantage of the seller.” Zalewski and Dominguez were convinced a crash was close and suggested as much in the story, which ran in early June 2005. By then the Everglades Hotel, a relic of the Jazz Age boom, had been imploded to make room for Cabi’s twin-tower Everglades on the Bay, which began construction just as Dominguez and Zalewski were beginning to calculate this boom’s consequences. From the Daily’s north-facing windows, Zalewski could see the building’s progress, as well as that of another project, a bland behemoth called 50 Biscayne, which rose just across the street to block the Daily’s northern view. As both projects crept upward, turkey vultures began to form a spinning crown atop each tower, a flock that thickened at the end of summer, riding the warm air that swept up off the bay, flying higher as the bubble stretched thin. It was all the metaphor Zalewski needed. 

A company can live or die by its name. In the case of Condo Vultures, the name was both a publicity tool and a signal to vulture capitalists looking for distressed targets. In January 2007, his reporting days behind him, Zalewski took the site live. By then, the condo market had begun to unravel. New buildings kept coming, and Zalewski added each one to his list of an already bloated skyline. Jose Suarez joined the company; with a background in investment, he found a niche in bulk, working the volatile downtown scene. But, at a moment when the market was still in denial, sales teams and developers simply balked at the name and brushed them off. “At first,” says Suarez, “no one was interested.” 

Zalewski and Suarez were patient. They kept up appearances at parties, conferences. Meanwhile, Condo Vultures began issuing reports on buyer walkaways, on how many units remained empty in a particular building, how many condos were in default, what a building’s amenities really were, what the real price per square foot should be. The strategy was to expose each building’s weakness. 

“When people put 20 percent down,” says Suarez, “there was no public record about the developer’s success in getting them to cough up the other 80 percent. So developers could say, ‘Everything’s great, sales are great,’ but the building was still dark. But Peter could pull their actual sales—and nobody knew how he did it. We would go to a building and they’d tell us that they’d sold this and sold that, and Peter would say, ‘No, correction: You’ve only sold this number of units.’ And they couldn’t prove him wrong. They’d do the research, come back to us, and we’d be on the money.”

“We sorted out what was real versus what was hyperbole,” Zalewski says. “We told people: this is what we’re seeing, this is what we’re finding, this is what’s out there.” 

To get that mysteriously accurate data, to help wade through the digitized swamp of public records, Zalewski hired other journalists, who became his core team of researchers—highly prized, well paid, and protected. What they do to get this data is an online grind of scouring public records and collating information the records don’t include. “We don’t know how he does it,” Suarez admits. “He doesn’t want us to know.” Zalewski shares in a good bit of this research, working out of a tiny room at home, surrounded by books and chotchkie. As for the other researchers, he says, “they mostly just sit at the computer all day, smoking. They’re not social types.” And while there is this impression of a great secret, the information his researchers collect is all public, and really just a matter, Zalewski insists, of “grinding it out.” 

The data quickly became a trading chit as Suarez and Zalewski continued to connect developers in denial with eager vulture investors. In many cases, they’d even offer information about a building next door or across the street. Suarez says, “It got to a point where the same sales force that’s running the building for a developer would say, ‘Listen, can you let us know where we are?’ They’d ask us to underwrite their own building for them.” 

In the meantime, the name was distributing the message. In the fall of 2007, Nightline ran a story on Miami’s crisis and Zalewski’s role in it; NBC News followed suit in February 2008, with 60 Minutes checking in by the end of that year. In each appearance, Zalewski advertised an intelligence and unapologetic charm that brought curious buyers and desperate sellers to his website. He became a regular voice of the downturn. In Michael Moore’s Capitalism: A Love Story, Zalewski unfolds his operational metaphor with a shit-eating grin. “This is straight-up capitalism,” he says. “Somebody asked me, ‘What’s the difference between you and a real vulture?’ I said, ‘Very simple: I don’t vomit on myself.’” 

His detractors grumble that Zalewski has garnered the spotlight by making outlandish statements like this, rather than by brokering high-profile deals. Zalewski himself publicly claims only six deals for a total of two hundred fifty units. Agents I spoke with credited Zalewski with brokering the city’s first bulk deal—sixty units in a building called Marina Blue in December 2008—but because of his reputation his deals are often cloaked in non-disclosure agreements, which make his actual influence a frustrating, unquantifiable secret. “If they’re a seller, they don’t want to be associated with getting vultured,” Zalewski admits. “That tends to be one of the negotiating points I have to deal with every time, because they’re all worried about their reputation, and reputation is the most important currency for a developer. If they’re going to build again, they have to do it the right way, and they have to control the message.” 

Still, many high-profile agents, such as Mark Pordes, whose bulk tally stands at over 400 condos worth $228 million, dismiss Zalewski. “It seems he chases bulk more than he gets,” Pordes said. “He’s been reporting on bulk. And that’s how he promotes himself, that’s how he earns—reporting.” But that doesn’t make Zalewski a player. “It’s all about manpower and who can get these deals to close,” Pordes says. “Just collecting data won’t get a deal to happen.” Moreover, Pordes reminded me, most of what Condo Vultures cobbles together is public information, freely available to anyone. 

“They’re not saying the data’s wrong,” Zalewski countered. “Of course anybody can do it, any single one of them can do it. But why don’t they do it? Because it’s a lot of work, that’s why. It’s a lot of work and the success rate is low. So yeah, we’re not the smartest. We’re not the best capitalized. But we work harder than all of them.” 

Ron Shuffield, president of EWM Realtors, one of South Florida’s biggest real estate brokerages, is an expert when it comes to Miami’s market, a regular voice of marketplace reports in the Herald and other venues. In the interviews I’d seen of him, the data flowed through nimble conversation, all of it within easy recall. I visited Shuffield at his office in Coral Gables to look at some of his data arsenal and see how it matched with Zalewski’s obsessive research. Through his window I could see a T-crane reeling an I-beam slowly up and into place: commercial property, Mexican investors, eighteen months out—a signal of the upswing. But quantifying the upswing is a tricky business, because markets are largely mood driven, and the moods, in turn, are driven by the data analysts publish. Markets in crisis trigger a blitzkrieg of self-fulfilling and self-contradicting data that, because of the brevity of the news cycle and the modus operandi of pundits, becomes politicized, creating more confusion than clarity. Even more difficult is the fact that in a housing crisis, nearly every bit of market data is lagging, so that the moods are at least a month behind the action, but perceived by the public as closer to real time.

“The problem is,” Shuffield said, gesturing to his secretary on the other side of the glass that enclosed his office, “real estate is a longterm investment, and we’ve tried to make it a stock investment, measuring it by the month. I’ve tried to encourage our association leaders to not publish our numbers more than quarterly at most. It’s too much of a knee-jerk reaction when you see the movement every month, whether it’s going up or down. It just takes longer than that to analyze real estate.” 

His secretary walked in and handed him a stapled stack of pages containing colored graphs and charts, which he slid to the middle of the table between us. The charts were composites of all the information agents in Miami-Dade County entered into the local MLS listings. Within this stack were full-color interpretations of weekly trends gauging prices, buyer attitudes, the pace of housing inventory. Whether he thought it was knee-jerk or not, he discussed stacks just like this one every other week with a couple dozen EWM managers around the country on morning conference calls. This way, he said, “you can keep your finger on the pulse of what’s happening in this country.” 

According to what those calls suggested and what his data told him, Shuffield said, “the two brightest markets in the nation are South Florida and Southern California.” Brightness was relative, considering the depths to which those two markets had plummeted. But the health of South Florida and Southern California was also due, in part, to how unique they were to the housing market. According to Shuffield, neither region was greatly affected by the end of the federal tax credit. “In the Midwest, that eight thousand dollar credit made a big difference to a lot of people,” he explained. “Eight thousand dollars in our market is a rounding error.” 

Flipping through the stack, several scenarios emerged from the numbers, both bleak and optimistic. In two years, the inventory of unsold homes had dropped by half, from a fortyeight-month supply to a twelve-month supply. (The ideal is six to nine months.) Foreclosure filings were down, though there was still an eighteen-month supply of foreclosures coming down the pipeline. More than half of all singlefamily homes sold in Miami Dade County were some form of distressed real estate—either short sales or bank owned. In the condo market, he estimated two-thirds of units were distressed, though it was harder to measure, since distressed condos could be dealt with by way of bulk sales before ever reaching the market or being repossessed. 

He showed me graphs comparing quarters, years, counties, median prices. His own extrapolations were scribbled all over in blue ink. Sales were down, inventory was up, and who knew what the moratorium would do to that supplyand-demand ratio. He pointed to another graph. In February 2007, the peak median price for a single-family home in Miami Dade County was $386,000; by August 2010, it had dropped to $177,000—lower than what it was in 2002. 

Shuffield, an admitted optimist, saw potential in the bad news. “Everything we’re selling today is below construction cost. So the land is free. At some point, when everything has been absorbed to a level that we need new construction, that’s when the reality will set in.” 

But as we cross-referenced the data, flipping back and forth, I kept getting a convoluted picture. Disconnects emerged: the percentage of buyers had increased, homes were cheap and selling, but very few headlines in October were about the ability to get financing. In fact, very few headlines were positive about anything. 

“It’s all a matter of perception,” Shuffield said. “If everybody thinks things are going to be okay, they get better.” He leaned on Roosevelt’s aphorism about fear, then pulled out another piece of paper, a comparatively homespun graph of a sine wave along which were various points marking moods of the cycle. It looked like a PowerPoint slide for a motivational conference. It was, in fact, a chart he showed to buyers to explain the opportunities of this market. 

The blue sine wave rose and dipped and rose again, rollercoasting along the arcs of Optimism (2003), Excitement (2004), Euphoria (2005)—each marked the “point of maximum risk in investment”—then sloping toward Denial (2006), Fear (2007), and Panic (2008), until it slid into Despondency (2009). Right there between Despondency (2009) and Depression (2010) was a treasure map’s X that marked the nadir, the “point of maximum opportunity.” Apparently, many of us had missed it. 

Hope (2011) led the crawl upward again. Optimism waited at the top, right around the year 2012. Along the way, following the psychological dots, Shuffield filled in details of what EWM had sold each year. 

This was a childish graph compared to the others he’d shown me, but it was also the most telling. Was he blindly optimistic or willfully naïve? Did this reflect his philosophy or his politics? I was curious to see how the graph might be redrawn as the recovery slouched along—if Hope might be revised to Fury. A color-coded version might tell a more nuanced story, with a red cosine wave marked Middle Class, beginning right about where Despondency was, then trailing off the page. 

But here it was, a sign of faith in the cycle, which technically you could never get around. The only alternative to eventual recovery is bedlam. And while it might be unfair to criticize Shuffield’s optimism, I was willing to bet that a year or two from our meeting that afternoon his sine wave might be stretched a little further out, the upward slope a little less steep. 

 

On a Tuesday at the end of October, more than two dozen lawyers joined creditors, contractors, and a handful of real estate agents to pack Courtroom 1409 of the Claude Pepper Federal Building in downtown Miami as Cabi Downtown finally relinquished ownership of Everglades on the Bay and Bank of America took back the note. For over a year, the bank had been chasing $209 million it was owed on this project. By the end of the day, it would walk away about $67 million shy. 

A bankruptcy hearing is a litany of deferments, objections, evidentiary hearings, and other procedural syrup. And with a bankruptcy this size, unraveling and nullifying so many commitments can be a messy business. There is a lot of delaying, stalling, agreeing to postpone particular contentions until a later date, to be agreed upon later on. There is no equivalent to a guilty verdict read by a jury member. It is all procedural, without the hook of narrative. The main crime, the inability to pay, has already been admitted to; what remains is dividing the pounds of flesh through a slog of legalese, the English language stripped of its music. Zalewski arrived fifteen minutes into it, a little puffy-eyed from a long night, and found a seat next to Suarez along the back wall, where I was. He wore a grin like he knew the script. And for the next couple of hours we listened as Judge Laurel Isicoff ground through the afternoon. Most lawyers not involved in the case doodled to pass the time. Others thumbed instructions into their Blackberrys. A few took notes. 

Then, toward the end of the second hour, things got interesting, when it was revealed that Bank of America had already made arrangements to sell Cabi’s note to a New York hedge fund known as Rockwood Capital. None of the agents on hand, Zalewski included, seemed to know who Rockwood was. Rockwood’s offer wasn’t the highest—the Lynd Company, out of San Antonio, had made the highest offer at $146 million—but Rockwood had muscle. 

Lynd’s attorney objected to the deal, saying that Bank of America was acting in “bad faith.” He had a point, since a lower offer meant that creditors who were owed money by Cabi would receive less than they would with a higher offer. But the bid is only half the equation. The terms of payment and, more importantly, the bank’s confidence in a buyer’s ability to pay can trump a dollar amount. Zalewski knew as much. “Like I said,” he whispered to me to me in the courtroom, “the highest bid doesn’t always get it.” And it happened this fast: Judge Isicoff called for a recess, the lawyers clustered in the hall—Lynd’s and Cabi’s on one end, Rockwood’s and Bank of America’s on the other—and within about fifteen minutes, Rockwood raised its offer to $141 million, and it was settled. Through it all, Zalewski wore his grin, but once Rockwood raised it’s offer, Zalewski’s client had no chance—and who could say, really, where his client stood among the five hedge funds courting this deal? What really mattered is that he’d fallen just short of making history—local history, at any rate—and that whatever his mastery of bulk data, his reputation as a closer and a true player would remain where it stood: six deals, a little over two hundred units.

Leaving the courthouse, we crossed the street to a bodega for coffee. Suarez was visibly depressed, almost sickly, and except for a soft refrain of, “Agh, fuck,” he kept quiet. Ten months of courting, of grinding out the numbers, of being patient, and the only moment to show for it was here at the takeout window of a grimy bodega under the Metromover overpass, with a round of cortaditos and a few cigarettes between them. But to the extent Suarez was dispirited, Zalewski was busy calculating, convinced of some back-door maneuvers that—in theory, at least—must have brought him to within one degree of separation from the winner. “The question to ask is, ‘Who’s going in on it with Rockwood?’ I bet you my guys have a piece of it,” he said conspiratorially. 

Or it was simply a matter of ignoring his advice: “Our guys screwed up,” he said. “Their offer should have been ten percent hard from day one, instead of five percent soft. That was the difference. They wanted to go with their style rather than my advice. I was being told 10 percent hard and we would get the deal.” 

He continued narrating how it all must have unfolded without him. “That day I went into Cabi’s office,” he said to Suarez, “when it was pissing rain. That’s when it must have gone down”—and as he did so, flipping through scenarios, forming the plot, his spirits kept lifting, until he was practically giddy. 

Suarez ordered an empanada. We sipped our coffees. 

Zalewski puffed quietly on his cigarette. It began to dawn on him just how much work had gone into coming up short on such a colossal deal, and for nothing. Ten months, who knows how many hours. He began to list his excuses, moments he could have seized upon, his suspicions. Had they gone in through another connection, perhaps, or been more aggressive earlier … 

But then he snapped out of it—fuck it!—and demanded Suarez join him for dinner at the Capital Grille, a pricey steakhouse where they normally celebrated their victories. 

“Well, that’s the end of bulk,” I said. 

“Nah,” Zalewski said. “There’s more. I got a lead on 319 units up in West Palm.” 

The owner of the bodega begged our pardon, then began dragging down the metal doors to close for the night. The sun was low, gilding the thunderclouds above us. It was well into fall, but hot, sticky, a holdout before the climate slipped into its blithe temperateness. 

We parted ways, and I watched the two of them walk to Zalewski’s Hyundai, on the other side of the parking lot’s chain-link fence, slipping behind a concrete column that braced the rusty, sluggish Metromover. And as Suarez sauntered, Zalewski kept waving his hands, gesticulating, like a couple of kids on the losing team after the season’s last game, recalling the innings, out by out, the moves that might have made a difference. 

The housing story is, in part, a story about bulk: houses and condominiums built in bunches, with harbors and hillsides cleared to fit the rush; millions of mortgages spliced and bundled and shipped across the planet with the same gravitas as a crate of rubber ducks. And when housing failed, it failed on a colossal scale, measured in the trillions. The recovery, meanwhile, has been mostly piecemeal—one sluggish modification at a time, a short sale here, a brief statistical uptick there. All except for one sector: condominiums—in particular, condominiums in downtown Miami, the ground zero of fraud in South Florida, where real estate has moved at a pace equal to the speed of the fall. 

And as the recession inevitably subsides, and the recovery takes hold of downtown Miami, and prices stabilize and offer less of what Zalewski likes to call “condo arbitrage,” how does a company like Condo Vultures fit in? 

“One of the things I’ve always worried about Peter,” says his former editor Eddie Dominguez, “is that he’s got a business model that depends on a sour real estate market. He’s going to ride the downturn, and what happens when the upturn comes? His business plan has no long-term upside. And I’ve asked him about this, but he doesn’t seem bothered by it.” 

A few weeks after the Everglades deal, I caught up with Zalewski to ask him about this evolutionary hurdle. We met in a downtown neighborhood called Mary Brickell Village, a strip of restaurants and shops that city boosters use to emphasize the recovery that’s underway. Here and there are fenced-in empty lots where condos never materialized, where, looking at the slim dimensions of the dirt, it seems impossible that something over ten stories could be built without the risk of it toppling over. In one lot, chickens scuttle freely at their leisure, a vestige of what the neighborhood was not too long ago. 

The street life here was recession-free, upbeat and easy. Athletic men and women carried lapdogs into a Starbucks on the corner. Young couples ambled along the sidewalk, cooing to each other in German, Spanish, Portuguese. Valets handled glistening German cars with military precision. The neighborhood seemed relaxed with casual, disposable wealth. 

Zalewski led me to a café across the street from a stalled construction site, a crater the size of a city block, wrapped in an eight-foottall chain link fence, which itself was sheathed in a banner painted with the promises of luxury. The project was called Capital at Brickell, another one of Cabi Downtown’s troubled projects. “They dug this in 07,” Zalewski said. “Probably will never do a thing with it. Ultimately they’ll have to cut a deal to give it back to the bank or sell it off.” 

Was there any lesson in that crater, or in any of the fallout in this town? 

“It’s going to happen all over again,” he said. “And you’re already seeing it. Buyers buying in bulk and reselling. And who are they selling to? Not people who are going live in it, but people who are going to rent it, and when the prices go up, they’re going to resell them.” 

Where, then, would his vulture shtick fit in? 

Yes, he’d continue issuing market reports and press releases, capitalizing on the public’s need to know, and would continue to sell condos piecemeal here and there. But his next move was to grade the skyline he’d worked so hard to quantify, establishing a ratings agency by which condos would be graded in much the same way Moody’s and Standard & Poor’s grades stocks—AAA, BBB, CCC, and so on. He had a few details he needed to work out, such as how a developer might sue him for a poor rating, but overall he was confident. 

“I look at condos like a bad sector with good companies,” he said, “meaning that while it looks like the whole thing is going to hell, there are certain buildings that are outperforming the rest. So a ratings agency is natural. Because when you’re trying to go through and evaluate a building, you don’t know what the delinquencies are. If you bring those in, now you can turn condominiums in a Wall Street sense.” 

Pork bellies. I imagined his popularity, such as it was, would suffer. 

He laughed. “This thing is going to be off the charts,” he said. “Everybody who disliked us before is going to hate us now.” 

And as he puffed on his cigarette, he grinned like the only man in the room who knew the script. 

 

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