The Tribune

• Circling purchasers reported ‘ready to go’

• Liquidators want realtors for 34 properties

• Maximum value goal versus ‘speed element’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Deal-hunters seeking discounts of up to 30 percent are circling FTX’s $256m Bahamian real estate holdings as local liquidators move to secure realtors who will market 34 properties for sale.

Ryan Knowles, founder and chief executive of Maison Bahamas Real Estate, told Tribune Business he had spoken to “at least a dozen, if not more, clients” in the past two weeks who were all asking when the high-end residences and commercial properties acquired by the collapsed crypto exchange will be “ready to go”.

Speaking after the liquidators for FTX Digital Markets, the local subsidiary, on Friday formally launched the bidding process to find realtors willing to handle the disposal of these properties, Mr Knowles and others said the trio could ultimately be forced to make hard decisions depending on how the process plays out.

Brian Simms KC, the Lennox Paton senior partner, and PricewaterhouseCoopers (PwC) accounting duo, Kevin Cambridge and Peter Greaves, will be mandated by the Supreme Court and their obligation to FTX creditors to maximise asset recoveries and obtain the best sales price for the Bahamian properties.

However, this objective may be challenged if deals prove hard to secure, and the properties remain on the market for long periods of time. In such a scenario, “the speed element comes into play” and the Bahamian liquidation trio may be forced to somewhat compromise their maximum price goal and offer discounts to obtain a sale and return the proceeds more quickly to investors.

Mario Carey, founder of Better Homes & Gardens Real Estate MCR Group, joined Mr Knowles in pointing out that FTX’s holdings will attract “bottom feeders” who, knowing of the crypto exchange’s plight, will make cut-price offers in hopes of securing a deal.

The liquidators, in launching their request for “expressions of interest” from Bahamian realtors on Friday, confirmed that a total 34 properties are being readied for sale. Of this number, close to half - 16 - are located in the high-end Albany community in south-western New Providence, featuring a number of three to seven-bedroom condos and one separate residential dwellings.

Of the remainder, eight are one-two bed condos located in the GoldWynn development on Goodman’s Bay, while another four units are in the One Cable Beach complex on Cable Beach. The final six properties include the Ocean Terrace gated residential condo building, with 16 units and leisure facilities, on West Bay Street, plus two residences in Old Fort Bay.

The balance consist of commercial real estate, including the 4,000 square foot Pineapple House; FTX’s former Bahamian head office at the Veridian Corporate Centre on Western Road; and undeveloped land on West Bay Street and Blake Road.

Explaining that the 34 properties are to be sold under the terms of the agreement worked out with their US counterpart, John Ray, head of the 134 FTX entities presently in Chapter 11 bankruptcy protection in Delaware, the local liquidators said they “will offer for sale a number of properties located across the western part of New Providence”.

Confirming that Bahamian realtors have been expressing their interest in marketing/selling these properties prior to the bidding process’s launch, they are “consequently looking to appoint one or more suitably qualified real estate brokerage firms to assist with the marketing and sale process, and to advise the joint official liquidators thereon.

“The joint official liquidators acknowledge and appreciate the informal expressions of interest received to date,” they added. “To be considered in this process, all interested parties, regardless of prior communication, must submit a formal response to this expression of interest in relation to the properties shown.....”

Besides confirming that they are licensed to sell real estate in The Bahamas, bidders must also have a “track record in selling high-end properties to Bahamians as well as international purchasers, and evidence of access to a purchaser base” and list the specific real estate they are interested in handling.

Realtors must also provide extra details “if you intend to partner with or leverage the international network of another broker outside of The Bahamas”. The bid deadline is March 1, 2024, and qualifying realtors will then advance to the request for proposal (RFP).

The high-end nature of the FTX properties represents a lucrative opportunity for Bahamian realtors and the tender is likely attract bids from multiple firms. Millions of dollars are involved in both real estate commissions and government taxes, as well as potential recoveries for creditors.

Given that the average realtor commission is around 6 percent, although sometimes split between those representing the buyer and seller respectively, should the full $256m be realised for selling the 34 properties then collective commissions would be around $15.36m. And the Government, based on 10 percent VAT on the sales price, would realise a timely $25.6m for the Public Treasury.

“I think, obviously, every realtor is going to want to get as much of the business as they can and there are certain of us that have better success at certain price points than others,” Mr Carey said. “We all deal with different types of clientele. The liquidators have to make a choice.

“Their approach is to be very transparent and share the path. I think that’s the right decision, and any realtor that gets the business should be very grateful for the opportunity. If they represent FTX they’re going to have a fiduciary duty to achieve the best price on behalf of the liquidators and creditors because most buyers naturally are going to think they’re going to get a steal.”

Mr Carey added that knowledge of FTX’s winding-up was bound to attract offers from so-called “bottom feeders”, but said: “We don’t know any prices yet. We don’t know until we get to the table. When we know the properties we can advise on value.

“The properties are fine properties. This is going to be an attractive market for bringing US currency to the country. There’s a lot of benefits to coming here, and hopefully we’ll attract some new people to the island....

“I don’t know what they [FTX] paid for them but by no means have values in this market decreased, so why not get top dollar for them? It’s not a forced sale.” Mr Carey explained that in conducting property appraisals he typically gives two values - one for market value, the other a “forced” value where real estate needs to be moved quickly.

He added that historical data showed properties priced correctly, and not in “forced” sales, were typically sold at a 2-7 percent discount to listing value “under normal market conditions” with the process taking between six to 12 months.

Confirming that his firm has already made contact with the liquidators, and will likely bid on some of the 34 properties, Mr Carey said: “We’re part of the process. Yes, we have reached out. They said there will be a process and you have to follow the process. There’s no jumping ahead. They are under the orders of the court. It’s not like they can give it to one person.”

While acknowledging that the prices paid by FTX founder, Sam Bankman-Fried, and his cronies “may not be what the property’s worth” as they did not have to worry about value given that it was financed by client monies, Mr Carey said he remains “very bullish” about recovering most if not all the total $256m outlay as demand for Bahamian real estate remains high.

“It’s prime real estate, it’s high demand real estate, it’s luxury and there’s a sense that buyers will try to get the best deal they can,” he added. “It’s an exciting opportunity. It’s unfortunate, but it’s exciting for the real estate community and there’s money to be made for everybody.”

Mr Knowles echoed similar sentiments, telling Tribune Business: “I think there’s enough for all the major firms to get some of the business. I suspect the liquidators will spread it around. I imagine all the major firms, at least ten firms, will submit a bid.”

Suggesting that the FTX liquidators will prefer realtors who have “a track record” of selling in the gated communities where most of the 34 properties are located, he described the bidding as “as very fair process

and added: “We’ll see how it plays out....

“Overall, there’s definitely interest circling and demand for several of those properties. I’ve had at least a dozen, if not more, clients asking in the last couple of weeks are they ready to go? I was engaged actively with a number of our clients interested in seeing those properties and bidding on them...

“Because it’s a liquidation the general perception of the market, and in this case I’m talking about buyers, is that deals are available. I’ve had a couple of buyers come in and say: ‘Can we get 30 percent off? What’s the number we can get?’” Mr Knowles revealed.

“We’ll see how aggressive they [the liquidators] want to be in moving these. Yes, you want to get top dollar, but you also want to recover funds as quickly as possible. The speed element comes into play. If they are listed properly, and offers come in below asking price, at that point you will have to make certain determinations as to how to play it.

“My understanding is that the liquidators don’t want an extended sales process. They want to list them and get them sold as quickly as possible. Based on what they’ve put out I don’t believe they expect to get the full 100 percent. They have fairly conservative expectations. They’re going to try to get maximum value for the properties as they have an obligation to the creditors.”

Mr Knowles confirmed that his firm, too, was likely to bid to market and sell several former FTX properties. “We’ll definitely submit,” he said. “We want to be a part of the process. Whether or not we get one in the end, we will be quite active on the buyer side. We have a number of clients ready to go to make offers on the properties.

“I’m keeping a close eye on it. We’ve been in active discussions with them [the liquidators] for the past three weeks as it’s been getting closer and they’re aware of our interest.” Mr Knowles added that the properties in Albany, GoldWynn and One Cable Beach were likely to sell relatively quickly, while the commercial real estate may take longer.

The 16 properties at Albany, 15 of which are condominiums, were bought at price points between $4.75m and $30m. The seven units acquired in the GoldWynn project at Goodman’s Bay were valued between $563,520 and $1.449m.

Four units, varying in value from $975,000 to $1.54m, were purchased in the One Cable Beach project. Some $26.34m was spent on acquiring multiple units at the Veridian Corporate Centre, with further outlays of $17.435m, $9m and $1.8m on property at Ocean Terrace, Old Fort Bay and Pineapple House respectively.