Gil Dezer, a Miami-area developer,
five years ago had 850 unsold condominiums on his hands and almost $500 million
in loans coming due as credit markets froze and buyers disappeared.
Today, he’s back in the market with
what he sees as a safer bet: a 132-unit luxury project for auto enthusiasts
called the Porsche Design Tower. Condos at the 60-story building, featuring an
elevator that transports cars directly into the homes, range from $4.5 million
to $32.5 million for a 17,000-square-foot (1,600-square-meter) four-floor
penthouse.
While the oceanfront tower’s
foundation is still being poured, 113 of its 132 units have sold. All buyers
placed deposits of 30 percent in cash -- seed money Dezer relied on to gauge
interest in the project.
“We wanted to reconfigure and go after a buyer
that is not as financially sensitive,” said Dezer, whose previous condos
started at $900,000.
After the property rout left the
Miami market with more than 25,000 unsold condos in 2008, developers have
returned -- this time on different terms. With construction lending tight and
memories fresh of speculators who walked away when mortgage financing dried up,
builders are funding projects with cash commitments from buyers of as much as
60 percent of the purchase price. The strategy has jump-started luxury towers that
are setting price records and luring investors such as Goldman Sachs Group Inc.
Chief Executive Officer Lloyd Blankfein and Leon Black, founder of Apollo
Global Management LLC.
Wine Storage
Developers are loading units with
extras including wraparound balconies with views of the Atlantic Ocean,
wine-storage rooms and cigar humidors.
“People started demanding large
units, a lot more amenities, and price sort of went out the window,” said
William P.D. Pierce, a Coldwell Banker broker based in Miami Beach.
Last year, Pierce found the buyer
for a penthouse at Ian Schrager’s Residences at the Miami Beach Edition. The
16,000 square-foot triplex is under contract for $34 million, making it the
Miami area’s highest-priced condo deal.
At least four units on the market
are poised to surpass that benchmark. The most expensive -- an unbuilt
penthouse at the Mansions at Acqualina on Sunny Isles Beach -- is listed at $55
million, Pierce said.
At all price levels, about 21,430
condos are proposed or under construction in Miami-Dade County, from downtown
Miami to the coastal A1A route spanning Sunny Isles to South Beach, according
to CraneSpotters.com, which tracks development in South Florida.
‘Real Buyers’
Institutional lenders are providing
about $2.7 billion to finance projects in all of South Florida, compared with
$11 billion during the last construction boom from 2003 to 2010. That suggests
that buyer deposits back up much of today’s building, according to Peter
Zalewski, founder of CraneSpotters.
“It’s a good way to measure real
buyers,” said Carlos Rosso, president of the condo division for the Related
Group of Florida, which wrote down $1 billion in losses in 2008.
Related has 15 Miami-area condo
projects under construction, in pre-sales or going through land approvals. All
are being funded with buyer deposits of at least 50 percent, he said.
“If we don’t have those real
buyers, we’d rather not build the building,” Rosso said.
Less Risk
With traditional bank financing,
the developer takes a huge gamble, said Gary Saul, co-head of the real estate
division at law firm Greenberg Traurig LLP’s Miami office.
“He’s in the ground, he’s borrowing
money anywhere from two to five years to build these super-sized buildings,”
said Saul, who worked on offering plans for the Mansions at Acqualina and Faena
House on Miami Beach. “And what we saw in the last cycle is that the buyers
could not care that they had these contractual obligations to close.”
A large cash commitment “lets you
sleep at night” because a buyer is less likely to walk away, said Diego Ojeda,
vice president of Rilea Group, which revived its Bond 1080 Brickell after
shelving the downtown Miami project in 2007. “When the music stops, everything
will be real and paid for.”
Rilea broke ground on the
British-themed project in January after 60 percent of the apartments had been
sold to buyers who agreed to put down half of the purchase price.
City Appeal
Miami, in a state that doesn’t
collect income tax, ranked above Dubai, Paris and Beijing on a list of “cities
that matter” to global high-net-worth investors, according to the 2014 “Wealth
Report” by London-based consulting firm Knight Frank LLC. At No. 8 worldwide,
Miami was the only U.S. city on the list after New York, which ranked second.
With so many towers rising along
the beaches, Zalewski last week began offering boat trips to prospective buyers
in addition to his weekly bus tours of Miami-area project sites.
At the Porsche tower, the smallest
apartment is about 4,500 square feet. Outdoor terraces spanning the length of
the apartment are standard and all but 16 units have a plunge pool. Additional
“man cave” space with ocean views is available on the building’s fourth floor,
where a collector can display more vehicles.
‘Go Play’
“You can set up your cars like a
museum -- a hangout with cigars and pool tables, for when your wife throws you
out of the house and says, ‘Go play with your cars,’” said Dezer, who has a
Lamborghini Murcielago and a Bugatti Veyron in his collection of 29
automobiles.
In September, once the tower
reached more than $500 million in pre-sales, Wells Fargo & Co. approved a
$214 million loan to help complete construction, Dezer said.
In nearby Aventura, Property
Markets Group is collecting 60 percent deposits from buyers interested in its
190-unit Echo Aventura. Every unit includes a terrace with an outdoor kitchen
and maid’s quarters that are accessible through a separate entrance, said Kevin
Maloney, principal of the New York-based firm. Buyers of the 18 penthouses,
with prices starting at $2.6 million, will receive a Tesla electric car.
Alan Faena, an Argentine developer
who transformed the derelict Puerto Madero section of Buenos Aires into a
residential and entertainment district, is making over a Miami Beach stretch
better known for budget hotels. Fifty percent cash deposits are required at his
47-unit Faena House, where Blankfein and Black are among the buyers, two people
familiar with the deals said in December.
New Yorkers
The 18-story project, which broke
ground in January 2013 and was marketed privately for much of last year, has
sold all but three of its units, at an average price of $3,000 per square foot,
said Alicia Goldstein, executive vice president of sales and marketing at Faena
Group. Ninety percent of the buyers have a primary residence in New York.
The building is “similar to how we
live in Latin America,” said Faena, clad in white with a loose-fitting,
button-down shirt and wide-brimmed hat. “It’s all based on big, open terraces,
360-degree movement around your apartment.”
The building is slated to be
completed next year. Prices start at $2.5 million for a 1,300-square-foot
one-bedroom unit and reach $50 million for an 18,000-square-foot penthouse.
Arts Center
The condo tower is part of the $1
billion Faena District, with plans for two luxury hotels and an arts center
designed by architect Rem Koolhaas, on a six-block stretch along Collins
Avenue. HSBC Holdings Plc (HSBA) provided a $300 million loan for Faena House
and the renovation of the adjacent Saxony Hotel in January, she said.
Builders are helping to replenish
the Miami area’s condo supply after cash-paying investors, mostly from South
America, snapped up units in bulk starting in 2009 at prices discounted by as
much as 75 percent, according to Crane Spotters’ Zalewski.
The glut of empty condos that
reached its peak of 25,424 in 2008 had been largely absorbed by the end of
2011, when 8,938 units remained on the market, according to data from the Miami
Association of Realtors.
That year, Argentine developers
Carlos and Martin Melo decided it was time to start building again. They funded
a condo tower in downtown Miami’s Edgewater neighborhood entirely with cash
deposits, a practice that’s popular in their home country, they said in an
interview.
Within a month of starting sales,
more than 70 percent of the units were under contract to buyers who put down
half of the $250,000-plus purchase price, Carlos Melo said. Melo Group broke
ground on the project, 23 Biscayne, in August 2011, hoisting the first
construction crane in Miami in three years.
‘Money Losers’
As builders turn to wealthy buyers
for funding, much of the region’s new construction is out of reach for local
residents, said Jack McCabe, CEO of McCabe Research and Consulting, which
advises developers and lenders on the South Florida market.
With more than 20,000 units on the
way, just three years after investors absorbed a similar number, McCabe said he
questions if there are enough multimillionaires in the world who want to buy
condos in South Florida.
“Miami is a kind of a boom-and-bust
market,” he said. “When things are good, everyone in the world wants to build
here. They eventually realize they’re overbuilding. The ones that are finished
later in the cycle a lot of times end up as huge money losers.”
In Miami-Dade County, at least
1,304 units are listed for re-sale at $1 million or more, with an average
asking price of about $3.02 million, or $1,114 a square foot, according to
Zalewski.
Mortgage Seekers
Buyers seeking a mortgage for new
luxury units in Miami have limited options. Mortgage financiers Fannie Mae and
Freddie Mac don’t allow banks to approve loans for apartments in buildings
where more than 30 percent of apartments are owned by investors,
said Orest Tomaselli, CEO of National Condo Advisors LLC, a White Plains,
New York-based consulting firm.
Luxury developers sometimes form
private partnerships with lenders to assist buyers seeking financing. Those
loans almost always require purchasers to have 50 percent equity in the deal,
he said.
In downtown Miami, where prices are
generally lower than beachfront locales, One Thousand Museum has sold about a
third of its 83 units at an average of $1,200 a square foot. That price is a
record for downtown, according to Pierce of Coldwell Banker. All buyers agreed
to put down 60 percent. The planned 709-foot (216-meter) tower, designed by
British architect Zaha Hadid, has yet to break ground at the site of a BP
station that’s still peddling gas.
Rooftop Helipad
The property, with a rooftop helipad,
includes eight almost 10,000-square-foot full-floor units, and three of them
have been bought, said Louis Birdman, the tower’s co-developer. The most
expensive apartment, a 16,000-square-foot duplex penthouse with a private
indoor pool, is priced at $45 million.
On Sunny Isles Beach, a buyer
interested in the Mansions at Acqualina’s Palazzo Dâ Oro penthouse would have to put
down half of the purchase price, listed at $55 million, said Michael Goldstein,
who oversees sales and marketing for the project, built by local developers
Jules and Edmond Trump.
Plans for the 17,000-square-foot
unit include a Swarovski crystal staircase, sky garden with a water wall, black
travertine floors and $5 million of Fendi Casa furnishings. Swimmers in the
glass-bottom pool, jutting 12 feet out from the building, look down onto
Collins Avenue 47 stories below.
Price Record
All but six of the 79 units at the
project, slated to be built to its full height this week, are spoken for at
prices averaging $1,750 a square foot, according to Goldstein. By contrast,
condos at a sister property next door sold for an average of $489 a square foot
when it was completed in 2006, he said.
More than half the buyers at the
Mansions of Acqualina are from Canada and the U.S., including hedge-fund
managers and two owners at Manhattan’s 15 Central Park West, according to
Goldstein. That dual-tower complex holds New York’s price record for a
completed apartment purchase, at $88 million.
“We looked at all the most
expensive units that have ever been sold” and decided to top them all,
Goldstein said. “We built a trophy product where a select few people can buy
it.”
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