New owners plan to convert luxury Miami Beach rentals to condos
By Sherri C. Ranta
After purchasing The Waverly at South Beach for $97.25 million this summer, the new owners plan to convert the luxury rentals to condominiums, launching sales in early September.
Miami Beach-based Karlton Properties and New York-based Athena Group, both real estate investment and development companies, purchased the Intracoastal Waterway high-rise June 28 from Orlando-based builder ZOM Inc., said Daniel Rotenberg, a Karlton principal. The sale represents the first joint venture for the partnership Athena Karlton SOBE between Karlton, under company president F. Nicholas Karlton, and Athena Group.
The 35-story, 399-unit building at 1330 West Ave. is the first of two conversions Karlton Properties plans on South Beach, Mr. Rotenberg said. A second building on the Beach is currently being considered for purchase.
Next, the company plans to look for similar conversion projects in the city of Miami, he said.
"We thought of this property as a jewel in the middle of South Beach. We felt this property had a lot of intrinsic value," he said. Barriers to entry for Miami Beach continue to grow, Mr. Rotenberg said, leaving fewer ground-up development opportunities but more and safer opportunities for conversions.
"There is a lot less risk in terms of market conditions," he said. "Buying today and converting today, we know the market. But building from the ground up can take a year or two. Market conditions could change."
"We'll bring them up to what we consider market, but it's still below any other luxury high rise in South Beach," Mr. Rotenberg said about the Waverly conversion. "We're pretty proud we can offer this to a more affordable niche."
The one-, two- and three-bedroom units, from 884 to 2,800 square feet, will be offered to the public for $250,000 to $500,000, he said. The company plans to open sales to new residents Labor Day weekend.
Waverly tenants, most young professionals, are receiving a special, below-market price for their units during the first 45 days, Mr. Rotenberg said. Prices will rise in September.
Florida law provides for certain tenants who qualify the right to renew their leases, Mr. Rotenberg said, but so far no one has elected that option. The company can also work to secure investors interested in having residents who would like to stay as tenants, he said.
So far, a few tenants have decided to buy units, he said, "We've had pretty decent sales."
Renovations are not planned for the one-year-old Waverly, Mr. Rotenberg said, although kitchen upgrades and other renovations could be included in the purchase price.
Designed by Arquitectonica, The Waverly at South Beach has private balconies with views of the Intracoastal, downtown Miami and Atlantic Ocean. On-site amenities include concierge, valet and security services, and a waterfront pool and spa, gym, cafe, lobby-level market and business center.
The building recently won national awards for best overall project from the National Association of Home Builders and National Builders Conference.
An affiliate of Karlton Properties put the Waverly under contract in March 2002, Mr. Rotenberg said. "We had many partnership options; however we preferred a firm with Athena's residential experience."
GE Capital Corp. provided financing for the deal. Karlton principal Gavriel Naim also assisted with the deal, Mr. Rotenberg said.
"We're very pleased with the deal we struck and the property we've acquired," Mr. Karlton said. "The South Florida housing market is very strong right now, particularly in South Beach."
ZOM Chief Investment Officer Trip Stephens declined to disclose the profit on the deal, but said both parties were pleased with the final price. "We think we made an acceptable return."
ZOM builds luxury residential rental properties in strategic locations with an eye toward selling them to parties interested in converting them to condominiums. The company also sells directly to institutional investors, he said.
Similar Zom projects include The Waverly at Las Olas in Fort Lauderdale, now under construction. Mr. Stephens said The Waverly at Lake Eola in Orlando is complete and being leased.