New York developers flock to Miami
It’s not just New York’s buyers who are heating up Miami’s real estate sector. The Big Apple’s developers, too, are looking south as historically high prices in some Miami neighborhoods make it worth their while to do business here.
“At $2,000 a square foot it’s a home run,” said Horacio LeDon, Douglas Elliman’s president of development marketing for Florida and senior managing director of development marketing for New York. “Those are New York prices.”
With properties such as Faena House commanding up to $50 million for plush condominiums, observers say the metrics work, justifying costs for developers used to handling expensive real estate.
“There’s been a natural synergy between New York and Miami for 100 years,” said Miami-born Mr. LeDon, who’s worked about two decades in New York realty. “It’s ebbed and flowed. But now you have a perfect storm of dynamics and factors occurring that essentially bring New Yorkers to Miami in some sort of critical mass. Prices justify it, but there are also the trends. Developers want to be in Miami. They want to enjoy the lifestyle. And now the numbers justify it across the board.”
Lower development costs, double-digit price increases and a market with demand outpacing supply was what attracted Property Markets Group, a company with more than 1.5 million square feet in five local projects and a recent $30 million land acquisition in Sunny Isles Beach.
“It probably comes down to money,” said CEO Kevin Maloney. “When you have low prices and growing demand in real estate, you want to enter the market.”
Entering this month was Brooklyn-based Forte Capital, which bought a 22,462-square-foot building at 48 NW 25th St. in Wynwood. The deal closed Nov. 20 for the site that was once a storage facility but will now house a mixed-used project with retail and restaurants.
“This transaction represents a rapidly increasing presence of high-profile investors from New York and beyond who believe in the emerging neighborhood of Wynwood as a future hub for retail, office and residential use,” said Jason Weisman, an agent with Metro 1 Commercial, the real estate firm that helped broker the deal.
And as the market strengthens, some old players are returning.
Property Markets Group, for instance, first came to South Florida in 2004 when it began developing The Mei, a 132-unit high-rise along Millionaire’s Row, at 58th Street and Collins Avenue in Miami Beach. But when the market crashed in 2007, the property lost 40% to 50% of its market value, and about 80% of buyers forfeited deposits and walked away from the building. To recoup losses, Property Markets Group sold about 100 condominiums at rates well below projections.
“New York did not see those kinds of violent swings,” Mr. Maloney said.
With a broad international base, that city’s real estate was less vulnerable to economic crises from one region, and typical buyers in New York before the crash were likely to live there and buy personal residences, not investment property. So they held on to their purchases instead of walking away.
“We stayed in Miami and started to buy with a local partner… but there wasn’t a lot going on,” said Mr. Maloney.
Property Markets Group maintained a local office, but didn’t make another significant investment until around 2009 when the market started to recover. Today its projects include Echo Brickell by award-winning architect Carlos Ott, and a Bal Harbour townhouse project called 95th on the Ocean.
“Prices have already reached levels we’ve never seen before,” said Jeff Morr, CEO of Majestic Properties and chairman of the Master Brokers Forum, a real estate group whose members have all reached $5 million in annual sales.
And they’re rising because New York developers are sometimes outspending their counterparts to bring plush amenities to market.
Faena House, for instance, cost about $500 per square foot to build – about twice that of a typical Miami development.
“There’s definitely a lot of money on the table for a developer, major money,” Mr. Morr said. “But the people who are buying these units are not living on their last dime. They are able to spend a few thousand dollars for something really extraordinary.”