Miami’s condo market continues to be global magnet

Miami’s condo market continues to be a strong magnet for international investment, but many brokers say the line between residents and investors may now be fuzzier than ever. “From what I see and what I’m hearing from developers,” he says, “about a third are buying for their own use as a permanent residence, a third for a second home and a third as an investment to rent out.

“Over the past two years rental inventory had been extremely low, so this is a very sought-after alternative.” That three-way split applies to the Greater Miami market as a whole, Mr. Kawas says; specific areas vary widely. Investors are much more prevalent in downtown, Brickell and Miami Beach, he says, “but if you go to Doral or Coral Gables or Coconut Grove there’s a much higher percentage of end-users – probably more like 60% end-users and 20% for each of the other categories.” Investors, Mr. Kawas says, can be further broken down into several different types.

“Some,” he says, “are buying in the lower to midrange price point – under $1 million – and are looking for a return of 5% to 7% or 8%. Then there are high-end buyers who are looking for more upside and capital preservation; they are happy with a lower return.” A third trend that is gaining momentum, Mr. Kawas says, is “a marriage between second homes and investment. For example, 60% of units at 6080 Collins Ave., which launched in August, are reserved, most of them by investors. “There’s a very high demand for properties with very liberal rental policies that will allow them to use it for a couple of months as a vacation home and then rent it out the rest of the year.”

Edgardo Defortuna, president of Fortune International Realty, says the trend for foreign investors to live in their units part of the year is particularly strong in Miami Beach, where he estimates about 65% of condos are owned by buyers from other countries. “They will spend two or three months here,” he says, “or the family will move here while the man of the house moves back and forth. This is happening much more, especially with investors from countries such as Venezuela and Brazil.”

As much as 85% of buyers of new product in the central business district and along the Biscayne corridor are investors, Mr. Defortuna says, and will likely put their units on the rental market. “Doral, which is heavily populated by Venezuelans, is an exception,” he says. “Most plan to stay here if they can figure out a way to become permanent residents.” ISG principal Craig Studnicky calculates that countywide the ratio of absentee to permanent condo owners is about 40/60. “It was higher 10 years ago,” he says, “but many now have their green cards and live here permanently or are early retirees from the New York area.”

While Brickell buyers are almost exclusively from South or Central America, Mr. Studnicky says, “moving north to Aventura and Sunny Isles there’s a bigger mix of people from the Northeast.”

Miami sees two annual influxes of snowbirds, he says – “those from the Northeast, who are here now, and South Americans who come here to escape their winter in June, July and August. So none of these buildings is ever fully occupied.” EWM’s David Siddons cautions against too much generalization. While he says his impression is that the downtown-Brickell market where he is active is about 80% either snowbirds or investors renting their units out, “that said, a number of buildings such as The Palace, Santa Maria or buildings on Brickell Key are not anywhere near that. They are family-friendly buildings that attract primary residents.” Like many other brokers, Mr. Siddons says, he is seeing more clients in the past three years who initially planned to live in their unit for only a couple of months a year but “end up using it a lot more than they ever anticipated.”

To learn more about residential opportunities contact AG&T. 

Thor equities buys an entire block in wynwood for 41.5 Million

Thor Equities just paid $41.5 million for more than an entire block in Wynwood, a missing piece that gives it one square block and marks the largest deal ever in the red-hot Miami neighborhood, The Real Deal has learned.

New York-based Thor Equities, led by Joseph Sitt, bought 2800 Northwest Second Avenue, a 100,000-square-foot site running from Northwest 29th Street to Northwest 28th Street at Wynwood’s northern entrance. The corner site includes five existing buildings totaling 45,000 square feet, and also features 300 feet of frontage on Northwest Second Avenue and a 16,500-square-foot parking lot, a Thor spokesperson told TRD.

The property has development rights in excess of 600,000 square feet, and the plan for the site includes a mix of retail, residential, hotel and/or office uses, the spokesperson said.

The seller is Lehman Family Partnership Ltd., headed by Dennis J. Lehman, as trustee, according to public records. The entity had paid $200,000 for the parcels in 1995. The properties have been the 68-year home of Lehman Pipe & Plumbing Supply.

Bruce Koniver, principal of Koniver Stern Group brokered the deal, representing the seller. The firm was the only broker involved in the transaction. Koniver said he has known Lehman since 7th grade, and began marketing the property a few months ago.

“There was a hit list of potential buyers we reached out to, and fortunately enough Thor was on that list,” Koniver told TRD.

Thor’s latest purchase gives it the entire square block between Northwest Second Avenue and Northwest Third Avenue and between Northwest 28th Street and Northwest 29th Street. Its latest Wynwood purchase is adjacent to 2801 Northwest Third Avenue, a 105,000-square-foot, seven-parcel site that the real estate investment and development firm purchased from David Edelstein for $26.9 million in May.

The huge real estate investment firm, which has been expanding its holdings in Wynwood, also owns 2722 Northwest Second Avenue in Wynwood, as well as additional properties in the Design District and on Collins Avenue and Lincoln Road in Miami Beach.

Wynwood, known for its artsy vibe, is a neighborhood transforming with new retail stores and restaurants. Among new retailers are Warby Parker, Illesteva and Marine Layer. New restaurants include Wynwood Diner and the Lunchbox. The area is also home to art galleries and one of the largest open-air street art installations in the world including Wynwood Walls, creative offices and showrooms.

The city of Miami’s Planning, Zoning and Appeals Board recently approved a slate of changes to zoning and land use designations that would allow denser residential developments on roughly 205 acres in Wynwood. The recommendations must still be finalized by the city commission.

“The already burgeoning Wynwood Art District is primed for a mixed-use, residential rezoning that will spur further development, and accelerate its ongoing transformation from an underutilized industrial area into a true live-work-play community,” Sitt, CEO of Thor Equities, said in a statement.

Caribbean Resorts Lure Private Equity as Banks Retreat

 

 

Bloomberg business by Ezra Fieser 

Dec. 2014

Private equity companies from Bain Capital Partners LLC to billionaire Sam Zell’s Equity International were boosting investments in Caribbean resorts as the region’s traditional lenders scaled back operations.

While Canadian banks including Bank of Nova Scotia and Royal Bank of Canada shuttered some businesses in the islands, U.S.-based private equity firms have spent $329 million on hotel developments this year, the most in a decade, according to Real Capital Analytics Inc., a New York-based commercial real estate research company.

“Private equity makes for an interesting hero in this situation,” said Robi Das, managing director in the Miami office for Newmark Grubb Knight Frank, a commercial real estate company. “The traditional lenders have been hesitant to participate in the Caribbean. I wouldn’t say they’re out of the market, but the new debt that’s coming in is private equity.”

Struggling with some of the heaviest debt burdens in the world, Caribbean governments are seeking to take advantage of rebounding tourism as the U.S. economy recovers. In May, Zell led the approximately $500 million purchase of Decameron Hotels & Resorts, which operates in countries including Jamaica and Colombia. Now, Cuba provides a new opportunity as U.S. tourists prepare to take advantage of an easing in travel restrictions.

“The Cuba story is huge, no question,” Das said.

While investors wait and see what financial safeguards will be put in place, U.S. hotel chains including Marriott International Inc. and Hilton Worldwide Holdings Inc. said they are interested in the Cuban market or monitoring developments there.

Closing Branches

As part of a larger international pullback, Toronto-based Scotiabank on Nov. 4 said it would close 35 branches in the Caribbean and take C$109 million ($94 million) in losses related to three Caribbean hotel development loans.

Those cuts followed Royal Bank’s sale of its Jamaica operations and Canadian Imperial Bank of Commerce’s May announcement of C$123 million in losses and a C$420 million goodwill impairment charge on CIBC FirstCaribbean International Bank. Royal Bank said on Nov. 21 that it would shutter its wealth management business in the Caribbean.

Scotiabank, which is weighing a sale of its Puerto Rican banking unit, will continue to implement “operational efficiency initiatives,” spokesman Marcelo Gomez-Wiuckstern said in a Dec. 11 e-mail. CIBC had no comment, spokesman Kevin Dove said via e-mail.

Luxury Development

Cuba’s opening to more U.S. tourists may change that trend. Five decades after closing operations in the communist country, Royal Bank’s Chief Executive Officer David McKay said Canada’s second-largest lender by assets is evaluating a return to the island.

“We see a very attractive, long-term marketplace in Cuba,” McKay, said in an interview last week in Toronto.

Traditionally the dominant lenders in the region, banks were stung by a drop in tourism and falling revenue for hotels in the wake of the global financial crisis. Tourist arrivals fell by 3.6 percent in 2009 to 22.1 million, the fewest since 2005, according to the Caribbean Tourism Organization. Revenue-per-available room for Caribbean hotels, a key measure of the sector’s health, fell 7 percent in 2008 and about 16.6 percent the following year, according to Smith Travel Research.
Macao Beach

The downturn ensnared projects such as Roco Ki, envisioned as a luxury development with four golf courses, a Westin hotel and $3 million estates built on a 2,500-acre (1,011-hectare) bluff above Macao Beach on the Dominican Republic’s east coast. The development said it received $85 million in loans from Scotiabank and the European Investment Bank. Construction stopped in 2008, leaving shells of buildings on a bluff overlooking the sea.
Calls to the lead developer, Macao Beach Resort Inc., went unanswered. Press officials at Westin owner Starwood Hotel & Resorts Worldwide Inc. did not respond to calls and e-mails by Bloomberg News seeking comment.

“The traditional lenders have been very, very slow, to return to the market, particularly for new construction,” said Parris E. Jordan, managing director at HVS Caribbean, a hotel consultancy that evaluates projects.

While the regional economy has rebounded, growth remains uneven. The economies of the Spanish-speaking Caribbean are forecast to expand by 4.1 percent next year, compared with 2.2 percent in the English-speaking countries, according to the United Nations. Vulnerable to hurricanes and earthquakes, Caribbean nations have an average debt-to-GDP ratio of nearly 80 percent, according to the UN.

25 Million
More than 25 million visitors are expected to visit the Caribbean this year, according to the region’s tourism organization. Jamaica Tourism Minister Wykeham McNeill said Nov. 29 that more than $300 million in hotel investment is helping boost an economy that is expected to grow by 1 percent or less this year. Fitch Ratings on Nov. 21 raised the Dominican Republic’s credit rating, citing the strength of the tourism market in the Caribbean’s largest economy.
Private equity firms are entering the market largely through joint ventures with hotel operators, including Marriott and Hyatt Hotels Corp.

“Our goal is to have 150 hotels open by the end of 2017 and the Caribbean plays a large part in that development story,” said Craig S. Smith, Marriott’s president for Latin America and the Caribbean.

For investors, working with the established hoteliers is “a shorter trip to the cash register than building new,” said William Sipple, managing director at Denver-based HVS Capital Corp, which consults on Caribbean hotel purchases.

Billionaire Sale

At least three such joint ventures bid on Occidental Hotels & Resorts’ portfolio of hotels, being sold by Amancio Ortega, the billionaire owner of the Zara clothing-chain, and Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank.
Caribbean Property Group LLC, a New York-based private equity company, and Spanish hotel operator Grupo Barcelo plan to resume discussions in the coming weeks with Occidental for a deal that could be valued at $625 million, said a person with knowledge of the talks who asked not to be identified because the talks are private.

“The attraction is that this type of capital can help position you to grow,” said Javier Coll, chief strategy officer of Apple Leisure Group, a travel company that manages 37 resorts, including seven in the Dominican Republic and two in Jamaica’s Montego Bay. Apple Leisure last year sold an undisclosed equity stake in its operations to Bain Capital.
Virgin Islands
The company’s hotel management subsidiary AMResorts has since opened all-inclusive resorts in the Mexican Riviera and new markets, including the U.S. Virgin Islands.
“The demand from visitors is there,” Coll said.
Caribbean all-inclusive resorts have evolved from their yesteryear image of cramped rooms, crowded pools and long buffet lines, said Ryan Cotton, a Bain Capital principal who led the investment in Apple.

“More and more passengers are going to come to four- and five-star American-centric” resorts, Cotton said in a Dec. 15 telephone interview. “So it’s a perfect time for transacting. We’re pretty compelled by that.”

Growth in the Caribbean has also brought investment from China, which is offering cheap loans, construction services and equity investments in hotel developments.
In the Bahamas, Chinese firms provided a $2.6 billion construction loan, $150 million in equity and about 4,000 workers to develop the 1,000-acre Baha Mar resort, the largest single development in the history of the Caribbean. That project, delayed by six months, is expected to open early next year.
Daniel Liu, senior vice president at China Construction America, Inc., which is building Baha Mar, said the company expects to expand throughout the region. The company, a wholly owned subsidiary of China State Construction Engineering Corp., is targeting projects of $100 million or more, he said at a conference in Punta Cana, Dominican Republic last month.

“We are really pushing ourselves in the Caribbean,” Liu said. “We’re going to be a driving force, I’m very sure about that, in the Caribbean market.”