As Miami-Dade County’s condo market shows signs of slowing due in part to a stronger dollar, an out-of-state developer envisions a pair of new condo towers with more than 550 units combined as a key component for a proposed $160 million mixed-use project in Coral Gables.
The latest condo project proposed for the Coral Gables area — a wealthy suburb of local residents and foreign investors — is the Gables Station complex slated to be developed on a 4.3-acre site located on the north side of the 200 block of South Dixie Highway near the upscale Shops At Merrick Park retail center, according to city of Coral Gables records.
“The applicant is proposing a mixed-use residential/hotel/retail project, which will be composed of three towers with a maximum height of 155 feet with about 168 hotel units totaling 111,583 square feet, 554 luxury condominium residences and 87,900 square feet of retail space,” according to the cover letter included with the developer’s application to the city of Coral Gables.
To build the project as proposed, the prospective developer — a “contract purchaser” based in Minnesota called NP International USA LLC with Charles D. Nolan and Brent Reynolds — is seeking a number of revisions to current land-use and zoning regulations, according to government records.
Currently, the owner of record of the proposed development site is a Coconut Grove-based corporation called Gables Station LLC with Jeffrey L. Berkowitz that had previously announced plans to build a retail-and-parking facility with 330,000 square feet after acquiring the land in 2005, according to government records.
With this newest project, the Coral Gables area now has 17 new condo buildings with nearly 1,400 units announced in South Florida since this current cycle began in 2011, according to the preconstruction condo projects website CraneSpotters.com as of Monday. (For disclosure, my firm operates the website.)
The total number of new Coral Gables units for this cycle would have been even higher if not for earlier decisions by unrelated developers to revise the original plans of the proposed Collection Residences project with 126 units and the Antilla Coral Gables project with 32 units.
To date, developers have revised plans to build nearly 20 new condo buildings with nearly 2,900 units since 2011. Most of the units in question were to be developed in Miami-Dade, according to the data.
Overall, South Florida developers have already completed 57 new condo buildings with more than 4,300 units in the coastal tri-county South Florida region of Miami-Dade, Broward and Palm Beach. An additional 129 new condo buildings with more than 12,900 units are currently under construction in South Florida.
A combined 233 new condo buildings with nearly 33,000 units — about 66 percent of the total tri-county pipeline — are currently in the planning or presale phase of development in South Florida.
In the Coral Gables market, no new condo buildings have been completed to date during this cycle.
A trio of new condo buildings with a combined 265 units are currently under construction in the Coral Gables market as of Monday.
An additional 14 new condo buildings — including the newly announced Gables Station project — with more than 1,120 units are currently in the planning and presale phase of development in Coral Gables, according to the data.
The combination of announced units that are in the planning or presale phase of development represent more than 80 percent of the total number of condos in the pipeline for the Coral Gables market during this cycle.
The Coral Gables market ranks as South Florida’s ninth most active preconstruction condo market based on announced units.
On the resale front, buyers acquired 275 condo units last year for an average of nearly 23 transactions monthly, according to data from the Southeast Florida MLXchange.
Based on the 2015 resale statistics, the Coral Gables condo resale market currently has about 6.7 months of supply of units available for purchase.
A balanced market is considered to have about six months of resale supply available for purchase. More months of condo resale supply suggests a buyer’s market, and less months indicates a seller’s market.
While the supply of condo units is encouraging, the average resale transaction price per square foot in Coral Gables was unchanged at $320 in 2015, just as it was in the previous year of 2014, according to the data.
Currently, the average asking price for a condo resale unit available for purchase is $431 per square foot, according to the data.
Litigation blocking the multimillion-dollar sale of two properties on Lincoln Road could be nearing an end after a judge ruled in favor of the owner, Leon Zwick, in a three-year dispute with Michael Comras and his partners the Cayre family of New York. Yet, Comras and Cayre vow to appeal the judge’s decision, according to their attorney.
At issue are two buildings at 940 Lincoln Road and 947 Lincoln Road in Miami Beach, which Zwick and his late brother bought in 1984 and 1986. Current tenants include Finnegan’s and Timeless Cosmetics.
The deal
In October 2012, Zwick entered into a deal to sell 940 Lincoln and 947 Lincoln to an entity managed by Comras and the Cayre family — including Robert Cayre and his uncle Harry Adjami — according to legal documents.
Soaring property values on Lincoln Road
Just up the street this September, Comras and his partner Jonathan Fryd sold the entire block from 1001 to 1035 Lincoln Road to Spanish billionaire Amancio Ortega for $370 million, or $7,708 per square foot for the land and $4,933 per square foot for the buildings. The transaction marked one of the largest real estate deals in Miami-Dade history.
In the 2012 Comras and Cayre deal, the property at 947 Lincoln was to sell for $25 million and 940 Lincoln for $61 million, according to a 96-page deposition from Comras. That equates to about $3,822 per square foot for the land and an average of $1,911 per square foot for the buildings.
Miami-Dade property records show that back in the mid-’80s, the Zwick entity had paid $301,000 for 947 Lincoln Road and $585,000 for 940 Lincoln Road. The buildings, with 8,625 square feet and 36,377 square feet, were built in 1925 and 1926, respectively.
Deal to sell is derailed
On Dec. 19, 2012, nine days before the scheduled closing, Zwick’s sister, Bella Miller, sued both sides involved in the deal in an attempt to prevent the sale from closing, legal filings show. The notice of lis pendens claimed she had a right to the ownership of both properties.
At the same time, Comras and Cayre were becoming concerned that the seller was not complying with pre-closing obligations to remove existing tenants from the building, legal documents show.
On Dec. 28, 2012, the buyers exercised their right to terminate the contract and requested the return of deposits. Their attorney, Todd Legon, partner in Legon Fodiman, said they had been told that the seller could not go forward with the sale because of the sister’s suit, and that Zwick would re-enter into a contract once that issue was resolved. “It was an oral promise that they said we will redo the contracts,” Legon told us. Zwick’s attorney Michael Schlesinger said his client disputes that allegation.
Zwick agreed to the cancellation, and Comras and his partners received their deposits back: $5.5 million for 940 Lincoln and $2.3 million for 947 Lincoln, said Schlesinger, of Schlesinger & Associates, who is co-counsel along with William Davis of Foley & Lardner.
New buyer emerges
Zwick then entered into a separate contract to sell 947 Lincoln to the Richard Chera family, also of New York, Schlesinger said.
The deal was signed the day after the termination, but email correspondence shows it was arranged while Comras and Cayre’s deal was still pending and before it was terminated, in violation of exclusivity and “no shop” provisions, Legon said.
Litigation follows
According to Schlesinger, Comras and Cayre were upset with the pending sale, and sued Zwick in February 2013 in three different complaints. One stated that Zwick asked them to cancel and gave them an oral extension to buy the property for the same price in the future. Another said they had an option of first refusal to buy the property. And the third said they were fraudulently induced to cancel.
“We did not seek to enforce an oral promise,” Legon said. “What we were saying is that we were fraudulently induced to terminate the contracts.”
New deal in flux
Schlesinger told TRD that Chera is under contract with Zwick for 947, but “we can’t close until the case closes.” He declined to disclose the sale price. “We can’t transfer title. All the litigation is holding up the sale of the building.”
Zwick moved for summary judgment, and last month, Miami-Dade Circuit Court judge Migna Sanchez-Llorens granted it, except for one count of breach of contract. She also dissolved Zwick’s sister’s lis pendens, which had been dismissed by another court in November 2013 for lack of merit, and was affirmed on appeal.
The next chapter
“Now 947 is close to being sold to Chera, and 940 is closer to being free so Zwick can do what he wants with it,” Schlesinger told us. “They used the legal system to hold these buildings hostage for three years.”
Yet Legon said Comras and Cayre will “definitely” appeal.
“We’re disappointed with the court’s ruling, but this case is far from over. We have substantial damages claims for breach of contract that we intend to vigorously pursue,” Legon said, declining to provide a figure, “in addition to our appellate rights.”
Industry experts say Miami’s hotel market could be reaching its peak in 2016 as revenues and occupancy rates begin to level out.
Last year was solid for the individual hotels that make up Miami’s leisure industry: more than 44 million travelers passed through the Miami International Airport, a bevy of new hotel developments opened their doors and room rates saw steady gains compared to 2014.
Occupancy rates hovered around 78 percent, mostly flat from the previous year, and hotel owners’ average revenue per room grew to nearly $153 — about a 6 percent jump, according to year-end data from STR.
“On one hand there’s a story about what’s going on at the property level, and then there’s a separate story about how buyers and sellers and lenders are acting right now and how the transaction market has been,” Max Comess of brokerage HFF said. “The stories have been a little disconnected.”
Comess said turmoil in global markets has started to put a damper on activity from certain investment groups and lenders as their strategies become more cautious. Plunging stock markets hurt real estate investment trusts in particular, he said, whose share prices “fell precipitously” compared to the highs seen earlier in 2015. One example of that early-year bravado was the $278 million sale of the former James Royal Palm in South Beach to the Chesapeake Lodging Trust.
That closing came in February, which also saw the $230 million sale of the Miami Beach EDITION to the Abu Dhabi Investment Authority “The REITs for the most part have exited the market,” Comess said. “They were really driving South Beach, downtown Miami; a lot of the resort markets throughout the state.”
Another factor playing into the market right now is a strong U.S. dollar shrinking the appetite of foreign travelers and investors, he said.
Less purchasing power for tourists abroad roughly equates to fewer hotel rooms booked. South American countries in particular are facing harrowing economic conditions, which Comess said is troubling because Miami is such a hub for that continent.
However, Comess said these trouble spots don’t mean Miami’s hotel sector is in bad health. If anything, it’s “bouncing off the top” as it starts aging into its golden years. Wendy Kallergis, president and CEO of the Greater Miami and the Beaches Hotel Association, would agree.
“It’s going to even out because we had so much growth in 2015,” she said. Hotels this year got a slow start, she said, at least partially because the northern states enjoyed warmer holidays than usual. But she expects business to return to normal during the spring, especially with big-ticket events like the annual Ultra Music Festival bringing in travelers.
She also said occupancy leveling out is a byproduct of more hotels opening their doors as opposed to a decrease in demand. Miami Beach alone saw the opening of the Edition, Faena Hotel, Nautilus, Aloft, Hyatt Centric, Hampton Inn Miami South Beach and 1 Hotel South beach, altogether bringing just under 2,000 rooms online in a single year. That trend will likely continue as the EAST Hotel at Brickell City Centre, Langford Miami in the downtown area and the Surfside Residence Inn all open this year.
And while the market maturing usually means a return to stability, the year will not be without its trials, experts say. “We expect this year to be challenging. The Miami Beach Convention Center is closed; several hotels are already reporting that this is leading to a loss of business,” Paul Weimer, vice president of brokerage CBRE’s hotel division, said .
[The convention center is not fully closed as events like Art Basel will still take place there, but it is taking no new reservations while renovations are underway.] “The dollar has remained strong, making it more expensive for international travelers. Many of our feeder markets continue to experience economic issues… I think we will be very lucky if RevPar ends unchanged year over year.”
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