Property Markets’ Kevin Maloney weighs in on prices, inventory and what’s next

Developer Kevin Maloney had serious doubts about the housing turnaround. It just seemed to be happening too fast, especially considering the depth of the downturn. Was it for real? Was it solid?

But Maloney decided to shove his skepticism aside. He had to if he wanted in on the action.

Today, Maloney has four luxury condominium projects in South Florida, including one on Miami’s Brickell Avenue that will shoot up 750 feet.

“Real estate is back,” Maloney said with a laugh as he sat down for a conversation in the New York office of his Property Markets Group. “Who knew?

“I was the guy saying it will never come back, it will never happen, it will be a decade before it stabilizes again,” he went on.

In just three years, though, Maloney watched the inventory get gobbled up.

“I was shocked because all of a sudden everything was gone,” said Maloney, who spends half of every week in Miami and travels once a month to PMG’s office in Chicago.

Right now, Maloney has more than $1 billion in construction going up in the three cities. In early April, he announced his biggest project in the Sunshine State yet — the 250-unit Echo Brickell, in the heart of Miami. Also in the works: the 190-unit Echo Aventura, on Biscayne Bay; Surfside’s 95th on the Ocean, with just seven four-story homes; and the 24-unit Sage Beach in Hollywood Beach.

Ground won’t be broken until June on Echo Aventura, a joint venture with JDS Development Group, but already more than half the homes are spoken for and the prices aren’t cheap, ranging from nearly $500 per square foot to roughly $900 per square foot. Maloney had upped the rates 11 times by the time he converted the reservations to contracts in mid-April.

Like the speedy recovery, the rising prices stun Maloney. He talked of the numbers in the New York super-luxury market — $5,000 for the lowest penthouse in one of his towers — and how South Florida, at the beach, is mirroring the madness.

“When the market crashed, there were crazy, crazy [high] prices,” he said, “and now it’s 20 to 60 percent higher than it was at the peak.”

Now, more from Maloney on why he isn’t worried about this boom going bust and what he still wants to do as a developer.

On his confidence in the South Florida market:

The difference between today’s cycle and that cycle, where in 2006 you had 25 cranes up in the air, there’s really only about 3,000 units available and maybe a half-dozen cranes between Brickell and South Miami Beach to Sunny Isles. There are not a lot of sites left to develop, certainly beachfront sites, so the amount of inventory is very moderate, and just keeping demand very high. The supply just isn’t there anymore, so I’m bullish about this market because it’s much more controlled.

On the availability of land:

Every piece of land has been bought, well, not every, but about 98 percent of the sites are controlled under some form of construction. We chase every site possible, and we’re fortunate to pick up a few, but it is very, very difficult now to find a site in South Florida, on the beach or on the bay. Downtown Brickell still has about half a dozen sites in play, and that market is very, very robust. But even if you built that amount of inventory, it’s not enough over a 10-year period to affect the pricing.

On how, with no vacant lots, construction is still going on:

What’s happening now in South Florida is people are actually assembling existing condominiums and buying them out, and then tearing down condos that they built years ago, and then trying to rebuild. They are tearing down existing housing, so you’re going into a condominium and you have to buy 300 people out.

On what he still wants to build in South Florida:

I would like to do a rental in downtown Brickell, and we have some sites in the pipeline. It’s really about the cost — because in South Florida, the cost for construction is going up. As costs go up, you push beyond the cap rate that you’re going to build into, and then ultimately your only strategy is to become a condo. We also are entertaining sites in the South of Fifth area. [Sales there] really start at $2,000 a foot, and the sky is the limit. It’s exciting.