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Priced out

Surging land values in South Florida are keeping many developers and investors on the sidelines

Property Markets Group paid $30.8 million for a development site inSunny Isles (left) on which the Muse condo (right) will soon rise
Property Markets Group paid $30.8 million for a development site inSunny Isles (left) on which the Muse condo (right) will soon rise

Escalating land prices have transformed the face of South Florida real estate, tightening the race for vacant turf and locking some developers and investors into a wait-and-see mode.

As an investor, Aztec Group CEO Ezra Katz says he’s struggled to launch a select-service hotel project while competing with condominium developers for plots in urban Miami neighborhoods.

“The cost of land has risen so dramatically that we may be at an impasse,” Katz said. “We’re finding we can’t buy more land at the price we want. I try to take it in stride and move on.”

Aztec, a merchant banking firm and an affiliate of Miami-based Mayan Properties, secured a $15 million construction loan for the in-the-works Hyatt Place hotel near Miami International Airport. Hyatt Place broke ground in October.

“We are land-constrained,” Katz said. “We can only look west of the airport and north toward Broward County and Palm Beach County.”

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Developer Neil Fairman, owner of the Plaza Group, said the cost to acquire developable condo land in Miami has doubled in 18 months. Oceanfront land sites range from $50 million to $200 million in Miami, Miami Beach and Bal Harbour, he said. The Plaza Group focuses on high-end waterfront condo projects in Broward County. “I expect the sale price of condos will moderate soon, after reaching a nosebleed level,” Fairman said.

The level of property appreciation is significant. New York-based developer Property Markets Group, led by Kevin Maloney, and partner S2 Development of Aventura paid more than $30 million for a 0.85-acre waterfront parcel in Sunny Isles Beach. Seller Palmero Beach LLC netted a 50-percent return on the $20 million it paid 18 months earlier.

In February, Miami-based HypCor700 sold a 58-unit apartment complex in the Edgewater neighborhood to Russian billionaire Oleg Baybakov for $21.5 million, after picking it up for $9.9 million in 2012.

The Bond at Brickell, a 44-story condo tower, is another project born amid rising property values. Spanish investment group MDR Toledo bought the 1-acre site in 2012 for $17.4 million from Rilea Group, which paid $9.5 million six years earlier.

Nitin Motwani, managing director of Encore Housing Opportunity Fund and principal of the 25-acre Miami Worldcenter project, said it’s essential to exercise creativity in the types of deals he is chasing.

“We tend to focus on deals that have more hair on them,” he said.

Motwani is one of the developers tied to construction of an 18-story condo known as the Paramount Fort Lauderdale Beach on the site of the former Howard Johnson’s hotel, which saw damage from Hurricane Wilma in 2005. An equity financing approach to the project will require condo buyers to pay a mere 30 percent deposit. “This market demands experienced developers,” he said.