The Real Deal Miami

Jorge Perez: Miami “not yet a global city”

Related Group CEO notes market still lacks substantial local buyer pool

November 14, 2014 03:10PM
By Francisco Alvarado

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Related CEO Jorge Perez

Related CEO Jorge Perez

While participating in a panel discussion during the Urban Land Institute’s annual Miami Condo Market Symposium, Related Group CEO Jorge Perez had a sobering take on the city’s booming real estate market.

“While we are here to promote Miami, it is not yet a global city,” Perez said. “We are highly dependent on buyers from New York, Europe and South America. We have very few local buyers even for condos going for $500 a square foot.”

On Thursday morning at downtown Miami’s Epic Hotel, Perez joined fellow developers Ugo Colombo, Eduardo Costantini and Richard LeFrak, along with Douglas Elliman chairman Howard Lorber, for a discussion on the latest trends in the Miami market. Perez said Miami lacks a young, strong middle class and still has a hard time attracting Fortune 500 companies to open offices in the city.

“We have done a poor job attracting high-paying jobs in comparison to Atlanta or Houston,” Perez told the standing room only crowd. “We have a long way to go.”

LeFrak, the New York real estate mogul who is developing 1 Hotel & Homes South Beach, echoed Perez’s comments.

“I was recently speaking to the CEO of a New York financial company,” Lefrak said. “He told me all his employees over 55 want to relocate to Miami. But he doesn’t know if he can convince those under 55 to move.”

The symposium also featured a discussion with commercial lenders on the resurgence of construction financing for Miami condo projects.

Panel participant Jonathan Roth, president of Canyon Capital Realty Advisors, and Michael Wadler, vice president of real estate finance for HSBC Bank USA, noted banks and nontraditional lenders are willing to loan money to developers who have a proven track record of finishing projects and have a substantial number of presold units.

  • TOLD YOU SO

    Everyone who comments praising these developers as if they are some type of real estate psychic and every word they say is going to happen when the majority of what they say is complete BS. Also to commenters who state buildings are selling out every day and buyers are here left and right are completely wrong and proven wrong. Developers are realizing that building the way they did and doing the exact same thing as every developer EAST OF US1 is wrong. they are catering to buyers that are not enough to fill up these buildings which are foreigners. They see that building thousands for hundreds of people is not the way to go which should be common sense real estate. but again these developers like the last bust are greedy and build on the fad of Miami being the hip spot for a short time is not the way to develop. They need to work with the economics of real estate and the real market not the inflated one.

    • SF

      Do they see it’s “not the way to go”? Seems that it specifically IS the way to go. This cycle, the developers have way, WAY less risk. But the time the building is topped off, they’ve made their money. They don’t care about end users — they care about pre-construction buyers.

    • Aj Reddy

      Learn English first before you comment

  • Al Czervik

    And after Perez said that, the voice of reason, Ugo Columbo, educated Perez and those who are missing the obvious.
    Ugo explained that it is NOT that locals do not buy a significant percentage of condos at $500 per sqft… they do not buy PRE-CONSTRUCTION properties at $500+ in Miami.
    Locals don’t put 70% down and wait 18 months for completion of construction.
    Locals buy in the resale market with 10 or 20% down and close in 30-60 days.

  • john

    Do they really think that amount of identical condos that being built are going to completely sold out???? They are not only catering to a small percentage of buyers, every developer is catering to the same buyer which so it makes each buyer very very very valuable. banks are loaning to only the developers but the these developers and banks are missing the main key factor, which is that they are not loaning to the buyers and if so they do not want to lend on condos. Developers, realtors, bank reps can have all the roundtables they want claiming they are lending, but any real buyer or realtor that goes and asks for a mortgage good luck. so this scenario makes residents not buy and their are not enough outside buyers that are rushing to buy pre construction because they are not in a rush or care enough.

    • Al Czervik

      These comments are clearly from people that did not attend the event, nor have listened to these people speak first hand and without a distortion filter applied by a journalist.

      1. The Faena House is not identical to anything, nor is Consultio’s (sp?) Bal Harbour development. Ugo Columbo’s buyers would never buy in Edgewater or Midtown.
      2. They are catering to a small % of buyers. Yes! Correct! Brilliant observation. So does Ferrari, Tiffany, Lafitte – Rothschild, and Corvette for that matter.
      3. They ARE NOT catering to the same buyer. Faena House sells waterfront for North of $3,500 per Sq ft. Ugo’s Flatiron building is landlocked for $700 per Sq. Not the same.
      4. Not one of the panelists claimed banks were financing buildings… it was the OPPOSITE. Each one discussed how buyer cash deposits are making the development possible.
      5. If you don’t think that there are buyers, then you are just wrong.

      • John

        Bottom line they are catering to the same buyer meaning the small percentage of buyers that can afford these condos. Now how many buyers that live over seas or out of state all want to buy a 650 sqf-1200 Sqf condo in brickell? not enough to fill up the new condos they are building. now the same small percentage of buyers who can afford these condos but rather be on the beach because hey if you buy in Miami you want the beach, so yes chances are developers who are buying on the beach will sell more than perez and developers who focus in brickell and edgewater. Sunny Isles alone has so many pre construction which means these buyers can go anywhere they want. its like having McDonalds on every corner eventually they take business from each other and each restaurant does not make what its capable of doing. Miami developers do not have enough buyers to fill up all these condos and they are realizing that now because they built on a hype that Miami received for 3 years. Now that the hype went down they are kind of screwed because buyers do not only have choices all over Miami but they go where the next big thing is and if that happens to be in Cali, vegas. new York ,Dubai etc than that’s where they will go and Miami will be stuck like 8-10 years ago. they did not build on the economics of Miami because if they did they would of known not to over build where they did or how they did.

  • Perezoso

    Sucks this article is mostly about Jorge Perez. Wasn’t there an entire panel? So over this hack, wanna-be art collector. The guy uses dirty South American cash to finance his garbage buildings.

  • DR.FUNK

    TRANSLATION: We need more “GREATER FOOLS” to overpay for white boxes.

  • jason

    I am so sick of hearing about this condo garbage. Many many man of the condos in Brickell and also south beach are cheap garbage. Perez says they are Italian cabinets Italian this Italian that and all it is made in China but stamped from Italy. Anyone in construction or development knows this. The quality of the work is garbage. You are paying $500+ sqft and you get the quality of a section 8 hoe in Illinois. Sorry but the quality in south florida again is garbage. Yes maybe some condos here and there are done excellent but not the majority. I just feel bad for the buyers, you are buying something for a view, or location, which is great, but at the end of the day your product is horse shit.

    • Aj Reddy

      Yes View and location are everything. You can live in an Ivory palace in the everglades. Does anyone want that? Nope. I can compromise on super high quality as long as I can live in the middle of everything and has a great view.

  • Steven Cook

    Retirees are looking for walkable cities. Gen Y, they don’t drive. They may be headed south but SF is most likely not their first choice. I don’t know one educated person that would willfully move here. I live in Fort Lauderdale #2 deadliest place in the country to be a pedestrian. Instead of trying to attract global businesses our mayor Jack Seiler is using the police to arrest people for riding their bikes and feeding the homeless.

  • Lu

    You all missed the point of an article that talks about Miami still has a long way to become a great city.

    Without going too far we do not have an efficient public transportation, we do not have large companies that provide higher paying jobs, hence the purchasing power of the general population is much lower than other major cities, we expect that foreigners buy properties that are not to supply those who actually live and work in our communities.
    construction of new buildings does not benefit the ordinary citizen, the creation of new and better jobs is vital to advance the city. everything else is irrelevant.

  • Stephanie Doscher

    The term “global city” does not mean “rich.” The term has a definition, and by this definition Miami (as well as Atlanta, but not Houston), is most definitely an Alpha or global city. Mr. Perez needs to familiarize himself with the meaning of the term and the rubric by which a city is adjudged “global:” http://www.lboro.ac.uk/gawc/gawcworlds.html

  • David Lohr

    He is the best this side of Donald Trump.
    Trump should be our next President.

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