The Real Deal Miami

Wall Street risk-takers target Faena House in Miami Beach

So far 22 units have been sold for an average price of $3,010 psf

October 07, 2015 12:45PM
By Peter Zalewski

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Rendering of Faena House and Peter Zalewski

Rendering of Faena House and Peter Zalewski

A case can be made that no preconstruction condo project being developed in coastal South Florida during this real estate cycle better symbolizes the level of high-stakes speculation for profit occurring in the tri-county region more than the newly completed Faena House.

Developed on an oceanfront site in an up-and-coming neighborhood of Miami Beach, an increasing number of the new units are being purchased in the ultra-luxury Faena complex at record high prices by some of the world’s biggest financial risk-takers: Wall Street executives.

Despite increased concerns in South Florida about the growing amount of preconstruction condo inventory planned for this cycle and the unknown long-term effects of rising sea levels on the barrier island city of Miami Beach, Wall Street power brokers, such as Lloyd Blankfein of Goldman Sachs Group and Leon Black of Apollo Global Management, have reportedly been linked to unit purchases in the Faena project since presales began back in 2012.

Now that Faena House — the first of four planned towers in a project located between 3200 and 3500 Collins Avenue — was completed in September, the magnitude of the wealthy buyers purchasing in the Faena complex has begun to surface through public records.   

To date, at least 22 units of the 44 condos in Faena House have been sold for a combined $192.5 million for an average transaction price of $3,010 per square foot as of Monday, according to the Miami-Dade County records.

Faena House made national headlines in the last few weeks when a record $60 million — an average of $5,295 per square foot — was paid for a pair of penthouses — units PH and PH-B — by billionaire hedge fund manager Kenneth Griffin of Citadel.

Griffin’s investment shadows over other pricey preconstruction condo purchases in Faena House made by a host of other individuals in the financial world, including:

  • Brian Kwait, a founding member of the private equity company Odyssey Investment Partners, bought unit 9B for $9.8 million for an average of $2,533 per square foot;
  • and Craig Effron, the co-founder of Scoggin Capital Management and currently a principal with S & E Partners, paid $9.2 million, or $2,378 per square foot, for unit 6B.

The finance industry is not the only sector from which executives are investing in new condos in the Faena House. Some of the other high-profile business leaders that have purchased in the Faena project include:

  • Mark Rachesky, chairman of Lions Gate Entertainment, paid $13.5 million, or $2,671 per square foot, for unit 11-BD;
  • And Jose F. Fanjul Jr., a member of the sugar family behind Florida Crystals and Domino Sugar, bought unit 8C for nearly $5.2 million for an average of $2,537 per square foot.

A trio of newly recorded units to transact in the Faena House are already on the resale market at a premium price as of Tuesday, according to data from the Southeast Florida MLXchange and government records.

The owner of unit 6A — a Delaware corporation called ABF6A LLC — is currently asking $18 million for a five-bedroom unit that was acquired for less than $11.8 million on Sept. 29.   

The owner of unit 5B — a Florida corporation called Fair Properties LLC with Stephen Sadove — is asking $14.5 million for a four-bedroom unit that was acquired for less than $8.1 million on Sept. 25.

The owner of unit 7C — a Delaware corporation called 555 Partners LLC — is asking $8.9 million for a two-bedroom unit that was acquired for less than $5.1 million on Sept. 14.

With half of the preconstruction condo unit contracts already transacted in the first tower, the focus at the Faena complex is now on completing the other three towers planned for the complex.

The Faena Hotel Residence — formerly the Saxony Hotel — that will feature hotel rooms and 13 penthouse residences is currently under construction in the 3200 block of Collins Avenue just south of the newly completed Faena House condo tower.

To the north of Faena House, efforts are underway on the development of a pair of condo towers — the new Faena Versailles Contemporary with 41 units and the Faena Versailles Classic with 22 units — in the 3400 block of Collins Avenue.  

Even for the Faena complex, selling preconstruction condo units in this current market is becoming increasing more challenging given recent changes in the local and global economies compared to conditions at the beginning of this South Florida real estate cycle in 2011.  

Developers have now announced plans to build 42 new condo towers — including the four Faena towers — with more than 1,925 units in Miami Beach since this real estate cycle that began in 2011, according to the preconstruction condo projects website CraneSpotters.com. (For disclosure, my firm operates the website.)

To date, six new condo buildings with nearly 335 units have been completed and 16 more condo towers with about 486 units are under construction. An additional 20 new condo towers with more than 1,100 units are currently in the presale and planning process.

Overall in South Florida, developers have announced plans to build 374 new condo towers with more than 45,000 units east of I-95 in the tri-county South Florida region of Miami-Dade, Broward and Palm Beach as of Monday, according to the data.

The unanswered question going forward is whether the Wall Street executives who invested in preconstruction condo units with a buy-and-flip mentality will be able to achieve the profits that were originally projected at the time of entering into their contracts.

Peter Zalewski is a real estate columnist for The Real Deal who founded Condo Vultures LLC, a consultancy and publishing company, as well as Condo Vultures Realty LLC and CVR Realty brokerages and the Condo Ratings Agency, an analytics firm. The Condo Ratings Agency operates CraneSpotters.com, a preconstruction condo projects website, in conjunction with the Miami Association of Realtors.

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