In a stalled Miami real estate market, with condo sales activity down nearly 50 percent from last year, the latest phase of the Loft Downtown proves price is the new sizzle.
Two years ago, promotional materials for the Loft Downtown 2 displayed a sultry blond woman in a red skirt draped suggestively over a model of the 32-story condominium.
The building sold out in a weekend. In truth, the marketers could have put a carp on the brochure and the building would have sold just as quickly: such was the heated disposition of the buying public in Miami at the time.
Yet when Loft Downtown 3, a nearly identical building, began sales this past October in a very different real estate market, it displayed a pointedly unglamorous image. The draw was a number, $159,000, with a couple of regular people dancing around it.
That value approach worked: the building sold 85 percent of its 495 apartments in a week-long, nostalgia-inducing buying frenzy.
Competing on price
Developers have been trying all kinds of incentives to get buyers off the fence — throwing elaborate and expensive launch parties, paying closing costs, offering free professional interior design consultation — anything to forestall reducing list prices.
The letter from the Related Group of Florida CEO Jorge Perez adjoining the brochure sent to prospective buyers of Loft Downtown 3 was a splash of cold water. It addressed the morbidity in the market head-on and stated plainly his intention to compete on price.
“The Related Group is very much aware of the housing crisis our community is facing,” wrote Perez. The starting price of $159,000 affords “you, the working professional,” he wrote, “the opportunity to have your home in the heart of the city, at the center of the action at a price and terms you cannot afford to turn down.”
Buyers were required to put down a mere 5 percent deposit at the time of contract, with another 5 percent due at the start of construction, which is scheduled for spring 2007. The cheapest apartment could be had for a down payment of just $15,900. Seventy percent of the units in the building are under $300,000.
Some factors cut building costs as well.
“We bought the land for Lofts 1, 2 and 3 at the same time, at a very competitive price,” said Oscar Rodriquez, vice president of development for the Related Group and head of its affordable housing division. “And because we build as much as we do, we experience economies of scale that other builders don’t. When we purchase a million masonry blocks, we get a better deal than someone buying 300.”
Small is beautiful
Loft 1, launched in July 2003 at the beginning of the condo boom, was one of the first buildings in Miami to bring price points down by offering small apartment layouts. The building had the usual complement of amenities found in luxury condominiums in Miami — pool, fitness center, steam and sauna, resident’s lounge — but its units are compact. Most are within the 650- to 700-square-foot range, tiny by local standards.
Loft 1 offered a starting price of $99,000 for one-bedrooms. And instead of the typical magazine ad blitz and cocktail parties, it marketed units through direct contact with community groups.
The building sold quickly without help from brokers. “Loft 1 had historically low broker penetration,” says Rodriquez. “It had only 200 units and we had 800 people interested.”
The success of Loft 1 started a marketing juggernaut for Related. Loft 2, a much bigger project, with 496 apartments starting at $108,000 and averaging around $200,000, opened in May 2004, at the height of the Miami condo madness, with a long list of prospects who had been shut out of Loft 1.
“We launched Loft 2 without spending a dime on advertising,” recalls Eric Fordin, Related Group project director. “We said, let’s call our VIP buyers, and after 24 hours on the phones people flooded our tiny retail sales office center. We sold 80 percent of the project in a weekend.”
The pre-launch buzz on Loft 2 made brokers and their clients edgy. “The hype created an expectation among consumers and brokers,” recalls Paolo Scattarreggia, principal of Miami Lodge Realty. Related put out the word that, “it’s about to come out, but you have to act quickly because it’s going to sell out right away.”
“It was crazy,” recalls broker Ariel Aranbaev, who was out of town when Loft 2 suddenly announced it would start sales the very next day. His clients were shut out. “They launched earlier than they were supposed to and nobody was prepared.”
Lining up
Aranbaev made sure he was prepared for Loft 3, which should be ready in 2009. He secured a penthouse for himself and a 700-square-foot, $230,000 one-bedroom for his client, New York schoolteacher Juan Carlos. Aranbaev was careful to send early letters of interest and pounced as soon as sales began.
Hundreds of buyers were equally well-poised, conditioned to expect a sellout. “They figured they totally missed Loft 1 and then they thought they were going to get into Loft 2, but they didn’t. With Loft 3 they said, ‘it’s not happening to me again,'” says Alicia Cervera Lamadrid, president of Related Cervera Realty, exclusive broker for the Loft buildings.
“It was a steal,” said Carlos, who intends to retire within five years and use the unit as a winter home. “I’ve been looking for apartments at pre-construction prices for the last three years. Now that I found this deal, I couldn’t let it go.”
The rousing, rapid sellout of Loft 3 made headlines in Miami as a sign of life in a flat-lining real estate market. Other developers sitting on units in new buildings may have had a twinge of envy. But perhaps they should be encouraged.
“This is not like the beginning of the 1990s,” the last time it seemed impossible to sell apartments, suggests Scattarreggia. “There isn’t a recession now. People are on the sidelines, looking and waiting. And when there’s a good deal, they’re buying.”
Eliminating the garage a radical solution
Related entered talks with the city five years ago to find a way to mitigate the cost of building large-scale housing in upwardly mobile Downtown Miami. They found a simple solution for the Loft Downtown projects — one that seemed radical in automobile-centric Miami. They would leave out the parking garage.
“We were able to identify certain municipal garages that were already built and operating at 30 to 40 percent occupancy,” recalls Oscar Rodriquez, vice president of development for the Related Group and head of its affordable housing division. Related worked out a deal with the city to secure reserved parking spaces at nearby garages for residents of the Loft buildings. “You save on construction costs if you don’t have to do parking,” he says. “It makes it a more efficient building from an engineering and architectural standpoint.”
It also makes it the only building in town without parking on site. “When we first did Loft 1,” recalls Alicia Cervera Lamadrid, president of Related Cervera Realty, exclusive broker for the Loft buildings, “I was so nervous I went to the site and paced the distance between where we were and the parking garage. In Miami, it was unheard of to have off-site parking. It was an educational process for the sales staff and our customers.”
“I walk to work now,” says new apartment owner Nury Enamorado, who bought a 712-square-foot one-bedroom in Loft 1 for $112,000. The Loft Downtown buildings are within walking distance of the Bayside Marina, American Airlines Arena and the Carnival Center for the Performing Arts.
While Downtown Miami so far offers little in the way of neighborhood amenities like cafes and shops that stay open after dark, it is set to become Miami’s first Manhattan-style pedestrian urban village once the thousands of apartments currently under construction move their people in and the retail follows.