Inside look: Privé at Island Estates seeks $147M in construction financing

Miami /
Oct.October 11, 2016 01:15 PM

Privé at Island Estates, the luxury condominium project in Aventura that is embroiled in litigation, is seeking $147 million in construction financing, The Real Deal has learned.

A 52-page offering memorandum issued this summer by JLL on behalf of developers BH3 Management and Gary Cohen’s Nomur Holdings, obtained by TRD, sheds light on the project’s behind-the-scenes finances. Details reveal the developers’ equity contribution of $48 million ($30 million in deferred value of land and $18 million cash), total expected sell-out of $487.3 million, total development costs of $341.8 million and projected profit of $145.5 million which equates to a 42.5 percent profit margin.

Privé at Island Estates, at 5000 Island Estates Drive, is currently under construction, with delivery expected in June 2017. When completed, it will have 160 units in two 16-story towers.

According to the offering, the requested two-year construction loan would provide a 43 percent loan-to-cost ratio. As of mid-June, 99 units, representing 63 percent of the project, were presold with 40 percent purchaser deposits. That provided $117 million in deposits to fund construction costs, the memorandum said. An additional 10 percent deposit is required at the completion of vertical construction. At closing, the presold units will provide $146.2 million in sale proceeds, which could virtually pay off the requested debt even if no additional units closed, the offering says.

BH3 principal Dan Lebensohn told TRD in October 2015 that the developers had closed on a $25 million loan that can be increased to $200 million from Maxim Credit Group. The New York-based private real estate investment company specializes in providing short-term capital, according to its website.

Adam Glick, managing principal and founder of Maxim Credit Group, responded to a request for comment from TRD, saying, “The status of the loan remains unchanged as construction is continuing on schedule and the borrower, as they oftentimes do, [goes] to market to explore different or more attractive financing now that the towers are topped off and they have made significant sales since our loan was issued.” He declined to comment on Maxim’s loan terms or elaborate further.

The memorandum does not mention the Maxim loan.

Lebensohn, Privé’s developer, would not comment on the $147 million loan request issued by JLL, whether the funds would be used to replace Maxim’s funding, if he has received interest from potential lenders or if he is running out of money to complete construction. “As any seasoned borrower, we’re always looking for the best value in cost of capital,” he told TRD.

“We have multiple projects, this is one of them, and we always talk to shops about what is in the marketplace and what could be accretive to us as investor developers,” he added.

JLL did not respond to a request for comment.

It’s not unusual for developers to recapitalize a project, said Ezra Katz, CEO and founder of Miami-based Aztec Group, though he declined to comment specifically on Privé since he is not privy to the situation.

“The market has changed …. It is more difficult to get construction financing than it may have been six months ago,” he told TRD.

Privé’s north tower topped off last month and the south tower will be topped off this month, Lebensohn said. Glass is going up in both buildings and 98 percent of the concrete has been poured. Delivery is on schedule for June 2017, he said.

According to a budget included in the memorandum, the project’s top expenses include $47.2 million for concrete and $39 million in sales commissions. The project estimates $10.7 million in interest.

Currently, 106 units of the 160 are under contract, with a value of more than $300 million, Lebensohn said.

Privé’s condos start at $2.1 million for a one-bedroom unit to $11.4 million for a penthouse with a rooftop pool. Sizes range from 2,585 square feet to more than 9,000 square feet, according to the offering. All units will feature private elevator entries, European kitchens and bathrooms and outdoor summer kitchens.

When completed, Privé will feature a 10,000-square-foot gym and spa in each tower, private dining, a poolside cafe, wine and cigar rooms, tennis courts, swimming pools, a marina and private pier, a nature trail, beach, and jogging path.

Yet the project continues to be mired in litigation. In August, BH3 and Cohen sued 11 Williams Island homeowners, alleging they have violated a 34-year-old settlement agreement prohibiting them from objecting to any new projects on the island. Over the last two years, opposing residents sued BH3 and Cohen to stop the Privé project. They alleged the developers only have the right to build single-family homes, and stalled construction from starting last year with a lawsuit over sidewalks, building permits and development rights.

In December, a $225 million lawsuit filed by the developers against specific property owners was dismissed. Two months later, the developers filed another, separate class action lawsuit targeting all 2,000 residents of Williams Island and the property association. On May 26, Circuit Court Judge Jerald Bagley denied the developers’ motion to certify a counter-defendant class.

“There’s nothing fruitful about these lawsuits….,” Lebensohn told TRD. “We would encourage them to settle, which we are completely open to.”


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