The Real Deal Miami

Shahab Karmely’s secret backer is hedge fund titan Dan Loeb: sources

Karmely's KAR Properties has spent over $112M on SoFla acquisitions and carries no debt
By Ina Cordle | April 26, 2017 02:45PM

Daniel Loeb and Shahab Karmely

Shahab Karmely’s KAR Properties announced itself in swashbuckling fashion on the South Florida scene with a series of big, all-cash purchases of parcels along the Miami River, in Hallandale Beach and in Wynwood. The firm spent over $112 million on acquisitions since 2013, and millions more on pre-development costs. Which led many in the market to ask: How exactly was Karmely pulling it off?

Karmely has always maintained that he has a silent partner, whose deep pockets allowed KAR to become an aggressive purchaser of South Florida real estate in recent years. Now, The Real Deal has learned that the partner is Daniel Loeb, the billionaire investor who runs one of the world’s most prominent activist hedge funds, Third Point LLC.

Loeb, whose net worth Forbes pegs at $2.9 billion, founded Third Point in 1995. The firm has $15 billion in assets under management, according to the publication. Its investments, according to a Feb. 10  filing with the Securities and Exchange Commission, include stakes in companies such as Bank of America, Apple, Sotheby’s, Baxter International and Facebook. Since its inception, Third Point has generated annual net returns of 15.7 percent, according to Loeb’s most recent letter to investors.

Sources told TRD that Loeb is Karmely’s quiet backer on his entire platform. In the past, Karmely has disclosed only that he was backed by an unnamed U.S.-based financial partner, which is “affiliated with one of the most significant hedge funds in the world.”

On Tuesday, he again declined to comment on the partner’s identity. “Our policy is never to comment on our investors and/or partners,” he said. A representative for Loeb did not respond to requests for comment.

KAR’s current projects include One River Point, a 60-story luxury condominium project designed by architect Rafael Viñoly on the Miami River. It is also seeking approval for a yacht club and restaurant near One River Point, and is planning a new oceanfront development in Hallandale which it aims to launch this spring.

Karmely told TRD that he has “zero debt.”

“Not only do I not have any financing on any of these properties, I have not borrowed a single penny for pre-development costs,” he added.

KAR, which is based in New York, has holdings in the United States, Southeast Asia and Europe. The firm has bought, redeveloped and sold more than 3 million square feet of office, luxury mixed-use, and industrial space, and manages a portfolio of more than 2 million square feet, according to its website.

In New York, Karmely’s first project was converting a warehouse at 601 West 54th Street, which was originally used as storage for Packard vehicles, into 88 showrooms for furniture, home decor and rugs. He later redeveloped 219 East 67th Street, the former home of Christie’s auction house, into Loft 67.

In recent years, Karmely has shifted his focus from New York to South Florida. “It’s a combination of loving the city and getting sticker shock in New York, and the timing of Miami and where it is going,” he told TRD in 2015. Karmely had always visited South Florida, staying on the beach for a few days at a time. But a few years ago, inspired by Swire Properties’ plans for Brickell City Centre, he decided to take a deeper look at the area. He spent two weeks surveying the region — by helicopter, boat and car — to understand the market. By spring 2013, he had made his first purchase along the Miami River.

In all, KAR has picked up at least six parcels in South Florida. The firm first paid $27.5 million for a 1.8-acre river property at 24 Southwest Fourth Street, which was the site of two failed condo projects. Karmely then added two more adjacent river parcels totaling 3 acres, for a combined purchase price of $33.1 million. In November 2014, his company paid $34 million for a condo site at 2000 South Ocean Drive in Hallandale Beach. Then, in December 2014, KAR paid $12.5 million for a 1.03-acre site in Wynwood, at 2050 North Miami Avenue. And last June, KAR and Alex von Furstenberg paid $5.4 million for the River Arts land, which includes three vacant buildings that they want to redevelop into a private yacht club with a sales and rental office, as well as a restaurant with an outdoor dining section.

Karmely said he continues “to be aggressive in the market” and is in the process of negotiating for another property in downtown Miami. “We love this market,” he said.

Hiten Samtani contributed reporting.