Sandor Scher is looking to bring the magic back to North Beach.
After a contentious campaign to upzone part of the quiet Miami Beach neighborhood failed in 2015, Scher and his business partner, Alex Blavatnik, went back to the drawing board and redesigned the $220 million beachfront, mixed-use development planned for Ocean Terrace.
Scher is now fully embracing the neighborhood’s history.
In January, the developers secured approval from the Miami Beach Historic Preservation Board to knock down portions of 12 historic buildings on more than 2 acres of land between 73rd and 75th streets and between Collins Avenue and Ocean Terrace. Property records show they paid at least $70 million assembling the development site. Blavatnik’s billionaire brother Len was developer Alan Faena’s partner on the mixed-use Faena District in Mid-Miami Beach.
In place of the Days Inn & Suites at 7450 Ocean Terrace, Scher and Alex Blavatnik are planning to bring a luxury hotel akin to a Faena Miami Beach. The development will also have street-level retail, a luxury condo tower, restaurants and a parking garage. The developers will open the block to pedestrians with a breezeway, and to cars via a separate entrance.
Ocean Terrace “was the place to go in the ‘50s,” Scher said, referring to his plans to bring that back. “There was no South-of-Fifth. There was no Prime 112. There was no Lincoln Road. This was it.”
Scher sat down with The Real Deal to discuss the developers’ latest proposal, the timeline for construction and what he would have done differently the first time around.
Your first proposal faced stiff resistance from preservationists and neighborhood activists in 2015. What happened?
Our plan initially was to preserve some things. And the plan never really got looked at properly. We didn’t do a very good job of messaging what we wanted to do and it sort of ran away from us in terms of public opinion.
How do you feel now that you secured approval?
Obviously, any time you get an approval for anything, you feel a sense of accomplishment and a sense of relief. It’s a very challenging thing to do, especially in Miami Beach. The community now says, ‘Well, when are you going to start? When can you put a shovel in the ground?’
What’s the thinking behind this latest proposal?
When you look at this area, the DNA of it is phenomenal for a mixed-use development. Already part of it is this retail experience and this oceanfront experience. It was really a function of how can we activate and enhance things, and at the same time find ways to make sure we preserve the character of what’s here?
If you look at some of the nicest-run historic hotels, they’re crafted in this European boutique luxury model. We definitely are targeting a boutique luxury hotel with a very high level of service. It would be in the same level of a Faena-type product. It will be approximately 70 rooms. Right now we have 150 rooms, so we’ll be reducing the room count tremendously and making it much more luxurious.
We [also] looked at how people move around. From a pedestrian perspective, walking around the block is never a great situation. So we said, is there a way we can incorporate a breezeway, sort of à la Sunset Harbour? You also have to circulate vehicles in and out.
What’s the next step?
We are having conversations with potential hoteliers and we are looking at the retail mix. The challenge in today’s development world is: How can you do something different? There’s nothing else I can point to that is a true mixed-use residential development on the ocean. If you look at how people have built hotels for years and years on Miami Beach, it’s the hotel, and the retail is something that is a financial equation on Collins Avenue. And they either sell it or rent it out to a Walgreens or whatever. And for us, to truly create a destination, all of these things have to work really, really well together.
The challenge now is this is when the work of development starts. Let’s underwrite this, how does this work? What are the economics? How does this look from a financing perspective?
We have some great financial relationships with City National Bank and Florida Community Bank and as far as financing for the development project, we’re not currently in the market for construction financing, not yet. We certainly expect our lending ratios will be similar to what’s in the market today for both hotel and condo.
What is your role and what is Alex Blavatnik’s?
Alex and I are the only two partners on the development. I am responsible for every aspect of the development from acquisitions, property management, entitlement, construction through sales, closings, hotel opening and retail leasing. Alex is involved in every major decision regarding the aesthetics, hotelier selection positioning, sales and marketing and is the financier of the entire enterprise.
When do you expect to be out of the ground? What’s the earliest you expect to complete the entire development?
[Groundbreaking] likely would not be earlier than the end of 2019. We estimate construction will take about 28 months.
Everything will be built at the same time. To set us apart from other residential buildings on the ocean, I think it would be a mistake to not have all of these things in place and take advantage of that because it will be defining, much like the way Faena was defining for residential when they came out of the ground.