Sign of the times: Masoud Shojaee scraps plans for luxe townhouse project Eleven on Lenox in favor of lower-priced condos

“Everybody is looking for a bargain,” said the developer, who now plans a 43-unit South Beach project

Rendering of Shoma Group's planned South Beach project and Masoud Shojaee
Rendering of Shoma Group's planned South Beach project and Masoud Shojaee

Responding to the luxury market slowdown, Masoud Shojaee’s Shoma Group is scrapping plans for the multimillion-dollar townhome project Eleven on Lenox in South Beach, The Real Deal has learned. The developer will instead build lower-priced condominiums.

The move marks a reversal to an original idea he had for the site near Lincoln Road a few years ago. He said it was brought on by a tough market, and by buyers demanding discounts on the luxury townhomes, whose prices he had raised from the original preconstruction level.

“The market overall is not ready for $3 or $4 million — it doesn’t matter where it is,” Shojaee said. “You will get a sale here or there on the water for $7 million or $8 million, but it’s very rare at this moment.” He added that “everybody is looking for a bargain. If it’s $4 million, they want to pay $3 million. If it’s $3 million, they want to pay $2 million.”

The changeover comes at a hefty cost to Shoma: $1.2 million. Shojaee said he will spend $1 million to tear down and relocate a new sales gallery that was on the site, with the rest to be spent on marketing the new construction. But in the long run, it will pay off, he said. “It’s worth it.”

Five of the luxury townhouses had already been pre-sold, and deposits are being returned. Douglas Elliman, which handled sales, will forgo commissions.

Now, instead of primarily focusing on wealthy foreign buyers and Northeasterners, Shojaee said he will target local buyers, as well as EB-5 investors and others who might buy multiple units to rent out. “The price range we have attracts everybody — especially the local people,” he said.

The new, as-yet-unnamed project will have 550-square-foot studios, 756-square-foot one-bedroom units and 1,200-square-foot two-bedroom units. Prices will top out at $795,000 for the two-bedrooms, and will average $750 per square foot.

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The building will have a garage on the first floor, with one parking space per unit, and condos on the second and third floors. Units will have 11-foot ceilings and 24 will have porches. Third-floor units will have porches on the rooftop and second-floor units will have them on the first floor. The project will also have a barbecue area on the rooftop and dog park in the back.

Shojaee said sales will start at the end of June or beginning of July. He is negotiating for a new sales office on Alton Road, and Elliman will still handle sales.

Construction is expected to begin in January 2019 with completion expected by the end of the year.

Eleven on Lenox, by contrast, was planned as 11 three-story townhomes, each with four bedrooms, a family room, two-car garage and rooftop deck with a pool and summer kitchen. Shojaee said he had tried raising prices on units from $2.9 million to $3.3 million, and from $3.5 million to $4 million. “The problem was they wanted to pay the original prices and we refused to do that,” he said. He added, “I don’t want to give it away.”

The project is the latest in a series of South Florida developments to be changed, placed on hold, canceled or delayed amid the slowdown in the condo market, as the strong U.S. dollar and foreign economic turmoil continue to dampen sales.

Among others, an investor group led by real estate broker Vivian Dimond bought the H3 Hollywood construction site and decided to market the 247 planned units as rentals instead of condos. Alan Faena placed his Versailles planned condo project on hold and the Related Group canceled Auberge Miami, a planned condo tower just north of downtown Miami.