The Real Deal Miami

What is Melreese really worth? Experts consider value of Beckham’s proposed soccer site

Valuations of the property range from $143M to $250M -- and some real estate insiders want a public bidding
By Keith Larsen | August 21, 2018 10:30AM

Melreese Country Club at 1802 North 37th Avenue (Credit: iStock)

Miami voters will decide in November if an ownership group led by David Beckham and the Mas brothers can build a $1 billon mixed-use development on the site of the Melreese Country Club. The ambitious proposal would be anchored by a 25,000-seat stadium that would be home to Miami’s Major League Soccer team.

But some real estate developers and experts are crying foul about the price and potential sale. While vacationing in Italy in July, developer Jorge Pérez blasted out an email from his iPhone. “I am VERY much opposed to taking open space away for private, for-profit purposes, particularly if a thorough financial analysis and community input has not taken place,” said Pérez, chairman and CEO of the Related Group.

Jorge Pérez

The condo king stressed one point in particular: the property must be appraised at a “fair market value.”

But what exactly is the fair value of the 131-acre property that houses an 18-hole public golf course just a tee-shot away from Miami International Airport?

Experts offer differing views, some reaching as high as $250 million, while Pérez, himself, projected the land is worth $200 million. Two appraisals commissioned by the city valued the land at $160 million or $28 per square foot and $143 million or $25 per square foot.

To others, however, a valuation process for the site is more complicated. And a public bidding wouldn’t necessarily give the city the desired result of bringing an MLS stadium to Miami, some say.

“Jorge Pérez can say he thinks the site is worth $200 million – but what is that based on? What development plan is he appraising?” said Anthony Graziano, senior managing director at Integra Realty Real Estate. “Land is only worth what you can do with it.”

History of the site

The Melreese Country Club site at 1802 Northwest 37th Avenue is the ownership group’s latest attempt at finding a home for their soccer team. After being awarded the team in January by Major League Soccer, the previous plan was to build the stadium in Overtown on an assemblage partially owned by the county.

That plan backfired when Bruce Matheson, a property owner in the area who also forced the city’s annual tennis tournament to relocate from Key Biscayne to the Hard Rock Stadium, sued the county. Matheson alleges Miami-Dade County gave Beckham and his partners “a secret discount from the taxpayers.”

The owners regrouped and met with Miami’s City Manager, Emilio Gonzalez, who proposed the Melreese Country Club as a consideration, according to published reports. Sitting in front of Dolphin Expressway, the golf course and public park had operated at breakeven, meaning it was neither profitable or non-profitable for the city, the appraisals showed.

While the site possessed a number of challenges, including environmental remediation, rezoning, and city and voter approval, along with gaining Federal Aviation Administration height clearance, it provided enough space to build the stadium – and then more.

The Beckham-Mas ownership group submitted its plans with the Miami City Commission in July, proposing a $1 billion commercial development project called Miami Freedom Park, that would require leasing 73 acres out of the 131-acre park. In addition to the stadium, Freedom Park would include 380,000 square feet of retail, 1 million square feet of office space, 120,000 square feet for entertainment uses and about 500 hotel rooms.

In total, the Mas and Beckham group would pay an annual rent of at least $3.6 million – or fair market value as determined by two independent appraisals – plus $20 million to fund the park’s construction, paid in annual installments of $666,667 for 30 years. They later agreed to pay up to $35 million in environmental remediation for the site and would seek federal funding if the costs exceeded that amount.

Appraisals

The city ordered appraisals for the 131-acre site by CBRE and Joseph J. Blake. CBRE valued the land at $160 million or $28 per square foot and pegged annual rents at $8.5 million or $1.25 per square foot, on the condition that the site would receive special area zoning and voter approval.

For comparable land sales, it cited the Doral White Course at the northeast quadrant of Northwest 41st Street and Northwest 87th Avenue, which Lennar Corp. and Armando Codina and Jim Carr of CC Homes purchased in January 2016 for $96 million.

The appraisal stated that the “highest and best use of the subject would be a high density, mixed-use business park with corporate office, retail & hotel components, surrounding generous open space including active parks & recreation land uses.”

The second appraiser for the property, Joseph J. Blake, said the site was worth $143 million or $25 per square foot with annual rents at $1.25 per square foot. The appraiser also used the White Course Doral site as a comparable sale.

It said that the property can be built with 2,102 multifamily units, 322,640 square feet of retail, and 345,337 square feet of office. The average density of multifamily is 16 units per acre.

Despite the independent appraisals commissioned by the city, others believe the land was valued higher. Pérez, who noted he was a fan of the site, was the most vocal critic. Yet Pérez added that he has “ABSOLUTELY NO INTEREST” in bidding or participating in the deal. A spokesperson for Related declined to comment on how Pérez arrived at the $200 million valuation.

Michael Fay, a managing director with Avison Young, submitted a letter addressed to the mayor and the city commission in July, suggesting that the land was valued at $200 million, mirroring Pérez’s number, with annual rents at at least $10 million, or 5 percent of the total value of the land.

“Based on the long-term transaction experience in the immediate marketplace, which includes the Palmer Lake area as well as other places… we know the values, from prior sales and ongoing offers being contemplating,” Fay told The Real Deal.

Fay said the proposal needs to be transparent and suggested his team set up a competitive bidding process for the city to determine the true market value.

Anthony Graziano

Other brokers view the property as even more valuable. Marcus & Millichap’s Ryan Shaw said the land is actually worth $250 million, and annual rents should be closer to $12 million to $16 million. He cited nearby zoning, which allows for higher density, mixed-use buildings.

Bidding could be complicated

Yet Graziano and others say putting the land up for a public bid could be problematic, since bidders would likely not want to propose an MLS stadium. If public bidding ensued, other bidders could seek the right to build a large condo project instead of a soccer stadium in a prime location.

“You can only bid something out if everyone is bidding on the same development plan – otherwise, you’re comparing apples and oranges in terms of value,” Graziano said.

Another unknown for the site is what the environmental remediation costs of the site will be.

Underneath the Melreese golf course, a large amount of coal ash will have to be removed before any new development can take place. For decades, the city buried tons of contaminated ash underneath city parks. In recent years, the city and county have undertaken efforts to remove the toxic materials. It cost the city $10 million to remove 86,000 tons of toxic soil at Grapeland Park, which is directly adjacent to Melreese.

Experts say until these costs are known it will be impossible to put a true price tag on the land. Ultimately, voters will decide Nov. 6 if the Beckham-Mas deal offers the best price.