The Real Deal Miami

Miami’s condo market of the future will be less about “cycles and roller coaster rides”: TRD panel

Developers Michael Stern, Jules Trump and others say shortage of inventory, tightening credit markets could serve to stabilize market
By Francisco Alvarado | October 25, 2018 05:15PM

The Real Deal South Florida’s Real Estate Showcase & Forum

A shortage of developable land and a credit crunch means Miami’s luxury condo market will see significantly fewer new projects break ground next year.

“There are a lot of properties that continue to be marketed that still haven’t come out of the ground,” said Louis Birdman, who is developing Zaha Hadid’s luxury One Thousand Museum. “I don’t think that you are going to see much come out of the ground in 2019. As lenders look at projects people are planning, they are going to set pretty high bars for sales thresholds…That will mean less projects.”

Birdman was among the panelists Thursday for the The Real Deal South Florida’s Real Estate Showcase & Forum. Joining him were Moishe Mana, who is developing projects in Allapattah, Flagler Street and Wynwood; Jules Trump, who is building The Estates at Acqualina in Sunny Isles Beach; Michael Stern, developer of Monad Terraces in South Beach; and Kieran Bowers, president of Swire Properties, the company behind Brickell City Centre.

Stern, whose company JDS Development is building the Jean Nouvel-designed 59-unit project at 1300 Monad Terrace, also saw 2019 as one with a shortage of inventory.

“You will see in the next couple of years a void and no new starts because of the credit crunch,” Stern said. But he didn’t think that was a negative. “The goal should be to make South Florida less about cycles and roller coaster rides,” he said. “The way to do that is don’t over-leverage and don’t over-build. Let’s get away from the cyclical business.”

Developers are also running out of land to build luxury projects, Trump told TRD Editor-in-Chief Stuart Elliott, who moderated the panel. “There is a tremendous shortage of land. There is virtually nothing on Miami Beach and there are a couple of developable sites in Sunny Isles Beach. There is definitely going to be a scarcity of product in next two years.”

Still, Trump announced his firm, Trump Group, signed a $600 million contract, the largest ever for a Miami-Dade condo project. The deal with Coastal Construction will complete the two towers and amenity villa that make up Estates at Acqualina. The deal comes on the heels of Trump Group securing a $558 million loan, also the largest in Miami-Dade history, from Bank OZK, formerly Bank of the Ozarks.

Trump said his firm approached 20 to 30 different lenders about financing Estates at Acqualina before settling on Bank OZK. “We negotiated for about a year,” he said.

Mana, the brains behind the planned Mana Wynwood Americas-Asia Trade Center & International Financial Center, said he is close to completing his buying binge in Miami. In addition to the 10 million-plus square feet he owns in Wynwood, Mana has spent $285 million on properties in downtown Miami and controls 6.64 contiguous acres on the west side of I-95 in Allapattah.

“At this stage, we have bought almost everything we wanted to buy,” Mana said. “We have been talking with lenders and talking with investors. The idea is to bring $1 billion worth of investment.” Although, Mana warned that rising interest rates could dampen real estate development in the near future.

Meanwhile, Stern predicted a popular financing vehicle for developers would soon dry up. He said the once wildly popular EB-5 visa program is in its last cycle. It offers foreign investors permanent U.S. residency for investing $500,000 in domestic projects that produce at least 10 direct jobs.

“The tides are turning where there is enough litigation and enough issues,” he said. But there is a new government-backed program that could soften the blow, he said.

Called Opportunity Zones, the program provides tax deferments and tax breaks for developers who invest in projects in designated low-income neighborhoods across the country. It has been catching the attention of real estate developers and fund manager who are hoping to raise big funds to cash in. Opportunity Zones have the potential to offer more investment opportunities for real estate projects. “I think that opportunity zones financing will replace EB-5 very soon.”