The cyclical nature of Miami’s condo market has many developers shifting toward rentals – but not Michael Shvo.
The New York developer, who is making a big push in Miami Beach, said that as long as you have the right site and project, the overall market’s performance is irrelevant.
“It doesn’t really matter what the market is. You build something special in the right location, you’re not competing with something in Brickell or in Wynwood,” Shvo said at The Real Deal’s Sixth Annual South Florida Showcase & Forum on Thursday. “I don’t lose sleep at night over oversupply or undersupply.”
Shvo will be redeveloping the Raleigh hotel in Miami Beach. A partnership led by Shvo, Bilgili Group and Deutsche Finance Group bought the 83-room Raleigh for $103 million from a Tommy Hillfiger and Dogus Group, and also purchased the Richmond Hotel and the South Seas Hotel.
Shvo was joined by Laurent Morali of the Kushner Companies, Florida East Coast Realty’s Jerome Hollo, and developer Lissette Calderon on the panel, “The next wave of South Florida development,” moderated by TRD’s Editor-in-Chief Stuart Elliott.
Hollo acknowledged the slow luxury condo market. “People are looking to place their investment in a little bit of a safer asset, which right now is multifamily. If that cycle turns again, you’ll see a lot of those buildings convert to condos,” he said.
His firm built the luxury mixed-use building Panorama Tower in Brickell, with rentals, retail, office and hotel components. The 2.6 million-square-foot, 85-story tower was completed in 2018 and secured a $425 million refinance earlier this year. It’s about 70 to 75 percent leased, he said.
“Renting is good for everyone now,” Hollo said. “Wherever they are in their life cycle, they love renting.”
Kushner Companies has purchased or is under contract to buy three sites in South Florida, and all of them will have rentals as opposed to condos, Morali said. In Edgewater, where it’s planning an 1,100-unit apartment development, the property is in a designated Opportunity Zone, giving Kushner substantial tax benefits.
But Morali said recent changes in the federal tax code and the wave of rent reform legislation in markets like New York and California didn’t impact Kushner’s decision to target South Florida.
“We’ve been looking [in Miami] for five years,” he said.
Calderon, president and CEO of Neology Life Development, said it was a personal choice to go from building condos to building rentals. “It was a natural progression to go into the rental side, [with me] wanting to make an impact on the community we’re in,” she said.
Targeting the right renter and buyer via social media is vital to a project’s success, the panelists emphasized.
“You really have to be hyper-focused in terms of authenticity, local context,” Calderon said, referring to when she became a young, successful profession. “I had two options: living in the suburbs or living in the urban core with my mom. There was no product for someone like me.”
Hollo, whose firm coined the term “Brickellista” to market Panorama to renters, said that now with social media and technology, developers can hyperfocus on a certain demographic.
“There’s traffic, and then there’s traffic that might not be great for your product,” he said.
Shvo took offense to the term “demographic.”
“I think you have to stop using the word demographic,” he said. “Because demographic doesn’t matter anymore. … It’s all about the psychographic. What’s their lifestyle?”