Developer and broker Edgardo Defortuna is carefully choosing which projects his firm, Miami-based Fortune International Group, picks up amid a flood of new development in the pipeline. He’s also keeping a close eye on still-rising construction costs and supply chain issues, as well as the affordability crisis in South Florida.
Defortuna, president and CEO of Fortune, said the company is storing items such as kitchen appliances in warehouses and is visiting factories and suppliers to lower costs. But one issue he can’t control is the soaring cost of land, he said during an interview with The Real Deal at his Brickell office this month. In most cases, developers can only justify paying today’s prices if they build condos, he said, contributing to the lack of affordable and workforce housing.
Fortune’s pipeline includes the planned St. Regis Residences in Sunny Isles Beach, Ritz-Carlton Residences in Pompano Beach, and the short-term rental-friendly Nexo Residences in North Miami Beach.
Here’s what Defortuna had to say about the state of the market:
We’re hearing about an increase in Colombian buyers. How is the political landscape in Latin America affecting South Florida real estate?
The bigger news lately was the election in Colombia turning significantly to the left, but so far it has not really materialized in significant changes in policies and in government. It could still go either way. But the feeling of the Colombian businessmen and potential Miami clients is that they still need to move money out of the country and diversify, and obviously, real estate is a great place for them to be.
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Colombia is always buying. I was looking at the sales report for a project that we have here on Brickell and a project that we have in Wynwood, and in the last three months, Colombia has had the bigger percentage of buyers than any other country, including the U.S. You might say it’s maybe an overreaction or a reaction of panic, and that it’s going to taper off. I’m not sure if that’s the case. And Chile is another example… Many of the Chileans are really watching [the political situation] very closely. It seems like money’s already moving out of the country in a fairly significant way. Brazil is another huge question mark.
What types of properties are these buyers looking at? Preconstruction?
In general terms, because nobody just picks up and goes [to the U.S.], they like the new construction, because it’s shinier, it’s more attractive and it’s paid in installments. And so for most people, unless they have to exit really abruptly or there are safety issues, then the process is more longer term. The beneficiary of that is preconstruction. To a certain extent, the existing inventory could benefit favorably, but that would compete with the U.S. buyer. But from an inventory point of view, there isn’t much that has been completed.
How is the brokerage side of the business doing?
We’re expanding our footprint more into Broward. We’re opening offices in Fort Lauderdale, and the office that we have in Boca Raton has grown. So we feel that the movement, even our own from a development point of view, is also going [north], expanding to Pompano. We’re looking at a project in Palm Beach, because obviously getting waterfront sites, especially what we like to do, it’s more and more difficult.
We’re bidding on sites to buy or joint venture. If the owner wants to sell, of course, we’re always willing to listen. But most people today that have good sites are not sure if [the market] is going to go up, or if they should wait it out.
Are more condo sales launches expected in the fall and winter?
Developers are more cautious. Yes, we’re all moving [forward with] the design and the plans for projects we have in the pipeline, but are more cautious about when to launch, and seeing what the impact of interest rates [will be] and the talk of recession. There are projects that make sense no matter what, and there are others that are a little bit more marginal in terms of ‘should we launch,’ ‘should we not launch?’ Developers, it’s like human nature, think that their project is the best product out there, and it doesn’t matter if yours doesn’t sell, theirs should sell.
As a brokerage company, we’ve been a lot more selective about what we would consider taking on. We need to consider all the factors because obviously our motto is we’ve never taken a project that hasn’t been successful on the sales side, so I don’t want there to be a first one. But with that being said, I’m very optimistic that the future looks very good.
This interview has been edited and condensed for clarity.