One major South Florida condo buyout has fallen apart, after a group of unit owners blocked the half-a-billion-dollar deal, The Real Deal has learned.
The Related Group and 13th Floor Investments confirmed they pulled out of their proposed purchase of the Castle Beach Club condo in Miami Beach. The aging oceanfront property hit the market late last year, months after the deadly condo collapse in Surfside.
The 18-story, roughly 570-unit condominium at 5445 Collins Avenue, built in 1966, is in need of repairs, according to city records and owners. The site is zoned RM-3, which means a more than 500,000-square-foot project with nearly 600 units could be built.
The zoning allows for a 200-foot-tall development, or about 20 stories, and the 4-acre property has 576 feet of beach frontage.
The Related/13th Floor joint venture notified owners that the “incredibly difficult decision” to terminate their $500 million offer was due to “multiple outside factors,” according to copies of the letters obtained by TRD. Coffey Burlington attorney and shareholder Susan Raffanello signed the letters on behalf of the developer, CB Land Owner.
Colliers was tapped to market the property. The brokerage and the developers’ attorney, Raffanello, did not immediately respond to requests for comment.
The joint venture confirmed in a statement to TRD that it was “unable to secure the necessary number of purchase agreements required to complete a transaction” since initiating talks with the Castle Beach association earlier this year. Related declined to comment further.
A dozen owners, representing the 5.1 percent of the building required to block a bulk sale, banded together to oppose it, said Mickaël Sebban, one of the owners. Studios make up the majority of Castle Beach Club, and those sellers stood to benefit from a greater per-unit sale price if the purchase price were based on units, not square footage.
Colliers had said that it received nine bids, including Related and 13th Floor’s offer. It’s unclear who the other bidders were and if they are still interested in pursuing a bulk purchase.
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Sebban alleged that the association behaved maliciously and didn’t hold a vote on putting the building on the market, and that owners have been kept in the dark about who the other bidders were and what their offers were.
Many units are operated as short-term rentals, but some owners live in the building. Sebban rents his roughly 2,000-square-foot unit out on VRBO, he said.
Developers are increasingly targeting older oceanfront properties across South Florida, but that may slow down along with the market. The collapse of the Champlain Towers South condo in Surfside last year that killed 98 people shined a light on the expensive upkeep required to maintain older waterfront buildings.
Because restoration and repair projects — which are required by code — don’t really add value to buildings, and many owners can’t afford them, it can be more appealing to sell to a developer who will often pay above market value for waterfront land.
After a bulk buyer secures control of a building and closes on units, it would then move to terminate the condo and knock the building down to make way for a new project.
In a separate deal, Miami-based Related, Two Roads Development and Rockpoint Group are moving forward with their planned Residences at Bal Harbour, a 24-story, 61-unit luxury condo tower on the former site of Carlton Terrace. Related and Two Roads completed a roughly $130 million bulk buyout of the older condo last year, and recently secured approval from a Bal Harbour board for their plans.
Still, Related has been cautious. The market-moving firm, the most prolific condo developer in Miami, recently eliminated one tower from its planned two-tower St. Regis Residences development in Brickell. Related and Integra Investments will now just build one tower, which they said was a result of buyers seeking more exclusivity.