Jose Luis Melo and his sons, Carlos and Martin, first saw Miami in a spring 2001 exploratory trip seeking out real estate development opportunities.
“We didn’t know anything about the city,” Jose recalled. “But once I got here, I told my sons that my next stop after Miami would be heaven or hell.”
While friends in their native Argentina recommended they search for land in the suburban outskirts of western Miami-Dade, the Melos were drawn to Edgewater. At the time, the neighborhood near downtown Miami was rife with prostitutes and drug addicts.
“It was scary,” Carlos Melo said. “No one wanted to come through Edgewater.”
Yet, his father saw promise in the views of Biscayne Bay and proximity to major expressways. “My father realized Edgewater was perfectly situated,” Carlos Melo said. “But it had been practically abandoned.”
Thirteen years later, their company, Melo Group, controls a large chunk of Edgewater; enough to build 2,500 units. They’ve completed six rental and condo towers there and have another half-dozen in planning or construction. The firm also has projects in the Miami River, Brickell and Allapattah neighborhoods.
Their success helped fuel developer interest in Edgewater, turning the neighborhood into the fastest growing market in Miami’s urban core, according to a Downtown Development Authority study. The Related Group, New York private equity firm GTIS Partners and Russian oligarch Oleg Baybakov are among the heavy hitters paying tens of millions for land in the neighborhood where the Melos’ first acquisition was for less than $200,000.
“We started by developing a rental apartment building on the bay,” Jose Luis Melo said. “It’s gone well for us ever since then.”
The son of a prominent developer in Buenos Aires, Argentina, the senior Melo graduated college with a doctorate in economics and got a job as a bank officer. At age 25, he bought an investment property.
“I converted a three-bedroom house into a three-unit apartment building,” Melo said. He converted another house, than developed a new apartment building. “I made a substantial profit.”
Melo quit banking and went to work with his father. Now, flash forward: between Argentina and Miami, he has developed real estate for 52 years.
In 1990, Carlos joined the company after graduating from the School of Architecture at the University of Belgrano in Buenos Aires. Martin, who has a master’s degree in economics and holds the company’s general contractor’s license, followed in 1998. Jose’s daughter, Laura, is an accountant for Melo Group.
In Argentina, the family completed 50 projects, building more than 5,000 units in Buenos Aires alone. In early 2001, when Argentina was in the midst of an economic depression that led to widespread unemployment, riots and the government’s fall, Jose Luis Melo decided his family should relocate the company to a more stable locale.
“I believed Argentina was on the verge of civil war,” he said. “We looked at Brazil, Portugal and Italy. But when we took a trip to Miami and I saw how beautiful it was, I decided we would come here.”
In December 2001, the Melos paid $196,000 for a two-story, 28-unit apartment complex at 615 Northeast 22nd Street in Edgewater. Two years later, they demolished it, and built in its place a 104-unit tower. Today, the property, dubbed 22 Biscayne Bay, is worth $11 million, according to the county property appraiser.
Their second project was a 22-floor condo tower at 275 Northeast 18 Street that included 195 residences, 11 commercial offices and a parking garage. They called it 1800 Biscayne Plaza and finished it in August 2005.
“We sold out in less than a year,” Carlos Melo said. “We were going to start another condo project, 25 Biscayne Park, when my father said no.”
Jose Luis Melo claims he knew Miami’s real estate bubble was about to burst.
“All the economic variables were out of whack,” he said. “People were still earning the same amount of money, their expenses remained the same, but the value of their homes kept going up.”
The Melos decided to develop 25 Biscayne Park as a rental building. “We do rentals because we believe in the revaluation of our properties,” Jose Luis Melo said. “It’s part of our long-term, conservative strategy.”
In 2011, the Melos felt it was safe enough to take a chance on condo development.
“People called us crazy, because locals couldn’t buy, because the banks were not lending money to anyone,” Carlos Melo said. “However, a large number of South Americans were looking to buy in Miami because the real estate prices were so low.”
These foreign buyers were unaware of the dizzying amount of red tape and attorneys involved with short sales and foreclosures. “They’d be waiting for months wondering if they were being sold a bill of goods,” Carlos Melo said. “They were our target market.”
The family announced plans for an 18-story condo tower on a 28,000-square-foot parcel the Melos had acquired for $1.4 million in 2010. After a subdued launch party, they sold 70 percent of the 96 units at 23 Biscayne Bay in less than three weeks. The catch: Buyers were required to put down half of the $250,000-plus unit price in cash.
“These people have the money to pay for a foreclosed property in cash,” Carlos Melo said. “Why wouldn’t they put a 50 percent deposit on a new condo? We weren’t asking for anything crazy”
The Melos noted that South American buyers were already used to putting down 50 percent or more in their home countries. “In Argentina, it is not uncommon for someone to pay 100 percent for a condo before it is finished,” Carlos Melo said.
This practice also eliminates speculators hoping to flip properties before the first mortgage payment is due, his father said.
The Melos used the deposits from 23 Biscayne Bay’s future unit owners to finance the building’s construction. They finished the building in May 2012, just 10 months after breaking ground. At the time, with the real estate market in the doldrums, banks were not lending to developers.
Soon other builders, including the Related Group, adopted the Melo strategy. It is now considered the new normal in this development cycle, especially when developers are targeting South American, Asian and European buyers with ready cash.
Miami condos, some note, are still a bargain compared to cities like Rio de Janeiro, Paris and New York.
Other prominent developers followed the Melos to Edgewater, which unofficially stretches from Northeast 17th Street north to the Julia Tuttle Causeway at 36th Street and from Biscayne Bay west to the railroad tracks. The Related Group is developing two massive luxury condo projects, Icon Bay and Paraiso Bay, and former Related executive Barbara Salk is the lead developer for Ion East Edgewater.
In March, GTIS Partners and Eastview Development of West Palm Beach acquired a 2.65-acre site between 29th and 30th streets with plans for a 42-story, 399-unit condominium called Biscayne Beach. AXA Developers and Strategic Properties Group recently paid about $20 million for a two-acre site at 545 Northeast 32nd Street with plans to build a condominium. Aventura-based mckafka Development Group bought an Edgewater property through foreclosure for about $2.1 million and are now constructing the Crimson condo building there.
And the Russian billionaire Baybakov has spent nearly $39 million for five Edgewater properties totaling about two acres since February. His first deal was for a 37,462-square-foot building at $21 million, or $560 a square foot.
In the “Edgewater East” area east of Biscayne Boulevard, the average sales price of condos built since 2003 soared to $454,317 in the first quarter of 2013, up from $236,649 in 2009, according to Focus Real Estate Advisors.
The frenzy is not scaring off the Melos.
The company recently finished exterior construction on 22 Skyview, a 32-story, 258-unit rental apartment at 425 Northeast 22nd Street. Last month, they broke ground on Bay House, a 36-story condominium with 164 units at 600 Northeast 27th Street. Units will range from about $500,000 to about $1.5 million. And they recently launched preconstruction sales for Aria on the Bay, a 647-unit luxury high-rise designed by Arquitectonica.
This time, Jose Luis Melo is not worried that Miami’s real estate market is due for another crash.
“People who are buying in Miami now are looking for economic stability and personal security they don’t have in their countries,” he said. “We are selling to the world. And there is always conflict somewhere in the world.”