Increasingly eager to sell out their luxury projects, South Florida developers are ramping up incentives to lure both brokers and buyers with a cherry on top of their condo offerings.
The sweeteners run the gamut and can include prepaid homeowners’ fees and taxes, lower deposits and high-end finishings at no additional cost. These enticements come as luxury towers across South Florida top off and developers scramble to sell out their projects in a sluggish market.
With a plethora of supply and the much reported drop in foreign buying activity, some discounting is happening, too — but incentives are the more heavily marketed option. Sales directors haven’t gone as far as offering the quirky freebies like free suits and iPads that rentals have offered in the past, but they are piling on the extras they believe will bring both buyers and brokers to their projects.
“When developers near the end of sales — the last 10 to 20 percent — you see more discounting and concessions,” said John Warsing, sales director for Aurora in Sunny Isles and Le Jardin and Pearl House in Bay Harbor Islands. By that point, developers have often paid back most of any borrowed capital. “They are eager to sell the units and close out the buildings, and it has gotten more competitive. We are all looking for the same buyers, and the pool has dwindled.”
At Le Jardin and Pearl House, Warsing is luring buyers by offering units with flooring and complete furnishings by Steven G., a high-end design firm. Both condominium projects are on schedule to be completed by the end of the year. Twelve of the 30 units remain unsold at Le Jardin, and at Pearl House, three of the 15 remain unsold. The units range in price from $775,000 to $900,000 for two- and three-bedrooms. “We have seen other developments offering a year or two of maintenance. There is potential at the end that we do that, but we are not there yet,” Warsing said.
In Miami’s Edgewater neighborhood, the Related Group has offered up to a year of free maintenance for new contracts at its four luxury Paraiso towers, with units priced from the low $600,000s to as high as $2 million. These fees, which average about 75 cents a square foot, would typically cost the condo owner around $23,000 a year. In addition, Related is offering 30 percent buyer deposits rather than 50 percent, which has been the standard among new condo developments this cycle. Paraiso’s towers, when completed, will bring 1,400 new units to the neighborhood.
Carlos Rosso, president of Related Group’s condo division, said the incentives he has rolled out at Paraiso are intended to create excitement to close the deal, but they are as far as his company will go. “I’m not interested in lowering the price. I have completed my loan, and I don’t mind holding those remaining units. I’m in a different situation than others who just started sales or who are trying to get to a loan and need to lower prices. My projects are all financed already.”
Slightly north, Marina Palms, a twin-tower condominium project in North Miami Beach, is also offering a year free of taxes and homeowners’ association fees as an incentive to close deals. The developer has estimated the enticements at about $22,000 on average. The project’s first 234-unit tower is sold out, and its second tower, the Reserve, has 26 units remaining of its 234, including 13 penthouses. Prices range from $990,000 for a two-bedroom, two-bath unit to $4 million for penthouses.
Enticements come at a good time for Jill and Bruce Michelson, empty-nesters who are looking for a good deal in South Florida’s luxury condominium market. The couple hopes to take advantage of a marketplace in which more than 3,250 luxury condo units are listed for sale at a minimum price of at least $1 million, according to a report from Condo Vultures Realty, the Miami real estate consultancy firm. “It’s really the high maintenance fees that kept us from buying. But now, some of the developers are offering to pick up the tab,” said Bruce Michelson, currently a Weston homeowner.
To lure foreign buyers, developers are rolling out an entirely different set of incentives. At Hyde Midtown, Related is offering to lease back the unit from buyers for the first two years following the purchase. “We will pay the buyer rent and find a tenant or cover the difference. It’s an incentive to lure investors who typically buy with the intent to rent it out,” Rosso said. While the Latin American markets have receded, he recently went to Colombia to market his new leaseback program. “We saw a lot of interest,” he said.
Even the exclusive Fisher Island has joined the incentive frenzy. To sell out the remaining 30 percent of its 46 condominiums at Palazzo del Sol at Fisher Island, the developer has commissioned a private boat dedicated solely to shuttling potential buyers. “We’re offering all sorts of incentives to get the deal done,” said Dora Puig, director of sales for Palazzo del Sol. “We have given away Fisher Island memberships with a purchase — that’s a $250,000 value. We have also offered extended closings and are offering our models, which are fully furnished units. We just sold two of three models full price, with longer closings.”
The competition for buyers — and the sweeteners to lure them — extend north to Broward County, where numerous luxury condominium projects are nearing completion and new ones are still breaking ground. There, too, the incentives come in the form of lower deposits, extra parking spaces and fully furnished units.
“Fort Lauderdale has always been a different market than Miami, but many of the brokers who are coming up are inquiring about incentives, and we realize we need to give them,” said Ivan Ramirez with ONE Sotheby’s, sales director for Gale Residences Fort Lauderdale Beach.
To lure buyers to Gale Residences, where 90 percent of the 123 units are sold or under contract, the developer has lowered deposits to 30 percent from 50 percent. “The project has been successful, and that provides for the financial stability to offer incentives on the last few units,” Ramirez said. The development is scheduled to be completed during the fourth quarter of 2017.
Nearby at the Riva, a 15-story riverfront tower that is scheduled for completion by year end, the same developer, Newgard Development Group, is selling the remaining 40 percent of its units complete with high-end finishings.
As the Ocean Resort Residences moves toward completion, the developer of the luxury lifestyle condominium hotel on Fort Lauderdale Beach is offering furniture packages in its residences (advertised as an $80,000 value). It is also offering a guaranteed income should buyers want to put their units into the pool of rooms for hotel use.
Even further north, the Sabbia Beach Condos in Pompano Beach, under construction and scheduled for completion a year from now, is offering some interesting incentives, including decorator packages, move-in-ready units and prepaid homeowners association fees for a year. In addition, developers Fernbrook Homes of Ontario, Canada, and Grupo Fernandez of Venezuela are offering only 35 percent down with 65 percent at closing. Sabbia has 68 luxury condominiums and resort-style amenities and is less than a mile north of the Pompano Beach pier.
Not only are South Florida condo buyers getting deals; the brokers who represent them are as well, in the form of higher commissions. Instead of the standard 5 or 6 percent commission on a sale, some developers are offering from 7 to 10 percent for bringing a buyer to their project. “Right now, it’s a great time for a buyer to shop. But it’s a good time to be a broker, too,” Puig said.
Peter Zalewski of Condo Vultures explained the current South Florida condo market this way: “A developer does not want to cut pricing, so what they will do first is raise commissions for brokers; second, eliminate or offer free maintenance; third is provide an incentive or credit for build-out of units; and the final step is reduce prices,” Zalewski said. “We are about halfway through the process when you have too many units and not enough buyers.”