For some South Florida condo residents, that pat on the back could lead to the deal of a lifetime.
The hot real estate market in the border triangle is causing the developers to take stock of the older skyscrapers on the beach in the region as potential buyout candidates for a new development. While this trend isn’t new, it has grown in importance as vacant land disappears and more residents move outside of the state to South Florida in search of luxury digs.
Owners who previously hadn’t considered selling are now taking the idea of moving seriously when faced with high bids to buy, industry analysts and lawyers say.
– In Pompano Beach, The Related Group recently bought the owners of all 46 low-rise buildings in the Beach Villa at 900 North Ocean Drive. The complex was built in 1978. The company recently received city approval to rededicate the property so it can build a 21-story luxury tower on the site of the Beach Villa.
– In Miami Beach, the owners of the Castle Beach Club, a 17-story skyscraper on Collins Avenue circa 1966, received so many unsolicited offers from various unidentified applicants that they hired Colliers, the real estate services company, to sort them out.
– In Sunny Isles Beach, Related Group and Dezer Development celebrate the sale of their elegant new 55-story Armani / Casa luxury tower. The project, which laid the foundation stone in 2016, came after developers took over a site that housed the decade-old Seashore Club, a low-rise 170-unit complex that they bought.
Although the last deal was roughly five years ago, it is emblematic of how new upscale condominium projects are increasingly displacing long-standing residential locations whose early years are still a long way off.
“It seems to be a growing trend,” said Gerard Yetming, executive managing director of Colliers, the real estate services company. “There are really only very few opportunities to build a new high-rise anywhere as popular as on the beach.”
HOW IT WORKS
Yetming said the obvious appeal to owners selling their older units is the premium prices developers are willing to pay for them.
“They are starting to see that we should explore this in an organized way,” Yetming said. “You can only achieve something with the right common goals and a consultant.”
He said there are a lot of buyout initiatives out there that are not heard from. Many fail, he said, amid bidding wars or internal disagreements over whether a sale should even take place. It always takes a consensus among the owners to move forward, he said.
“These are more the exceptions than the rule,” he said of the successful buyouts.
“This doesn’t apply to every building,” added Yetming. “There are a lot of well-built and well-located and well-managed buildings that are unlikely to be good candidates. For these deals to work, very specific circumstances must be present. “
Once an older building is acquired, the time from sale to construction of a new project is 18 to 24 months, said Eric Fordin, general manager of Related’s condominium division.
“After the buyout, it takes 6 to 9 months to get approval for the site map,” he said. “Then the sales and marketing process varies depending on the market, but generally also takes 6 to 9 months. As a rule, it also takes 12 months from the release of the construction documents to the approval. “
THE FACTOR OF THE CHAMPLAIN TOWERS
The increase in building maintenance costs is one of the sales drivers.
For years, members of many condominium associations have postponed repair projects because of their costs. A possible consequence of the delayed maintenance became clear after the horrific collapse of the Champlain Towers in Surfside, killing 98 people.
The disaster caused great concern among the homes of other older buildings along the Gold Coast.
“The Champlain Towers incident is really driving this trend,” said Joseph Hernandez, partner and chairman of the Real Estate practice group at law firm Weiss Serota Helfman Cole & Bierman in Coral Gables.
“The trend has been going on for a while,” he said. “I’ve been doing these transactions for 10 years. The trend really started because we are entering a time when condominiums developed in the 70s or 80s are functionally out of date. “
“Now people are much more attuned to the subject,” said Hernandez. “They’re focused on banding together and selling their property in ways they weren’t before.”
He added that he “has seen likely two to three-fold interest in these transactions over the past year since Champlain Towers”.
“I usually work on a couple of these transactions every year,” he said. “I’m working on seven or eight big deals right now.”
PRIME RATES FOR PRIME REAL ESTATE
Nevertheless, the bottom line is that profitability decides whether a deal can be made, claims Yetming from Colliers.
“This only makes sense if the value of the underlying land is significantly higher than what the collective units are currently selling for,” Yetming said. “Why else would anyone want to sell their property if they can’t make a significant profit?”
Jamie Sturgis, founder and CEO of Native Realty Co., Fort Lauderdale, said that apartment buildings are paying “all-time records” as new residents from out of the country and out of the country arrive in South Florida.
“I would say the vast majority of destinations are on the beach, given what is happening in Surfside,” he said.
Many owners are Snowbirds who see this as “a good time to cash out at the top of the market and not have to pay those extra payments” on heavy repair projects in older buildings.
Nick Perez, a vice president at The Related Group, said the owners of the beach villa in Pompano sold after realizing they could double or even triple their money from their original purchase prices.
“Ultimately, it was the price they got for their units,” said Perez. “I would say they were well above their market price for their units. Nobody has to sell. Fortunately, I was the only one who tried to acquire all of the units and I didn’t have a bid war. “
He said he met with 26 or 27 of the 46 owners.
“There was a bit of hand-holding,” said Perez. “They didn’t want to leave the beach.”
Some wondered where they would live next. What is linked is that the sellers can stay until the end of the winter season.
“The deciding factor was that if they were to sell to another end user, contrary to what I proposed, they would have received significantly less money,” he said.
Perez didn’t make any sales.
But sales data unearthed by Zillow, the national online real estate research and investment firm, found that some owners were paying as much as $ 800,000 for their 30-square-foot, one-bath, one-bedroom units with a market value of just under $ 200,000 Dollars received.
It’s not difficult to understand the pull of Related. The 3.07-acre complex of one- and two-story buildings is located directly on the beach between the Atlantic Ocean and State Road A1A. The property offers plenty of green space and a communal pool in the rear.
In its place: Related is planning a 21-story, mixed-use luxury freehold tower with 119 condominiums and around 2,200 square feet of commercial space, according to a filing with the city of Pompano Beach.
A little further north, Related is building another luxury high-rise called Solemar, 99% of which has been sold, according to the company.
The quick sell-off, the company says, is an example of the hot demand for beachfront properties.
“There really aren’t any real vacant lots that are right in the sand,” said Perez. Forty-year-old low-rise buildings are the next best thing.