As it's watched foreign buyers scoop up excess condo properties in South Florida, The Related Group, a Miami condo builder, is betting the market can absorb more units.
“We’ve seen a big influx of cash buyers buying cash assets,” says Carlos Rosso, president of Related’s condominium division. Company CEO Jorge Perez is currently in presales with two projects in the area: Apogee Beach, a 22-story oceanfront condominium tower with 49 units; and the 190-unit My Brickell. The 47,000-square-foot development site for Apogee Beach was purchased for more than $2.9 million in a U.S. Bankruptcy Court auction, according to CondoVultures.com. Brickell is on a piece of land that Related held through the downturn (the firm originally planned a much larger building) and is adjacent to a new office building with 4,000 workers.
“We've identified some very strategic locations where we're starting to do preconstruction again,” Rosso says. “We've seen an opportunity to start some boutique buildings that we're trying in [a] Latin American model.”
That Latin America model is simple: With banks unwilling to finance condo developments, Related is relying on its strong brand to lure Latin American buyers to pay for its condos as they’re built. Rosso says buyers will pay 10 percent at reservation, 10 percent at contract, and the rest (broken out into five payments) during the construction of the project.
“In essence, what [Perez] is looking to do is finance the construction through funds coming from buyers,” says Jack McCabe, chief executive of McCabe Research & Consulting in Deerfield Beach, Fla. “He has to sell out the majority of the building to get the money he needs to begin anything.”
While it might be unrealistic to count on cash-strapped, weary American buyers to participate, committing as much as 50 percent to a down payment isn’t foreign to Latin American buyers. “It cuts out the American buyer entirely,” McCabe says. “The only ones [Related is] going to be selling to are Canadians, Europeans, and Latin Americans, which is 70 percent of the [South Florida buying] market in the past year anyway. The majority of these buyers are coming from a culture where you have to put 50 percent down to buy real estate in their homeland. For them, it’s not that different from what they’re used to at home.”
Rosso discounts the ability of foreign buyers to walk, because of the money they’re putting down. “We think it's a good system because [the buyers] aren't speculators,” he says. “These are people buying for the long term.”
The question is, will the buyers come? McCabe wonders whether buyers can forget the money they lost in condos during the real estate bust and line up to buy condos again. “Will buyers’ memories be that short again?” he asks.
Rosso says yes because of the relative bargain that Miami condos at pre-recession prices present compared with condos in other heavily Latin American U.S. cities, as well as the reputation and expertise Related brings to the table.
“We have to show value,” Rosso says. “The value comes not only in price but in design and location,” as well.