With its maize- and cherry-colored exterior, Valencia Apartments is a colorful sight in South Miami. But the festive-looking façade belies just how much of a nail-biter this 294-unit market-rate property—initially envisioned as student housing—was. “I put the last piece of land under contract on the last day I could file for a [comprehensive] plan amendment,” recalls James Harris, president of J.W. Harris and Co., the Hollywood, Fla., firm that assembled the parcel. Here's how the deal went down.
The Land Seller: James Harris, J.W. Harris and Co., Hollywood, Fla.: When Harris first saw the site that would become the Valencia, he thought it would be perfect for a student property: The city block was located just four blocks from the University of Miami.
But there were a few alligators to tame. “There were five different owners on one block,” Harris remembers. “The major owner was a family of seven who couldn't agree on the time of day.”
He eventually won most of the landowners over, but only by taking a major risk himself: He bought the land without the deal being subject to approvals and entitlement. “I explained that if they sold it ‘subject to approvals,' I could pay them a lot more money,” Harris says, but the landowners weren't interested. So Harris bought the land as-is, taking comfort from his discussions with a major multifamily builder who wanted the site for student housing.
That is, until the day his contact called with bad news: They had to drop the deal. Harris didn't know what he was going to do. “I owned three-fourths of a block in a funny configuration, and you can't get anything in South Florida approved unless you have a detailed site plan.”
So Harris pursued the last piece of the puzzle, finally nabbing the remaining land parcel at the last available moment. “We ended up getting it literally at the 11th hour,” Harris says. With all the land in hand, he explored other partnerships, eventually sealing a deal with Lane Investment and Development Corp. in Atlanta.
But the entitlement delays had just about eliminated the student housing option for the site. “I made a comment that maybe we should do market-rate,” Harris says. “That's all Marc Pollack [president of Lane Investment and Development Corp.] needed to hear.”
The Builder: Ed Monarchik, Lane Investment and Development Corp., Atlanta: For Lane, the project—particularly built as market-rate units—offered an appealing entry into the Miami market. Surrounding properties dated to the 1980s or earlier, giving the brand-new $40 million Valencia a distinct competitive advantage. Of course, when it came to setting rents, the lack of competition required some extra research. “We couldn't come up with true comparables in the immediate submarket,” says Ed Monarchik, development manager for the Atlanta-based Lane, which reached out into the surrounding submarkets, identifying properties such as Gable Grand Plaza and the Shops at Sunset as potential benchmarks for Valencia.
The company's work paid off. Built with tunnel form concrete construction, the six-story Valencia opened for leasing in late 2003 to strong activity. “The property came on like gang-busters,” Monarchik says. “We gave away only minor inducements for new leases.”
Penciled out at $1.60 per square foot in asking rents, the Valencia hit $1.63 per square foot. “To be above pro forma in an overall economic market like this is incredible,” the development manager says.