Now that he’s finished an exhaustive, two-year process of negotiating with 80 lenders to work through issues with his past developments, Jorge Perez is thinking about the future. In fact, with 534 starts in 2010, the CEO of Miami-based The Related Group is already preparing for that cycle. He’s already looking at hundreds of construction and acquisition deals, while also maintaining a property management company that operates close to 10,000 units.
In the second of a two-part interview with Multifamily Executive senior editor Les Shaver, Perez says this is just the beginning.
MFE: What are you working on right now?
PEREZ: In 2011, we are thinking of starting a couple of affordable housing jobs and a couple of market-rate apartments. With any luck, in 2011, we should be starting close to 1,000 units. There will maybe be one condo project, believe it or not, in a specially priced situation. It will be in the Miami area to sell mostly to a foreign market. It will be a boutique-type product—150 to 200 units.
In addition, we have two rentals that we’re permitting right now. One is in Ft. Lauderdale, Fla., and the other is in Tampa. They are infill-type sites that will be close to 600 units of high-end rentals. Then we have close to 300 units of affordable housing. We should be doing a little more than 1,000 units next year.
We’re also acquiring assets. We’re acquiring everything from busted residential deals to apartment houses that need some rehabilitation to distressed shopping centers and mixed-use jobs.
MFE: How will your development appetite be different this time around?
PEREZ: A thousand units isn’t small, but it’s not where we used to be. It’s a way for the company to get back on its feet. We’re planning for more than that, but the planning is going to be subject to the market and making sure that we’re very conservative in what we do. We’ve put in a lot more equity than ever before. We’ve been very, very careful.
MFE: When did things pick up in South Florida to start talking about development?
PEREZ: Every area is a little different. We’ve seen a total lack of supply in the past few years and a decrease in vacancy rates and an increase in rents, particularly in urban areas. As the condominium supply has gotten absorbed, we’ve seen a strengthening of the rental market.
MFE: What are you seeing from lenders on new construction deals?
PEREZ: That financing is at 60 percent, and they want personal guarantees. It’s much more conservative. Even the mezzanine money that’s starting to appear is much more conservative. So projected cash flows are being looked at in a lot more critical way.
MFE: Are they looking at condo deals?
PEREZ: I don’t think any lenders are looking at condo deals. If we do a condo deal, it will be al- cash. The one that we do will be with very little leverage, if any.
MFE: I remember touring some of your buildings in 2005 and 2006. You put in a lot of money as far as features, design, and amenities. Will you do that again this cycle?
PEREZ: Design, art, and high-end finishes are things that will not have to disappear, in particular for people who have disposable income. I think people will pay to live in strategic locations and in projects that are deemed to be the best of their kind. Will I be able to do that in next year? Probably not, but there’s no question in my mind that wealthy people will be looking to live in wealthy environments surrounded by art, design, and beauty.
MFE: How much have you focused on acquisitions?
PEREZ: We’ve done a lot more of that than anything related to new construction. When you can buy much cheaper than you can build, and you see an upside in what you’re buying, then it makes sense to buy. We’re focusing on buying notes, buying real estate, and talking to lenders and developers that are in trouble. We’re doing this all over the country. We have many people out on the street pounding the pavement, knocking on doors, and trying to do acquisition deal.
MFE: Are you concerned the acquisition markets are getting too heated?
PEREZ: There’s a lot of stupid money chasing deals. That’s coming from everywhere—funds, foreigners, and families. When that happens, we have not been very successful [buying] because those deals don’t meet our return parameters. They are not what we want.
MFE: What are you involved with outside of The Related Group?
PEREZ: I’m involved with the [Miami] Dolphins because my partner [Stephen M. Ross, chairman, CEO, and founder of The Related Cos.] bought them. I’m the vice chairman. I’m a sounding board to Steve. He’s owner of the team and makes all of the decisions, except the football-type decisions. I’m also very much involved in the arts.
We also founded a company in India to do middle-income housing. I’m on the board of that. That’s an exciting thing because that’s a country that’s growing leaps and bounds and had a middle class that’s growing tremendously.
MFE: And you're outlook for the future?
PEREZ: I’m very busy in creating a new future. The new future won’t be what it was before. If I was waiting to build condos, I would be waiting a very long time.