Miami Developer Edgardo Defortuna On Building Condos in the Magic City

He pioneered sales and market aimed at buyers from Latin America. Now he's seeing a shift in interest.

reprints


For decades, wealthy Latin American buyers, looking to stash their riches outside of their native countries, powered Miami’s luxury condo market. It was Edgardo Defortuna who helped open the doors to them.  

Originally from Argentina, Defortuna founded Fortune International Group back in the 1980s, to broker deals for a Latin American clientele and manage their properties. Over the decades, the firm became one of the largest and best-known luxury brokerages in South Florida. 

SEE ALSO: Sunday Summary: Is Anybody Happy With the Rent Board?

By the end of the 1990s, Defortuna and wife Ana Cristina Defortuna took things to the next level by adding a development division to the company. Today, the firm is one the most prominent builders of condos in Miami. Its portfolio spans boutique enclaves like the Herzog & de Meuron-designed Jade Signature condominium in Sunny Isles Beach to high-rise towers across Brickell and branded lifestyle projects with St. Regis and Ritz-Carlton.

Even in this turbulent market, the firm is not slowing down. Case in point is the project branded after Casa Tua, a popular Italian culinary concept that hails from the Magic City. First pitched as a 70-story condo tower geared toward short-term rentals, Fortune in March filed plans to build a development that would feature offices, more condos, and — at 930 feet tall — become one of the tallest buildings in Miami.

Defortuna sat down with Commercial Observer in April to discuss his latest projects, a $500 million condo takeover in Miami Beach that did not work out, and the state of the Miami market.

This interview has been edited for length and clarity.

Commercial Observer: How did you get into real estate?

Edgardo Defortuna: I moved here when I was 23 — like everything else, almost by accident, in the sense that my sister wanted to come here to study to become a medical doctor. My dad convinced her to never go by herself, so she convinced me to come for three months. I’m still waiting for me to come back.

I saw the opportunity to target the Latin American market. Nobody was really focused on it at the time. I realized that people from South America weren’t properly served. I teamed up with lawyers and bankers to make the purchase and selection easy for them and structure it the right way.

How would you say the profile of the Miami condo buyer has changed since you moved here?

It was 60/40 foreign-domestic or 70/30 depending on which location and the project, always the majority being South American, especially for the new product. Since COVID, it’s now more 50/50 or even 60/40 on the other side. For the Ritz-Carlton project we’re doing in Pompano Beach, it’s 85 percent domestic. 

For foreign buyers, the developments were more investor-driven. Domestic buyers usually seek primary homes for families. But there are many people like me, who have been living in the U.S. Am I a Latin buyer or an American buyer? 

You have a bunch of projects in the pipeline. How’s financing going?

Banks have also seen that the pipeline of multi-
family projects has somewhat diminished because of higher interest rates and higher construction costs. That makes the numbers significantly tighter. The big hedge funds and people that love to call these assets for ego purposes have somewhat disappeared from the market. 

So the condominium financing is more attractive for some of the banks that understand. They look for experience, pre-sales, a concept they like, and they see if the strength of the sponsorship in terms of capital is as committed as them. 

I was pleasantly surprised. Last month, two banks called me and said, “Don’t forget us, because we’re in the market.” The reality is that banks have to place, so they’re just trying to choose the better projects. 

Have you secured any loans recently?

We don’t have construction loans — not because the banks aren’t there, but because we don’t have the costs tied up. Some of the prices are totally out of mind.

Can you talk about your partnership with Casa Tua, a popular Italian concept originally from Miami?

We thought that being in the heart of the financial district we should have a building that is the city’s amenity. I told Miky [Grendene, co-founder of Casa Tua] that we should try to do something on my site that has a lobby that is inviting and is open to the public, that can create traffic for the younger crowd that’s coming to Brickell.

Miky came up with the concept of a market in the lobby that has breakfast and is open 24 hours. There will be an area for people to sit down. It won’t feel like the lobby of the condominium.

In 2018, you completed the Jade Signature, which was designed by Herzog & de Meuron. How was it like working with the star architects?

I had a great experience with Herzog & de Meuron.

Me and my wife gave a wish list to the architects of what the units and the public spaces should look like. We had a normal competition between three or four architects to give us their ideas and met with a few in New York.

Then we went to Switzerland to meet with Herzog & de Meuron. We flew eight hours to Zurich and drove an hour to Basel. It was snowing. When we were in the car, Cristina, my wife, said “Why are we doing this? We had two wonderful options in New York. It’s crazy to have to come here.” But then we walked into the conference room and they had a presentation; when they opened their mouths, we knew this was it. 

We told them we didn’t want to see a pedestal for the parking and a pool on top. Instead, we want a wall that is connected to the ground, so that the lobby, pool and beach are all on the same level. They said they could certainly put the parking underground. I was shocked since we’re right next to the ocean. But they do it all the time in Germany. There are parking spots that are 10 stories underground right next to the river. It’s expensive and you have to really commit to it.

Another wish was for all the units to have both ocean views and city views. We also asked that the pool not be shaded by the building after 1 o’clock, which is common in Miami. So they tilted the building 30 degrees — without tilting the units. 

They came up with every single answer for everything that we wanted to do.

Last year, you launched sales for a St. Regis development in Sunny Isles, but not with other star architects. Why is that?

There were two things. The building was completed in 2018. Unfortunately, the market wasn’t there yet. Buyers, as sophisticated as they may be, don’t want to pay extra for these architects.

The buyer is also looking for a lifestyle. That’s provided by the service and attention to detail of the people that eventually manage and run the building. So you have to associate yourself with a brand. It provides a certain level of certainty. 

Those architects also don’t like to do five buildings in the same city. In the case of Herzog & de Meuron, they get between 500 and 600 requests a year, and they take 30 to 40 projects max. So it’s as much a selection process for us as it is for them. 

I’d be remiss if I didn’t ask you about One River Point in Downtown Miami, where you’re planning to build a condo tower. The site is across the river from Related Group’s Baccarat site, where prehistoric remains and artifacts were discovered. You sat through the full six-hour city meeting about whether the project could move forward. You’ll be required to do a full excavation, which could be expensive, cause delays and, at worst, cancel the entire project. Are you worried?

We hired the same archaeologist as Related, Bob [Carr]. So far, he hasn’t found anything of significance. 

I think what happened with Related was really taken out of proportion. Related did exactly what they were required to do. You can’t take away zoning rights — unless you can pay for it. The city doesn’t have the funds to do anything significant. But, of course, you have to follow the procedures and take real good care of potential artifacts that may be there.

Your son was also at the meeting. Will he take over the business at some point?

I’m very careful about making sure that my children earn it. My oldest, Andres, is now 19. He comes out here to the office and loves it. His face lights up about business. 

You’ve been developing in Miami for decades. I’m curious to know your opinion on Terra offering $500 million for Castle Beach Club, an oceanfront condo complex in Miami Beach, after a similar offer from Related Group fell through. (Condo terminations are big these days, with developers paying to buy out owners, then terminate the condo association, and redevelop the site. It’s a tricky proposition because it usually requires buy-in from over 90 percent of unit owners as well as negotiations over each unit’s price.)

We put in an offer for that piece of property and we were relatively close to that number.

Do you mind telling me how much exactly?

It was between $425 to $450 million. But we wanted certainty. We wanted everyone to sign. I’m not going to waste two years of my life arguing with people. That’s what happens in general. If you put one number globally, it’s almost impossible. That’s why the prior offer [from Related Group] fell through. It’s like having a child — it’s the most handsome. If there are so many units, you think yours is better. 

There’s also a greed factor. “If they don’t buy my unit, they can’t do this. So I’m going to ask double.” But we have done those types of deals. At the St. Regis residences in Sunny Isles, we bought 346 units and terminated the condo. David [Martin of Terra] is capable.

$500 million is a lot of money for essentially just land. Had you bought it, how would such a deal pencil out?

The price tag is obviously a big issue. There are risks associated with it. But the location and the exclusivity could generate sales over $2.5 billion or something like that. Even though it’s a very high price for land, if you are aggressive in your pro forma you can sell at $3,500 or $4,000 a square foot. There are some small projects in Miami Beach getting those prices per square foot. Then obviously the numbers work.

But obviously you’ve got to have very strong assumptions and a very strong product.

Still, if you told me today that it’s guaranteed for $500 million and everybody signed up, I would have a hard time saying no.

Are you eyeing any condo terminations?

Yes.

Can you tell me more?

Of course not. 

In Brickell, it’s not easy. It takes a long time. Some haven’t yet faced the music in my opinion. So they think that us, as developers, are trying to take advantage of the situation. There are very significant dollars associated with [building repairs tied to assessments], which, arguably, doesn’t add even $1 to the sales price. If you spend $100,000 in redoing their apartment, people walk in and say “Oh, this is beautiful. I’ll pay more for it.” People don’t typically say that for having a stronger column.

Julia Echikson can be reached at jechikson@commercialobserver.com