The South Florida Real Estate Market Leans Evermore on the Wealthy

The South Florida market remains strong as wealthy Northerners continue to relocate down south, even as the rest of the country faces headwinds due to rising interest rates, speakers agreed at Commercial Observer’s South Florida Capital & Development Forum, held Oct. 15 at Don Peebles’ Bath Club in Miami Beach. 

“Were selling unaffordable apartments,” said Gil Dezer, president of Dezer Development, who’s building the Bentley condo tower in Sunny Isles Beach, at a panel hosted by Zachary G. Darrow, chairman and CEO of DarrowEverett. 

“There’s a new billionaire minted in San Francisco every week, and they want to be in Miami,” added Genghis Hadi, co-founder and managing principal of Nahla Capital, which is redeveloping Miami Beach’s oceanfront Raleigh hotel, its first project in South Florida. 

Isaac Toledano of BH Group, who’s developing a skyscraper nearby, agreed: “When we went out to market the financing, we got multiple term sheets, so I think it’s still very encouraging.”

Just this month, Swire Properties broke ground on a condo skyscraper on Brickell Key after landing more than $1.7 billion in presales, Erika Cajigas, vice president of residential sales and marketing, told the crowd, at the next panel moderated by Benjamin Wilson, a partner at Akerman. 

The buyer pool is changing, said Christine Martinez de Castro, chief sales and marketing officer CMC Group, which is developing the Four Seasons condo in Coconut Grove. Domestic buyers have remained strong presences, while Europeans are starting to overtake Latin Americans.

For these buyers, “location is paramount,” said Harvey Hernandez, CEO of Newgard Development Group, who’s developing a Standard-branded tower along Brickell’s waterfront. “Otherwise, it’s better not to do it.” 

Amenities remain important, too, said Aaron Stolear, president of development at 13th Floor Investments, which is developing Nobu-branded condos, also along Brickell’s waterfront. The 70-story development will have 10 floors dedicated to amenities focused on food and wellness. 

On the rental side, tenants desire similar amenities, said Gevorg Shahbazyan, founder and CEO of Starlife Group, who added shuttle services to his multifamily development in Hollywood, Fla. 

Despite the onslaught of demand, debt deals are still having to be “pieced together,” said Greg Newman, senior managing director of originations at Bank OZK, in a following panel moderated by Brian Cohen, director and chair of New York real estate at law firm Goulston & Storrs. 

“There is capital out there, but it’s hard to get people to say yes because the norm on everything is changing,” added Jordan Kornberg, chief investment officer at Miami-based development firm Mast Capital.

As some lenders lie low, new sources of capital have emerged, including family offices, according to Adam Falk, principal and co-portfolio manager of BH3 Fund Advisors. These wealthy families are hiring sophisticated advisers and typically have a long-term view, which can help close capital stacks.  

Jonah Sonnenborn, senior managing director and head of real estate at Access Industries, the investment firm of billionaire Leonard Blavatnik, agreed.

“You have to have duration on your capital, and, if you don’t have that as your superpower, you can be pretty mightily screwed,” Sonnenborn said in a panel moderated by Samantha Ahuja, a co-chair Greenberg Traurig’s hospitality practice.

Despite all the commotion, some fundamentals have not changed, including the role of cash, added Scott Wadler, managing director at Berkadia. “There’s no substitute for cash in the capital stack,” the broker said. “A lot of people are trying to get away with developing or acquiring an asset without the requisite cash equity.”

For others, the uncertainty is creating new opportunities. “There are a lot of overleveraged sites right now,” said Zack Simkins, managing director at Vaster. “So I’m interested to see how that cycle started to hit us and where players were now kind of sitting on the sidelines that have the equity available.”

Aaron Kurlansky, a co-founder and principal of Sheridan Capital, said that the current environment “feels much different than 2008” and “this time, people are starting to actually work in Florida.” However, others, including Morris Betesh of Arrow Real Estate Advisors, remained cautious. 

“What ultimately ends or puts a pause to great momentum we’re seeing is probably something that we don’t see — it’s usually the unexpected,” the broker.

At least for now, the momentum in South Florida is translating to the office markets, said experts on another panel hosted by attorney Jimmy Morales of Bilzin Sumberg.

“Every week there’s a new announcement” about a major office lease, said Alex Haw, managing director at Wells Fargo, which opened a 55,000-square-foot office in West Palm Beach this summer. 

“We have seen an incredible amount of new-to-market tenants that don’t want to wait 12, 18 months for space,” said David Weitz, co-founder of Oak Row Equities, which has developed mixed-use projects in Miami with sizable office components. “The onus is on developers to take on the burden of the cost and time to build. But to the extent they can, the sky’s the limit with rent. Absorption is through the roof.”

To ensure the corporate migration continues, Stephen Ross’s Related Ross is taking it one step further by funding and building the necessary ancillary services. “We have a team that’s dedicated just to trying to bring hospitals, schools, affordable housing,” said Daniah Missmar, a vice president at the firm. 

But given the amount of construction now underway, the region could be becoming a victim of its own success, warned Heidi Wigand, a vice president of project management firm Cumming Group: “We’re seeing big gaps in infrastructure. Your power grids are starting to be tapped out.”

Other challenges are emerging, too, namely traffic, agreed those on the following panel moderated by David Scharf, a partner at Morrison Cohen. 

“It’s really important that people are able to travel to work, and it doesn’t take them two hours to get to their jobs,” said Dayssi Olarte de Kanavos, president and chief operating officer of Flag Luxury Group. “When we first built the Ritz-Carlton in South Beach, most of our employees walked to work, and that doesn’t happen anymore.”

For Tony Fineman, who lives in Boca Raton and works 40 miles south in Coconut Grove, his commute can last hours. “If I leave it at normal commuting time, it can take two and a half hours. If I leave an hour later, I get there at the same time,” said the senior managing director and head of originations for Acore Capital. 

“We realize we need more offices because people would rather not drive 50, 45 minutes,” said Andrew Wachtfogel, co-founder and managing principal at Redeavor. 

While it’s easy for developers to complain about government, it’s not the enemy, both keynote speakers, prominent developers Russell Galbut and David Martin, agreed. 

During a talk moderated by Thomas Coyle Jr. of Greenspoon Marder, Galbut praised Florida’s Live Local Act, which grants developers approval for residential projects if at least 40 percent of units are priced as workforce housing.

“Everybody complains about the government, but we have to get aligned on what the solutions are,” Martin said while speaking to Iris Escarrá, co-chair of Greenberg Traurig’s land use practice. “Those solutions are a competitive advantage over other cities and states.”

Other moderators and speakers included Ryan Doyle of Nuveen, Brett Forman of Forman Capital, Joe Furst of Place Projects, Mark G. Levy of FRP Holdings, Miller Townes of Link Logistics and Marko Kazanjian of IPA Capital Markets. 

Julia Echikson can be reached at jechikson@commercialobserver.com.