South Florida CEO
Miami Beach City Report
April 1, 2004
Both prices and development in Miami Beach are heading northward, as South Beach
By Rochelle Broder-Singer
As little as a year ago, anyone would have said the real estate hot spot in Miami Beach was SoFi, the area of South Beach south of 5th Street that includes Southpointe. That was before Canyon Ranch came to North Beach. The world-famous Arizona spa announced it would open a location in Miami Beach, on a North Beach site that development firm WSG had originally set for an, ordinary, oceanfront condominium. Along with the resort and destination spa would be the first Canyon Ranch immersion-living community.
WSG had scored a major coup. Suddenly, people realized that the area between 60th and 79th Streets had some 2,400 condominium units planned or under construction, with more projects being announced every month. "Where the trendies wouldn't live at 67th and Collins before, now with Canyon Ranch, they are buying," says Esslinger-Wooten-Maxwell master broker Kevin Tomlinson. "Celebrities are buying there. Millionaires are buying there."
"It's a phenomenal area to build in," says Eric Sheppard, one of two partners in WSG. "It's just been a resurgence in the past couple years."
From BSG Development?s intimate, 34-unit, 25-story 6000 Indian Creek on the Intracoastal to Merco Group International's 386-unit Akoya on the Atlantic Ocean, North Beach is filled with construction cranes. Part of the attraction two or three years ago, when many projects got their start, was the relative bargain north Beach offered. "Probably the most important factor is that you get to live on the ocean at a very reasonable price," says developer Frederic Karlton of Karlton Properties. Its project, The Collins, is set for completion this month and nearly sold out - at $310 to $315 per square foot. After starting conversion of The Waverly in South Beach, Karlton says, "We felt that North Beach was going to be the next chapter for Miami Beach."
Those relative bargains are disappearing fast, especially with the arrival of Canyon Ranch Living, which is garnering prices from $500 to $1,200 per square foot. It will rise at 68th and Collins, on six acres of oceanfront at the site of the historic MiMo [Miami Modern] hotel The Carillon, currently an empty shell that will be preserved. With 151 condo-hotel suites and 467 condominium residences planned, the project will offer total immersion into the spa's wellness philosophy - from spa services and an indoor rock-climbing wall with an ocean view, to an on-staff nutritionist, physician and psychologist. The Canyon Ranch name has enough loyalty and visibility that 242 units were reserved before the sales center even opened, largely through a direct-mail campaign to past spa guests. Sheppard says that nearly 97 percent of buyers so far have been domestic. "There's been people from all over the country that never come to Miami," he says.
While prices are rising, density restrictions and price points that are still better than South Beach have given developers the freedom to do projects such as BSG?s Terra Beachside Villas - 117 townhomes at 6000 Collins Ave., with a price range of $380,000 to $1 million. "Our thought was that we can develop a 1,500- to 2,000-square-foot product, outfit it with the highest-end finishes, price it competitively with single-family homes of the same size in Miami Beach - and have a better product," says BSG principal Ronald Bloomberg.
The same factors have allowed smaller developers to find profitable niches in North Beach, such as Coconut Grove-based The Berman Group?s Bayside Homes on the water [which start at $1 million], and the Linx and Bay Villas condominiums and townhomes, which will be in the $200,000 to $500,000 range. "Our target market is young families that are looking for city living and a quiet, secluded waterfront park area," says Berman partner Shellie Sims.
Further south on Collins, developer Craig Robins, Dacra Development has also targeted families with Aqua on Allison Island, which has garnered considerable national publicity. Aqua?s 46 zero-lot-line single-family townhomes [priced from $1 million to $7 million] and 105 mid-rise condominiums [starting at $400,000] were designed by world-renowned architects such as Alison Spear, Elizabeth Plater-Zyberk and Walter Chatham.
Also in the same neighborhood, Peebles Atlantic Development's under-construction The Residences at The Bath Club is drawing prices in excess of $1,200 per square foot for its 120 condominiums and 6 oceanfront villas. Developer Don Peebles had vacation homebuyers in mind when he purchased the historic Bath Club and decided to build a low-density development on its 5.5 acres. While about 55 percent of buyers are purchasing second homes, the rest are empty nesters who plan to live full-time in The Bath Club's 2,000- to 8,000-square-foot units. The buyers, like those at Canyon Ranch and Aqua, are not looking for a riotous South Beach lifestyle. "Most people, when they cross that 40 or so age barrier, don't want to live in South Beach," he says.
North Beach's surge has also been helped by March's City Commission approval of the North Beach Resort Historic District, and the development moratorium in effect while approval was pending. It inspired BSG to turn a historic oceanfront hotel near 60th Street into Cabana, a beach club with 210 fully furnished [including plasma televisions and fine linens] "swanky studio" getaways. Cabana will also serve as a beach club for 6000 Indian Creek and Terra residents. The sales center hasn't opened yet, but about one third of the units have already sold, averaging $700 per square foot.
The historic district designation also helped the purchase of the Deauville hotel, site of the Beatles,' "Ed Sullivan Show" appearance and a favorite performance venue for the Rat Pack. Miami Beach-based Merco Group International paid $28 million for the 500-room hotel and two nearby lots. The company is already selling Deauville units as condo-hotel rooms, and plans a refurbishment as well as a new hotel flag. Merco CEO Homero Meruelo Jr. says half of the units have already sold. He plans to build two new condo towers [totaling 242 units] and a parking garage.
Of course, Miami Beach real estate has been a hot story for the better part of a decade. Even 9/11 couldn't stop the juggernaut. "The Beach never skipped a beat," broker Tomlinson says. "Even now, everyone is saying that there is a bubble and it's going to burst, but I see no signs of that." The buyers, though, have changed.
Joyce Bronson, senior vice president for The Related Group of Florida, has overseen all of that company'[s SoFi developments. She sees a maturing buyer. "There will always be some of the glitterati, but I think buyers now are much more subdued, and not necessarily interested in addressing their wealth by expounding where they live," she says. That doesn't mean the celebs have abandoned the Beach. "There are still big names coming here and spending money," says Roger Herman, president of Prudential Florida WCI Realty. "South Beach is becoming a bigger player in pop culture and hip-hop culture."
In terms of buyers, entertainment celebrities such as Beyonce and Ricky Martin [even Cher is also rumored to be back] have been joined by business celebrities - who buy in an area not just because it's hip, but because it's a good investment. One example is The Setai, where the former CEO and founder of several nationally known companies recently paid $9.1 million for the 6,000-square-foot penthouse.
In South Beach, where the real estate boom started, projects such as The Related's ICON [designed by artist Philippe Starck] are hitting average prices of $400 per square foot. Related's Murano Grande, too, is all but sold out, at prices averaging $380 per square foot. That's up substantially since the company's first project in SoFi, Yacht Club at Portofino, where prices were under $300 per square foot. And it's not just international buyers paying those prices. "The domestic market has continued to improve and increase in terms of percentage," Bronson says. "Even though most of our properties are a second or third residence."
There are also projects that attract resident buyers, such as Ricardo Dunin's The Meridian just north of Lincoln Road. With prices averaging $320 per square foot, the 111 condos are 80 percent sold out. "It's been mostly primary residents and mostly Beach people, different from other projects we've done," says Dunin. It's a project he says is possible only because he bought the land two years ago. "If I was [starting] this today, people would have to pay 50 percent more," he says.
Clear evidence of the primary residence trend came with the recent condo conversion of The Floridian Apartments, which Virginia-based developer Gumenick Properties sold at the end of 2003 for $97.8 million - a record price of around $290,000 per unit. The project was considered risky when it was built [finished in 1997], as the first high-rise constructed on the Biscayne Bay side of Miami Beach's main island. "Gumenick had tremendous vision building that project when they did," says Donald J. Kipnis, CEO of Miller & Solomon General Contractors, The Floridian's builders. "The question was: did people want a city view and a sunset view?" Clearly, they did, and still do.
"Prices in the past five years have doubled and tripled in spots," says developer and dealmaker Hank Rodstein, whose H.R. Mortgage and Realty has been involved with projects from The Setai to the Blue and Green Diamonds. With build-out approaching and downzoning that has already occurred, "Miami Beach is on its last legs of development," he says. "You're going to have a great rise in the tax base in Miami Beach, and a great influx of quality people here. But after that, it's going to be all over."
"Prices, most likely, will continue to rise. The affordability factor in Miami Beach is becoming lower, and I see people moving over the bridge [to the mainland]," says Tomlinson. "I've seen the $200,000 home disappear, and now I'm in the midst of seeing the $500,000 home disappear."