Daily Business Review
Real Estate Review: Transfer
November 11, 2005
Oil And Water On South Beach
By Paula Iuspa-Abbott
An oil magnate has struck concrete gold in Miami Beach's luxury condominium market.
Dallas-based Headington Oil Co. and its owner, Timothy Headington, recently added two units to its high-end residential portfolio of South Beach condos, bringing to 22 the number of units the company has acquired in the last five years. He has resold most of them, reaping about 28 percent gross revenue.
Headington, president of the oil company, paid $3.37 million for a suite and $1.6 million for a studio at The Tides on Ocean Drive, according to Miami-Dade County public records. The units were hotel rooms until last November, when Chicago-based condo converter Falor Cos. acquired the 69-year-old hotel. It is selling the rooms as condo-hotel units. Headington is one of the first buyers to close on the purchase of a converted unit in the art deco building at 1220 Ocean Drive.
All 45 studios and suites have ocean views. The Tides has a restaurant on the ground floor, a pool with cabanas and the beach across the street.
Headington, who did not return a phone call to his Dallas office, sealed both deals on Oct. 4. He has the option to enter the condos into a rental program, in which the units become hotel rooms and the unit owner shares revenue with the hotel operator. Los Angeles-based Kor Hotel Group runs the rental program at The Tides and is responsible for the look and maintenance of the property's common areas. Condos in this building have been on the market for almost a year, and there are only few left, said Bryan Sereny, a senior sales associate with Miami Beach-based Chariff Realty Group. His firm was not involved in this transaction. The units range from 539 square feet to 2,100 square feet, and prices go from $906,900 to $3.38 million.
Since 2000 until October 2005, the oil company has poured at least $36.85 million into South Beach real estate buying up residential and retail condos, according to public records. It has resold a third of that inventory, raking in a $7.79 million in gross profit.
Headington has resold some of his condos to high-profile buyers. For example, movie and TV producer Jerry Bruckheimer and his wife, Linda, bought two penthouse units from the oil tycoon at Il Villaggio, 1455 Ocean Drive. Headington paid $10.01 million for both units and sold them for $12.7 million to Bruckheimer.
Headington held one unit for a year and a half and the second for five months, netting a combined $2.67 million.
Bruckheimer is the executive producer of the CBS series "CSI" and "CSI: Miami" and such films as "Bad Boys" and "Black Hawk Down."
In 2003, former Silicon Graphics president and chief operating officer Tom Jermoluk also bought a condo from Headington at the 127-unit Il Villaggio. Jermoluk, who together with Netscape co-founder Jim Clark became a developer of residential towers in Miami, paid $2.15 million for the unit, and the oil company walked away with $525,000 in five months, according to public records.
Headington has followed some fundamental principles in investing in real estate to minimize the risks of a possible market meltdown. He has picked waterfront condos with distinguishing features.
He has also bought in projects with name recognition, such as The Setai Residences and that were built by experienced developers such as Jorge Perez and Ian Bruce Eichner.
"He is buying in Miami Beach's premier condo projects," said Kevin Tomlinson, a broker with Esslinger-Wooten-Maxwell in Miami Beach. He was not involved in any of the Headington transactions.
Luxury units on Miami Beach sell from $1,000 to $2,000 per square foot, he said.
Many of Headington's purchases have another detail in common: They are located along world famous Ocean Drive.
"There is only one Ocean Drive in the world, just like there is one Fifth Avenue in New York and one Champs-Elysees in Paris," said broker Jean-Louis Delbeke. "I have clients who tell me, "Get me something on Ocean Drive. I don't care what it is, but it has to be on Ocean Drive.""
Delbeke, with South Beach Investment Realty in Miami Beach, was not involved any of Headington's deals.
Headington's investment strategy could shield him, to a certain extent, from any real estate crisis. He is investing at a price level aimed at a financially sound buyers not typically affected by rising interest rates, Delbeke said. And many of the buyers pay in cash. About 25 percent of the transactions he has brokered in the last six years were cash deals, he said.
Headington's acquisitions apparently were all cash; no mortgages were recorded with the Miami-Dade's clerk of courts.
The value appreciation and demand for condos in Miami Beach's premier buildings probably won't be impacted by any market correction, Tomlinson said. "In a meltdown, the rich get richer because those buildings continue to do well. There won't be a big sell-off."
People who pay more than $1,000 per square foot for a condo tend to keep their units for a while, instead of reselling them a few months later for a profit.
They often use their Miami Beach condos as their third or fourth homes, just a place to crash when they are in town, Delbeke said. Big corporations also buy luxury condos for their executives to have a place to meet clients and to stay while conducting businesses in South Florida.
He said he hasn't seen many corporations interested in acquiring luxury condos with the sole purpose of reselling them for a profit. That attitude is more common among individual buyers and limited liabilty companies, or LLCs, he said.
Including the units at The Tides, Headington Oil currently owns four residential condos and two retail condos on the beach. Early this year, the company paid $2.8 million for two units at Setai, a 40-story glass building on Collins Avenue and 20th Street. About the same time, it acquired for $2.27 million two retail units on the ground floor of Il Villaggio.
Paola Iuspa-Abbott can be reached at firstname.lastname@example.org or at (305) 347-6657.