Daily Business Review
February 23, 2006
Buy, Hold, Build
By Oscar Pedro Musibay
Paul Cejas, U.S. ambassador to Belgium under President Clinton, is teaming up with two veteran commercial developers to build mixed-use projects in Miami Beach and West Kendall.
Cejas is working with Beach Bank director Bud Scholl and former Codina Group president Ford Gibson on the LincolnEast condo and retail project off Lincoln Road.
The group's next venture would be to develop a vacant 13.9-acre parcel east of Florida's Turnpike at Southwest 104th Street and 117th Avenue. The tract was once owned by the late corporate raider Victor Posner.
Scholl and Gibson through an independent company also are developing an office-condo project with a Whole Foods store as an anchor in Coral Gables.
PLC Investments, Cejas' development company, will benefit from buying the Miami Beach and Kendall properties years ago. The buy-and-hold strategy ensures the developers cheaply acquired land for the project at a time when costs for sites and construction are soaring.
The group hopes to start sales at an average of $350 per square foot on the nine-story, 160-unit LincolnEast condominium project in April, targeting young professionals. Construction of the building designed by Mexico-based TEN-Arquitectos would start late this year.
Scholl and Cejas said the pricing addresses a slowdown in condo sales. Cejas also said he has a waiting list and has hired Douglas Elliman Florida to handle sales, the same company working with Leviev Boymelgreen, a partnership of an Israeli conglomerate and a New York developer.
Esslinger-Wooten-Maxwell broker Kevin Tomlinson, who specializes in luxury condo sales in Miami Beach, expects demand to be driven by price and location.
He said units on Miami's Biscayne Boulevard have sold for more per square foot, and Biscayne has far to go before it is comparable to Lincoln Road as an urban center. And the beach is only a few blocks away.
"As Miami Beach becomes more Manhattanized, people are really starting to care and really want that real urban living New York-style, where you have retail at the bottom and you just walk out and have Starbucks," Tomlinson said.
Cejas assembled the property at 420 Lincoln Road in two purchases totaling $16.7 million in 1996 and 1997, putting together about 100,000-square-feet of retail space. After renovations, the retail segment will grow to about 106,000 square feet.
Cejas owns the 3.3-acre block from Lincoln Road to 16th Street between Drexel and Washington avenues. Ground-floor retail tenants in a historic seven-story building on Lincoln that is part of the site include Starbucks and a Mexican restaurant named Santo. The site is also home to a McDonald's.
Cejas has invested $15 million since the purchase to refurbish the office building, which dates from 1940 and will remain in place.
To the south, the group is bulldozing four buildings, including a 10-unit apartment house on 16th Street and a vacant three-story office building on Drexel.
A parking lot at the corner of Drexel and 16th Street will become part of the base of a parking garage and the condo building. The 500-space garage will be open to the public. Eleven of the 160 condos will be two-story, street-level townhouses wrapped around the garage.
The developers wanted the residential design to stand out from the historic Lincoln Road office, Scholl said.
"When you are next to a historic building the last thing you want to look like is historic," he said.
LincolnEast was designed by Enrique Norton, who is designing the proposed Guggenheim museum in Guadalajara, Mexico. LincolnEast will help re-establish Miami Beach as a center for cutting-edge architecture, Cejas said.
As part of the overall redevelopment, Cejas began upgrading retail tenants as leases began turning over in 2003. RadioShack and Subway stores are moving to refurbished space on Washington, said PLC development director Glenn Boyer.
"We were shackled with leases when we bought the building," Boyer said. "They started to turn over two years ago. We are still early in that process. During the next 12 months we should see the next big turnover."
Cejas has maintained 98 percent occupancy in the 175,000-square-foot office building at 420 Lincoln Road. The building is home to PLC Investments and the development operation with Gibson and Scholl.
Gibson and Scholl were hired on a fee basis because they could provide expertise in getting approval for the project and help execute on the vision of a site involving infill development and a historic building. The project has been approved by the city.
"They mitigate any execution risk," Boyer said.
The site came with a 100-foot height limit, but the city approved a request to take it to 105 feet. Boyer said it might not sound like much, but the extra 5 feet allows for taller ceilings.
A one-bedroom, 650-square-foot unit will be priced in the low $300,000s. Two-bedroom, 1,100-square-foot units also will be available. The two-story, 1,400-square-foot townhouses will cost $700,000, Boyer said.
Boyer said the units were "more price sensitive than per square foot sensitive."
"The units are smaller because it's more about living in the city than having a 3,500-square-foot McMansion," he said. "You might have only 650 square feet, but it's more about living on Lincoln Road."
Rezoning in Kendall
In Kendall, the group is pursuing rezoning on a residential parcel to develop 85 townhouses and an 80,000-square-foot shopping center including a supermarket. Cejas paid $4.5 million for the land in 2003.
Posner attempted to develop a mixed-use project at the same location, but neighbors on the other three residential corners strenuously fought his plans.
Cejas comes to development from a financial background. The former accountant founded and was chairman of CareFlorida Health Systems, which grew to become the nation's largest Hispanic-owned health care company.
CareFlorida merged with Foundation Health of California in 1994, and Cejas became the single largest shareholder.
Cejas served on the Miami-Dade County School Board for eight years and was chairman for five years. He served as ambassador from 1998 to 2001.
Gibson, a 22-year veteran of the commercial real estate industry, was president of Codina Group starting in the '90s.
During his tenure as president, he led the development of the 205-acre Beacon Centre in Doral, the 400,000-square-foot, master-planned Beacon Pointe at Weston, the 10-story Baptist Medical Center office tower in Kendall, the 300,000-square-foot home of NCCI Holdings Inc. in Boca Raton and a 150,000-square-foot build-to-suit for IBM in Boca Raton.
Scholl co-founded and was president of Miami Beach-based Beach Bank. He remains a director of the commercial bank. Scholl also is chairman of the Sunny Isles Beach Planning, Zoning and Intergovernmental Affairs Committee.
Gibson and Scholl founded Gibson Scholl Inc. in 2003 and developed Plaza San Remo, a 114,000-square-foot office condominium in Coral Gables. Their company also is developing the 34,000-square-foot Flamingo Pavilion office building in Miramar and a 34-acre subdivision in Toxaway, N.C.
Cejas, Scholl and Gibson are looking for land for another mixed-use project, and Scholl said he and Gibson will continue to develop projects on their own. The three developers will work together in the future when they find a good opportunity.
"We are not looking to have 20 projects," Cejas said.
"It's not about mass," Scholl said.
Oscar Pedro Musibay can be reached at firstname.lastname@example.org or at (305) 347-6651