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New York Developer, Backer Scale Back Projects In Miami

Global investors may be souring on US housing market

By Christine Haughney and Michael Corkery

In a sign some global investors may be souring on the U.S. housing market, a New York-based luxury condominium developer and his Israeli financial backer are trimming back in Miami. The U.S. partner plans to expand in India and elsewhere overseas.

In recent weeks, Shaya Boymelgreen, who got his start building Brooklyn apartments and has designed some of the flashiest condo projects in New York City, and financial backer Lev Leviev have entered into contracts to sell three parcels in downtown Miami for $89 million.

Mr. Boymelgreen, who hasn't bought properties for condo development in 18 months, says he is refocusing his efforts in Israel, India and Europe. He recently put down a $54 million deposit to buy a 64% stake in Israeli publicly traded company Azorim Investments. He says he plans to get into residential and commercial real-estate development in India.

In an interview yesterday, Mr. Boymelgreen said he is seeing "more demand in India than in Miami by people that can afford to buy houses. The Miami market is not going as fast it used to go. So we're going global."

Mr. Boymelgreen's cutback in Florida -- a market he entered during the recent real-estate boom with ambitions of catering to some of the wealthiest buyers -- comes as financial backers are curbing their enthusiastic investing in U.S. real estate, particularly as once-hot markets cool.

"There is a distinct caution in the marketplace with foreign investors," says Brian Street, president and chief executive of Boca Developers of Deerfield Beach, Fla. He adds that foreign investors are more likely to be skittish than a local investor who has a better first-hand knowledge of the market.

To be sure, lots of foreign money continues to pour into U.S. residential real estate, especially from cash-flush long-term investors like Dubai companies that have purchased several Manhattan office buildings and a California-based homebuilder. But for developers building projects using borrowed money and looking for quick returns on their investments, the atmosphere in the U.S. has become more challenging.

"The general feeling among the Israelis and especially ones that had a phenomenal run mainly in U.S. residential real estate was that they reached the peak and they've squeezed the juice out of the New York market specifically and the entire U.S. market in general," says Yoav Oelsner, a senior director with real-estate brokerage firm Cushman & Wakefield Inc. who has worked with many global investors on ventures.

Messrs. Boymelgreen and Leviev say they will complete three luxury apartment buildings with 616 units and build on three more sites in Miami with an estimated 600 units.

A spokesman for Mr. Leviev, who runs publicly traded firm Africa Israel Investments Ltd., says the pair will continue to do deals together on a case-by-case basis and that Mr. Leviev will continue to invest in the U.S. real-estate market. "He will deal with Shaya and more partners," says spokesman Shlomo Peles.

Before the latest real-estate boom, Mr. Boymelgreen was a relatively unknown Brooklyn developer who worked on small projects in neighborhoods such as Park Slope and Dumbo, for "down under the Manhattan Bridge overpass." After meeting Mr. Leviev on a cruise to Puerto Rico, the two developers hit it off and decided to form a partnership. In January 2002, they entered into a five-year development agreement. Since then, Mr. Boymelgreen says they have worked on more than 30 luxury condominium projects in Miami, Toronto, Las Vegas and New York City, valued at $8 billion.

In New York City, Mr. Boymelgreen's projects continue to sell well, and Mr. Boymelgreen has been willing to drop the prices when it has been necessary, says Pam Liebman, chief executive of real-estate brokerage firm the Corcoran Group in New York. Corcoran represents the developer on seven projects in New York City.

Since he entered the Miami market, Mr. Boymelgreen has attracted attention for lavish parties and marketing of his projects. But he also experienced turnover in marketing firms and has been criticized by some contractors about late payments. Michael Cannon, managing director of Integra Realty Resources in South Florida, says Mr. Boymelgreen's troubles could stem from high development costs and some potentially overbuilt locations, such as one in downtown Miami.

In March, Mr. Boymelgreen tapped his attorney, Andrew Hellinger, who has extensive experience in bankruptcy, to oversee his Miami operations, sparking rumors in the market that he was experiencing problems with his condo projects.

Mr. Hellinger has said he was hired for his knowledge of the Miami market and not because of his bankruptcy experience. He said the firm's projects are moving forward. "Right now we're in the development of three projects with a total sellout price of about $600 million, and we have three more projects that are planned that are close to $1.5 billion," says Mr. Hellinger.


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