With a dozen new condo towers already under construction and nearly 11,000 units planned in South Florida, investment funds from around the world are intensifying their efforts to acquire — or unload — development sites for future residential high-rises near the coast in the tricounty region of Miami-Dade, Broward and Palm Beach.
In the past six months, greater downtown Miami, the epicenter of the last South Florida boom-and-bust cycle, has emerged as one of the most active markets in South Florida for trading condo development sites as at least a dozen properties – either vacant land or sites with buildings that are likely to be razed — totaling more than 16 acres have traded for more than $140 million since April.
The land transactions include $2.1 million for a 15,000-square-foot site that was proposed to be the Bunker Brickell condo tower on Southwest 1st Avenue near Brickell Avenue; $5.75 million for a nearly one-acre site on Biscayne Boulevard that at one time was the proposed Boulevard condominium near Midtown Miami; $28.2 million for a riverfront property immediately north of the new Brickell Citicentre mixed-use complex and $35 million for the development site of the former Miami Arena that will be incorporated into the proposed Miami World Center mixed-use complex.
Adding to the land activity, a pair of condo development sites fronting Biscayne Bay has been put up for sale since August in hopes of capturing top dollar given the newfound optimism about greater downtown Miami.
Originally proposed as the Villa Magna during the last condo boom, the ownership is attempting to sell the 2.5-acre site at 1201 Brickell Bay Dr. with entitlements that permit a pair of high-rise towers — 51 stories and 52 stories, respective — with 787 units and more than one million square feet of saleable space, according to marketing material.
The 1201 Brickell Bay Drive site is situated catty-corner from the proposed 46-story BrickellHouse condo tower with 374-units that began construction in July.
To the north in the Biscayne Boulevard corridor, an investment group is attempting to resell a two-acre site — dubbed Midtown Bay — on Northeast 32nd Street that comes equipped with entitlements for a 60-story tower with nearly 300 units, according to marketing material.
During the last construction boom, the site was originally slated to be the ICE II condominium but the structure was never built.
Demand for land
The sudden demand for land — considered to have negligible value a few years ago during the heart of the condo bust — is a dramatic about-face from as recent as 2010 when the prospects of new condo construction seemed farfetched.
The catalyst driving the transaction activity in greater downtown Miami is a combination of surging rental rates by former homeowners and newly arrived residents that have increased prices by nearly 30 percent since 2009, strong foreign investment in condos and townhouses, and the dwindling number of unsold developer condo inventory from the last real estate crash.
As of Sept. 30, 2012, about five percent of the 22,225 condo units created in greater downtown Miami during the last real estate boom remained unsold and controlled by the original developers. Condo units that were purchased in large bulk transactions from the original developers during the bust are not counted in this total and are likely to be resold in the future.
It is unclear how long the demand for greater downtown Miami condo development sites will be attractive to investment groups aspiring to build new condo projects given that 12 towers with 4,800 units are already slated to be developed in a market that stretches from the Julia Tuttle Causeway south to the Rickenbacker Causeway, and Interstate 95 east to Biscayne Bay.
Real estate bust
Additionally, the task of obtaining construction financing for new condo towers remains a challenge for developers — despite recent optimistic comments from bank economists — as lenders still have lingering memories from the last real estate bust and subsequent workouts required to reclaim their principal, let alone interest.
To date, a supermajority of the developers proposing to build new condo towers in South Florida are implementing a deposit structure that is common in Latin America whereby buyers agree to make multiple payments during the course of construction that ultimately total as much as 80 percent of the contracted purchase price of the units.
Going forward, 2012 could be remembered as the year that South Florida’s condo market began another construction boom or simply experienced a positive blip during an otherwise depressed market.
Peter Zalewski is a principal with the Miami real estate consultancy Condo Vultures. Zalewski, a licensed Florida real estate professional since 1995 and founder of CVR Realty and Condo Vultures Realty LLC, advises developers, lenders and institutional investors.