They finish one another’s sentences. At times, they yuck it up like frat brothers. And in the strongest testament of their bond, after 20 years in the brutal business of marketing and selling pre-construction condominiums, Philip J. Spiegelman and Craig S. Studnicky are still standing.
“Frankly, I think we are doing better than most marriages in the United States,” said Spiegelman, co-founder and principal of ISG, an Aventura-based real estate brokerage that is among a handful in Miami specialized in marketing and selling pre-construction condominiums for developers. “We came out of the recession with the simple philosophy of having a few quality clients with like mind.”
Twenty years may not be all that long, as corporate milestones go, but given the tumultuous history of Miami’s condominium sector over recent years, survival has been a feat.
When the condo bubble burst and Miami became the global poster child for speculation and overbuilding, ISG was besieged on all sides: As prices tanked, unit buyers reneged on pre-construction condo contracts, looking to ISG to get back their 20 percent deposits. Developers, choked with unsold units, chimed in with demands that advances on commissions paid to ISG agents had to be returned because the deals fell through.
“Buyers asked us to protect their deposits and brokers asked us to protect their commissions. We weren’t able to do either,” said Studnicky, also co-founder and principal. After extensive negotiations, Studnicky said, the company was able to “mitigate” the situation and work out differences.
This time around, Spiegelman and Studnicky said, they are confident Miami real estate is on firmer ground. One key reason: Developers have been financing projects largely with big deposits from unit buyers — a practice that deters most speculators and keeps the pace of construction in step with demand. It is an argument repeated often by developers and brokers in South Florida these days, as one new project after another is proposed.
As South Florida’s latest condo cycle has hit its stride, business has brightened for ISG.
In 2011, after the recession, Spiegelman and Studnicky formed a joint venture with Miami mega-developer Jorge Pérez — Related ISG International Realty — to market several new Related Group projects.
Related ISG was tasked with handling sales and marketing for Apogee Beach, a 22-story, 49-unit luxury condominium in Hollywood Beach, and MyBrickell, a 28-story, 192-unit condominium in downtown Miami. Related recently closed on the units in Apogee Beach and expects to begin turning over units of MyBrickell any day.
Those projects — the first two condominiums Related launched after the crash — were early examples of the buyer-deposit model that has been driving the current boom.
Under that approach, condo buyers — mostly cash-rich foreigners looking for an investment or a second home — pony up big deposits on pre-construction units, typically upwards of 50 percent of the purchase price. (For Apogee Beach and MyBrickell, buyers agreed to pay a whopping 80 percent of the purchase price in a series of payments before closing.) Developers generally can use the buyers’ deposits to finance construction, except for 10 percent that is escrowed.
The buyer-financed model has proved surprisingly popular — especially considering the unit buyers become mere unsecured creditors should something go awry with a project.
“In 2011, there were a lot more sellers than buyers and we thought, ‘How are we going to do this?’ ” said Studnicky. “But there was enough demand from South Americans looking to move money to South Florida.’’
A pivotal factor, Spiegelman said, was having a well-established developer like Pérez doing the project. “Not everyone could put a trailer on a property and start selling it,” Spiegelman said.
Related ISG is overseeing sales of Casa Costa, a condo project composed of two 15-story towers and 393 units in Boynton Beach. Related bought a distressed note and completed the project.
More recently, Related formed its own in-house sales arm, Related Realty, which has been marketing a host of Related projects in conjunction with Miami-based Fortune International Realty, a competitor of ISG led by Edgardo DeFortuna.
Matt Allen, executive vice president and chief operating officer of Related, said Related decides case by case whether a project is handled in-house in cooperation with Fortune or steered to Related ISG.
“It all depends on the market we’re in,” Allen said. Related ISG is “actively marketing one of our projects now,” he added, pointing to Casa Costa.
In addition to handling pre-construction projects, the Related ISG venture also handles condo resales and other real estate transactions through several general real estate offices.
Besides the Related ISG venture, ISG, for its part, has continued to line up marketing and sales agreements with other developers.
Among other things, ISG is handling two major condo projects for New York-based Property Markets Group: the 58-story Echo Brickell project and the 11-story Echo Aventura project, which includes two buildings and 190 units. Echo Brickell, at 1451 Brickell Ave., will have far larger units than the typical Brickell condos and is aimed at owner-occupants rather than investors looking for units to rent, Studnicky and Spiegelman said.
Echo Aventura, which has 70 percent of the units under contract, is under construction and scheduled for completion in the first quarter of 2015. Echo Brickell has reservations on 70 percent of its 180 units, but they haven’t yet converted those reservations to contracts, Studnicky said. The ultra-high tower is to begin construction around April 2014.
“We’re on target to sell out Echo Brickell at a blended [price of] $1,000 a square foot. That’s the highest price in the history of Brickell Avenue, but it’s a spectacular building,” Studnicky said.
Selling yet-to-be built condominiums that are typically little more than a patch of dirt, a snazzy website and a glossy brochure when sales are launched takes special talent. Developers plow big bucks into sales offices to provide a real space for buyers to visualize their purchases. Technology is playing a growing role in sales efforts.
“We have to build the product in a computer so they [the buyers] can see it in virtual reality,” Spiegelman said. “The conversion of those images is what is necessary to convince first, a broker, and then a potential buyer that this will deliver a promise.”
An app for Echo Brickell enables agents to show shoppers 3-D visuals of not just the building but individual units, decorated to order. “Buyers can see how different flooring, different paint colors will look in a unit,” Studnicky said.
Agents also are encouraged to hone their social media skills.
However, the key element remains solid connections. “Our secret sauce,” said Studnicky, is having good ties to a network of real estate brokers, including many in foreign countries where investors are looking for overseas investment options to safeguard their money.
“The network ISG has developed over the years — that’s the backbone of the business for us,” added Spiegelman, who often confirms or elaborates on his partner’s words.
ISG has more than 200 agents licensed with the firm and hundreds of outside agents throughout Latin America that bring deals to the table.
The more perilous the political or economic environment in the source country, the better for ISG. Venezuela is a case in point: Under the Chavista regime, Venezuelans have been prolific buyers of pre-construction condos in Miami, a textbook example of capital flight.
The policies of Argentine President Cristina Fernández de Kirchner have made that nation fertile turf for brokers hawking new Miami high-rise units, too. And recently, interest among Colombians has resurged. Many Colombians are concerned that negotiations to reach a peace agreement with Colombia’s FARC guerrillas is dragging, said ISG’s director of international sales, Liliana Gómez, who recently returned from a marketing trip to Bogotá with Studnicky.
For now, Studnicky and Spiegelman insisted, there is no condo bubble in the making in Miami. One thing to watch for, they said, is if lenders start to loosen their purse strings to allow for less equity and higher leverage in developments.
A reduction in the percentage required for buyer deposits would also be a red flag, they acknowledged, because the less skin in the game, the more likely a buyer will choose not to close.
“I’d rather struggle to find qualified buyers than go back to that sleigh ride we were on,” Studnicky said.