Developers are moving closer to unloading the remnants of Miami’s epic condo boom and bust.
An investment group that includes former Gov. Jeb Bush has begun marketing nearly 500 condo units from the Midtown Miami complex, which opened in 2008 and smacked up against a collapsing housing market. The Bush group, led by longtime Miami investor Ronald Krongold, paid $110 million for 538 condos in the three finished towers from the lender on the project, HSBC. After selling 60, the group is touting the apartments as a last shot at taking advantage of the crash.
“We bought right,” Krongold said last week from a three-story loft doubling as a Midtown sales center. “We’re able to sell at a good profit, but less than anyone else.”
His comments capture the increased urgency among real estate sellers as inventories from the bust evaporate and more developers jump back into the revived Miami market. Analysts estimate that of the 22,000 new condos built in the Miami area during the bust, at least 90 percent have been sold. A summer study by Goodkin Consulting estimates that about 2,200 remain unsold. That would put Krongold’s group, Gold Krown Financial, in possession of about one in five units leftover from the boom.
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Meanwhile, a growing number of high-rise projects are selling within the downtown area as builders try to cash in on demand from investors. The condovultures.com realty site lists six, including a 300-unit tower planned for the waterfront on 28th Street by Jorge Pérez, the county’s top condominium developer during the boom. The project will bear the name Icon on the Bay, an expansion of the 1,800-unit Icon complex Pérez built off Brickell Avenue at the boom’s tail end, only to lose it to lenders in 2010.
Pérez’s growing portfolio of new projects — his Related Group has two other pre-construction ventures underway in downtown and the Brickell Avenue area — captures the revved-up nature of Miami’s real estate market. That’s despite local buyers largely sitting out of the fray.
While demand for downtown is strong as rents soar, the local buyer remains elusive, sales managers and others said.
The biggest pool of buyers — Brazilians, Venezuelans and Argentineans — are starting to see more competition from buyers in New York and Canada, said Craig Werley, of Focus Real Estate Advisors, which has conducted condo surveys for Miami’s Downtown Development Authority. But sales centers aren’t counting on South Florida demand to scoop up the remaining units.
“When are we going to start seeing our local buyers? That is a really big question,” he said.
Until recently, investors had no choice but to pick among the leftovers from a condo boom that’s nearly nine years old. That can be a challenge for sellers of existing condos, who must deal with worn lobbies, out-of-date technology and the fact that apartments rarely live up to the glamour depicted in sales brochures.
“Being on both sides of the coin, it’s much easier to sell a dream than reality,” said Millie Sanchez, executive vice president of Douglas Elliman, a brokerage representing developers. “Everything looks better in a rendering.”
Both groups — developers of future towers and the sellers of exiting condos — largely target the same buyers: investors from Latin America looking for rental units. With mortgage financing difficult and local residents wary of buying real estate, demand for rentals continues to climb.
That makes tenants one of the strongest amenities offered by existing towers, which often can provide buyers a condo along with the cash flow that comes with an occupied unit.
The Midtown complex is centered around the 3300 block of Northeast 1st Avenue, which is the address of 4 Midtown.
The 600-unit Opera Tower, a short drive south of Midtown, has virtually no vacant units but more than 300 for sale. The idea of a tenant-occupied unit appeals to many Opera buyers.
“Opera Tower is mainly investor product.’’ said Sanchez, who oversees the Elliman sales team at Opera. “The people purchasing at Opera want to put their money to work.”
Added Craig Studnicky, whose ISG brokerage in Aventura manages sales for downtown’s Vizcayne condo tower: “Truthfully, there’s very little demand from locals. You’re mostly seeing landlords from Latin America, and second-home buyers from Latin America and New York.”
Krongold predicts Midtown will buck the investor trend and appeal to local buyers.
Gold Krown, which includes the former governor’s son, Jeb Bush Jr., investor Gary Goldbloom and apartment mogul Sam Beznos, has brought on Fortune Realty to sell 304 units in the 33-story building called 4 Midtown. Prices start at $232,000 for the smallest units and run to $2.4 million, averaging about $350 a square foot, Krongold said.
As the owner of all unsold units in the three towers that make up the Midtown complex, his team sees the area as a natural fit for young professionals looking to buy into an area that has emerged as Miami’s newest retail district. A derelict industrial area when the housing boom began, the 26-acre Midtown shopping area is now home to more than three dozen restaurants and shops, and once a year becomes the center of Art Basel’s circuit of satellite fairs. And while sales at Midtown continue, most of the units for sale already have residents paying monthly rent in buildings that boast nearly 100 percent occupancy rates.
“This is a neighborhood,” Krongold said. “We’re getting a lot of local people who want to live in this area.”
Part of that effort includes sprucing up the 4-year-old building.
“We’re tripling the pool furniture,” Krongold said during a tour of the seventh-floor sundeck, which includes a small hot tub and sprawling pool overlooking Biscayne Bay in the distance. Caution tape blocks off spots outside as crews make their way down a list that includes a redesigned lobby.
The group has already sold 60 units in the sister building that sits across a vacant lot that was supposed to be 3 Midtown by now but was idled by the crash. Across the street from 4 Midtown, Gold Krown owns about 175 units in the nine-story Midtown building called Midblock. Those are for sale, too, but Krongold said he’s beginning to rethink the urgency for unloading them.
“We’ve been marketing them,’’ he said, “but we may be changing our minds because the prices keep increasing.”