Art Falcone got his start managing McDonald’s franchises in rough New York City neighborhoods in the late 1970s.
Three decades later, he sold massive home-building company Transeastern Properties for about $1.6 billion.
“If you want to be a general, you have to start off fighting people on the front line,” said Falcone, who now runs national real-estate firm Encore Capital Management from its Boca Raton headquarters. Encore focuses on residential, retail and mixed-use projects. It owns and operates about $2 billion worth of real estate nationwide, with about 60 percent of its business in Florida.
In between flipping burgers and becoming a real-estate titan, Falcone invested in hotels, condos, shopping centers, broadband and other businesses around the country with his brother Edward. “I’m an entrepreneur,” said Falcone, who moved to Florida in the ’80s. “I don’t want to stay in the same business my whole career. I build a company up to sell it off and then turn to the next thing that’s fun and exciting.”
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His latest ventures include a Jimmy Buffett-themed resort project in Orlando called MargaritaVillage Resort and the redevelopment of the Fashion Mall in Plantation, which he bought at auction for $38 million after it went into bankruptcy.
But Falcone’s biggest project these days is the $2 billion Miami Worldcenter, a massive 27-acre mixed-use project in downtown Miami that will include a 750,000-square foot mall, a luxury condo tower and several apartment rental buildings. He’s working with real-estate investor Nitin Motwani to develop the project and has also partnered with Los Angeles-based firm CIM Group.
Falcone first started assembling parcels of land for Worldcenter in 2003 but lost many of them during the recession. His group was able to get them back when the bank couldn’t find other buyers. After securing roughly $108 million in public subsidies for Worldcenter last year, the long-dormant development is going ahead full-steam. Community and union activists criticized the subsidies at the time but Falcone says the jobs he’s agreed to provide to locals and the economic stimulus of the project will be a major boost to neighboring Overtown, one of Miami’s poorest communities.
“Something of the size we’re doing is always going to be contentious,” Falcone said. “But we know it’s going to be a game-changer for the Overtown community and the whole downturn area.”
He answered emailed questions from the Miami Herald.
Q: What did you learn from the hospitality industry that you think applies across businesses?
A: Our strategy has always been focused on understanding and embracing the communities that we serve. Our strength is on the operations front as we create jobs and train our people to deliver a quality product, a high level of customer service and a clean environment. If you can provide all three of those on a consistent basis, then financial success will follow. In many ways, the same factors that helped us make our McDonald’s franchises a success in under-served communities in New York are relevant to our work in other cities where we are developing today.
Q: How is doing business in South Florida different from the rest of the country?
A: Encore has investments across the U.S., with 60 percent of our holdings located in Florida. We are most active in South and Central Florida. South Florida is unique when it comes to its diversity, geography and economy being closely tied to foreign markets, but doing business here is similar to working in major cities like New York, San Francisco and Los Angeles. Our region is now on par with those cities. We have emerged as a tier-one market for new domestic and international investment over the past decade, which underscores the strength of our business base and economy.
Q: Why do you think the Miami Worldcenter project has been so controversial? How will it justify the public subsidies it has been granted?
A: While I was operating McDonald’s franchises in New York, I learned that there are going to be skeptics anytime you promise change in an under-served neighborhood. Many people don’t realize that the first parcels we acquired in downtown were auctioned off by the City of Miami. This land had been overlooked for decades even though it sits in the heart of downtown. Acquiring the parcels was a risk at the time, but we saw value in the area. Bringing change required economic incentives designed to lure new investment and a long-term vision for the site. Miami Worldcenter will bring a 27-acre mixed-use development that will result in $2 billion in private investment and tens of thousands of jobs. We will be creating a destination in a part of Miami that’s now desolate, breathing new life into city streets, building infrastructure that doesn’t currently exist, and planting the seed for additional investment.
Our Miami Worldcenter team, led by Nitin Motwani, took the time to engage members of the community one by one and our project is stronger because of that outreach.
Q: What did you see in the market in 2004 that led you to sell your home-building business? Do you see any signs that South Florida is in the midst of another real-estate bubble?
A: We first saw the writing on the wall at Transeastern communities in Central and Southwest Florida, which were extremely active during the boom. Lending requirements for Fannie Mae and Freddie Mac had just been relaxed, opening the door to unqualified buyers pursuing multiple homes and the accompanying mortgages. This was a clear sign that the market was peaking, so we began looking for a buyer for Transeastern. We eventually sold the company to TOUSA.
Today’s market is vastly different. South Florida is dominated by cash-heavy buyers, so over-leverage isn’t as much a concern and lenders aren’t as exposed as they were during the last cycle. At the same time, developers are exercising restraint by building to meet buyer demand rather than speculator demand.
Q: What are the most important qualities an entrepreneur should have?
A: People don’t instinctively embrace change, and it’s difficult for entrepreneurs to see the forest through the trees. Staying flexible and anticipating where a market and an economy are headed are invaluable characteristics. I started my South Florida career in the restaurant and hospitality business but soon realized that there was long-term opportunity in real estate. We understood how the market was shifting and put our business in position to capitalize.
Q: What are your plans for the Fashion Mall in Plantation? Why is mixed-use a better play than pure retail?
A: The decline of traditional malls and the growth of e-commerce over the past decade have given way to lifestyle centers offering a place to gather, shop, eat, work and, in many cases, live. That’s exactly what we’re bringing to the former Fashion Mall site. Plantation is one of the best-located, most affluent communities in Broward County, yet it lacks an urban and commercial center. We’re meeting that demand with 180,000 square feet of lifestyle retail, 250,000 square feet of traditional and creative office space and 295 apartments in an open-air, walkable setting. The appeal of this property will lie in its diverse uses and its access.
Q: What does Encore have under way in terms of development in Orlando? Please elaborate on that market, as compared with Miami and other markets in Florida.
A: Orlando’s tourism sector is on fire, with 62 million people visiting in 2014, and that number is expected to grow. We have two major projects in development: The Encore Club at Reunion and MargaritaVillage. The Encore Club is a community of 750 homes ranging in size from 5 to 13 bedrooms that will be purchased by investors and rented out to large groups and multigenerational families. About 250 homes are sold and under construction now, along with a clubhouse and aqua park. Nearby, our 300-acre MargaritaVillage destination resort will include a 175-room hotel, 300 timeshare units, 500 vacation homes, 300 apartments, 170,000 square feet of lifestyle retail and a waterpark — all adjacent to Disney World. Construction begins in mid-2016 and we’ll open in 2017.
Arthur ‘Art’ Falcone
Current position: CEO of Encore Capital Management
Born: April 17, 1959
Education: Graduated from high school on Long Island, N.Y.; he was raised in the Floral Park-Elmont area.
Previous positions held: CEO of Transeastern Properties
Personal life: Married with three sons
Hobbies: Tennis, mountain biking, mountain climbing, golf
Charity work: SOS Children’s Villages; Crohn’s and Colitis Foundation