PITTSFIELD — A pair of real estate investors from Andover purchased the shopping plaza that houses the Stop & Shop supermarket on Dan Fox Drive in Pittsfield for $3.85 million in October 2021.
A little less than two years later, Manoj and Preeti Munjal have received a significant return on that investment, close to double what they paid for it.
The Munjals, a married couple, sold the 13-acre Del Alba Plaza for $6.3 million in mid-August, according to documents filed at the Middle Berkshire Registry of Deeds in Pittsfield. It was the largest commercial property sale in the Berkshires this year, according to the Berkshire County Board of Realtors. The board tracks only Realtor-assisted transactions.
The plaza, which includes the 61,000-square foot-supermarket, a second much smaller structure and a gas station, is located at the corner of Dan Fox Drive and South Street (Route 7), the main route that motorists travel when they go to nearby Bousquet Mountain Ski Area.
The Munjals own NNM Realty Trust, which owned most of the Del Alba Plaza and is the parent company of two other realty trusts that each owned 18 percent of that property.
“We got a good offer,” said Preeti Munjal, when asked why the couple decided to sell the property now. ”It was a little too far for us from Boston, a good two and a half hour drive. We thought if we get a good price we might as well take advantage of that.
“Not bad,” she said, referring to the purchase price.
The new owner, Dan Fox Drive Pittsfield LLC, is a local affiliate of L2 Partners, a commercial real estate agency in Miami that was founded in 2014 and has acquired and manages $1.1 billion in commercial property across the country, including in Massachusetts, according to its website. The firm’s other properties in Massachusetts were unavailable.
L2 Partners, which also has offices in Chicago and Providence, R.I., has obtained a mortgage on the shopping plaza with Bank of America, according to registry documents. Lance Lazarus, listed as the new ownership group’s resident agent in papers filed with the Secretary of State’s office, did not return a telephone call seeking comment.
The sale was arranged through a national broker that the Munjals worked with.
“It wasn’t actively on the market,” Preeti Munjal said.
“They approached us. We didn’t approach them,” she said. “They really wanted to be in this area.”
The Munjals had also renovated the property after buying it from Wells Fargo Bank. Preeti said the couple’s total investment was less than $500,000, but the work they performed on a smaller building on the property that is adjacent to the supermarket, allowed them to attract two national tenants: Amedisys Home Health, and Fyzical Therapy and Balance Centers. A third storefront in that 8,100 square-foot building is currently vacant.
“That building next to Stop & Shop we leased that, and with the additional rent [from the tenants] we got an additional return on our investment,” she said. “They are good tenants for the town. We completely redid that whole space for them.”
South Florida’s commercial real estate market continues to grow but at a slower pace compared to 2022 levels. The rise in interest rates has had a significant impact on the commercial real estate sector. The Fed’s aggressive tightening has successfully lowered inflation from its peak of 9.1% in June 2022, but these rate hikes have put pressure on the economy. The commercial real estate market is not immune to the prohibitive current rate environment. Major firms such as JLL, Marcus & Millichap, and CBRE have all reported lower transaction volumes. This decline in sales activity is particularly pronounced in the office and industrial sectors.
In South Florida, the multifamily market continued to grow during the first half of 2023 but at a slower pace due to rents easing from their peak in March 2022. This, combined with higher insurance premiums and increased borrowing costs, has led to reduced investor returns. Lower cash flow is placing pressure on property valuations. Using the income approach, a property’s value is determined by dividing the income it generates by the cap rate. In practical terms, if the net income is reduced by 10%, the value of the underlying asset will correspondingly decrease. On a positive note, the ongoing challenges of mortgage affordability sit well for multifamily property owners, as tenants are less inclined to move out to purchase their homes.
Miami’s office sector continues to be one of the few markets in the US with surging post-pandemic demand. Out-of-state relocations and Miami’s proximity to Latin America will continue to drive growth in South Florida’s office market. According to CoStar, the Miami office vacancy rate stands at 8.8% compared to 13.2% nationally.
The industrial sector remains robust, as evidenced by a Blackstone affiliate breaking ground on two warehouses totaling 310,456 sqft with a 36-foot clear height. The Miami industrial sector continues to be a top performer, posting a 3.1% vacancy rate in 1Q2023, down from 3.6% in 2Q2023. According to CoStar, over 3.5 million sqft of new industrial space was delivered in the first half of 2023. There are over 9 million sqft of industrial construction in the pipeline as of the third quarter of this year. The most notable projects breaking ground this quarter are Bridge Point Doral, Sycamore Logistics Center, and Eastgroup Homestead Park of Commerce. Strong tenant demand has fueled Miami’s industrial leasing rates to $19.70 per sqft.
We are currently in a price discovery period where sellers need to set realistic prices, and buyers need to have a long-term time horizon. Owners with maturing and rate-adjusting mortgages may need to dispose of properties, creating opportunities, especially for cash investors who will have the greatest advantage.
Interest rates will be the main driver for future growth, Last week at Jackson Hole, Federal Reserve Chairman Powell reaffirmed his commitment to a 2% inflation target. Should the Fed need to continue its rate hike to accomplish that, it will create headaches for the overall real estate market as more restrictive lending could curb demand and limit growth.
Fortunately, Florida, being a no-income-tax state, will continue to attract investment from abroad and other states within the US. We expect the economy in Florida to be resilient enough to offset the impacts of these headwinds on commercial real estate.
Fernando Echeverri is a broker specializing in commercial investment properties and works with Great Properties International on Key Biscayne.
MIAMI – The Greater Miami area, which includes Broward and Palm Beach counties, is the 11th most overvalued area in the country. Nine other metropolitan areas in Florida are part of the 15 most overvalued cities of the 100 that make up the list in the United States.
Florida International University professor William Harding says is all about paying more for less.
“Some of the newer units that we are building, especially in Brickell and some of those areas are relatively small,” said Harding, Dean of the F.I.U. Business School refering to one of the smaller apartments built in overvalued areas in Miami. “And what they want is different than what I might want if I have three children in middle school,” said Harding describing the profile of the residents who have caused homes to be heavily overvalued.
“Many of the people who moved to Florida are affluent or wealthy young professionals, they have more capacity to buy a home than the existing people in the market,” said Harding.
F.I.U. and Florida Atlantic University are the two institutions that participated in a study that analyzed 100 cities and ranked the top 15.
These are the Florida metropolitan areas where buyers are paying rising average premiums for homes, according to the Beracha and Johnson Housing Index:
• Tampa: 42.56%
• North Port: 41.93%
• Cape Coral: 41.66%
• Lakeland, 40.26%
• Palm Bay, 39.89%
• Greater Miami: 38.89%
• Jacksonville, 38.37%
• Orlando, 38.18%
• Deltona, 38%
“Miami is still more expensive than Tampa,” said Harding, when asked about the percentage increase in value at Tampa – which ranks #1 – versus Greater Miami, which is 38.89%.
He cited the overpriced value of property in Miami as higher in terms of price per unit in comparison to income and purchasing power.
Once faced with the question – what are the options for middle-class residents who dream of buying a family home?
“We will actually see a plateauing of prices,” responded Harding. He firmly believes that the supply of smaller units will outweigh the demand.
“When we live in a world where inflation is 4, 5 or 6% and real state is flat in real terms, you will see that people’s incomes are going to go up because it’s going to be adjusted to inflation, which gives them more ability to buy,” concluded this business professor.
Currently, new family homes recently build are valued at $900,000 dollars, in certain centrally located areas.
“The (middle class) buyers are not willing to pay that price, so we’re going to see within the next six to seven months and we’ll see who wins that tug of war, developers or buyers. Remain patient, it will get better,” said Harding.
Genting Malaysia—controlled by billionaire Lim Kok Thay—is seeking fresh bids for its iconic waterfront site in Miami after U.S. property developer Terra walked away from the proposed $1.2 billion transaction that was announced in April.
“The purchaser had requested an extension of the exclusivity period and sought amendments to the commercial terms of the sale and purchase agreement,” Genting said Thursday in a regulatory filing to Bursa Malaysia. “However, the purchaser’s requests were not granted at this time and hence the purchaser has elected to end its current bid.”
The property—located midway between Miami Beach and Miami International Airport—is the largest undeveloped waterfront property in downtown Miami. Genting, which owns casinos in New York and Las Vegas, bought the site in 2011 when it initially planned to build a casino in Miami.
The value of the Miami site has increased 400% in the past decade since Genting bought the property. Genting would have booked an exceptional gain of $967 million if the sale to Terra proceeded. The company said it will review opportunities to sell the property to potential buyers, adding that Terra remains interested.
With a net worth of $2.3 billion, Lim was ranked No. 8 on the list of Malaysia’s 50 Richest that was published this month. Genting Group was founded in 1965 by his late father, Lim Goh Tong, who had the idea of building a mountain resort in Malaysia, now known as the Resorts World Genting casino resort and theme park. Genting—which also operates casino resorts across Singapore and the U.K.—has interests in plantations, energy and hospitality.
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There are currently some headwinds that may affect commercial real estate heading into 2024. For buyers, higher interest rates have the greatest impact as they increase the cost of borrowing, thereby reducing the capacity to borrow.
For property owners, higher borrowing cost affects the return and, consequently, property values.
Higher interest rates can deter buyers from purchasing a property when the cost of borrowing exceeds the investment return, resulting in what is referred to as negative leverage. For example, buying a property with a 5% return when the borrowing costs are 6% wouldn’t make sense unless there are other compensating factors.
The fall of some regional banks has also had a negative impact on commercial real estate, as these banks account for about 69% of outstanding commercial real estate loans. The ongoing troubles in the regional banks made them tighten their lending practices.
A report from Goldman Sachs estimates that $1.07 trillion worth of mortgage loans will mature before the end of 2024. The investment bank believes this could put more pressure on net operating income and potentially increase vacancies and delinquencies, mainly in the office sector.
Property owners with maturing loans or adjustable-rate mortgages may need to sell to avoid higher rates, creating opportunities for investors. Sellers are beginning to improve pricing and offer more attractive returns to compensate for higher interests.
The reality is that rates are currently high as the Fed tries to tame inflation, which has been at a 40-year high. However, if the right opportunity presents itself, it’s important to remember that you can always refinance when rates come down.
The other factor that could impact commercial real estate is a potential recession. That could have a damaging effect on businesses, causing companies to delay or cut expansion plans. During an economic downturn, there would be decreased demand for space, and this put pressure on rents. This will affect the cash flow of properties, resulting in lower returns for investors.
However, sectors such as healthcare facilities and essential retail, including groceries and fast-food companies, are more resilient and can potentially mitigate the impact of an economic downturn.
So, where are the opportunities?
It is expected that new opportunities will emerge in the market as loans mature and adjustable-rate mortgages reset. This will create perhaps the greatest opportunities for buyers in recent years.
In an economic downturn, investors should also consider distressed properties or those with potential appreciation through repositioning or renovation. To be able to acquire properties, investors should maintain a sufficient cash reserve. It is crucial to identify areas with strong economic fundamentals.
No matter which direction the US economy takes, Florida is expected to perform better than other states due to its business-friendly environment, migration, lack of income tax, a robust service economy and tourism. Consumer spending should all contribute to Florida’s success and allow businesses to better withstand any economic downturn.
Fernando Echeverri, is a broker specializing in commercial investments properties, and works with Great Properties International on Key Biscayne.
Home prices increased in April throughout South Florida, breaking a record for single-family homes in Miami-Dade, according to data from the Miami Association of Realtors. Above is an aerial view of North Bay Village on Nov. 11, 2022.
Home prices hit a record in Miami-Dade County last month, despite 12 consecutive months of double-digit declines in sales activity.
The figures point to a wildly imbalanced residential real estate market, experts said, one in which many local buyers still can’t afford to buy homes.
The median price for single-family houses in Miami-Dade reached $600,000 in April, up from $565,000 a year ago and surpassed the former record median of $579,000 in June 2022, according to the housing market update released Thursday by the Miami Association of Realtors. In neighboring Broward County, the single-family home midpoint price rose to $575,000 from $560,000 in April 2022, while home sales plunged for 14 straight months.
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“It is not a healthy market. It is not balanced. It is a market that is still a seller’s market,” said Kim Henderson, an aspiring homeowner and CEO of Neighborhood Housing Services of South Florida, a community development group assisting people to attain homeownership. “We need the inventory freed up. There’s not much inventory in the attainable price range, around $450,000 to $600,000. For the basic middle class person, there’s not a lot of inventory.”
The two counties condominium markets saw the same upward pricing trend. Miami-Dade reported an April median of $414,900, higher than $390,000 a year ago, while the median in Broward increased to $270,000, from $245,000.
Meanwhile, April home sales fell steeply in both counties. Miami-Dade posted 2,222 total sales last month, down 35.5% from 3,445 closings a year ago. Broward saw a 31.4% annual drop, to 3,489 from 4,006 closings a year ago.
Many aspiring buyers wonder if and when they can expect home prices in South Florida to fade. Real estate experts predicted a dip in condo prices later this year, to go along with the sales slowdown. However, the market’s slim number of available homes is expected to enable sellers to keep the upper hand. Investors, newcomers from across the country and cash buyers also continue to prop up home prices.
The regional housing supply remains another stark indicator of the imbalanced housing landscape. Miami-Dade has 3.3 months of houses and 4.9 months of condos available, but a balanced market consists of six to nine months of inventory. Broward has 2.5 months of houses and 3.3 months of condos.
Blame the tight supply on corporate expansions, digital nomads and the continued stream of transplants, said Tingyu Zhou, a professor of real estate at Florida State University. Many have chosen to call South Florida home during the pandemic that emerged in March 2020. They jump on the trend of remote work, trading high-tax states — like New York, Massachusetts and Connecticut — for the warm climate, loose COVID-19 public health rules and zero Florida and local income taxes.
The migration here has slowed since early in the pandemic, but outside buyers offering cash deals or offers above asking prices on homes still have a profound effect on the regional housing market.
In South Florida, close to half of the home deals closed in cash in April. In Broward, 42.4% of sales last month were handled in cash. In Miami-Dade, 37.9% of all home transactions were done without financing. The U.S. average in April was 28% cash home sales.
Overall, the housing market still confounds would-be buyers and renters.
Henderson started house hunting in January 2022. Since then, she’s made 10 offers and gotten beaten by competitors every single time. Usually, it’s investors, out-of-towners making cash purchases or bidders up to $100,000 over list prices. Many of her clients face similar conditions.
“Other people’s money can shove you out of your neighborhood and city,” Henderson said, recalling the same trend in Washington, D.C., where she lived and worked until 2018.
“If you want to stay, you’ve got to buy. You have to find a way to purchase a property, so you can live in the community of your choice. There’s a transformation going on. It’s heartbreaking when people say, ‘I’d like to stay and be near my mother and my abuela, but I can’t.’”
Mortgage rates are part of the problem. They tumbled to 2.65% on a fixed 30-year mortgage in January 2021, according to Freddie Mac data. Many aspiring buyers rushed to buy and homeowners refinanced.
Today, however, Freddie Mac reports a 6.39% rate for a 30-year, fixed-rate mortgage, compared to 5.25% a year ago.
South Miami resident Kyle Payne moved eight months ago from Philadelphia, the nation’s fifth-largest city, and considers Miami’s housing market far more expensive than he expected. Payne, 30, paid $900 in monthly rent for a one-bedroom apartment in Philadelphia. Now, he pays $2,850 a month for a one-bedroom apartment he rents with his girlfriend.
“I got denied originally for two different spots and they each charged a $600 [rental] application,” Payne said of the nonrefundable $1,200 he spent during his home search. “After getting denied for the second spot, my girl and I said we’re not going to force it. We had thoughts of giving up.”
Payne has spent several years working as a DJ and event producer and he wanted to live in Midtown to be closer to Miami’s nightlife hot spots. The competitive housing market to buy or rent has not allowed that. When his lease expires in September, Payne hopes to move to Midtown or nearby.
Real estate experts said they see hope for waiting buyers that prices could at least stabilize. More U.S. bank failures and new Florida legislation are expected to lead to a further slowdown in home sales around the country and possibly price dips here, at least in certain pockets of Miami-Dade.
Earlier this month, Gov. Ron DeSantis signed into law bill SB 264, which limits the property buying power in Florida of citizens from Russia, China, North Korea, Syria, Iran, Cuba and Venezuela. Neighborhoods in Miami-Dade shaped by these international communities, such as Sunny Isles Beach by Russians and Doral with Venezuelans, are expected to have more home inventory, less demand and maybe cheaper pricing.
“I am cautiously optimistic about this new measure,” said Henderson of Neighborhood Housing Services. “My worries are that the most pressing factors defeating low- and moderate-income buyers is the … [out-of-state] buyers and heavy presence of institutional buyers of single-family homes.”
This story was originally published May 19, 2023 5:30 AM.
Money didn’t seem to be an object for several buyers of properties on Key Biscayne, in Coconut Grove and in Brickell during the first quarter of the year.
The largest sale: A $48.499 million residence in Coconut Grove that was built in 1935.
Currently, the largest asking price among the three areas is $59 million, a spacious waterfront residence on Key Biscayne.
Let’s take look at what was sold, according to Realtor.com:
Key Biscayne sales
1. A $10 million residence on Reef Lane led the way. Boasting 4,997 square feet, 5 bedrooms and 5.5 baths, the property was brokered by Bruno Junqueira at Coldwell Banker Realty and sold in March, with the buyer represented by Cristian Black at Berkshire Hathaway HomeServices EWM Realty. It was built in 2014.
2. A $5.2 million luxury unit at the Grand Bay Residences was sold in February. There is room to roam over the 3,950 square feet, with four bedrooms and 5.5 baths. It was brokered by Jorge Fernandez at COMPASS. The seller was represented by Brigitte De Langeron with Fortune International Realty Key Biscayne Inc.
3. Within that same week, another condo at The Ocean Club went for $4.8 million. The 3,084-square-foot unit has three bedrooms and four baths. No listing agents were available.
4. The final day in March resulted in the sale of a $4.379 million Grand Bay residence. The 3-bedroom, 3,630 square-foot property, with 5.5 baths, was brokered by Veronica Cervera at Cervera Real Estate, Inc., and the buyer was represented by Juanita Lopez of Berkshire Hathaway HomeServices EWM Realty.
5. In late January, a 3-bedroom, 5.5-bath unit, covering 2,790 square feet, was sold for $3.4 million at The Ocean Club. That sale was brokered by Paulette Monserrate-Schena at Berkshire Hathaway HomeServices EWM Realty, and the buyer was represented by Michael P. Schnabel with Compass Real Estate.
Key Biscayne’s current most expensive residential listing:
1. A majestic 8-bedroom, 8.5+bath residence at 3 Harbor Point is being sold for $59 million. Overlooking the water, the property covers 14,978 square feet. Presenting the property is William Earle of Three Bridges Realty Inc.
In comparison, the Matheson estate on Key Biscayne sold for $47 million back in 2015-16, matching the second-most expensive sale in Miami-Dade County history with a mansion on Indian Creek Island in 2012, and trailing only the $60 million sales price in 2015 for an eight-bedroom, 12,516-square-foot penthouse at the Faena House at that time.
Since then, Adrienne Arsht reportedly sold her waterfront Coconut Grove estate, near the Vizcaya Museum & Gardens, for a county-record $106.9 million last year. The compound, consisting of two two-story homes, covers 25,000 square feet with a total of 12 bedrooms and 13.5 baths.
Coconut Grove area sales
1. Built in 1935, a residence at 3007 Brickell Ave. sold for $48.499 million in March. The 7,769-square-foot property has 5 bedrooms and 5 baths. No listing agent was available.
2. In January, a 7-bedroom residence with 7.5 baths and 7,720 square feet, sold for $15,424,500 at 2900 Brickell Ave. It was built in 2019 and the seller was represented by Julian Johnston of The Corcoran Group.
3. A condo unit on South Bayshore Drive sold for $7.6 million. The 5-bedroom, 6.5-bath, 4,647-square-foot property was brokered by Sandra Masis of Cervera Real Estate Inc.
4. In February, a waterfront condo on East Glencoe Street sold for $6.275 million and encompasses 2,978 square feet. The 3-bedroom, 4.5-bath residence was brokered by Cristian Cardenas with Cardenas Larocca Commercial Real Estate.
5. A $6 million home on N. Moorings Way was sold by Judy Zeder with Coldwell Banker Realty. Covering 5,095 square feet, the property boasts 6 bedrooms and 5.5 baths.
Coconut Grove’s current most expensive residential listing:
1. For $48 million, one can relax in this 8-bedroom, 8.5-bath property at 3080 Munroe Drive in Southwest Coconut Grove. The residence covers 7,279 square feet.
1. At $6.4 million, this 4-bedroom, 4.5-bath condo unit with 3,606 square feet and a pool overlooking the city was the top sale in the first quarter of 2023. The unit, at 88 SW 7th Street, was brokered by Allison Ortiz with Fortune International Realty. The seller was represented by Banna Fakhoury with ONE Sotheby’s International Realty.
2. A 3,860-square-foot studio unit at 1331 Brickell Bay Drive sold for $5.225 million. The condo was built in 2004.
3. Another studio unit, at 1000 Brickell Plaza, sold for $4.8 million. The property has 2,826 square feet and was built in 2019.
4. A 3-bedroom, 4.5-bath condo covering 3,415 square feet was sold for $4.168 million. The property at 1331 Brickell Bay Drive was brokered by Florida Capital Realty. The buyer was represented by Scott Shuffield of Berkshire Hathaway HomeServices EWM Realty.
5. Daniel Hertzberg with Coldwell Banker Realty conducted the sale of the $4.050 million condo at 1581 Brickell Ave.. The 4-bedroom, 4.5-bath unit covers 4,130 square feet. Diana Payeras Paz with Avanti Way represented the buyer.
Brickell’s current most expensive residential listing:
1. A penthouse overlooking the Bay is on sale at 1451 Brickell Ave., at a cost of $38.5 million. Covering 11,068 square feet, the property contains 5 bedrooms and 7.5 baths. Built in 2017, it also features a 6-car garage. It is brokered by Douglas Elliman.
MIAMI – The tallest commercial building in the entire state of Florida is coming to Brickell.
Before construction of the new One Brickell City Centre can officially get underway, demolition crews first need to do their work.
The new 1000-foot-tall super tower will be right at the corner of Brickell Avenue and Southeast 7th Street.
It is a collaboration between Swire properties, the same group that created Brickell City Centre, and Miami Dolphins owner Stephen Ross’ Related Companies.
“Today you see what people thought were first-class buildings, corporations no longer want them. They want like what we call the ‘double A’ building that really features all of the latest (amenities),” said Ross.
Ross called the building “iconic.”
He also said it will help bring companies to the area that otherwise might not be interested in South Florida.
“They want to be in the best locations, in the best places with the best buildings, and this is what we’re looking to deliver,” he said.
It’s a concept that Miami Mayor Francis Suarez said will help keep local talent home and bring plenty of benefits to the area.
“The companies bring high-paying jobs, number one,” he said. “Number two, you have construction jobs throughout the process.”
Construction is slated to begin later this year, once demolition is complete.
As for when it will be finished, officials weren’t able to give a clear answer.
Copyright 2023 by WPLG Local10.com – All rights reserved.
Florida continues to be a top destination for investors from all parts of the world.
There are plenty of reasons as to why this is, perhaps the most well-known being the strong population growth, tax-friendly environment, and availability of investment options.
After the pandemic, Florida became a desired place to start a business, thanks in part to the more relaxed Covid restrictions, and being one of the first states that was re-open for business. A total of 318,855 people relocated to Florida in 2022, according to the National Association of Realtors (NAR).
Florida commercial real estate not only benefits from significant capital investments from the US, but also global players from Latin America and Europe. Multinational companies are relocating here, which has a multiplier effect that boosts the local economy.
Thanks to its strategic location and investment in its infrastructure, Florida is an important hub for trade. Port of Miami, Port Everglades, Port Canaveral and Port Jacksonville are among the busiest ports on the East Coast.
Investment in passenger trains has also been a catalyst for growth. Brightline, a privately-owned company, is connecting major Florida cities with its high-speed trains. Recently, Brightline unveiled their new facility at Orlando Airport. Brightline not only connects passengers across the state but also has the potential to create thousands of jobs.
On the technology front, South Florida continues to attract companies and startups.
Before the pandemic, Miami was not on the tech hub radar, but the city today is a rising star and a top destination for many startups thanks to the multicultural population.
On the restaurant and hospitality front, Miami has performed better thanks to an increase in household income and warmer weather. Relaxed COVID-restrictions contributed to a quicker recovery in the restaurant industry. Florida’s hotel construction pipeline has grown for nearly two years. According to CoStar, over 20,000 rooms are currently under construction, representing 4.3% of Florida’s existing supply.
Here are some of the accolades that help explain why businesses invest in the Sunshine State:
– Florida is a tax friendly state; there is no state income tax.
– Florida is the third state in the nation with tax-friendly Opportunity Zones.
– Florida ranks in the top 3 in the nation for job growth, according to the US Bureau of Labor and Statistics.
– Fast Company magazine ranked Florida #1 in the country for innovation.
– Florida is the second “best” state for business, behind Texas, according to Chief Executive magazine.
– U.S. News & World Report ranked Florida #8 nationally in fiscal stability and #8 with its economy.
– Florida ranks among the top five most tax-friendly states for retirees.
– Florida is top 10 in the United States receiving foreign direct investment (FDI).
Thanks to all of this, Florida’s commercial real estate should continue to do well across all sectors and outperform the rest of the US in many fronts.
Fernando Echeverri is a broker specializing in commercial investments properties, and works with Great Properties International on Key Biscayne.
To read his last piece in the Islander, click here.
As South Florida experiences a surge of domestic migration and inbound investment, hundreds of real estate developers, lenders, and investors attended the 2023 Annual Bilzin Sumberg Development Conference in Miami to explore the latest trends driving the regional market.
Panels covered everything from sustainability and transit-oriented development, to condo redevelopment and methods for effectively structuring joint ventures. A candid conversation between Rialto Capital Management CEO Jeff Krasnoff and Bilzin Sumberg’s Real Estate Group Chair, Suzanne Amaducci, delved into the dynamics unfolding in specific asset classes, and what economic uncertainty means for the industry.
The annual gathering brings together policy-makers, planners, developers, lenders, investors, and attorneys from South Florida and beyond who are eager to expand their knowledge of the region’s diverse and complex real estate market.
National Developers Align With Local Partners
One of the clearest paths for out-of-market investors looking to enter the South Florida market is the creation of a joint venture relationship with a locally-based firm. These joint ventures are an opportunity to marry national development and investment expertise with a deep understanding of the subtleties present in the local market.
South Florida-based partners bring relationships with local consultants, public officials, potential investors, and community nonprofits – all of which can be helpful in securing approvals and executing a development.
While the idea of working alongside a local firm may be appealing, structuring the partnership correctly is critical to realizing success, according to Bilzin Sumberg Partner David Resnick, who specializes in negotiating and structuring real estate joint ventures in Florida and nationally.
“Allocating risk during the pre-development phase, navigating capital stack shortfalls, and negotiating exit strategies are among the realities of a joint venture,” said Resnick. “How an entity is conceived and structured from the start can go a long way toward delivering all partners a healthy return on their investment, as well as ensuring all parties have a clear understanding of, and an agreed upon roadmap to resolving, potential issues that may arise later in the partnership.”
“As a litigator with expertise in resolving real estate related disputes, it’s very important to have documents that are specific as well. While you might not want to look at it, I do, and I want to make sure it’s drafted with no room for ambiguity,” added Jake Greenberg, Bilzin Sumberg Real Estate Litigation Partner.
The Aging Condo Conundrum: Opportunities for Redevelopment
Condo redevelopment has become an especially appealing niche for joint ventures. As South Florida’s real estate market has matured and demand for housing intensifies, the region is facing a scarcity of developable land.
Couple that demand with recent legislation addressing condominium safety and budgets which is rendering some older communities ‘functionally obsolete,’ and developers and investors are increasingly pursuing the redevelopment of existing condominiums.
When residents cannot afford to fund special assessments and repairs or decide to monetize the value of their property, it presents an opportunity for South Florida developers to focus on a new, modernized use that will meet demands in today’s market.
“Major assessments combined with a coming prohibition on waiving reserves will be a wakeup call for condos, and we’re seeing many communities go down the path of termination and redevelopment as a method for alleviating costly repairs and realizing the value of their property,” according to Carter McDowell, a Partner in Bilzin Sumberg’s Land Development and Government Relations Practice, who guides clients through the condo redevelopment process.
Navigating a Changing Development Landscape
With South Florida experiencing more domestic migration than any other state, one of the most pressing questions facing local residents is how to secure attainable housing. Developers are looking to satisfy this demand by structuring creative cost models and planning and zoning strategies.
Municipalities are also playing a significant role by ushering in privately-developed housing on publicly-owned land.
To ensure that all parties are benefiting from these public-private partnerships, developers are working with government authorities to improve public transit systems and amenities.
One example is Grove Central, a partnership between Terra and Grass River Property, which is bringing transit-oriented development to Miami’s Coconut Grove neighborhood, adjacent to Miami-Dade County’s Metrorail system and along the new Underline linear park.
As the landscape for underwriting deals and lending is changing, developers are looking for ways to mitigate construction pricing and insurance costs.
Sustainability and resiliency have also been top of mind for new projects, as public and private sectors plan for the future.
“It’s critical that we incorporate climate resilience solutions and sustainable improvements for the neighborhood in order to really make these projects a win-win for the government from a tax and revenue standpoint, and also for the surrounding community and its residents,” said Terra’s CEO David Martin.