The South Florida condo market reviving by the North-Easterners
The South Florida condo market is reviving and heavily fueled by North-Easterners. This article by the Daily Business Review takes a deeper look and highlights The Ritz-Carlton Residences, which is now 70% sold.
If New York psychologist Paul Kleinman hadn’t struck quickly to buy a condominium at Aventura’s Mystic Pointe complex for $385,000, he might not have had another chance to finally own a South Florida residence before prices soared.
“We weren’t going to buy anything,” he said. “Then we found a new listing renovated the way we like it. It was priced a little more than we wanted to spend, but we weighed everything and put in an offer.”
Retired New York dermatologist Arthur Mandell, who already owned a Palm Beach County apartment and two units at luxury complex Canyon Ranch Living Miami Beach, wasn’t going to be satisfied until he secured a penthouse unit at Canyon that could accommodate his large contingent of visiting children and grandchildren and had breathtaking ocean views.
While on opposite ends of the pricing spectrum, Kleinman and Mandell represent increasing aggression from Northeastern buyers chasing South Florida residences and condos.
Mandell, an avid art collector who annually attends the Art Basel Miami Beach festival, also needed the extra space at Canyon for his prized pieces.
“We used to put the family up at a hotel, but they would come to our condo and bring their laundry,” Mandell said. “We decided we might as well get a bigger unit so they can live with us” when visiting.
About three-quarters of the buyers at the 580-unit Canyon Ranch, which in 2009 — a year after it opened — was taken over by a Lehman Brothers subsidiary through a deed in lieu of foreclosure, come from the Northeast. They also were crucial to the turnaround of the former 2700 North Ocean building, a Daniel Catalfumo project that has been rebranded as the Ritz-Carlton Residences, Singer Island following developer Lionheart Capital’s takeover in 2010.
Additionally, the Northeast is playing a big role in South Florida’s suddenly competitive pre-construction market, most notably with the Mansions at Acqualina in Sunny Isles Beach.
Low Interest Rates
A few years removed from the bottom of the recession and real estate downturn, with housing prices in the region rising in nearly every category, purchasers from the Northeast realize the window to grab a vacation or retirement home before the next significant price run-up is quickly closing.
In the latest housing sales report released last month, median condo and home prices rose in Miami-Dade, Broward and Palm Beach counties in the year ended July 2012.
“Everybody wants a piece of Florida,” according to broker Ken Golden, director of broker development at RelatedISG International Realty. The partnership between the Related Group and International Sales Group opened a New York office three months ago specifically to target city residents looking for a second home in the Sunshine State.
Since opening, RelatedISG’s New York office has been “inundated” with brokers and buyers who want to acquire residences in South Florida, he said.
“It’s not all about the ultra-rich,” said Golden, who represented Kleinman in his Mystic Pointe purchase. Some of “these people want to get affordable places at price points between $200,000 and $500,000.”
Pricing is a key consideration, but low interest rates are equally as important for noncash buyers like Kleinman. The Mystic Point unit that Kleinman is set to close on this week is approved for a bank loan at a 3.63 percent rate.
“Paul saw that the market is turning around and wanted to grab a piece before it did,” Golden said.The local market has been carried for many years by international investors, particularly Latin Americans, but that pool is not limitless. Even powerhouses like Brazil, whose residents gobbled up South Florida condos during the recession individually and through bulk transactions, are experiencing an economic slowdown. Brazil’s central bank on Wednesday cut interest rates to historically low levels with hopes of boosting the nation’s sagging economy.
Sellers of existing homes in South Florida and developers of new projects looking for pre-construction commitments are counting on Northeastern buyers to fill the potential void. The early signs are promising.
Without snowbirds, Canyon Ranch might still be languishing like it was when the Lehman subsidiary took control of its unsold inventory three years ago.
When builder WSG Development launched pre-construction sales at the complex in the middle of last decade’s real estate boom, some potential purchasers were turned off by the exorbitant asking prices, according to Canyon sales director Michael Sadov, director of operations at Aventura-based Pordes Residential.
Since the Lehman takeover, “the same buyers realized they could buy at a 30-to-40 percent discount” from pre-construction prices, Sadov said. Only 14 units remain unsold from the original 580.
“The property came to life,” he said. “Everybody in New York considers Miami the sixth borough, an extension of New York City.”
Like Canyon, the Ritz-Carlton Residences experienced a significant momentum shift under new ownership.
The twin tower, 27-story luxury complex has had a surge in interest in the last six months, according to Carolyn Block Ellert, co-owner of Fort Lauderdale-based Meridian Investment Group, which markets units at the 242-unit Ritz. About 70 percent of the units have been sold.
Block Ellert estimates the volume of sales to Northeastern buyers increased more than 20 percent in the last year to represent more than 26 percent of the current buying pool. Unit prices range from $700,000 to more than $10 million.
Snowbirds “recognize the fact that inventory is down, so the opportunities to buy something beautiful before potential price increases” are dwindling, Block Ellert said.
The same group is helping developer Trump Group’s 79-unit Mansions at Acqualina get a jump on the competition in Sunny Isles Beach, where developers have been feverishly acquiring oceanfront sites and planning high-end residential projects.
More than 40 percent of pre-sold units at the Mansions, where construction started last month, went to Northeastern buyers.
Without advertising in that market, Trump generated nearly $300 million in pre-construction sales since launching in March, according to company president Michael Goldstein. The project is scheduled for a first quarter 2015 completion.
“The market has completely changed,” Goldstein said. “Foreign buyers don’t like to spend a lot of money for a unit they use four weeks a year. The buyers coming here will use the unit for four-to-six months, which is more” geared toward domestic buyers.
Some Northeasterners, like Mandell and Kleinman, do not fit the typical snowbird profile. They are looking to spend more time in South Florida than just the winter months, which makes buying residences more desirable than short-term rentals or timeshares.
Both say they plan to eventually use their new purchases as permanent homes even if they keep their New York properties.
“We’re not really snowbirds,” said Mandell, who interned at Jackson Memorial Hospital in the 1950s before returning to New York to finish his residency. “We like South Florida in the summer, too.”
Kleinman expects to retire in the next two or three years and settle at Mystic Pointe, where his father used to own a unit.
“We’re looking forward to moving down there,” he said, “and spending more quality time outside.”