Word on the street (or in my ear) is that the penthouse at Setai South Beach, located at 101 20^th Street in Miami Beach, is under contract. Penthouse Villa B encompasses the entire 40^th floor of the high rise and is 6,200 interior sq. ft. with a 4,000 sq. ft. roof terrace and private pool.

While this rumored sale would be newsworthy on its own, the magnitude of this potential sale is staggering. If the unit closes at or above $22.5M (which I heard…), here’s what it would mean:

Real Estate Records Broken in Miami-Dade & Broward Counties

It would be the second highest-priced residential property (condo or single family home/land) ever to be recorded in Miami-Dade and Broward Counties.

If the closed price is at $22.5M, or above, that would mean a price of $3,624 p.s.f., which would beat the previously-reported pre-construction sale at the nearby W South Beach of a one-bedroom direct oceanfront bungalow at $3,348 p.s.f .

The Setai penthouse was purchased in May 2004 for $9.5M and is owned by Andrew and Elyse Barroway of Philadelphia. They seem to have a knack for picking winners when it comes to real estate.

Luxury Miami Beach & Fisher Island Condos Continue to Break Real Estate Records

Despite weaker market conditions for “regular” condominiums, 2007 has been a very good year for luxury condos in Miami Beach and Fisher Island.

Right now, I’m listening to Frank Sinatra sing “It was a very good year.” Indeed it has been so far.

[youtube:http://www.youtube.com/watch?v=cDp8anVM0eU]

Today I went to a presentation by the Canyon Ranch Miami developer. To give you a little background on me and my history of this project, I have been a fan of this project since BEFORE the project was launched over three years ago. The project consists of three towers on OVER 6 acres of oceanfront property which encompasses 1100 linear feet of prime Miami Beach ocean frontage. The 21 story south tower, which are condo residences only, has 143 units, the 16-story center tower, which is the historic Carillon building, has 151 condo-hotel units (floors 2-10) and 80 condo residences (floors 11-16). The north tower, which is the tallest building at 35 storys, has 207 units including 7 direct oceanfront townhomes

Canyon Ranch: More Than Just Real Estate

Since the inception of this project, my focus has been on the real estate side of the project for the obvious reasons. After today’s presentation, I am even more excited about this project and what it brings to Miami Beach because it is SO much more than just another condo or condo-hotel. Canyon Ranch Living Miami Beach, which is dubbed “where the wealthy get healthy”, is more about the amenities and healthy lifestyle than the real estate.

The “Power of Possibility” is their slogan and today I learned exactly what it means. Many people come to “The Ranch” to change their lifestyle, to de-stress, get in shape and learn healthy living habits. I saw this incredibly interesting video where a 54 year-old man went to Canyon Ranch in Tucson, AZ and Lenox, MA for four months. They tested him at the beginning of his stay and determined that two of his arteries were 70% clogged, he had numerous ailments and he said he was taking about 17 Advil a day! The doctors estimated that this 54 year-old man had the body of an 84 year-old. After his four month stay at Canyon Ranch, his arteries showed NO SIGNS of blockage, lost 30 lbs. and doctors estimated that the 54 year-old NOW had the body of a 52 year-old man. Fascinating!

Update: Closings to Begin in Late July

The south tower (condo residences) is estimated to begin closings in late July. The center (Carillon) tower closings are estimated to start in September. The hotel and spa will have a soft opening by year’s end.

Back to Business

The reason why I continue to like this project so much is because throughout Miami and Miami Beach the branded projects like Setai, ICON and W South Beach continue to do well even in today’s market. Comparing other branded projects to Canyon Ranch is not fair because Canyon is so much more than just a brand it is a destination! The south and center (Carillon) towers have been SOLD OUT for about two years! There are re-sales available in south & center towers and the developer has great buys on the remaining units in the north tower. Prices in the north tower are about $1000-$1100 p.s.f. for western exposure, and $1100-$1200 p.s.f. for oceanfront units, which is a very fair buy for direct oceanfront luxury property.

Recently I had a conversation with a client with regard to a condo-hotel unit that he purchased, pre-construction, at a resort which is nearing completion.

The reason for his call, being an investor, was to basically get my opinion on what he should do with his unit. It was clear that his first thought was to put the unit up for re-sale when it closed. As our conversation progressed, I offered him some other options to consider with regard to his investment.

Some of his options are:

1. Price the unit VERY aggressively and to try to line up a buyer prior to closing. Since what he owns is basically an option to purchase, and he has owned that option for more than two years, the profits would be taxed on a long-term capital gains basis. That would allow my client to sell quickly, for a lower price, and limit his exposure and holding costs.
2. Knowing that he has an extremely desirable unit, close on the unit, wait a specified time period (less than one year) and then sell at a much higher price. Since he now took title to the asset, his profit would be taxed on a short-term capital gain basis.
3. Close on the unit, sign a management contract with the hotel operator and put the unit in the hotel pool and sell at a later date, past the one-year period of owning the asset. His profit would then be taxed on a long-term capital gain basis. There are some draw-backs to this option:

a. When he sells the unit, the management contract stays in effect with the unit, so if the new buyer is NOT an investor and doesn’t want the unit in the hotel pool, that unit would not be an option for the new buyer.

b. The hotel operator has the right of first refusal on the unit when the owner decides to sell.

After we went through all of the above, and he was processing the information, he paused and said ‘you know, Kevin you are really acting more as an advisor, and not like a typical salesman, and I’m really impressed’. I responded by saying that I don’t think or operate like a salesman, and it wouldn’t be my objective to ‘set you up’ for a quick commission. My goal is always to serve the client, and being compensated, now or much later when the time is BEST for the client, is the reward for a job well done.

I appreciated his remarks very much. It’s just how I am. But it’s nice when someone notices.

In Miami, Buyers and Sellers Will Have To Rethink Their Strategies. [Miami Herald]

Miami’s Building an Instant City Downtown, will it backfire? [Miami Herald]

Florida lawmakers release tax cut details [Miami Herald]

Maps, Charts & Graphs [PDF] [Miami Herald]

Rumor has it that Villa Magna has decided NOT to move forward, and will be returning deposits.  Some say it’s because they decided not to build, others say it’s because there is a high-roller interested in the land.

Either way, I think the decision not to go forward in an already saturated Brickell condo market is an excellent decision.

One down, how many others not going up?

Villa Magna is/was being developed by Florida East Coast Realty.  The project was to have approximately 750 units in two 55 story towers located at 1201 Brickell Bay Drive.

Prodigy Network sent me an email recently, announcing “exciting news” about the “progress” of the Beach House Designed by Richard Meier in Surfside. My new concerns stem from the fact that during the last two years or so, this project has switched developers twice. In April of 2006 the original developer, Lynx Strategic Development, announced a new partner, Turnberry Developers, a well-known and well-respected residential and commercial developer. Fast forward to my email of last week, yet another TOTALLY different development team, Wavestone & Development Services Solutions is in place and “ready to bring to life the design of one of the masters of modern architecture”. So for me, this email did not offer “exciting news”. Quite the contrary; this email reinforced concerns I already HAD regarding this project, and raised some new ones on top of that.

1. Who are the new developers? What is their track record?

2. What happened to Turnberry? With all the resources available to Turnberry, did they not feel this project was worthwhile, and if so…WHY?

3. Why has it taken three developers to bring this project to where it is today? (two years behind schedule)

4. If pre-sales were so strong, why would it take so many development teams to get this project built?

Regarding #4 above, attached to the email was an inventory list of available units. What surprised me was the low number of units available, as I know this project well and remember in April, 2005 (coincidentally the pinnacle of the recent real estate boom in Miami) bringing clients to the project when it was first announced. Even back at the beginning, this project was, in my opinion, both chaotic and disorganized. So much so that my clients and I put The Beach House on the back burner. We just didn’t get a good feeling and decided not continuing to pursue purchasing at the Beach House. Sometimes you have to go with your gut, even when you can’t put your finger on the concern in a factual way.

I’m not saying that this is a bad or undesirable project, what I am saying is that the history of this project gives me cause for concern. In fact, I hope that “The Third Time’s A Charm”, and the Wavestone Group can deliver the unique design of Meier’s vision. But this situation with The Beach House, highlights the risks of preconstruction development I have addressed in the past. Even with a strong developer involved like Turnberry, markets change, construction costs vary, and projects may never be built. In Florida, it is likely that only the first 10% of the monies paid to the builder are placed in a protected escrow account. Any additional deposits, or pre-payments of upgrades, may be used by the developer for construction costs. If the developer shuts down, some portion of the buyer’s money could be at risk.

That said, even with all the uncertainty of the market and the development teams, Richard Meier’s name and design, combined with a prime oceanfront location, has created a lot of interest among the international elite. I wish them well and will take a fresh look at the project as it moves forward. Everyone is best served when a new construction project finds its way to a satisfactory resolution. I always hope for the best, as a bad market is bad for everyone. But this project will have to prove itself to me, and I will have ten times the questions I might normally have, given its history, before I could comfortably recommend it to my clients.

Flow through units have been “all the rage” in Miami Beach condo floor plans in the last four or five years.  I would describe these units as typically having exposure on the ‘prime’ side of the building and exposure on the street-side as well.  When a building goes up for sale in the pre-construction phase, these are usually the best selling units in the building for a couple of reasons:

1.  they are less expensive $ psf than compared to units which enjoy more exposure on the “prime” side of the building

2.  the developer “highlights” the fact that you have “both views”, thus making you feel like these units are steals compared to the corner units.

APOGEE SOUTH BEACH FLOOR PLATE

The problem with flow-through units is that they look great on paper, but in reality they are not.  Though they do have two exposures, the units tend to be narrow and dark.  Whenever one of my clients thinks something looks really great…on paper..I try to take them to a similar unit in an existing building.  This way they get a chance to see what I already know:  some things look a whole lot better on paper than they do when they are completed.

I was a bit surprised to see how many of the $5M+ condo sales this year were on Fisher Island. Five units went for more than $5M; that is one a month! And if you think that’s pricey, then consider the $250K equity membership you must purchase just to use any of the Fisher Island’s amenities!

The Setai came in with the highest $ psf for non-pre-construction at just over $2300.

And get this—W South Beach sold a 2,700 sq. ft., south-facing PH for a cool $7.3M. Impressive, considering W South Beach just commenced construction and isn’t slated for completion until mid-2009!

Fontainebleau II sold an incredible PH for $6.4M. The view from this 4,500 sq. ft. residence with rooftop Jacuzzi is amazing.

SPECTACULAR MIAMI BEACH REAL ESTATE:

NEW TO MARKET

MIAMI BEACH PENTHOUSES

Il Villaggio – Spectacular PH in one of Miami Beach’s finest and most desirable buildings, Il Villaggio. $17,500,000. This Penthouse is a stellar piece of real estate. The unit has A LOT of millwork, so you better like wood-EVERYTHING!


1500 Ocean Drive- Largest condominium residence ever to hit the Miami Beach real estate market! 11,940 sq. ft. + 9,824 sq. ft. balcony/rooftop; 10 parking spaces (that’s right, 10!). Taxes: $107,246; monthly maintenance: $10,817. $18,500,000. 1500 Ocean Drive was built in 2000 and designed by architect Michael Graves.


Continuum- Tri- level, 40th floor Penthouse in SoFi’s exclusive Continuum I. Breathtaking direct ocean, South Beach and Fisher Island views! 7,400 sq. ft. with 6,000 sq. ft. of terrace with pool. Oh yeah, a paltry $25,000,000 for this pied-a-terre.  [Update: off market]


Continuum- While this is not a TRUE Penthouse, this one rates! This unit was in the BIG hit movie Miami Vice (joke). This condo is the epitome of over the top drama. It is basically a sexy bachelor pad. I love this unit– ALL FANTASY, NO REALITY! $18,000,000…chump change!  [Update: off market]

Setai-This isn’t the TRUE Penthouse in Setai, but it has received a lot of play by throwing that PH “thing” around. PH Villa B is a single-story unit in the uber-fab Setai, which basically is a deluxe hotel room which they “say” commands $25K per night. Madonna and Mariah have slept there; out of Britney’s and Lindsay’s league! I wonder if David Hasselhoff has dined on the master bathroom floor? Hmmmm….

This is a REAL ad!

Developers are increasingly worried that buyers may be trying to cancel their contracts for either legitimate or frivolous reasons. Over the last four years or so, the Miami area has enjoyed a renaissance and real estate boom. During that time, reports claimed that 60,000 to 70,000 condos were planned or under construction. In spite of the recent “bust,” the reality today is that most of these projects have survived and will be delivered in the next 18 months. Many people are realizing, to their horror, that they can’t afford to close or don’t want to.

Under state law, a buyer can cancel a contract if a “material” amendment is made to the condominium documents that “adversely” affects the buyer.

The two most important words in the above sentence are, you guessed it, “material” and “adversely.” What may be “material” or “adverse” to you may not be so to a judge or jury.

The reason why this is Miami’s touchiest subject right now is because developers are concerned that buyers in general don’t want
to close because of the South Florida housing downturn. Since real estate is governed by the law of supply and demand, one can just look up at the Miami skyline and deduce that supply totally exceeds demand and that the majority of the buyers in these towers are speculators. “Oversupply” and the “new South Florida condo market” are the flies in the ointment here that no one counted on changing, and changing so rapidly.

I find that this is really about the speculators who don’t want to keep their units. When these buyers made their initial purchases, they were likely sold a pretty picture on how they wouldn’t have to close, and that the project was going to start a “re-sale” office to help speculators off-load their condos. The developer’s reps projected a enormous gains;basically, a scenario of all of the benefits with none of the risks!

I know a project that had material changes to their docs, which automatically gave buyers the chance to get their money back and rescind the contract. This development basically lost all of its buyers, and now the developer is looking at changing uses to either a rental tower or a hotel.

What should you do if you can’t or don’t want to close on your Miami pre-construction condo? Here is some advice:

1. Check the last date signed on your contract with the developer. When did it become an executed agreement by all parties? By state law, the developer has to deliver the unit within a specified time from the date you signed the contract. If the developer doesn’t finish the project within the time allowed, and you haven’t signed any extensions or new contracts that “re-up,” (make it a new contract with a new date), you may be able to rescind on that fact alone.

1. Call the developer. Tell him that you can’t possibly close on the unit and ask to be released from the agreement. I did this with one of my clients and since he bought a very desirable unit very early in the game, the developer was more than happy to take the condo back because he could make a few hundred thousand more dollars on it. This is a long shot, but worth a try. This developer was very well funded, met his pre-sale requirements, and the project was a huge success. If you feel that your project hasn’t been that successful, this approach is worth a try.

1. Check for any last minute changes to the condo docs and/or operating budget. Right before closings begin, developers will file any last minute changes to the condo docs. There might be “material” change that is “adverse” to the buyer.

1. Hire a good real estate lawyer. I am shocked beyond belief by how many people purchase these sometimes multi-million-dollar condos and never run the deal by their attorney. I make sure my clients read their contract with the developer and have their lawyer review it before they sign it. As I said in my last post, read your condo docs!

Getting out of your contract is NOT going to be easy, so at the end of the day be prepared to close or lose your deposit.