November 24th is the date set for foreclosure auction of the impressive 25-acre assemblage of land and properties which was supposed to become home to the Miami World Center. They are located beginning just one block west of Biscayne Blvd from approximately 7th street to 11th street.I have no doubt that something similar will take shape at this central location but due to the lack of available commercial construction financing, it will likely have to wait a few more years before a project of this magnitude gets the green light. When I first heard of the project in 2008, I was shocked to by the timing of the developers and assumed that they must have had very deep pockets to fund the project almost entirely themselves, which apparently was not the case. Fifth Third Bank is the one foreclosing on $39.3 million in mortgages and I would imagine that the they eventually sell for between $12 -$18 million.
A few weeks ago Lennar Corp, a Miami based home builder and one of the nation’s largest, decided to take a big gamble and purchase a portfolio of over $740,000,000 of distressed real estate assets in show of confidence that the worst of the housing market slump is over. It even cost Lennar a downgrade of its credit rating to do the deal because it had to use so much of its unrestricted cash reserves which credit rating agencies felt had to be reflected in a new rating. In the same light, this week the home builder confidence index was released which also came in surprisingly strong and caused a favorable reaction in the markets. Lennar must have felt very confident to make such a bold move and other builders are apparently more bullish as well but I am not going to speculate if they are right. However, I think it is important news to report.
The most important news in October and perhaps of 2010 relating to the foreclosure market has been the recent freeze of the foreclosure proceedings by major US banks and mortgage servicers due to apparent legal missteps to put it mildly. The banks halting their foreclosures and reviewing their legal processes include Ally Financial (GMAC), JP Morgan Chase, Bank Of America, and more may follow. Continue reading →
Intending to cater to the masses walking along NW 2nd ave during Gallery Walk in Wynwood, Art Walk will be comprised of 35,000 square feet of open air vendors, performers, and artists. I have not heard much about this so it will be interesting to see how it will take shape. However, it is a good idea and will certainly add even more depth and entertainment to the monthly event. It will take place this Saturday, October 9th from 6:00pm to 10:00pm.
According the the Miami Association of Realtors and the Southeast Florida Multiple Listing Service, pending home sales in Miami-Dade County increased 28.6% in September 2010 compared to Sept 2009. This is in a brighter contrast to the national pending home sales figures which showed ONLY and improvement in the month over month figures but were still weaker when compared to 12 months ago. Despite the weak job market in Miami-Dade, the real estate market has reached a price level which has become very attractive to not only those that can afford it locally but especially to outside buyers. Many foreign buyers of Miami real estate come from Canada and Latin America and their economies have either been improving dramatically over the past year or were not as impacted by the financial crisis of 2008. The largest increase in pending home sales came from condominiums which grew by 40% from September 2009. That is dramatic improvement.
In the latest news for distressed real estate sales in the Midtown Miami area, a bankruptcy court will auction off 40 units in the Onyx Condominium. The Onyx Condominium is a luxury high rise in Midtown Area in front of Biscayne Bay located at 665 NE 25th Street. All the units have direct bay views but the project had several delays which left it with cost overruns, some unfinished work, and unsold units. The court has set the price at $7,000,000 which comes out to $121 per square foot, which is based on the 2010 assessed values and surprisingly conservative to be a government assessment. The new owner will have to pay some back taxes and complete the rest of the project. Nevertheless, the price represents a significant discount from market based on two recent sales in the building. One sale in May 2010 went for $234 per square foot and a more recent one in July sold for $180 per square foot. Many of these types of deals were hindered for a period due to previous laws which held new buyers of a significant portion a building liable to previous condo purchasers for many potential issues which were the developer’s responsibility. This inhibited many investors from bidding because they could not calculate their potential liabilities. Slowly but surely the bulk real estate deals in Miami are drying up. To read more on the Onyx bulk sale read the article at Housing Wire.
Biscayne Wall refers to the towering row of skyscrapers in Biscayne Boulevard stretching from 11th ST before the Performing Arts center all the way down to 1st Street. The buildings face the American Airlines Arena and Bayfront Park. Some have complained that the designing of these buildings with parking garages in the rear was flawed, preventing productive development from taking place behind these condominiums and hotels. I agree that the properties could have been designed better but that will not stop this area from continued development. Some of the more notable buildings here are:
10 Museum Park
Everglades on the Bay
Epic Hotel and Residences
Wachovia Financial Center
Even though most of these condo buildings were finished in 2008, the area still seemed barren. Then the renters came and it started to pick up. However, the all important ground floor retail was still eerily vacant. Now, that is changing. 2011 will bring Biscayne Wall to the forefront with heightened attention on this upcoming basketball season and the all star Miami Heat. Recently, we have seen award winning Zuma restaurant open at Epic Hotel, and Amuse Restaurant and Lounge in Marquis. And as mentioned last month, Miss Yipp Restaurant will also be coming to 900 Biscayne soon. It is only a matter of time before the last few retail real estate is rented out to more first class tenants and Bayside Marketplace gets major improvements.
As part of the massive and ambitious project known as Miami Intermodal Center connecting Miami’s somewhat fragmented transportation network, Sky Train has been completed and in operation for Concourse D. Sky Train provides light rail transport for passengers through Miami International Airport. Sky Train is built to transport up to 9000 passengers per hour. Once the under-construction Miami Intermodal Center and Central Station are completed, Sky Train will connect to MIC and the other rail networks, the large Rental Car Center, and other ground transportation. This is all part of a decades long plan which is finally starting come to fruition.
Miami County commissioners voted 8-5 in favor of a tax increase of 14%. Understandably, this is not sitting well with many residents who are demanding pay reductions for government officials or outright removal. Many property owners may not necessarily pay higher taxes, however, because of declines in assessed values which the tax rate is based on. This is not the case for many Homestead property owners, which will likely see an increase in tax liability. Here is a video highlighting this development:
During the months of August and September we have seen more retail real estate being leased up in the Midtown Miami area as well as signs of more to come. It is nice to see that the businesses that are open appear to be well received by the public. There are still some key spaces available so it will be interesting to see what will come next. Here is a list of the some of the establishments that just recently opened and those coming soon:
As reported by the Miami Herald, the old dilapidated hospital on 6th ST and Alton Road just got one step closer to being replaced by a 400,000 sq ft high-end mixed-use complex. In a 6-1 vote Miami Beach commissioners agreed to change the zoning to allow for the development, which is being organized by Crescent Heights. This seems to be a welcome real estate development as the current South Shore Hospital is in very bad shape and an outdated use of that location. Less than two years ago, before the shopping complex at 5th and Alton was built, that area of South Beach was one of the more desolate but will likely become one of the focal points, especially if this new development takes place, which now seems much more likely.
Miami-Dade County commissioners voted yesterday to raise the property tax rate in a way that would affect more than 60% of homestead property owners even though their properties are worth less. There will be another hearing before the budget is ultimately set on October 1st. The County has been struggling to offset the decline in property values and resulting tax revenues and $444 budget shortfall. From an economics perspective it makes sense that the lesser of two evils is to make homestead owners pay more tax since many of them pay very little to begin with. However, it is surprising that this initial vote was passed since homestead owners are so active politically but apparently not more vocal than the proponents of several programs that would have to be cut if more tax revenues are not collected. There have been other proposals to increase tax revenues from property owners such as a fire rescue fee, which is already imposed by some cities such as Coral Gables. As I had pointed out in a previous commentary in June 2009, I highly expected this move to raise the property tax rate to offset the decline in assessed values. It was highly unlikely that the government was going to cover the majority of the potential shortfall by significantly cutting programs as opposed to raising taxes. To read more on this story visit the Miami Herald.
As reported by WPTV, several public hearings are scheduled for an improvement in the current rail transit between Palm Beach and Miami that would transport people directly to the downtown areas. This could be a welcomed project not only providing local jobs but ultimately resulting in a much more efficient transportation network, which is desperately needed. Officials state that it could provide as many as 25,000 permanent jobs although I find that figure overstated and difficult to imagine. The project may cost $2.5 billion and may take two to three years, starting as early as January officials say. As downtown Miami real estate becomes more densely populated, projects such as this will be increasingly necessary to help alleviate the congestion and provide many other benefits.
Despite the exceptionally hot and sticky night, people came out in droves last night to witness the sights and sounds of art walk in Wynwood, which occurs monthly every second Saturday. Everyone at the event seemed to be in great spirits and it is sure to continue to generate buzz in the area as more and more people find out about it. Some galleries were sponsored by liquor companies, some had street bands, and another had artists painting live.
My friend and I were hungry so we left early around 9pm to go eat. Local restaurants were packed and I took the opportunity to try out the newly opened Gigi restaurant. You could tell some of the staff were a little overwhelmed by all the people but we still managed to have a very attentive waiter and the food was great. The menu is very limited but what they do they do well and with very reasonable prices. The industrial design and atmosphere seemed a little cold but that will not stop this establishment from being very successful and a welcome addition to the neighborhood of Midtown. New success stories like Gigi will definitely pique the interest in retail properties of other restaurateurs and companies that are looking for confirmation that there is enough local demand to support their products or services.
Based on a recent interview with Fidel Castro, Cuba may be opening up sooner than people think might be possible. I have already highlighted this trend in a past commentary based on actions we have been seeing primarily from the U.S. as well as a shift in power in Cuba. However, the recent open comment by Castro himself was a real shocker. He basically said that the Cuban model does not work anymore…even for Cuba. It is one thing to think it privately but for him to openly say it to a foreign journalist was very striking despite him supposedly having relinquished control over domestic affairs to his brother. To me this is a sign that things will be opening up much more quickly in the next couple of years.
What will this mean for Miami? For one thing, it will increase traffic in the port and further improve Miami’s status as an international trading city. Miami will also benefit as a natural staging ground for large businesses in Cuba. Over the longer term, growth in Cuba will have very positive general spillover effects for Miami. If per capita wealth increases in Cuba, Miami will likely be the next market they invest and spend their money in. The net effect to Miami real estate will be positive.
As reported by Bloomberg, in a recent news interview with Tom Keene, Karl Case, of the S&P Case-Shiller index, is seeing “a lot of positive stuff” in the latest housing statistics. He says that although we may see a “little” weakness in home prices in the following year due to overhang in the general economy, it seems as though the housing market has begun to stabilize and we are in year 4 of a 5 year correction.
I tend to agree with his views on the overall picture and it is generally consistent with what I am seeing for the real estate market in Miami as well. Personally, I would not be willing to wait and call a specific bottom because that is too difficult but I would be comfortable in saying we have gone through a majority of the correction.
On August 24th in Miami, Bloomberg News correspondent Betty Liu interviewed Jorge Perez, the CEO of The Related Group, one of Florida’s largest luxury condo developers. Perez offered a candid perspective on how he dealt with the housing crisis in Miami and in the United States and what his impressions are of the current market conditions and outlook for the future of Miami real estate. He explains that although these have been two of the toughest years, the market appears to have reached an equilibrium.
We have provided a report of some recent closed sales of condos in art deco buildings in South Beach that occurred in the past 60 days. These are a unique type of property in that they are charming in style and architecturally significant yet lack general amenities of the newer buildings on South Beach, such as a assigned parking, pool, spa, gym, and etc. Nevertheless, they can be very attractive properties for individuals and families looking for a simple vacation spot in one of the hottest beaches in the world. Who needs a car when on vacation in South Beach anyway?
The range in price per square foot was $86 to $386. The average was $229 per square foot or approximately $123k for a 540 square foot apartment . The full report is bellow.
As the national headlines are broadcasting the dismal July home sales report which was 25% lower than July 2009, Florida came out a better with only a 14% decrease in sales in comparison to the same period last year according to data released by the Florida Realtors. Florida is seen as the poster child for the housing bust, yet it faired much better in this latest report than the national average. There was an even greater difference when looking at condo sales, which actually increased in Florida from the prior month by 11%. Keep in mind that Florida had to deal with some of the impact of the Gulf Oil Spill which affected sales of some coastal areas. One can likely attribute the better than average home sales in Florida on heavily discounted prices which are attracting buyers despite weak employment statistics.
We are still feeling the after effects from the expiration of the first time home buyer credit. Unemployment is definitely keeping the national housing picture weak and outweighing the benefits of absurdly low mortgage rates. This will provide more incentives for the Fed to keep interest rates low. In fact, I would not be surprised if the government begins dialogue on possibly creating additional incentives in housing. Not only that, but the Congress is supposed to debate what to do with Fannie and Freddie Mac. The other day, legendary investor Bill Gross suggested nationalizing the entire mortgage industry. As dramatic a statement as that may sound, we are not that far off with current 30 year mortgage rates sponsored by the GSEs at 4.5% in contrast to what private lenders are willing to lend at around 7% for the same product. That is a lot of government intervention already in the system.
Despite this recent news of a decline, the overall picture is much better than it was a year and a half ago and it needs to be put into perspective. This is even more the case with regards to Miami real estate. In fact, the statistics from the south in this latest NAR report showed the least amount of weakness as compared to other regions in the United States. The recovery in housing will likely be a lengthy process but there are a lot of signs that we are working our way through it.
Miss Yip restaurant on Lincoln Road will add another location on 9th ST and Biscayne Blvd in the ground floor retail located under the ultra luxury high rise, 900 Biscayne. Miss Yip will be a welcome addition to the area in Downtown which is also known as the “Biscayne Wall” and is still in the process of leasing up its prime retail spots. Read the article on Miss Yip’s new location here.
The Miami Herald posts another news piece on the transformation of the Design District in its business section. The article mentions how the area was an international destination for furniture design but has now turned ultra chic with its plethora of high end restaurants, art galleries, and luxury shopping.