MIAMI-The Related Group is reentering the development market this month after four years of sitting on the sidelines. Related Group CEO Jorge Perez will break ground on MyBrickell, a new condo project in Downtown Miami.
Perez led the evolution of downtown nearly a decade ago, from a business and financial hub to a 24-hour city filled with nightlife, condos, restaurants and culture. Now, he’s preparing for the next wave of construction with the first groundbreaking in the district, post crash.
GlobeSt.com caught up with Perez to talk about why now is the right time to break ground and what he will do differently this time around. Perez also discusses his strategy for the next wave of development.
GlobeSt.com: Related has more than 20 new projects in condos, market rate apartments and affordable housing. What signs do you see the time is right to move out so aggressively?
Perez: Out of the 20 jobs, more than 70% are affordable and market rate rentals. The market for both these segments in South Florida is extremely strong. Our affordable jobs are at 100% occupancy and there is an immense need in this sector. On the market rate rental side, South Florida occupancies are over 95% and rents have risen considerably over the last few years. We expect this trend to continue and feel that the multifamily rental market will be very strong over the next decade.
GlobeSt.com: What will you do differently this time around as you resume condo construction in downtown Miami?
Perez: We are requiring much more cash upfront for all our new condo developments. In the two jobs that have already been launched, we are requiring 40% of the total purchase price at construction start and the balance to be paid over the construction period. The high equity requirements should eliminate all speculation, which was the main factor in the collapse of the housing market in 2008 and 2009.
GlobeSt.com: I’ve heard you say you will focus on high performance, value-driven properties in the next wave of new construction. Can you explain that?
Perez: Our new projects in the Brickell market are characterized by high ultra modern, cutting-edge design both in the outside architecture and interior of the units. For MyBrickell, for example,Arquitectonica will be designing the exterior and Karim Rashid will be in charge of the interiors. Similarly in Millecento, Carlos Ott will design the exterior and famed Italian designer Pinifarina, will be in charge of the interiors.
We are doing this at extremely affordable pricing with sales at Millecento starting at $350 per square foot, a price that can be achieved only because we were able to buy the land during the recession and construction prices are still at very reasonable levels. As the market improves, both land and construction will go up and these prices will be impossible to recreate.
GlobeSt.com: What is your financial formula to weed out speculators and assure demand is solid for your new condo projects?
Perez: By requiring our buyers to put over 40% equity in their purchases, we will be weeding out all speculators. We have three types of buyers: those that want to live there full-time; those that want a second home in Miami and; those that are buying, particularly in the Brickell/Downtown area to rent their apartments and keep until the real estate market improves.
GlobeSt.com: What do you see as the biggest challenges in this new round of condo development in Miami?
Perez: The desire of international buyers to purchase in Miami has created a mini-boom, increasing land values to almost the prices realized during the top of the market. Additionally, as more developers announce jobs, construction pricing will also increase. These factors translate into higher prices which could dampened the interest in the market.
GlobeSt.com: Are you concerned about overbuilding?
Perez: Real estate is an imperfect market where people don’t have full knowledge of what others are doing. As a response to these perceived new demands, there could be new supply that exceeds these demands, as has happened repeatedly in the past. We are hoping that we have learned the lessons of the past and that developments are not started until real buyers, with substantial equity, have committed to the jobs.
Categories: Southeast, Multifamily, Residential, Development, Six Questions, Florida, Miami