Billions of dollars from foreign investors may propel Miami into the ranks of the world's elite cities.
"They see Miami has all the potential to be at another level in three or five years, and they're paying top dollar. These guys from Asia are grabbing everything."
— condo developer Harvey Hernandez
Even by the standards of the city that put the "over" in overbuilding, the projects announced this year for Miami are colossal:
Swire Properties, a global real estate company based in Hong Kong, unveiled plans for Brickell CitiCentre, a $700-million retail, office, hotel and condo tower project totaling 4.6 million square feet on nine acres off Brickell Avenue in downtown Miami.
Then, Malaysia's largest conglomerate, casino-resort developer Genting Group, paid more than $400 million to secure more than 30 acres on the bayfront for its $3.8-billion Resorts World Miami. The project will include four hotels that total 5,200 rooms; a casino; 1,000 condos; a pool more than three football fields long; and a column-free convention ballroom that will be one of the largest in the nation.
Both developers have such deep pockets that they won't have to worry about the credit markets. And Genting says it will build regardless of how the legislative scrum plays out on casino gambling.
Meanwhile, the construction crane has returned to the city's skyline with an Argentine company's new condo tower. Foreign developers — and projects backed by foreign investors — have emerged in force ["Foreign-Backed Projects," page 44], and more may be in the offing. "There are a lot that have invested — and it's not even public — that are of equal financial strength and stature as Genting and Swire," says a land-use attorney for those two firms, former Miami Beach Mayor Neisen Kasdin, managing shareholder for Akerman Senterfitt's Miami office.
"This is completely different in quality and quantity and depth and staying power than anything we've ever seen before, and it bodes very well for us," says Kasdin. "It's a recognition that Miami has arrived as a major global gateway city."
What a change for a downtown that was ground zero for the real estate recession. Beginning in 2003, developers put up 22,250 condo units in 80 projects downtown, begetting excess inventory, foreclosures, falling prices and
discounted sales. As recently as 2009, it was projected to take a decade to
absorb. Instead, the last of those units will be sold by next year, projects Peter Zalewski, principal of Bal Harbour-based real estate firm Condo Vultures.
Seven of 10 new buyers, says Zalewski, come from abroad, and the wider Miami area is on pace to pass the sales volume at the height of the boom in 2005, according to the Miami Association of Realtors.
A bustling, more densely populated downtown is emerging. Women feel comfortable jogging alone. Parents exit condo lobbies with kids in strollers. Spanish, Portuguese, Russian and German are spoken.
The foreign buyers and investors are responding to multiple draws: The city's location and appeal, a new strength in the arts, the widening of the Panama Canal, a strong market for renting out units, a weak dollar, fears of political developments in home countries and real estate that's cheap relative not only to New York but also to São Paulo. Prolific condo developer Jorge Perez says South Americans "have effectively saved the real estate market."
And they've prompted new building. Zalewski counts eight towers totaling 2,800 units planned for downtown Miami alone. Melo Group, an Argentina family business, has an 18-story, 96-unit condo tower rising in the city's arts district. Another condo developer, Harvey Hernandez, hopes to break ground in the second quarter on Brickell House, a 46-story condo tower he's building with backing from U.S. and foreign investors. He has his eye on foreign buyers. They pay cash and, as is customary back home, put 70% down during construction.
Jobs will be welcome in Miami. Unemployment countywide in September was 11.5% — higher than both state and national averages. Construction employment has fallen by 45% — 25,300 jobs — from the 56,200 who were working in 2007, the market's peak.
Condos aside, direct foreign investment in Miami commercial real estate also has rebounded, hitting $472 million this year. That marks a huge jump from 2010's $16 million, though well off the recent peak of $1.5 billion in 2008, according to Real Capital Analytics, a New York research and consulting firm. Market analysis director Ben Thypin says the $472 million figure is almost certainly understated because the firm tracks only direct commercial investments of more than $2.5 million, not individual condo purchases or investments through conduits. "A lot of people in the industry have been shocked by how less volatile Miami was in the last few years," Thypin says.
Hernandez, a native of Venezuela who has built in Florida for 20 years, says "what you're seeing nowadays is unprecedented." Miami always has drawn foreign investors interested in a condo or two or a single commercial property. "Now what we're seeing is a lot of the tier-one investors," Hernandez says. "They see Miami has all the potential to be at another level in three or five years, and they're paying top dollar. These guys from Asia are grabbing everything."
One of those guys is Tan Sri Lim Kok Thay, 60, executive chairman of Genting, who Forbes reckons is worth $665 million. (In Miami, he goes by the westernized K.T. Lim. Tan Sri is a title awarded to select Malaysians.)