Last month, four local experts stretched their intellectual muscles for Curbed Miami's Friday Open Threads Q&A series. The experts were Felipe Azenha of StreetEasy.com, Vanessa Grout of Douglas Elliman Florida, Asi Cymbal of Cymbal Development, and Jonathan Miller of Miller Samuel.
Tropics of discussion ranged from the casual (like "who was your biggest role model") to the fantastically specific ("should I buy this kinda old condo in Coconut Grove). Then of course, there were the really great, educational questions. Here we present the best questions and answers from the first four installments of Curbed Miami's Friday Open Threads:
Hi Felipe. Why isn't anybody constructing rental product in Wynwood?
Felipe Azenha: Wynwood desperately needs more eyes on the street and density with full time residents. Goldman Properties has recently announced a residential development on the corner of NW2nd Ave and NW 27th Street (NW Corner). I'm not 100% sure if they will be condos or rentals. Wywnood it mostly zoned as T5, meaning you can't build higher than 5 stories. Goldman also has a smaller project for in an existing building located on the north side of the 300 block on NW 26th Street. This project will have retail on the ground floor with loft style apartments on the second and third floors. The project is called Wynwood House and it won't be entry-level priced product either. They expect to get Brickell-like prices and the units will be slightly larger live/work spaces with high ceilings.
There is also the long-stalled Filling Station project which just sold for $9.2 million. Metro 1 Properties will be handling the leasing of this project. FLS Development will invest $11 million to complete the project by the first quarter of 2014, Includes 81 loft apartments and ground-floor retail. Work has already begun.
Due to inadequate sewer and water lines, don't you think it is about time to call a building moratorium in Miami? You do know what happens to our sewage, don't you?
Felipe Azenha: A building moratorium is completely unrealistic. Good development needs to happen in the urban core, not in the suburbs. The impact fees that have been generated in the urban core have been wisked away and sent to develop the suburbs. Impact fees should be invested back into the community where that have been generated and not sent to develop costly infrastructure in the suburbs that serve far fewer people and more costly to maintain . The County should introduce policies that encourage denser developments; we all get a "bigger bang for our buck" . Suburb infrastructure is far more costly to maintain on a per capita basis than infrastructure in the urban core. Vanessa, when will real estate brokers reduce their fees?
Vanessa Grout: Depending on the nature of the transaction, real estate brokerage fees may range from 1-8 percent of the purchase price with all fees negotiable between the client and the brokerage. Because a broker operates on a commission only basis, the broker takes on risk when representing a client, as a lot of time and money are spent during the sales and marketing process. The commission is meant to counteract this risk. Ideally, the level of service, pricing and efficiency generated by the broker should justify the fee paid. If you feel otherwise, the conversation should be had with your broker. When is the right time to develop? Is the risk-reward ratio ever favorable to development given the colossal number of variables that can go 'not as planned'?
Asi Cymbal:There are a ton of variables for development. Financing, supply, demand, construction pricing and duration -- all play a role. Development is a long game. You need to be prepared to sit on a project for a while in case you have to. That speaks to your basis in the deal and your financing. No one loses money in real estate unless you sell at a loss, so make sure you've got the the ability to carry it.
The big money (and risk) in South Florida comes during construction (as opposed to other markets like NY where the big money and risk is up front on acquisition), so you need to pull the construction trigger here very carefully.
The right time to construct is when you have depth and room in the market so that you are leaning into an uptick in the market as far as values increasing, demand is strong and supply is weak, and your biggest cost--construction--is under control and within budget.
Do you have any advice for someone looking to build their own home? It seems as if there is a great opportunity in some transitional neighborhoods to acquire existing homes for the purpose of tearing down and building new (obviously not to do so in a way that destroys a historical property). What are some general issues to consider when looking for a neighborhood to do this type of work in? How do you establish "how much house to build"? Any suggestions or ideas are appreciated.
Jonathan Miller: Hi thanks for asking. Miami has entered a period with falling supply of non-distressed properties and as experience tells us, transitional market locations become the next area of opportunity as core markets become more expensive to develop. While there are concerns about distressed sales as competition, often that housing stock is smaller or a different product than what I think you are proposing. This is tough to answer because there really isn't a formula. The early adopters to transitional locations would probably want to look at a nearby core market to see what is normal property size expecting the buyers in those locations to push into yours as prices in the core market rise first. While per foot prices may be lower in a transitional market, I'd probably focus of what the overall price would be to see whether you think someone would be willing to pay for it and be wary of ppsf as a benchmark so you don't over improve the site. Sorry to be so general in my response. Thanks for your response. For example in some areas like wynwood/edgewater, where there is some decent stock ready for a thoughtful renovation, more often than not there are properties that really could stand to go. In most cases new construction is cheaper than a renovation and with a more predictable outcome of the final product in terms of quality. Just look at what was done at the Rubell Collection for what is possible. I don't understand why there is not more of that type of development in Miami, town home, row house scale. It seems as if the whole new construction focus is either on enormous mansions or 20 story condos, or endless sprawl suburbs. What holds a neighborhood like that back?
Jonathan Miller: I'm not exactly sure - it seems more like a discussion about scale... ie one-off development projects by small investors like yourself versus large scale projects by well known developers. Limited access to financing for small projects and the flood of international buyers who want luxury condos and large single family properties seem to be driving the recovery. Perhaps your observations will take hold as the recovery expands. · Friday Open Threads archive [Curbed Miami]
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