🥂 Top-Shelf Tear Downs

Happy Friday, Highest & Best! Today we’re talking plans — the best-laid, changed and optimistic kind.

Here’s the play list:

💵 New York billionaire pays top-dollar for unsafe condos

🤗 Miami’s courting Airbnb landlords

🚫 No takers yet for Brickell’s planned office towers

🏫 School shortage hindering Miami’s growth?

🌴 Not your Seinfeld’s Boca Raton

Let’s get to it!

NYC Developer Sees Value in Termite-Infested Miami Building

Most people evacuated from their structurally unsafe condo building don’t get New York billionaires lining up to buy their old apartments.

But unit owners at Majestic Isle Condominium aren’t most people. Because their 64-year old waterfront building — on an island off Miami —sits on a tantalizing development site, in the nation’s most hyper luxury real estate market.

This week, New York developer Harry Macklowe, together with Miami’s Related Group, purchased 14 condos in this North Bay Village building for a combined $7.91 million, according to property intel site Vizzda. That comes out to $565,035 per apartment — or 33% more than the median condo price on the island last quarter.

Pretty good deal considering the building has termite damage, sagging floors, and, at one point, partially collapsed ceilings in several units.

Last year, local officials declared the three-story property unsafe to live in and ordered the evacuation of all its residents.

Macklowe, the 87-year old New York developer whose projects include a skyscraper on Manhattan’s Billionaires’ Row, teamed up with Miami’s most prolific condo developer, Related Group, to acquire individual units at the low- slung, desolate condo building. After this week’s purchase, the firms now own 20 of the property’s 36 condos, Vizzda reported.

Neither Macklowe nor Related responded to requests for comment on their plans for the Majestic Isle site, at 7946 East Drive. I’m gonna go out on a limb and guess they’re aiming to buy out remaining condo owners, raze the property, and build something fancy and expensive in its place.

Macklowe, a relative newcomer to Florida development, has been buying up other parcels in North Bay Village, an island between Miami and Miami Beach. Last year, his firm and Related acquired the the Biscayne Sea Club for $47.7 million.

⏪ Catch up on recent Highest & Best issues:

• Blackstone Shops Florida, May 3, 2024

• No Apocalypse Now, April 26, 2024

• Lux, Loss and Leasing, April 20, 2024

Towers of Transience

🧐 How’s this for a real estate stat: Half of all condos being planned or developed in Miami are…..designed to become Airbnb rentals?

🏗 There are 20,613 condos under development in Miami, Miami Beach, and the islands in between, according to a new report by brokerage ISG World. Of those, 10,335 will be short-term rental friendly — meaning they’ll be smaller, come furnished, and their buyers can list them for rent, without restrictions, on home-sharing websites like Airbnb.

🤔 What this means: Half of Miami’s new condo owners will be future Airbnb landlords. And Miami hotels could face competition in coming years, from all those new condos that get listed as short-term rentals for tourists.

🏨 Small condos that can be rented out as hotel rooms have proven to be a popular investment in recent years as buyers, from places like Latin America and elsewhere in the U.S., seek access to a slice of Miami’s real estate market at lower price points.

📈 And there’s still more coming: 

🏗 Just last month, Miami’s Alta Developers did an about-face on a planned rental apartment building in Coral Gables…and decided to build Airbnb-ready condos instead.

The planned 12-story project, called Cassia, will include 174 condos, of between one and three bedrooms, ranging from 662 square feet to 1,439 square feet, the Real Deal reported. Prices will start in the $700,000s and go up to about $1.8 million. The condos will be furnished by RH, the retailer previously known as Restoration Hardware.

🏗 Developer Henry Pino is buying a Rodeway Inn in South Miami for as much as $19 million and is planning to redevelop it into a 310-unit Airbnb-friendly condo project, the Real Deal reported yesterday. The plan is for a 15-story building, with condo prices ranging from $550,000 to $890,000.

Miami’s Future Office Tenants Have Commitment Issues

🏗 There’s nearly 3 million square feet of new office space being planned for Miami’s Brickell neighborhood. And so far, not a single tenant has shown interest in signing a lease.

📝 Pre-leasing — the act of getting tenants to commit to a future building before a shovel hits the ground — is a must for developers seeking financing for their project. Lenders typically require signed tenant commitments for at least 30% of a planned office (a sign of viability) before committing funds toward its construction, the Real Deal reported this week.

🚨 The absence of any leases for Miami’s biggest planned skyscrapers puts into question whether they will even be built, the paper said.

🚫 Out-of-town firms aren’t seeking offices in Miami like they used to, so the volume of leasing declined in the first three months of this year as compared to a year ago, according to brokerage CBRE. Much of the space leased this year was claimed by firms already in the city — suggesting a smaller pool of takers now than two years ago, when corporate relocations were more robust.

🧱The not-yet-built towers seeking tenants include: One Brickell City Centre, (to be Florida’s largest office); Santander Tower; and 848 Brickell, whose lux tenant search we wrote about here. 

Billionaire Sternlicht: Miami Growth “Hamstrung” by Schools

Billionaire Barry Sternlicht says a shortage of schools is hindering Miami’s ability to lure new residents.

While Miami’s growth in wealth and population is far from over, it’s slower than it should be because there aren’t enough schools to accommodate it, Sternlicht, chairman and CEO of Starwood Capital Group, said in a Bloomberg Television interview.

“There are a lot of companies that would move down if they could get their employees’ kids into schools, which is impossible,” said Sternlicht, who moved his own firm’s headquarters from Connecticut to Miami Beach in 2018.

Schools have become a sore point for the thousands who’ve moved to Miami in recent years, Bloomberg reported. Waiting lists for a handful of elite private institutions grow ever longer, and efforts to lure new schools to the area have so far been unsuccessful.

Perhaps Sternlicht has identified a source of Miami’s office leasing slowdown (see above). New idea: build a school in each skyscraper base?

That said, Sternlicht too has had a brush with office misfortune in the region. Last month, Starwood sold a four-building portfolio of offices outside Fort Lauderdale for $45M— a big loss from the $82 million that his firm paid to acquire the properties in 2015.

No Longer a Seinfeld Punchline. Boca is…Cool?

The New York Post declared that Boca Raton, my new hometown, is no longer a Seinfeld punchline. In fact, it’s possibly kind of cool.

“Boca Raton is more complex and varied than visitors sometimes glean from its repetitive, gated residential communities, or its old reputation as a retirement town filled with geezers in golf carts,” the Post reported. “Its Atlantic Ocean waterfront now thrives with luxury condo towers, restaurants and private clubs that draw a younger clientele.”

Perhaps it will take a while longer to disassociate the city’s name with the image of “Del Boca Vista,” the fictional retirement community made famous by Seinfeld in the ‘90s, which, frankly, I watched on repeat before moving down from NYC:

That’s it for today!

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