SFBJ Real Estate Journal: After condo boom, Pérez readies more projects for Related Group – South Florida Business Journal

The Related Group is in the late innings of its massive condominium development cycle, and the company is employing new strategies as it gears up for another wave of projects.

The Miami-based developer, led by billionaire Chairman and CEO Jorge M. Pérez, has delivered 3,790 condo units since 2010, making it one of the busiest builders in the condo boom. By late 2019, Related will have completed the majority of the 2,643 units remaining in its South Florida condo projects in this cycle.

So, that begs the question: What’s next?

The answer shows how much Related has diversified as a developer. During the boom of the early 2000s, the company was mostly known as a condo developer in South Florida. But the condo market often has boom-and-bust periods, and Related was hit hard when the market tanked during the Great Recession.

Its future projects include modest-sized condo towers, micro units, apartments and affordable housing – and they’ll be located not just in South Florida, but in multiple states and other countries. It’s part of the company’s push to diversify its reach in the residential market to reduce its dependence on the condo cycle.

“The key to South Florida is timing,” Pérez said. “We have gotten very good at playing and understanding the cycle. We hit it right on the dot in this market.”

Pérez’s biggest project

Related’s current condo development cycle features well-known brands, eye-catching art, a wide variety of amenities and its biggest project yet.

The four-tower Paraiso project in Miami’s Edgewater is the company’s largest ever, with over 4 million square feet, said Carlos Rosso, president of Related’s condominium division. Located along Biscayne Bay, Paraiso has a resort feel, with multiple pools, tennis courts, a bowling alley, a cinema room and eateries, including a signature restaurant by chef Michael Schwartz. The towers are 97 percent sold.

Pérez said he expects the company to close over $1 billion in condos in 2018.

Rosso said completing Paraiso and closing the units feels much better than the end of the last cycle, when Related completed Icon Brickell and turned it over to lenders.

“It’s great to finish the cycle the right way and prepare for the next one,” he said. “The good thing about this market is it’s not an abrupt stop.”

Ron Shuffield, president and CEO of EWM Realty International, said Related Group’s condos have elevated the profile of Miami on the world stage because of their attractive designs, promotion of the arts and well-recognized brands. The developer has introduced some of the best amenities into its buildings, which caused competing developers to improve their amenities in response, he said.

“Each building is a mini country club – and that wasn’t always the case,” Shuffield said.

There’s an oversupply of condos on the market now, he added, but he expects that to be temporary as sales pick up and fewer projects break ground.

Pérez said this strong cycle was fueled by buyers putting down 50 percent deposits.

“It surprised us we were able to get so many sales with so little leverage,” he said. “In the previous cycle, we had many sales, but everyone was getting 10 or 20 percent deposits. We did 50 percent to protect ourselves from people walking away from contracts, and we were pleased with the results.”

This strategy attracted mostly foreign investors, who often used the condos for second homes or rented them out. Going forward, Related has some projects that it hopes will appeal more to domestic buyers.

The next act

Related won’t go long without a construction crane up somewhere. Pérez said he expects to launch another South Florida condo project soon. However, it won’t be hundreds of luxury units in downtown Miami.

He hopes to commence sales this year for a micro-unit condo in Miami’s urban core – maybe more than one, Pérez said. By building smaller units in attractive neighborhoods, it will make prices more attainable for young people, he added.

Pérez said he recently completed a condo in Brazil with 400-square-foot units – and it proved popular.

“In 400 square feet, you are able to create a space with a bedroom, a small kitchen and a counter where two people can eat,” Pérez said. “The key to this development is, if I have six friends coming to eat dinner or watch TV, where do I take them? So, in micro-unit buildings, we will have great amenities.”

Pérez said a micro unit could sell in the $200,000s. In addition to primary homeowners, that price point could also open it up to investors who can’t afford a $1 million condo on Brickell, he said.

The Related Group and Metro 1 co-own a property in Miami’s Wynwood, called W House, zoned for 182 smaller units, plus office and retail space. It’s also looking for land in Midtown Miami and downtown for a micro-unit project.

“You can live comfortably in 400 or 450 square feet, particularly if they are in neighborhoods where young people want to live,” Rosso said. “People in New York want to have a little place in Wynwood.”

Pompano Beach is another likely location for a Related condo launch this year, Pérez said. The developer has approval for 130 condos at 1112 N. Ocean Blvd. Condos in Pompano Beach sell at a slower pace than in Miami, but that’s OK because it’s a relatively small project in a great location on the beach, he said.

The typical buyer in Pompano Beach is a second-home owner from the northeastern U.S. or Canada, Pérez said. Rosso said many empty-nesters with homes in western Broward County have moved to condos on the beach.

“We are very confident we will be able to sell in that market,” Pérez said.

The company also hopes to acquire beachfront condo development sites on Florida’s west coast – such as Naples, Sarasota or St. Petersburg – for modest-size projects, he added.

Related still owns sites with approvals for large condo buildings at 444 Brickell Ave. and 1400 Biscayne Blvd., where sales for Auberge Miami were halted in 2017. Pérez said the market isn’t strong enough to relaunch sales there yet.

The company is also busy building condos in other countries, such as Argentina, Brazil and Mexico.

“Most of our guys, when the market slows down in Miami, they can take a plane and do a project in Mexico or Buenos Aires,” Rosso said.

Apartments going national

Related’s apartment division has expanded from Miami to Atlanta, and it will soon head west.

Steve Patterson, CEO of Related Development, said his division has completed 1,402 apartments since 2016 and has an additional 2,659 apartments under construction, with delivery expected through 2019.

“The last seven years, we built more for the affluent baby boomer renter,” Patterson said. “Going forward, we will focus more on the millennials, because they are coming into the prime renter age.”

It’s been especially active in Palm Beach County. Patterson said Related Development plans to break ground on 720 apartments at Town Lantana this summer, and on 399 units at Marina Village in West Palm Beach in the second half of 2018.

Related Development is currently seeking approval to build 311 apartments at Las Olas Boulevard and Federal Highway in Fort Lauderdale, and 350 apartments at CityPlace West Palm Beach in partnership with the New York-based Related Cos. Related Development is also partnering with the Allen Morris Co. in negotiations with Coral Gables for an apartment, office and retail project on a city-owned parking garage.

Outside of South Florida, Related Development has apartments in the pipeline in Tampa, St. Petersburg, Maitland and Atlanta. It recently opened an office in Dallas, which will target projects in Phoenix and Las Vegas, Patterson said. He’s looking for markets where household formation is exceeding the rental supply.

“Owning a home is not the American dream anymore,” Patterson said. “The American dream is about independence, both geographic and financial. A lot of people are electing to rent.”

Aside from Patterson’s division, Related is co-developing two apartments projects in Wynwood under the direction of VP Jon Paul Pérez, the eldest son of the CEO. Both the 175-unit Bradley and the 289-unit Wynwood 25 will feature micro-sized apartments and ground-floor retail space.

Jon Paul Pérez said people with smaller apartments will probably want to spend time socializing in common areas, so both Wynwood buildings will have active amenity spaces and social activities. Rock star Lenny Kravitz was hired to oversee entertainment programs at the Bradley.

Addressing home affordability

At the same time the Related Group is building units for wealthy jet-setters, its Related Urban Development Group is constructing South Florida’s largest affordable housing project.

The redevelopment of Liberty Square in one of Miami’s most economically distressed neighborhoods will create over 1,300 new public housing, affordable and workforce units, plus commercial and community buildings. Albert Milo Jr., CEO of RUDG, said national brands have expressed interest in locating there. The area has one of the highest crime rates in South Florida.

“Bringing economic prosperity to the neighborhood is the best way to address crime, and that is what our mixed-income project will do,” Milo said.

RUDG has placed more emphasis on projects that mix affordable housing with workforce housing, which lets developers obtain federal tax credits for the affordable units, while allowing them to charge higher rents on workforce housing units. A conventional bank loan can finance the workforce units, Milo said.

He has four mixed-income projects with a combined 575 units set to break ground in Miami-Dade County this year. In Fort Lauderdale’s Flagler Village, RUDG is seeking approval for the Gallery at FAT Village, with 168 affordable and workforce apartments, plus commercial space.

“As federal and state resources [for affordable housing] continue to dwindle, it will be more and more challenging to produce deals that are 100 percent affordable housing,” Milo said. “Our division has no doubt that mixed income is the wave of the future.”

RUDG also plans to build 87 affordable senior housing units in West Palm Beach, and it’s working on a large affordable housing project in Tampa’s West River area.

A new space for Related

Amid all of Related’s new development initiatives are plans for a new eight-story headquarters in Miami’s Coconut Grove.

The company will eventually move its office to a lot along Tigertail Avenue, Rosso said. It filed plans in 2017 to rezone the property, which is just behind One Park Grove. (Pérez will be moving into One Park Grove, just a few steps from the new office.)

So, a company that prides itself on selling ideal new homes to their clients will finally have a new home of its own.

BY THE NUMBERS: Development by the Related Group

Condo division, since 2010

8: Towers delivered

3,790: Condos delivered

10: Towers to be completed through 2019

2,571: Condos to be delivered through 2019

72: Condos to be delivered after 2019

6,224: Condos sold or presold

$5.64 billion: Value of condos sold or presold

Apartment division, since 2013

4,128: Apartments completed

2,659: Apartments under construction

2,118: Apartments planned

Affordable division, since 2010

26: Projects delivered

3,794: Units delivered

$456 million: Value of projects delivered

Six: Projects to be delivered through 2019

992: Units to be delivered through 2019

$161 million: Value of units to be delivered through 2019

Source: The Related Group

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Rank Company New square feet developed 2016 1 Swire Properties 1.96 million 2 Boca Developers 1.22 million 3 The Related Group 935,000 View This List

Related Group CEO Jorge Pérez reveals what’s next for his company.

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