Daily Archives: November 29, 2006

The Sarnoff Factor

Development
For activist, election victory just a skirmish in density fight

November 29, 2006 By: Oscar Pedro Musibay

he election of activist and attorney Marc Sarnoff to the Miami City Commission is likely to cause trouble for the high-density development that made Mayor Manny Diaz a national celebrity.

Observers say the newly elected commissioner will be a vigorous advocate for smaller projects in low-density, low-rise residential neighborhoods throughout the city. Most agree the Diaz lobby still holds a majority vote on the commission, which means Sarnoff will experience a tough time changing the city’s direction on development.

But Sarnoff did win by capitalizing on his opposition to a Home Depot in Coconut Grove, drawing on growing discontent with fast-paced development and its effect on the quality of life.

Residents of the Grove and the Brickell Avenue corridor turned out for the Nov. 21 runoff in higher numbers than voters in other parts of the district, helping Sarnoff beat out appointed Commissioner Linda Haskins — whom Diaz strongly backed — by a nearly 2-1 margin.

Support in the Grove and other vocal opposition by some neighborhood associations to high-rise projects in neighborhoods like The Roads and Morningside are broadcasting a negative message about the mayor’s and commission’s infill development policies.

That could spell trouble for Related Group’s Mercy Hospital redevelopment, which has triggered some neighborhood opposition, when Sarnoff votes for the first time Dec. 14.

He insists he’s not anti-development, saying “development is good” as long as there is concurrent planning for roads, water, schools and other infrastructure.

Sarnoff has said high rises should not be allowed north of 36th Street because Metrorail and other municipal resources aren’t there. He also said buildings of five stories and up should not be allowed next to single-family homes.

“Look at Coral Way. Right behind Coral Way are [single-family] neighborhoods, and yet there are 36-story buildings being built on Coral Way,” Sarnoff said. “That person that lives two, three, four houses away, and even 10, 15, 20 houses away, no longer has sunshine. I think that’s wrong.”

He said approval of the 15-story Kubik condo project on Biscayne Boulevard between Northeast 55th and 58th street was a “horrible mistake.”

The proposal sparked a lawsuit by residents trying to stop construction of the project in a neighborhood of single-family homes and low-rise commercial. The city responded by passing a height limit in the area.

“I’m pro-smart development,” Sarnoff said. “I think we should continue to develop Miami, and we should do it in a smart way. We need to keep the high rises away from the residential areas and not put pressure upon those residential areas. We need to make sure that we create and occupy green space and we don’t seem to be doing that. High-rise development belongs downtown.”

Patricia Baloyra, head of Broad and Cassel’s real estate practice, said she doesn’t see Sarnoff’s victory scaring off developers and investors.

“I don’t think he was running on a platform of ‘no growth,’ so I don’t think that his victory will dampen interest from investors and developers — for now,” she said.

Sarnoff supports the city’s proposed zoning-in-progress legislation, which would act as a de facto building moratorium during development of Miami 21, a citywide zoning reassessment, according to Baloyra and other real estate attorneys. His support could cause investors to be more cautious.

“Any building moratorium is bound to cause investors and developers to be more circumspect, at least in the short term,” she said. “There is also a scarcity of affordable and work force housing, and a moratorium would of course delay any progress on that important and time-sensitive issue.”

Zoning-in-progress rules are being reviewed by the city and commissioners.

Irela Bague, chairwoman of the advisory Miami River Commission, which is the first stop for developers pursuing projects and rezoning on the river, said Sarnoff could have a big impact on development along the waterway.

The river commission has supported scaling down development density from the mouth toward the more industrial areas upriver.

But city commissioners and the mayor have backed high-rise redevelopment in poorer neighborhoods like East Little Havana and pushed for higher densities near single-family homes and the conversion of marine zoning to mixed-use residential on the river.

They also have stacked the Miami River Commission with like-minded appointees.

The river commission, left with a shrinking pool of marine-zoned properties, modified its infill plan last year to prohibit changes to marine zoning.

“Our infill plan was amended last year to preserve all marine uses,” Bague said. “Anything that goes for a zoning change, from marine to anything else the marine industry is going to fight it. I don’t know if he is going to support that or not.”

Commissioner Tomas Regalado has been on the losing end of several votes approving redevelopment including the Freedom Tower condo and Home Depot projects.

Regalado said he doesn’t know what to expect from Sarnoff but doesn’t expect his new colleague to be as pro-development as the “happy duo,” his reference to Diaz and former City Commissioner Johnny Winton.

Winton was suspended from office following an altercation with police at Miami International Airport last May, and Diaz named former city chief financial officer Haskins to replace him until voters chose a replacement.

“We have the Mercy Hospital project, which is a huge project and which will be a test. In January, we have the streetcar. He is not running out of tests,” Regalado said. “It’s only the vote that counts — not the words but the vote.”

Another signal will be whether Sarnoff votes his mind or defers to commissioners on projects in their districts, an unwritten code in Miami politics.

“On his campaign Web site, in response to the question ‘Can you vote against a commissioner on another district issue?’ Marc Sarnoff answered, ‘Definitely.’ So the resulting intracommission dynamics could prove interesting, considering the general consensus regarding deference to the commissioner of the district,” attorney Baloyra said.

Little Havana activist Yvonne Bayona said Sarnoff may be more sensitive to the residents’ concerns about overdevelopment. But she doesn’t expect him to have a big impact on commission decisions because Commissioners Angel Gonzalez, Joe Sanchez and Michelle Spence-Jones routinely align with Diaz on development, she said.

“The majority is going to rule,” she said. “As far as the commission is concerned, there are more pro-development commissioners.”

Source: http://www.dailybusinessreview.com/news.html?news_id=41182

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North Bay Village Implements Novel Retail Boosting Ordinance

Businesses Wanted
New Ordinance Encourages Ground-Level Retail Along Kennedy Causeway


North Bay Village has big plans for Kennedy Causeway. File photo by Mitchell Zachs/MagicalPhotos.com.

“I remember when there was a bowling alley here.”

By Angie Hargot

Last week the North Bay Village City Commission passed an ordinance prohibiting residential developments on Kennedy Causeway that do not include commercial uses.

The item passed quickly during the Nov. 8 meeting with relatively little deliberation from elected officials or citizens.

“What we’re saying with this ordinance is you can’t build an all-residential building on the causeway anymore,” Mayor Joe Geller said. The plan is to allow only mixed-use buildings in the commercial (CG) district, thus encouraging additional commercial and entertainment businesses to move into North Bay Village. The ordinance is also designed to drive more pedestrian traffic to those businesses, and Geller says the ordinance is intended to keep “entirely residential buildings from taking up space in [the city’s] limited commercial district.”

The meeting was the first for newly elected at-large City Commissioner Reinaldo Trujillo. Trujillo took the spot vacated by now-former Commissioner Tzvi Bogomilsky, who chose not to run for re-election. Trujillo ran unopposed.

Bogomilsky bid a fond farewell to the citizens and the commission, and looked on as staff replaced his name placard with Trujillo’s.

One of Trujillo’s first orders of business was the causeway item. “My understanding is we want commercial business [in the city],” Trujillo said.

Although the change would hardly return development-attractive North Bay Village to the unique quaint character of its past, Commissioner Paul Vogel reminisced about a time when the city had different kinds of businesses within its borders. “I remember when there was a bowling alley here,” he said.

Introduced by newly reappointed Vice Mayor George A. Kane, the Kennedy Causeway item made its way to the commission after approval by the Planning & Zoning Board at a meeting on Aug. 15.

“The way our code is at the moment, we wouldn’t be able to [for example] tear down the Crab House” and replace it with a mixed-use building, Kane explained. The new ordinance also allows businesses located in mixed-use residential buildings to direct their signs toward the street. Previously only stand-alone businesses were allowed to have signs.

“The Lexi development, with two floors of commercial [businesses], is exactly the kind of building we’re looking for,” Geller said. The Lexi is scheduled to open in 2007 together with a handful of publicly accessible shops, including a Starbucks. (Lexi developer Scott Greenwald and his associates were also present at the Nov. 8 meeting.)

Other causeway-related moves conducted at the meeting were heralded by the administration as a response to calls to beautify the thoroughfare that came out of the city’s charrette in June. Although voters did not pass a $2 million bond item slated for landscaping and aesthetic improvements to the causeway in September, other measures are being taken to actualize the results of the charrette – or what the commission sees as citizens’ desire to have the causeway improved.

At the same commission meeting, an item was passed authorizing the expenditure of $68,350 to Iler Planning Group, who hosted the city’s charrette, to devise a “causeway plan, design guidelines and code amendments.”

The allocation of $35,000 was also approved to go to LaRue Planning and Management Services to revise the city’s comprehensive plan as state law requires, following the city’s recently approved Evaluation and Appraisal Report. The state gave the city 18 months to move forward on the comprehensive plan, setting the deadline for plan changes in late 2007. Geller says some incremental changes, such as design guidelines, have already been adopted.

“That doesn’t mean I’m going to approve any high-rise,” he said. “We don’t want it to turn the city into ‘condo-canyon.’”

Source: http://www.miamisunpost.com/fifthststoryfrontpage.htm

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Housing Slump Has Broad Ramifications According to Chairman Bernake

Fed chief sees housing as a risk

By Patrice Hill
THE WASHINGTON TIMES
November 29, 2006

 

Federal Reserve Chairman Ben S. Bernanke said yesterday that a deepening housing slump is the biggest risk looming over the economy, a warning driven home by an industry announcement of the biggest drop in the nation’s median home price on record.
That median price drop of 3.5 percent was recorded by the National Association of Realtors and was led by a 5 percent drop in the Northeast. Futures markets are predicting further drops totaling more than 8 percent on average in the Washington area, Miami, Chicago, Los Angeles and other major cities by the middle of next year.
“The correction in the housing market could turn out to be more severe and widespread than seems most likely at present,” Mr. Bernanke said in a speech to the National Italian American Foundation in New York.
A downturn in prices was “inevitable” after the extraordinary run-up between 2000 and 2005 that raised prices nationally by 60 percent and doubled or tripled home values in Washington and other hot markets on the East and West coasts, he said.
House prices went so high in many areas that they became unaffordable for average buyers, he said, and that “sowed the seeds of the correction” now under way by limiting demand for homes and forcing the need for price cuts and incentives to bring purchasers back into the market.
He suggested the rise in interest rates engineered by the Fed since 2004 was a less important factor precipitating the housing downturn.
While the deceleration in home prices and the housing-led slowdown in the economy so far this year has been welcome among central bankers intent on cooling the fires of inflation, Mr. Bernanke said, further deterioration could threaten the already low 1.6 percent pace of economic growth by undermining consumer confidence and spending, which had gotten a big boost during the housing boom.
“A deeper correction would directly affect economic activity through additional cutbacks in housing starts and through its effects on employment in construction and housing-related industries. More indirectly, it might also impose greater restraint on consumer spending by reducing homeowners’ equity and thus household wealth, and perhaps by affecting consumer confidence.
“Because consumption makes up more than two-thirds of aggregate expenditure, any significant effect on consumer spending arising from further weakness in housing would have important implications for the economy,” he said, although “to date there is little evidence that the weakness in housing markets is spilling over more broadly to consumer spending or aggregate employment.”
Mr. Bernanke took heart that home sales appear to be stabilizing, with the Realtors reporting a slight increase of 0.5 percent in existing-home sales last month, the first in eight months. Big price cuts and incentives also brought about increases in new-home sales during August and September.
But the number of homes on the market for sale keeps rising, and at today’s slow sales pace, will take a long time for the market to absorb, Mr. Bernanke noted. The inventory overhang also will force developers to cut building plans by even more than the 35 percent slash in construction starts they already have ordered this year, and thus will continue to weigh on growth well into next year, he said.
Dramatic cuts in auto production also have been depressing growth, the Fed chairman said, but “outside of the housing and motor vehicle sectors, economic activity has, on balance, been expanding at a solid pace.”
Mr. Bernanke said the Fed continues to be “uncomfortable” with the underlying rate of inflation running at 2.4 percent to 2.7 percent — well above the Fed’s unofficial target range of 1 percent to 2 percent. He blamed higher costs for energy and other raw materials, which are being passed on by businesses, as well as a jump in housing inflation to 4 percent from 2.25 percent last year.
The government’s measure of housing inflation reflects the cost of renting single-family homes rather than the direct costs of owning homes, such as mortgage payments, insurance and taxes — a feature that some economists criticize.
The design of the index has created a statistical enigma: Measured housing inflation has been going up even though home prices are dropping, while it was flat during the years home prices were soaring.
The reported rise in housing inflation “may reflect in part a shift in demand toward rental housing as families judged homeownership to have become less financially attractive of late,” Mr. Bernanke said, but his remarks suggested the Fed is unsure about the reliability of the housing measure.

http://washingtontimes.com/business/20061128-093710-8201r.htm

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Condominium Hotels are a Tricky Business

 

Condo Hotels

By AMY GUNDERSON

Published: November 29, 2006

Imagine a vacation home complete with 500-thread-count linens on plush mattresses, daily maid service, and a 30-treatment spa. Hotels have rolled out condos at an increasing clip over the last several years, tempting buyers with amenities, hassle-free ownership and the potential for regular rental income, all rolled into one sleek package with a concierge desk.

Like the rest of the housing market, however, condo hotels are not immune to the slowdown, and several projects, after splashy sales releases, have quietly curtailed building plans because of sluggish sales and rising construction costs.

The Hard Rock Hotel’s plans for 1,200 condos in Las Vegas ended in February, with developers returning buyers’ 10 percent deposits, while Las Ramblas, a condo hotel development that counted George Clooney as a backer, scrapped its blueprints for more than 4,000 condos and hotel rooms off the Vegas Strip. A handful of condo hotels in the works in Orlando and Clearwater, Fla., have also lost momentum before ground was ever broken.

But even with setbacks like these, hotels continue to build condos on a more modest scale, and convert existing rooms for ownership.

“Offsetting those cancellations is the expansion of the concept into a lot of small marketplaces which aren’t necessarily large resort areas,” said Patrick Ford, president of Lodging Econometrics, a Portsmouth, N.H., hotel industry research firm. “It is spreading away from the major markets and into the secondary and tertiary resorts.”

Of the 168 condo hotel projects in the works, according to Lodging Econometrics, 81 are under construction and 46 are scheduled to start construction over the next 12 months. And the number of projects actually opening for business is on the increase: In the first three-quarters of 2006, a total of 14 condo hotels opened their doors, while in the fourth quarter of this year alone, 15 will open.

Although many new projects are in places like Orlando, Las Vegas, Miami Beach and Fort Lauderdale, an increasing number are popping up in less likely places. There are of course the condo hotels like Nicky Hilton’s Nicky O South Beach on Miami’s Ocean Drive, opening next year, and the Westin St. Maarten Dawn Beach Resort & Spa, opening in December and selling its 99 condos for $895,000 to $2 million. But expect to see more developments in golfing destinations like Arizona and other mountain enclaves. Condo hotels are even popping up near universities and in obscure gaming towns, like West Wendover, Nev.

Regardless of a condo’s location, potential buyers need to look closely at the development, beyond those grand spas, swim-up bars and concierge services.

Look at Comparable Condos

The longer the list of amenities at a hotel, the higher the asking price for units. Jones Lange LaSalle Hotels, a firm that brokers hotel sales, estimates that condo hotel units in areas like Miami, Las Vegas and the California beachfront are nearly twice the price of comparable stand-alone condominiums.

Get Ready to Research

Hotels selling real estate are legally limited in what they can share with potential buyers about hotel rates, expected occupancy and just how much an owner should expect to make from a rental pool. In fact, unless the developer files documentation with the Securities and Exchange Commission — a task that most consider costly and time consuming — he or she cannot reveal anything about the economic workings of the hotel to a potential buyer.

Before buying a one-bedroom condo in the Fontainebleau in Miami Beach last year, Kimberly Hartke looked at other hotels and condo hotels in Miami that were already open for business, and asked for their nightly rates in order to estimate how the Fontainebleau might stack up. She was swayed by the Jerusalem stone tile and soaring ceilings that highlighted the Fontainebleau’s interior, but she was equally impressed with its proximity to the convention center and its siting on the Intracoastal Waterway — an asset during big events like the annual boat show. “With these annual events, I thought the hotel was likely to sell out,” she said, noting that her condo now rents for anywhere from $300 to $800 a night depending on the season.

Understand the Management

Some condo hotels are made up entirely of condos, while others have a dedicated hotel with a separate area for condos. Regardless of the structure, buyers will want to know how the hotel integrates with the condominiums. Before a purchase, it is important to understand everything — from the number of days a buyer may use the unit (some have usage restrictions), to how far in advance he or she might have to book the unit, to how the hotel will maintain common areas like hallways and lobby.

Jim Butler, a lawyer with Jeffer, Mangels, Butler & Marmaro, a Los Angeles firm that represents hotels in structuring condo hotel contracts, also recommends that buyers reserve 4 to 5 percent of their revenues each year for incidental expenses.

 

Don’t Expect to Make a Profit

The prospect of rental income, and the fact that owners do not have to worry about finding a property manager, is no doubt attractive, but turning a profit may very well be an unattainable goal, according to Dante Alexander, chief executive of the National Condo Owners Association. “Most should not expect to make a profit even with full participation in the rental program,” Mr. Alexander said. “The average condo hotel will generate $7,500 a year but cost you $12,000 a year.” While a unit might rent out for $500 a night, remember that the hotel takes a large slice of that (typically at least 50 percent) and owners still need to pay real estate taxes, homeowner association dues and the mortgage.

Source:

http://www.nytimes.com/2006/11/29/realestate/greathomes/29GH-home.html?_r=1&adxnnl=1&adxnnlx=1164814937-3+XAewPqsYxZPbKAO282rA&oref=slogin

 

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