Today, the profile I wrote on CABI principal Jacobo Cababie (developer of Everglades on the Bay, Turnberry projects, the Capital at Brickell) was the most popular read on my site. Considering I had written it months ago and didn’t have a direct referrer (website linking to me), I figured maybe something happened to him and people are searching him on Google. Turns out, something did. He died of a massive heart attack. No word on how or whether this tragedy will affect his firm’s numerous major Miami projects–including the Fontainebleau expansion.
Daily Archives: January 28, 2008
Condo Boom Stimulating Class A Office Development
Loretta Cockrum, President of the Foram Group (builders of the Brickell Financial Center) has said that the condo market boom has impacted the demand for Class A office space. Most agree that the condo boom, with all of its problems, does have one major positive aspect: the improvement of Miami’s demographics. For Miami, the status quo means mostly low income. Although not likely to quickly change, the incoming occupancy waves in and around the urban core will bring up income levels so that they are more compatible with declining home prices. This demographic improvement, according to Loretta, has and will continue to result in significant high quality commercial development.
Local Small Business Owners Uninterested in Green
Regarding the “Green” or LEED aspects of the Brickell Financial Center, Loretta stated that local small business owners have been mostly indifferent to green development but larger outside corporations based out cities like Chicago, NYC, and San Francisco have come to expect green buildings. According to her, these types of companies are the ones likely to set up shop and bring jobs and affluence to the local market.
Commercial Market is Looking Up
If large corporations are persuaded to do business in urban Miami, then corporate condo-bundle acquisitions at below prevailing prices (sometimes 30% less) are likely. All in all, Ms. Cockrum and representatives of Cushman and Wakefield agree that the Class A commercial market will remain strong as new inventory comes in 2009. With Class A rates stagnant throughout the 1980’s and 1990’s, along with the lack of new inventory added, and a small office market compared to most other U.S. urban centers, Miami’s Class A market is primed for growth.
More from BoB:
Cash is King
At Friday’s ULI Conference Related Group principal Jorge Perez announced plans for a $1 billion “opportunity” fund for the purpose of bailing out troubled buyers and expanding assets. Mr. Perez emphasized the scarcity of prime land and claims that the next upswing, whenever that may be, will involve significantly higher acquisition prices–prices that will make today’s per square foot values seem minimal in comparison. In a market where cash is king, he aims to demonstrate that his crown shines the brightest.
Conflict of Interest?
When asked if he would use the fund to acquire mortgages and units in Related Group projects, he quickly dispelled the notion. He did not disclose the fund’s other partner. He went on to say that the next 8 months will be the toughest for the market as most of the construction units are delivered. Within the last six months the fall out (contract walk outs) for Related Group projects was hovering at around 3%, now he estimates that number to be at around 20% with matters likely to deteriorate before they get better.
The Fall Out
Closings in his most high end developments continue to remain strong. He went on to say that his lower end loft developments have not been hit hard by fall out, but the middle of the road luxury condos were being affected. He said that it’s important that during these difficult months Condominium Associations remain fully funded. His fund will help do just that.
Condo Associations Running Low on Funds
The media has seemed consumed with the high foreclosure rates and the growing fall out, but the negative effect caused by operational budget deficits has been mostly ignored. The problem is that foreclosure units aren’t paying maintenance. In most cases, when the bank forecloses on a unit, the Association takes a loss as most of the outstanding funds cannot be recovered. In the case of fall out, developers are left footing the bill for operational costs of unfilled units. To make matters worse, owners in troubled straits barely affording to pay their mortgages are also less likely to pay maintenance. This has led to widespread amenity cuts and a furthering of financial woes for both unprepared developers and troubled condominium associations.