Vacant waterfront property is nearly extinct. This is causing developers to target older properties, buy out the current owners at premium prices, and then tear it down to replace it with a new luxury tower. This process is also known as condo termination.
That was the strategy adopted by the Russian developer and businessman Vladislav Doronin, chairman, and CEO of the real estate firm OKO Group, with their newest plans involving a 47-story luxury tower, Una, in partnership with investor Cain International. Una will house 135 residents. Each unit has its private elevator entrance, and they range in square footage from 1,100 to 4,786. Construction is set to finish in 2021.
While sales of luxury condos have surged, the supply still surpasses demand by quite a significant amount. According to the 2018 EWM Realty International Annual Market report, the current inventory of available luxury properties showed 40.8 months. While indeed a decrease from the previous year, the excess of stock is still far above the desired six to nine month of inventory desired of a healthy market.
“If you have confidence in a market — and we have a lot of confidence in Miami — you have to back it with your equity,” said Jonathan Goldstein, CEO of Cain International, “You’re going against the grain a little bit. You’ve got to have the confidence of your convictions. It’s during the times when other [developers] can’t access the marketplace when you can hopefully do the best. But we would not be averse to third-party financing if it becomes available at the right time.
Developers believe Una’s location and timing will help it stand out among other properties. “This is a very established neighborhood, very private and quiet,” Doronin said. “There has been no new construction here for the last ten years. We were lucky to manage to purchase this site. And for the near-future, no one else is going to build here. We won’t have any competitors in South Brickell.”
While the process of finding these types of properties and turning them into something new is very complicated, other developers will soon be turning to this method – especially with the lack of waterfront properties available on the market.
“This kind of development is a thing of the future: It’s actually here now,” said Edgardo Defortuna, president, and CEO of Fortune International Group. “Real estate in Miami is almost a new game now because it’s very very difficult to find a site that is readily available. Developers have to be creative and figure out a way to solve that issue. And this way of developing is a win-win because the old condo owners are making a nice profit on their property.”
Defortuna’s company is currently working on a new project at the previous site of Playa de Varadero, which was built in 1965.