It’s not an easy time to be a developer,
even in South Florida, one of the stronger real estate
markets in the country.
Over the past week, we reported on the challenges facing
developer Alirio Torrealba, who is at the center of more
than a dozen lawsuits from lenders; the Magic City’s sinking
skyline; the oversaturated branded condo pipeline (at least
15,000 units underway); and the death of a nearly $200
million condo buyout deal in West Palm Beach.
Torrealba, founder and CEO of MG Developer, is fighting to
hang onto some properties, while admitting defeat on others
(he hired brokers to list other sites in Miami). As interest
rates rose, an oversupply of apartments slowed leasing and
forced a drop in rents. That affected his ability to raise
money, and he failed to line up new debt. Torrealba was the
victim of bad timing, a lesson many developers have learned
during Miami’s busts. But he’s not giving up, and Torrealba
has the support of a number of developers who have called or
texted him, offering words of encouragement and welcoming
him to “the club” of South Florida development.
Farther north, Orlando developer Chuck Whittall’s firm
canceled its contract for a nearly $200 million buyout of a
waterfront co-op building in West Palm Beach. Whittall,
founder and CEO of Unicorp National Developments, terminated
the contract for the 140-unit La Fontana at 2800 North
Flagler Drive, on the eve of his deposit becoming
non-refundable, according to sources. He sought an extension
on the deal. Another buyer will likely step in, but the
co-op board will have to start the notoriously challenging
process all over again.
We also analyzed the branded condo market. Across South
Florida, 66 branded projects are planned, under construction
or recently completed. All developers I spoke to agreed: the
market is oversaturated, with roughly 40 brands in the mix.
(Check out a map of the projects here.)
Hospitality branded projects are typically the easiest sell,
because buyers can physically test out the brand. But there
are only so many hospitality brands to pick from, although
more announcements are expected this year. So developers
have branched outside the box, tapping fashion brands,
luxury car makers, and even watch brands.
As developer Bippy Siegel put it, “the market has been
polluted by brands that don’t have soul.”
Speaking of condo towers… A new report that follows up on
research released last year shows new luxury high-rises are
settling at uneven rates, which could lead to long-term
structural damage and increased maintenance and insurance
costs. This is called differential settlement, which leads
to tilting buildings that often result in major structural
issues — think cracked pipes and facades, uneven driveways
and warped floors.
The new research said this can affect neighboring buildings
as well, and experts suggest that government officials
reexamine the current high-rise permitting process and
consider implementing a moratorium on narrow high-rises.