Buy of the Week 9/8/08

Continuum TH 11

2200 square foot townhouse in the best building in South Beach, The Continuum. I sold two townhouses this year at the Continuum, TH 9 was a raw unit which sold for $2.35m and TH 7 was a beautifully finished unit which I sold for $3.1m. This unit is also professionally decorated with a two car garage and a great side yard. This four level townhouse has great views of Government Cut and Fisher Island and at the asking price of $2.35m is a great value, but there is additional flexibility in this property as the owner is relocating back to Europe and wants to get rid of this responsibility. There is significant additional value that will be added when South Pointe Park an $18m investment will be constructed by the end of the year.

Hedge Funds

Hedge Funds

Wall Street is calling and Miami is responding.

The best value players on Wall Street and internationally are looking to Miami for their investment returns. I currently represent 7 hedge funds: 1 each from Russia, Dubai, Norway and Argentina with the remainder being domestic players. Combined their fund values are over $100 billion. They have collectively dedicated over $250 million to invest into the Miami marketplace.

Some of the deals we are looking at include top hotel/condo players such as Regent and W in Fort Lauderdale as well as Miami-Dade counties. The numbers and returns are interesting. Some of the barriers to pulling the trigger with some of them have been the maintenance costs, but developers are now working with us on that as well.

The condo/hotel route seems to be the one that makes immediate sense to them because it provides a source of income from hotel revenue, which covers their costs and allows them to sit on the property until the market turns. What they are doing is holding their equity position. The exit strategy on this investment is approximately 5 years and most developers are looking to create deals with as low as 10 units, although the average fund is purchasing 20-30 units.

There are those keeping a keen eye on the projects along Biscayne Boulevard as well waiting to see what can be done with entire projects that are in trouble. Those with the deeper pockets are considering doing a hotel or an apartment rental project. However, I would warn that the holding period and gentrification process for this area of town would be closer to a 10 year period, although the entry price would be significantly lower.

If you have the stomach and staying power for this, it could prove very profitable for you.

Warmly,
Michael Valdes
Senior Vice President International Relations

My Date With Russia

I am now on my way to Moscow for 10 days to meet with some of my repeat client base looking to purchase additional properties in Miami as well as the top Russian developer, Mirax Corporation whom I represent exclusively for all their real estate transactions in the United States.

Mirax purchased 13 waterfront townhouses at Aqua on Alison Island as raw units. They subsequently hired renowned interior designers Rene Gonzales and Sam Robin to complete several of the projects and they in turn have repackaged them and resold them as turn key units, down to the linens and silverware back to the elite Russian community for top dollar amounts.

Two units have sold as record breaking sales in Aqua in July, with the top sale reaching over $8m. Now with nine homes left to sell, with the most expensive current unit being $5.9m an interesting equity play arises. Someone can now come in and purchase any of the townhouses for under $6m and have a closed sale comp for $8m, in essence creating $2m in equity.

I will also be meeting with our Sotheby’s real estate affiliate who says his largest buying group has been purchasing in Miami and New York. It is my opinion that the Russian investor who is not chasing the bottom of the market will end up being the winner when the dust settles. They are purchasing quality pieces of real estate in a downward market at a “fair” or “exceptional” price and having the staying power to turn a great profit.

The senior executives of Sotheby’s Auction House/Moscow; UBS Russia and HSBC are also on my schedule to discuss synergies they wish to pursue in this market.

Stay tuned for more information when I get back from this trip on the 13th.

Thanks again!

Michael Valdes
Senior Vice President
SOL Sotheby’s International Realty

Welcome to MyRealEstateRockstar's Blog!

Hello.

Thanks for taking the time to find out about my blog. I wanted to create this page as a way to highlight investment opportunities that exist within the Miami marketplace to a global audience.

I am currently ranked one of the top 10 brokers in Miami Dade County and this is the best year I have ever had because I was able to adapt and concentrate my efforts to where the buyers are. Namely, international money focused primarily in Moscow and London and international hedge funds looking for bulk sales with developers that are in trouble.

The international buyers have been a great niche because they are buying properties in a currency that is much stronger against the dollar and it will serve as a hedge for them if they are paying in cash when our dollar will strengthen (presumably after our next Presidential election). I am also directing them to quality purchases which will have a larger percentile of equity growth in relation to the overall marketplace when the pendulum swings to positive ground again, which by expert accounts should be within the next 2-4 years. For a foreign investor in Miami (and US based real estate investments) it’s a win-win. Buy with stronger currency and have the growth of the dollar and buy quality properties with higher equity growth than the remainder of the market when it returns.

Hedge funds have been another specified area of concentration which has provided great growth. Wall Street had focused on Miami in a big way because of the oversupply of condos that exists. The current saturation rate is 12 years, which is absurd. Miami’s population growth will not justify such a number. What is now happening are hedge funds coming in and purchasing in bulk from developers that are in trouble and in turn getting deals (almost at 50% of value), renting them and comfortably having a holding pattern of 4-6 years and then realizing a great profit.

What I plan to do through this blog is present investment opportunities for the individual investor looking to purchase a single property, a foreign investor looking for a deal on a high end property or a hedge fund looking for a bulk deal.

I am open to your questions to guide you through the process. There are many brokers in Miami, but few with my experience and track record coupled with my experience as an investment banker in New York for Deutsche Bank and UBS for 10 years.

Thanks again and welcome to the site!

Michael Valdes,
Senior Vice President
SOL Sotheby’s International Realty