Valuing Climate Risk in the Built Environment

January 29, 2019 – Miami, Florida

Facilitated by Zac Taylor, PhD (Research Fellow, University of Leuven) and Adam Greenfader (Managing Principal, AG&T; chair of Caribbean Council of ULI Southeast Florida/Caribbean) Participants included individuals representing development, insurance, sales, master planning, public sector, legal, and academic perspectives.

 

 

Key Messages

  1. The economics of real estate in South Florida face several medium- and long-term challenges due to climate risk.
  2. Climate risks place pressure on the ability to create sustainable value from real estate in the region, including increasing costs of finance (insurance, investment, property tax), growing cap and op ex, and negative market perceptions.
  3. Proactive local action will be key, but not sufficient, to mitigate these concerns.
  4. Decision-maker education and collaboration, in part through ULI, will be essential to secure regional change.

Thematic Observations

Insurance – Property Rates and Terms

  • Insurance is geared towards the sudden and acute, not the gradual and chronic. Supply of capital for Florida risk is declining and will continue for those who continue to build in risky areas.
  • Risk of losing coverage over medium-term (eg 5-10 year hold period) is increasingly raising concerns about profitability of developer strategy in South Florida.
    • Eventually property owners cannot pass cost of insurance on to consumers/tenants – this will erode asset value.
  • Insurance rate baselines are 15-20% higher post-2017/18/19 underwriting cycle due to historic losses. Rates are cyclical to an extent, but unclear if this pattern will persist in context of growing losses, rising risk because insurers increasingly set rates according to reinsurance investor appetite (see ILS market).
  • Insurance policy terms are changing, and likely to continue, to limit insurer liability for losses. Requires careful scrutiny.

Location Investment Decisions

  • Institutional capital providers increasingly ask developers to address risks through asset-level mitigation.
  • Investors are also asking what community-scale measures are being put in place, in recognition that assets are not independent from broader risk/resilience patterns.

Public Finance

  • Bond ratings agencies increasingly looking at municipal creditworthiness in relation to economic exposure to climate risk (e.g. property tax base security). This may have impact on cost of capital.

Design and Mitigation Considerations

  • Public investments can have negative as much as positive impacts on private property (see Miami Beach road-raising) — this is cost and time intensive work, in part because it is politically contested and in part because of local public sector capacity.
  • Insurers likely to determine how, where development happens. Access to risk models has changed one participant’s understanding of their practice, re: valuation and incorporation of long-term risk reduction principles in design, building code, planning

Collaboration / ULI Opportunities

  • South Florida communities need a collaborative plan to address the economics of built environment climate risk. Without it, insurers and lenders will leave the market, and negative feedback loop (property devaluation) will be faster.

 

 To learn more: uli-selected-to-manage-southeast-florida-regional-climate-compact-project

Join us: Private Equity Forum on Land, Homebuilding & Condo Development

IMN logo2

Adam Greenfader will be speaking at this year’s IMN’s  Annual Real Estate Private Equity Forum on Land, Homebuilding & Condo Development (East), which will return to Miami, FL on April 10-11, 2018. 

 Wednesday, April 11th, at 11:45 am on Product Innovation and the future of Homebuilding. 

The forum, which in its 5th year has become the premier gathering of homebuilders, developers, and capital providers, will once again provide over 250 senior level industry participants with a day and half of panel discussions, keynote addresses, and networking & dealmaking opportunities.

 Focusing on private equity, debt and joint venture financing in the dynamic land, homebuilding & condo development markets, our agenda will examine the latest investment opportunities, strategies and trends that will help carry your business forward in 2018 and beyond.

If you would like to attend the conference,  we can provide you with a 20% discount off the current site rate

https://www.imn.org/real-estate/conference/Land-Homebuilding-East-18/

W Fort Lauderdale – The Residences Investor Opportunity

Own Your Own Floor Before Renovations Begin (Limited Time Only)

W Hotel and Residences

 

 

Be part of the W – Fort Lauderdale.

1. The hotel is located in one of the fastest growing areas in the US

with over 1.5 Billion in Investment.

2. Great opportunity for multiple unit sales before the project begins its renovation.

3. World Class development and management team in place – Related and Starwood.

 

 

W

W Pool 2

W Pool Area

 

 

 

Biltmore Park in Coral Gables: Units Still Available at Construction Prices

Biltmore Park – Coral Gables

Coral Gable, March 2016 – The project is well under construction.  Expected delivery is set for Fall 2017.  Biltmore Park is located walking distance to the Biltmore Hotel and the areas top restaurants and retail. It is a AAA location.

The price point at approximately $600 p/SF is below many of its beach competitors and Brickell/Downtown competitors. Beautiful residences still available.

Here are some of the highlights or click on link for brochure.

Call 305.363.8833 for immediate unit availability and pricing information or contact.

 

Biltmore

Luxury Boutique Building

 

 

Terrace

Expansive Balconies with Nano Folding Doors (Luxury Yacht Style)

 

Bath

Beautiful Decorator Finishings

 

Master

Ample Room Dimensions with 12′ Ceiling Heights.

 

 

 

 

 

 

 

No water element…Crystal Lagoons may be the solution.

Crystal Lagoons

By Ina Cordle, The Real Deal

 

SoLē Mia Miami, the $4 billion planned mixed-use project in North Miami that marks a joint venture between Turnberry Associates and LeFrak, will have South Florida’s first patented “Crystal Lagoon,” The Real Deal has learned. The 10-acre Crystal Lagoon at SoLē Mia represents the first in Miami for Miami-based Crystal Lagoons, a company that touts itself as able to “transform any destination into an idyllic beach paradise.”

Turnberry Associates and LeFrak also have an option to develop a second Crystal Lagoon in the future at the same site — a former landfill — the lagoon company said. SoLē Mia Miami, between Northeast 139th Street and Northeast 151st Streets, is a 183-acre master-planned community located on one of the largest remaining undeveloped parcels in South Florida east of Biscayne Boulevard.

The massive project, zoned for 4,400 residential units, is also expected to feature a dine-in movie theater, high-end bowling and entertainment venue, 37 acres of community parks and recreation, upscale shopping and dining, commercial office space, as well as other amenities. Biscayne Landing languished for many years after an attempt to develop it fell apart early last decade. Developer Michael Swerdlow sold his stake in the mixed-use project to Boca Developers in 2005.

Crystal Lagoons

The company was not able to get the project started before the real estate and financial markets collapsed. Swerdlow helped revive the development in 2012, forming a partnership with LeFrak to build the master-planned project over a 16-year span. LeFrak brought in Turnberry Associates earlier this year. Crystal Lagoons’ technology uses disinfection pulses that allow using up to 100 times less chemicals than swimming pools, and also uses an ultrasonic filtration system that allows using up to 50 times less energy than for conventional filtration systems.

Uri Man, CEO of Crystal Lagoons US Corp. said the technology allows for the construction and maintenance of unlimited-size lagoons. The beachfront and blue water create a venue for swimming, kayaking, paddle boarding, sailing and windsurfing, he said. “We’re revitalizing real estate development. Now, you can create your own location,” Man told TRD. “Our lagoons are really transforming the lifestyle of these communities with access to the beach.” The lagoons at SoLē Mia will be anywhere from six to 12 feet deep, he said.

Crystal Lagoons Miami
Crystal Lagoons Miami Proposed

 

“Our lagoons provide real estate developments with substantial quantifiable benefits such as increases in pricing, sales velocity, higher rents and in many cases the lagoons are being used to transform otherwise non-viable development sites into viable development sites,”

Man said. The first Crystal Lagoon was built 17 years ago in Chile at San Alfonso del Mar. Patented in 160 countries, Crystal Lagoons currently has a portfolio of more than 300 projects in 60 countries worldwide including the United States, Saudi Arabia, Indonesia, Egypt, Singapore, Thailand, Brazil, Mexico, Argentina, Peru, Paraguay, Uruguay and Colombia. The SoLē Mia Miami project follows the lagoon company’s recently announced U.S. projects including partnerships with real estate developers such as Tavistock Development Group in Orlando, Metro Development Group in Tampa, and more projects planned for Texas, Arizona, California, Nevada, and Hawaii. The company said it has 35 projects in negotiation in the United States, valued at $20 billion.

An Unfolding Story: Brickell City Centre

Brickell City Centre

Brickell City Centre boasts some of South Florida’s greatest logistical advantages. Situated above two floors of below-grade retail parking, Brickell City Centre allows an unprecedented ease of street-level traffic flow. Eleven acres are connected by elevated walkways, which span across all corners of the development’s four city blocks, while an onsite Metromover light rail station provides direct transit connections to many of Miami’s favorite destinations.

Gary Nader’s Plan For Condo, Hotel Towers And Museum On Biscayne Boulevard

VgQouzz

 

Former Related Group president Roberto Rocha has teamed with art dealer Gary Nader on a plan to develop a Biscayne Boulevard property owned by Miami Dade College.

The proposal calls for replacing a 2.56-acre surface parking lot owned by MDC at 520 Biscayne Boulevard with a project that includes:

Tower A – 144 condo/hotel units (142,272 rentable sf), 228 luxury residential condo units (450,718 sellable sf)
Tower B – 300 luxury residential condo units (692,100 sellable sf)
Latin American Art Museum (122,902 sf)
Theater (1,600 seat)
Conference Center (29,150 sf)
Nader’s proposal, called ‘Museu’ was unsolicited, and MDC is asking for alternative bids from other developers, due early November. In a May letter, Nader had said that he hoped to begin marketing the project during this year’s Art Basel.

Fernando Romero Enterprise is the architect.

Miami 3Q Sales Report

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MIAMI: Q3 Report Reveals Surging Buyer Demand
by James McClister November 16, 2015

Sales were up, prices were up and homes sold faster, so despite a dip in inventory, it was mostly a banner quarter for Miami, a report from the Miami Association of Realtors recently confirmed.

Residential sales topped 7,800 this quarter, which marks a 2.3 percent increase from the same period last year. Growth can largely be attributed to the 4.1 percent year-over-year jump in single-family transactions – though, condo sales did still inch forward 0.8 percent despite the rise in inventory and pre-construction condo units available.

The strong demand represented in sales translated to price as well in the third quarter. In the single-family sector, median price was pushed up 9.3 percent from the third quarter in 2014 to $273,200 – higher than both the state’s median price of $199,900 and the national median of $229,000. Condo median price also experienced a healthy bump of 4.8 percent.

Prices + Low Mortgage Rates + Diverse Job Market = Consumer Confidence
Since the beginning of the year, several organizations, including rating agency Fitch Ratings, have put forward evidence claiming Miami properties are overvalued. However, according to the National Association of Realtors 2015 Profile of Home Buying Activity of International Clients, the city remains “more affordable” than other global cities, such as London, where the difference in condo price is more than $700,000 – a fact MIAMI 2015 Residential President Christopher Zoller reiterated in a statement accompanying the association’s report.

“Miami real estate remains a bargain compared to other world-class global cities,” he said. “Miami single-family home prices are at 2004 levels, considerably lower than world cities such as New York, London and Hong Kong.”

Zoller attributed a growing consumer confidence to a coupling of prices, low mortgage rates and the area’s diversified job market.

Inventory Issues
The appeal of Miami’s real estate market, particularly its luxury sector, which attracts buyers from around the globe, is becoming more apparent to many homeowners in the city, as active listings were up in the third quarter from 17,480 during the same period last year to 17,837 – a 2 percent increase.

Still, demand in the single-family sector is outpacing both builders and the ambitions of potential sellers. Median days on market has dropped from 45 a year ago to 39, while inventory tumbled 5.4 percent to a 5.1-month supply – still ahead of the national supply.

As mentioned above, the supply of available condos in Miami has surged this year, a trend that continued in the third quarter, as active listings went up 6.3 percent year-over-year to an 8.7-month supply. But demand in the sector has failed to keep up. Median days on market for condos climbed 5.3 percent from the same period last year to 60.

– See more at: http://miamiagentmagazine.com/miami-q3-report-reveals-surging-buyer-demand/?utm_source=hootsuite#sthash.ne41KqQV.dpuf

Is Miami real estate at or nearing its peak ?

Faena_Balcony

By Erik Bojnansky, The Real Deal 

Most of Miami’s real estate sectors are at or near their peak, according to a national economist who spoke at CREW-Miami’s Economic Outlook luncheon held at the Four Seasons Hotel Miami on Tuesday.

Hugh Kelly, a clinical professor at New York University’s Schack Institute of Real Estate and a member of the Counselors of Real Estate, said that while most real estate sectors across the country are poised for expansion, there are local markets that have already seen explosive growth, such as Miami, and “it’s time to play defense.”

Current data suggests that there’s still room for the office market to grow in Miami, he said. But the data also claims that the hotel and apartment sectors in Miami are at their peak, Kelly said. Miami’s industrial and retail sectors, meanwhile, are coming close to the peak.

“It’s time to start thinking about how to preserve those gains and how to monetize those gains. Is it a sell strategy or a hold strategy? Is it a chance, if you are going to acquire, to make sure you buy based on existing cash flow rather than on future appreciation?” Kelly said. “Those are ways to think defensively about where you stand in the cycle and make the cycle run in your favor rather than react to the cycle as it turns.”

Most trends, on the other hand, appear to favor Miami in the long haul, Kelly added. For one thing, Miami is what Kelly calls a “24-hour city”— places that tend to be very beneficial for long-term real estate investors. The financial markets are also going through a period of volatility, which will likely increase the flow of cash toward real estate as a “safe haven.”

“In a lot of ways that is why gateway cities do so well in terms of foreign capital,” Kelly said.

However, rising interest rates, capital rates, and increases in regulations have contributed to the overall deceleration of international capital flows, Kelly added. This will cause some “marginal deals” to fall apart nationally, he said. Incidentally, Kelly doesn’t blame the rise of capital rates on the Federal Reserve finally increasing interest rates. “It’s because the pool of capital is very deep but not limitless,” Kelly said.

Overall, a knowledgeable investor who “stays awake” and knows when to play offensively or defensively will do fine in the national real estate market, Kelly said. He also doesn’t foresee a major correction in most hot real estate markets, except for places that are really saturated and overpriced like Manhattan.

“If you are building 5,000 apartment units that need to have buyers at $10 million and up, even in New York the market is a little thinner,” Kelly said.

But is Miami overbuilt and overpriced? And will it be hit by the devaluation of foreign currency against the U.S. dollar? After all, it was foreign currency that helped fuel Miami’s rebound that followed the great recession. When asked that question by Britt Rosen of Appraisal Services, Inc., Kelly, whose speech mainly focused on national trends, admitted he wasn’t sure. “You don’t come into a city pretending to know more than the people who live there,” Kelly said. He then quoted from his old high school history teacher, a marine captain: “Remember what an expert is: a loud mouth far from home.”

Rosen believes that Miami is heading for a price correction. With foreign currencies continuing to drop, it’s only a matter of time before some South American investors sell their units for below market price, he reasoned. Plus, there’s a lot of new residential units being built. “I think we’re going into an oversupply market residentially,” he said.

But Cristina Arana Lumpkin, an attorney with Bilzin Sumberg and president of CREW-Miami, is more optimistic.

“There are two ways of looking at it. You could look at the devaluation of Latin American currencies as being negative, but you can also look at people living in those countries where their currency is being devalued and they still need a safe haven,” Lumpkin said.

“And Miami has operated as a safe haven for Latin America for a long time now and will probably continue to do so in the near future,” she said. “In difficult times… safe havens are more about the preservation of capital than the return of capital.”

 

Transforming Cities through Art and Culture

red lips

 

By Leslie Braunstein, ULI Magazine

Art and expressions of culture can no longer be considered pricey or optional additions to major real estate projects. “Culture is the new currency,” stated Shaheen Sadeghi, president and CEO, LAB Holding, at a 2015 ULI Fall Meeting opening general session. “It’s the way you think and interact with your community.” Jessica Goldman Srebnick, CEO of Miami-based Goldman Properties, added, “Art is a game-changer.”

Srebnick’s late father, Tony Goldman, “saw things that other people don’t see,” she explained. “We always integrate art into our projects. Why surround yourself with sterility when you can surround yourself with something fascinating? As developers, we have the largest canvases in the world.”

For the last four decades, Goldman Properties has used community-based public art as a springboard for neighborhood revitalization, transforming some of the East Coast’s most downtrodden urban areas into iconic destinations that have skyrocketed in value. After rebuilding much of Greene Street in New York City’s SoHo district, Goldman moved into Miami Beach in 1986, quickly acquiring 18 deteriorating art deco buildings along Ocean Drive. Now, of course, this South Beach strip is a world-class cultural, recreational, and tourist magnet.

More recently, the company has taken on another challenge: acquiring about 20 run-down single-story commercial buildings in the dying industrial Miami neighborhood called Wynwood. It was there, said Srebnick, that her father would implement many of the lessons learned throughout his career. Before redeveloping and leasing a single structure, the company invited a group of the world’s leading graffiti artists to paint the backs of their newly acquired buildings. These modern works of art—open to the public and illuminated at night—became the Wynwood Walls, “the world’s largest outdoor street museum,” attracting up to 15,000 people per day.

One of the lessons learned by Goldman is the evolution of a new live/work/play neighborhood. It starts with the “play” element, often in the form of restaurants. Greene Street Café in New York, Trust in Philadelphia, and Wish and Lucky in Miami Beach all proved that “people will come to a great restaurant even if it’s in a crappy neighborhood.” So Goldman proceeded to lease space to a new restaurant, Wynwood Kitchen and Bar.

The next step, Srebnick went on, is work. “Dad said we should never give in to fear, so we have always been the first to jump into the pool,” she explained. “Curation is important; we wanted differentiated and creative office users.” To obtain an anchor tenant in Wynwood, Goldman leased a building for a dollar a year to the Museum of Contemporary Art. Later, they had an artist paint bold black-and-white stripes on an empty building, then leased it to technology sector tenants, realizing a rent increase from $6 per square foot ($65 per sq m) to $35 per square foot ($377 per sq m). A plain garage was given a stunning, futuristic facade. “We believe that Wynwood will become one of the world’s most important neighborhoods for the marriage of public art and architecture,” Srebnick concluded.

Sadeghi engaged the audience of ULI members with music, images, and a variety of provocative questions. “Why do we fear riding in an elevator with another person? What would happen if you let that other person into your life? What if there was a pawnshop where you could sell your bad memories and leave them behind? As developers, we are in the memory-making business; our projects can change people’s lives.”

The California-based speaker went back in history to point out that after World War II, the world had to buy goods from the United States because other major powers were destroyed. Foreign and domestic demand, combined with new technology, spurred the era of mass production, the era of consumption, and the rise of the middle class. TV dinners and canned meat gave rise to fast food and then the drive-through. Everything had to be done faster and cheaper. Americans represent 4.5 percent of the world’s population, Sadeghi pointed out, but consume 25 percent of the world’s goods.

But now Americans are fed up and a major shift is occurring, he continued. Mass culture in the United States is giving way to a plethora of niche subcultures. “It’s about personalization, customization, and localization, not homogenization. We want content in our lives; we want layers of experiences; we want authenticity that cannot be bought.”

So what does this have to do with real estate development? The answer is: everything. “We are stuck in Development 1.0,” Sadeghi noted. “But insanity is doing the same thing over and over again [and expecting different results]. People in the community are now active participants—even coauthors—in our projects.”