Archives for posts with tag: Tobacco Road

This past week Miami Today spoke to FA Commercial Advisor’s very own, Fabio Faerman to get his perspective on the booming real estate market in Miami’s downtown area. Faerman divulged some interesting tidbits for investors interested in the future of Brickell.

Take a stroll down the streets of downtown Miami these days and it is easy to see that times are once again changing. While South Florida may have experienced one of the largest busts in the real estate crash years ago, the recovery, particularly that of the Brickell area, may be one of the most rapid in the nation. Several sites are set for demolition and construction cranes have now become the “unofficial bird” of our city. Existing buildings are chipping in, too. Many office buildings have begun pouring millions of dollars into upgrades.

Faerman says that all of this excitement is attracting celebrities, financial advisors and families alike to move downtown and experience life on Miami’s sunny shores. Faerman receives calls from buyers looking to invest in Brickell about one to two times per day.

Brickell_01

The beautiful Brickell skyline

Last year, a buyer purchased a package from Faerman that included the landmark Tobacco Road, River Seafood & Oyster Bar, as well as six parcels on Seventh Street for $12.45 million. With values currently sky-rocketing, Faerman estimates that the same assemblage would be sold for double that amount this year.

Those are prices that buyers these days are more than willing to pay, if the investment properly fits their objectives. For example, this past summer Swire spent $64 million to acquire 700 & 710 Brickell in order to build One Brickell CityCentre, the 80-story gateway to their $1 billion Brickell mega-project. Faerman believes this deal was good for Swire because it gave them the Brickell Avenue frontage that their project needed.

Faerman touted a river-facing site behind Brickell CityCentre that could have that type of value for the right buyer. The 2.52-acre off-market property would give a potential investor the opportunity to create a mixed-use project of up to 1.98 million square feet. The owners are seeking a buyer in the range of $100 million for this site, which Faerman says has, “huge potential.”

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In recent months we have seen that the Greater Downtown Miami has become the epicenter of the recovery in the construction of the new condominium buildings. This creates a demand for land which has intensified enough for the sale of them to produce attractive prices for the sellers.

For the developers the most important number is the incidence on the price per unit of land that can be built. We see in the sales values ​​measured with impressive higher prices that sometimes impress us with the price, but does not really show if the financial analysis is feasible for the project.  The developer needs to invest his monies or his investors monies for a minimum of 4/5 years with the risks associated with the purchase of land, project & design process, construction plans, budgets, construction, sales and closings.

Some of the recently sales transactions of land are the following:

$28.2 Million for Miami Riverfront, 5 ST, Brickell

Potential units:  1,000

Incidence of land per unit: +/- $28,200

– $3 Million for Unika by the Design District Project, Midtown

Potential units: 180

Incidence of land per unit: $17,000

World Center Miami/ Former Miami Arena

Cost of Land: $35 Million

Potential Units:  1,400

Incidence of land per unit: $25,000

Tobacco Road

Cost of Land: $12,250,000

Potential Units: 500

Incidence of land & units: $24,500

– Infinity 2

Cost of Land: $18,500,000

Potential of Units: 582

Incidence of land & units: $27,000

The sellers find themselves divided into those who really understand this equation and sell, or put aside their land at market prices and those who believe that their land can fetch high prices.They do not reflect the reality of the developer or his development risks.  We can see that the average incidence is around 25,000 units but can be higher or lower according to its location and ease of putting together a project with very good views and low cost of implementation.

Our job as investment sales is for the seller to help them understand the financial analysis of the buyer and to reach an arm length transaction where both parties can be satisfied.  Speculating that future sales prices exceed the present value is only a stake a buyer with bad advice would take, the ones that have no experience in the local market or the ones that won the lottery and believe they can develop a project of more than 100 units is as easy or difficult as choosing the 6 number for the lotto.

Fabio F. Faerman

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Picture above: Unika by the Design District Project