The pandemic and ensuing economic slowdown has prompted some condo owners to post virtual ‘for sale’ signs on their units, even in the toniest enclaves. The result: an uptick in resale activity that poses competition for unsold developer units in new buildings.
That’s the scenario at Merrick Manor in Coral Gables, Marina Palms Yacht Club in North Miami Beach, Residences by Armani Casa and Porsche Design Tower in Sunny Isles Beach, and Palazzo Della Luna and Palazzo Del Sol on Fisher Island.
“Some of the people just need money. They paid cash and they need cash,” said Henry Torres, president of Astor Companies and developer of Merrick Manor. “These owners have lost their jobs or lifestyle since their businesses have closed.”
Some resales are priced 15% to 20% below developer-owned units, said Nadjalisse Rodrigez, a real estate agent for Merrick Manor and Realtor with Berkshire Hathaway HomeServices EWM Realty International. She said, “It’s a result of the pandemic and uncertainty.”
Units are priced to sell fast, said George Helmstetter, partner at Plaza Equity Partners and co-principal of Marina Palms Yacht Club. “There are some owners that are experiencing financial distress and are selling a distressed asset compared to what the market price is. They want to sell in less than the typical time of six-to-nine months. And some buyers are looking for bargains.”
Despite the resale competition, developers are holding firm on their own prices. Gil Dezer, the developer behind the Porsche Design Tower and co-developer of Residences by Armani Casa, said, “I’ve been competing with resales for the last two years [for Porsche]. I am willing to wait.” Some units at Porsche Design Tower have sold for $1 million less than what the original buyer paid two years ago, Dezer said.
Dezer said he also expects to see resales at Armani Casa. Prior to the pandemic, 15 units went under contract. Five are expected to close by late June but others may go back on the market.
“Some of those that planned on closing in cash may have had things change in their country and they may feel uncomfortable taking on a mortgage.”
Fisher Island has seen its fair share of resales since the onset of the pandemic, said Elena Bluntzer, real estate advisor at Bluntzer Group.
“Sellers were optimistic about the market recovering, but after the pandemic they lowered prices. They were more realistic of negotiating with the offers they got, if they got any offers.”
Resales during the pandemic generally brought a 10% discount compared to developer-owned units, Bluntzer said. One resale in Palazzo Della Luna sold for $10 million in June after an original listing price of $14.5 million.
The resale activity may shape real estate development in the long term in South Florida, said Bruce Eichner, developer of the Continuum Miami Beach and founder of the Continuum Company. “The one thing that I’d take from the pandemic is that having a smaller number of units is better.”
He expects luxury condo developers to opt for building projects with 500 units or less. He also expects developers to negotiate more on release prices for units — the minimum price the developer and lender agree each unit will be listed for until the loan is repaid — with their lenders and add a lockout period for buyers. A lockout period would prevent a buyer from reselling a unit for a certain amount of time, such as from 12-to-18 months, Eichner said, minimizing competition with the developer. The practice is not common in Miami.
Some developers have escaped — at least so far. Alirio Torrealba, CEO of MG Developer, the firm behind Biltmore Parc, said none of his buyers have listed resales since the outbreak. In fact, only one resale occurred since the project was completed in 2017, he said, and it sold at a higher price than what the buyer paid.
He credits his success to his project’s Coral Gables location, which has drawn end users rather than investors.
“Neighborhoods like Brickell and along Biscayne, including Edgewater, have an issue with resales because of an oversupply of condos,” Torrealba said.
The resale trend may quickly fade out, Torres said. “There are some desperation sales but that will pass. In two months those deals are going to be gone.”
Bluntzer gives the trend even less time. “We are seeing a huge influx of buyers from New York, Philadelphia, Boston and locals. This whole thing that we’ve gone through has made people rethink their lives.”
Source: Miami Herald
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