Metro Mall building, Mika Mattingly and Yair Levy

Developer and New York investor Yair Levy made his first real estate purchase in South Florida, and he doesn’t plan to stop at one.

Levy’s Time Century Holdings paid $14.5 million for the Metro Mall building, a development site in the heart of downtown Miami’s jewelry district, at 1 Northeast First Street.

Levy plans to renovate the 225,000-square-foot building, according to a press release. The building sits on a 33,750-square-foot corner lot that’s zoned for 810,000 square feet, 774 units and at least 80 stories of development.

Colliers International South Florida’s Mika Mattingly, Gerard Yetming and Linn Ahsberg represented the seller, Metro Mall Limited, which was led by Stanley Goldberg, Judith Jaffe and Joyce Goldberg. Wedad Saad-Anderson of New Capital Realty represented the buyer.

Levy acquired the building’s master lease and 84.2 percent of the land, Mattingly said. It’s now vacant.

“There were a lot of hoops to jump through before [Levy] could even buy it,” she said. “At one point they didn’t think the building could be renovated.”

Mattingly said the property, built in 1926, saw interest from two jewelry groups from New York. Levy plans to renovate it back “to its glory days,” transforming it into a luxury jewelry center.

Levy rose to real estate prominence through several high-profile residential condo conversions in Manhattan, but his real estate empire unraveled during the recession. In 2011, he was permanently banned by the New York state Attorney General’s office from selling condos and co-ops in the state, and has largely stayed under the radar since then.

In recent years, prices for commercial properties in Flagler Street area of downtown Miami have soared, with developer and investor Moishe Mana spending more than $200 million on properties in that area alone.

Four years ago, Leonard Steinberg stunned the brokerage world when he announced he was leaving Douglas Elliman for Compass, then a startup brokerage with just $150 million in its war chest.

“It was a very tumultuous time, because I took an enormous risk on a company that was not known for resale brokerages at all,” Steinberg told The Real Deal‘s E.B. Solomont in a recent studio interview. “I walked away from well over a billion dollars worth of business, so the risk I took was enormous — but I’ve always been one to enjoy a good calculated risk.”

Since then, much has changed for the technology-focused brokerage, which has added numerous well-known names to its roster, expanded in cities across the country and amassed a $2.2 billion valuation following a $450 million investment from SoftBank.

Throughout it all, Steinberg has had to navigate the tricky gray area that comes with being both president of a brokerage firm and one its top-producing agents.

“I’ve learned over time that there have been agents and brokerages that have said, ‘Why would you want to list with Leonard, or why would you want to work at Compass if you have someone in senior management competing against you for the same business?'” Steinberg said. “Pretty much 99 to 100 percent of my business is an existing clientele that has expanded out of existing clientele — so I think it was a very untrue perception that I think requires more clarity.”

To minimize the appearance of any conflict of interest, Steinberg told TRD he is stepping down as president and into a new role at Compass.

“I have no idea how the industry will react, but I do know the agents who I care about most know who I am, know how I conduct myself and will completely understand what that means,” Steinberg said.

To watch Steinberg announce his new role and talk more Compass’ profitability, why new development will always be an important part of the business, and whether Compass is a tech company or brokerage, check out the video above.

Video produced by Jhila Farzaneh

995 Hillsboro Mile and Kishore Mirchandani

A Hillsboro Mile mansion just sold for $14.9 million after being on the market for only a week.

Kishore Mirchandani, who founded a New York company that provided outsourcing for finance and accounting services, and his wife, Anjali, purchased the 13,914 square foot house at 995 Hillsboro Mile for $1,074 per square foot, according to property records.

A company tied to Sharon Gustafson, who bought the home in 2008 for $13.5 million, sold the waterfront property to the Mirchandanis.

Susan Rindley of One Sotheby’s International Realty represented the seller. Chad Whitaker of Whitaker Realty brought the buyers, according to Redfin.

The seven-bedroom home sits on a 1.18-acre lot overlooking the ocean and the Intracoastal Waterway and features a home theater, tennis court, a 10-car garage, library, a billiards room, a wine room, two elevators, and a summer kitchen with a pool and spa. It also can fit a yacht of up to 175 feet long.

Mirchandani founded Outsource Partners International, a professional services firm that provided outsourcing of finance, accounting, and analytics business processes. According to his LinkedIn, he grew the company’s revenues to more than $100 million before it was sold to EXL Service Holdings in 2011.

Hillsboro Beach is known for its stretch of exclusive, pricey homes on Hillsboro Mile. Last year, Patrón Spirits Company CEO Edward Brown paid $20 million for a spec home at 1115 Hillsboro Mile.  Le Palais Royal, a 91,000-square-foot mansion in Hillsboro, was at one point listed for $195 million, but was taken off the market in recent months. 

Bankers and family members lending money to a home for sale (Credit: Pixabay and iStock)

As renters struggle to set aside money each month, companies are coming up with others ways for them secure down payments on homes.

Nearly 40 percent of renters ages 25 to 34 don’t set aside any money each month for a down payment on a home, according to a survey last year by Apartment List. To help address this, startups and established lenders have found ways to provide these young prospective buyers with the funds necessary to secure a mortgage. For example, HomeFundMe, run by lender CMG Financial, allows prospective homebuyers to crowdfund down payments from family members and friends. Startup Loftium supplies up to $50,000 for a down payment if a buyer agrees to rent out one of the rooms in their new home through Airbnb and share the profits.

Other companies, including Unison Agreement Corp. and Landed Inc., offer “shared equity” contracts, which provide funds for down payments if the buyer promises part of the home’s future value to investors like pension funds or foundations, the Wall Street Journal reported. Even banks like Morgan Stanley and Bank of America provide programs that allow young buyers to get a mortgage with nothing down if their parents are willing to put up investment assets as collateral.

Some economists warn, however, that making it easier for buyers to rustle up a down payment compounds the problem of limited housing supply in an already fiercely competitive market. [WSJ] — Kathryn Brenzel

Lebron James and his Brentwood homes (Credit: Keith Allison via Flickr, MLS)

NBA superstar LeBron James never before played for the Los Angeles Lakers, but his announced move to the storied franchise represents something of a homecoming.

The four-time league Most Valuable Player and three-time champion owns two homes in Brentwood, having spent a significant amount of time in L.A. in what has become a popular offseason residence for players around the league.

James made his first foray into L.A. real estate in November 2015, when he paid $21 million for a 9,440-square-foot custom-built mansion in Brentwood.

The purchase came a year after he famously re-signed with his hometown Cleveland Cavaliers, the team he left Miami for in 2010. At the time, there wasn’t much speculation that King James was planning a move to the Lakers any time soon. The home was the site of an incident two years later, when someone spray-painted a racial slur on his front gate.

In August 2015, James sold his Coconut Grove mansion in Miami for $13.4 million, which netted him a $4 million profit.

He sold the the 12,200-square-foot home — originally listed for $17 million — to an LLC controlled by Mayfair in the Grove owner Timo Kipp and wife Nathalia.

James had purchased the six-bedroom home in 2010, when he signed with the Miami Heat.

But he may have telegraphed his pass in December 2017, when he purchased a second Brentwood home for $23 million. That got the rumor mill spinning.

James picked up a two-story mansion much larger than his first home in the neighborhood It spans nearly 16,000 square feet and includes a wine cellar, cigar room, sauna and home theater. The eight-bedroom estate includes reclaimed marble and oak from Spain. TMZ reported last month that James was dropping around $70,000 to add a basketball court — which seems useful — along with an indoor wine tap, and make changes to the home theater and pool.

The purchase made headlines because James was considering opting out of the final year of his contract, which he made official Sunday night when he signed a four-year contract with the Lakers for $154 million.

It was at that Brentwood mansion the night before that he met with Magic Johnson, now president of basketball operations for the franchise, to discuss a possible move to L.A.

James leaves Cleveland behind but he and his family can still return to the area whenever they want. James built a 30,700-square-foot mansion in his hometown of Akron. He purchased the land in 2003, and built the two-story palace around 2007. It has six bedrooms, a two-lane bowling alley, barbershop, and a recording studio. The home is estimated to be worth around $9.2 million.

(Illustration by Chris Koehler)

In 2010, WeWork’s Miguel McKelvey and Adam Neumann were two unknown entrepreneurs scouting buildings for their first co-working space. They set their eyes on a Canal Street property, but when they contacted the landlord, he balked.

Instead, the building’s owner offered a meeting with an acquaintance who, he said, might be interested: Joel Schreiber, an obscure Hasidic real estate investor living in Brooklyn.

“This guy shows up in the meeting, sits down, doesn’t really speak to us, doesn’t shake hands,” McKelvey recalled during a June interview with the NPR podcast “How I Built This.” “These are like Orthodox Jewish guys, you know, wearing the black suit and stuff, so to me as an Oregonian, I don’t really know the world too well. But Adam felt really comfortable with it by then.”

Not long after the meeting was over, Schreiber called the WeWork co-founders. He didn’t have a suitable building, but he had another proposal: He wanted to invest in their company. Neumann and McKelvey hesitated. They already had some money from the recent sale of another co-working venture called Green Desk and wanted to do their own thing.

Joel Schreiber (Credit: Shir Stein)

But Schreiber persisted. “Whatever it takes, I want to be a partner with you,” he said, according to McKelvey. “And so we were like, why not? Let’s throw out a number, and we’ll make it outrageous,” he recalled. “There’s no chance he’ll say yes, but if he does, then hey, we’re fine.”

Neumann and McKelvey reportedly offered Schreiber a third of the company for $15 million, and he accepted. Though McKelvey did not name Schreiber in the podcast, a spokesperson for Schreiber’s firm, Waterbridge Capital, confirmed to The Real Deal that he was WeWork’s first investor, noting that he “provided seed capital to open the first few locations” during its startup phase.

In McKelvey’s telling, the deal was a pivotal moment for what would become the world’s most valuable co-working company. WeWork went on to raise another $6.1 billion over the next seven years and garnered a $20 billion valuation in July 2017. Representatives for the company declined to comment for this story.

Into the spotlight

Now, as WeWork prepares for a rumored blockbuster IPO, its secretive first investor is being thrust into the spotlight. The sudden attention is a big change for Schreiber, who has kept a very low profile within the tight-knit and media-shy community of Brooklyn’s Hasidic property moguls.

Despite his being a key player in several big New York real estate deals — including Williamsburg’s first Apple store and the $481 million trade of the Long Island City office tower One Court Square — finding a photo of Schreiber online is virtually impossible. Even partners who spent years working with him say they know little about the man.

“He likes to be very secretive,” said Ira Zlotowitz, president of the commercial mortgage brokerage Eastern Union Funding, who has helped negotiate debt deals on behalf of Waterbridge. “He’s very below the radar.”

Schreiber, who did not respond to several requests for an interview, would clearly like to keep it that way. One of his allies in the real estate business called TRD last month anonymously, asking what kind of offer it would take to kill this profile. We refused to engage.

But while he may be shy, Schreiber may just as well not want his dirty laundry aired. Court records show a dozen lawsuits against him — almost all of them over money owed. There are allegations of defaulted loans, unpaid commissions and missing partnership payouts.

And not every Joel Schreiber story is as uplifting as McKelvey’s.

“He ruined my life,” said Sally Shtrozberg, an Israeli entrepreneur who told TRD that she lent Schreiber about $5 million in 2008 for various real estate investments but only got a fraction back. Her story was corroborated by the claims in her lawsuit, before she settled.

In 2010, around the time he pledged $15 million to Neumann and McKelvey, Schreiber missed payments on the loan, according to court records.

Shtrozberg, the founder of BuildIn, an online real estate platform, repeatedly broke down in tears during a November phone interview, accusing Schreiber of cheating her. When she read that Schreiber invested $15 million in WeWork, Shtrozberg said, her first thought was: Who did he take the money from?

Key alliances

Schreiber was born into a Hasidic family in London in the 1970s or early 1980s, according to several people who have worked with him.

It wasn’t long before he set out on his own and moved to New York. In 2000, he began buying residential properties in Brooklyn, upstate New York and New Jersey with the help of his family’s money and a syndication of private investors. By 2004 Schreiber had sold those buildings and began focusing on more high-profile commercial properties in Manhattan. He then founded Waterbridge, a small real estate investment firm based in Midtown, in 2006.

Schreiber has been a key player in several big New York real estate deals, including Williamsburg’s first Apple store

A year later, he teamed up with a group of investors to buy a Soho office and retail building at 536 Broadway for $190 million, according to Richard Baxter, who brokered the deal. Baxter recalled him being a “very knowledgeable and savvy investor.”

But Schreiber’s big break as a New York real estate player came with a series of deals in 2012. That April, he partnered with Ben Bernstein and Ben Stokes’ RedSky Capital to buy an assemblage of properties on North 4th and North 3rd streets and Bedford Avenue for $66 million. The joint-venture partners later redeveloped the property and signed Apple to a 20,000-square-foot retail lease — a watershed moment in Williamsburg’s gentrification.

Then in July 2012, Schreiber and Brooklyn real estate investor David Werner bought One Court Square from SL Green and JPMorgan Asset Management. The following month, he partnered with WeWork’s Neumann and Alchemy Properties to buy the top floors of the Woolworth Building for $68 million with plans for a condo conversion. A seven-story penthouse at the tower hit the market for $110 million this September. Alchemy’s Ken Horn did not respond to inquiries about whether Schreiber is still a partner in the project.

Waterbridge is a small operation with fewer than 10 employees, and Schreiber usually leaves development work to the firms he partners with, sources said. What he does, and does well, is find deals and raise money.

People who have worked with Schreiber describe him as blunt, quick to the point and at times charming. “He’s a character, no doubt about it,” said Dagan Lacorte of the investment advisory firm L&L Partners Wealth Management. “He’s not afraid to ask for what he wants.”

RedSky’s Bernstein said one of Schreiber’s greatest strengths is the speed at which he goes after deals. There is “no rethinking, no additional noise,” he noted.

Still, not every deal has been wrinkle-free. Just short of three years ago, Schreiber went into contract on an assemblage of properties on North 3rd Street — near the Apple-leased property — that includes the popular Radegast Beer Hall. But he struggled to land bank financing at favorable terms, according to Lacorte, who brokered the deal. Instead, he cut a deal with the seller, the estate of Olga Sosa, in which Sosa became the de facto lender by allowing the buyer to postpone full payment.

One Court Square in Long Island City

Schreiber paid about 30 percent of the $92.3 million cost at the closing in April 2015 and paid the rest with interest by September 2016, Lacorte said. Waterbridge refinanced the property the following month with an $82 million loan from Deutsche Bank.

At one point Schreiber tried to flip the property to New York developer Chaim Miller, according to news reports, but the deal fell through.

“Along the way, I wasn’t sure he was going to close,” Lacorte said.

Legal troubles

It was Schreiber’s savvy as a dealmaker that convinced Shtrozberg to lend him the roughly $5 million back in 2008.

The Israeli native had recently moved to New York on a mission to invest her family’s savings in local real estate. A mutual acquaintance from her home country introduced her to Schreiber, who took her around town with his private chauffeur and showed her all the buildings he claimed to own.

Shtrozberg said she was impressed. “He speaks very fast to show that he’s a big guy,” she recalled. “It was all an act.”

When Shtrozberg requested a full reimbursement in early 2009, Schreiber didn’t pay, she told TRD. They agreed to an extension that February, but after the new promissory note came due one year later, Schreiber still owed her $3.8 million, according to her lawsuit. She then took him to court.

In the end, Shtrozberg said she recouped about $3 million. A few days after her on-the-record interview, she requested that her remarks not be printed. Her attorney, Saar Rosman of Lipa Meir & Co. in Israel, later sent TRD a demand letter regarding the matter.

“The said loan has been repaid in full and any controversies between my client and Mr. Schreiber, in connection with the foregoing, have been settled to the satisfaction of my client,” Rosman’s letter read.

Similar lawsuits from other parties followed Shtrozberg’s. Investors Oren Evenhar and Isaac Hershko filed a complaint against Schreiber in June 2014, accusing him of cheating them out of a 35 percent stake in 119 West 25th Street, which Waterbridge and its partners bought for $54.5 million in 2013. Court records indicate that the suit was later settled.

Then in August 2015, the commercial brokerage Eastern Consolidated sued Schreiber over a commission he allegedly failed to pay for the Radegast deal. That same year, investor Marco di Laurenti sued Schreiber for allegedly bilking him out of his share of profits from a $38 million sale of a Soho retail property at 154 Spring Street. The sides reached a settlement, but Schreiber never paid the agreed-upon sum, di Laurenti’s lawyer Stephen Meister said. Only after Meister filed a confession of judgment and froze his bank account did Schreiber finally pay.

And last year Schreiber and his partners filed for Chapter 11 bankruptcy on their mixed-use development at 182-186 Spring Street, where they owed lenders, including Acadia Realty Trust, $26 million. The real estate investment firm Opal Holdings bought the site out of bankruptcy for $31.6 million this June.

“Waterbridge was a preferred equity investor in the deal, and the bankruptcy filing facilitated the reorganization of the partnership,” the firm’s spokesperson noted. “All creditors were paid in full.”

WeWin?

Despite the lawsuits and financial troubles, Schreiber still has plenty of friends in the NYC real estate industry. “I only have good things to say about Joel,” noted Normandy Realty’s Gavin Evans, who partnered with Waterbridge on the purchase of 119 West 25th Street. RedSky’s Bernstein described Schreiber as loyal, honest and fair, while Zlotowitz of Eastern Union pointed out that several of the lawsuits against Schreiber and his firm were ultimately resolved.

“He has vision,” Lacorte said, pointing to Schreiber’s WeWork investment — as good as the investment looks in hindsight, giving two entrepreneurs with little track record a big chunk of money was incredibly risky.

But how much of the reported $15 million Schreiber paid and how much of WeWork he actually owns today remain unclear.

“He gave us some of the cash,” McKelvey said on the “How I Built This” podcast.  “A little bit to start and a little bit more over time.”

A former business partner of Schreiber’s, speaking on condition of anonymity, said he finds it “extremely hard to believe” that he ever owned one-third of WeWork.

An investor in the co-working company, who also asked not to be named, said Schreiber owns 1 percent of WeWork at most, and that he could have held a much larger share if he followed through on his funding commitments.

But even if his stake is that small, he could still strike gold once the company goes public.

“If he owns 1 percent of the company, that’s still worth $200 million,” Schreiber’s former partner said, referring to WeWork’s $20 billion valuation. “That’s probably more money than he’s made in any other venture.”

Shtrozberg has her own hopes for WeWork’s anticipated IPO, which she speculates would raise the level of scrutiny on Schreiber.

“Now it’s [soon to be] a public issue,” she said. “If you have a shareholder in a company who is [questionable], the market can respond to that.”

From left: Natalia Karayaneva, Andrew Hinkes and William Kakon (Credit: Pixabay, iStock, Images Money via Flickr)

Daniel de la Vega is a Bitcoin believer. But his faith comes with a catch.

As president of One Sotheby’s International Realty, he had seen the potential of the cryptocurrency and others like it to shake up the real estate market.

But de la Vega’s research also gave him pause. Concerns over the currencies’ extreme volatility and vulnerability and the potential lack of transparency among cryptocurrency buyers have so far kept him on the sidelines.

“I’m open to it but I just don’t encourage it,” he said. “I believe it’s still very risky. I would just need to be surrounded by the right professionals.”

As of Tuesday, 1 Bitcoin was worth about $10,000. The cryptocurrency peaked in December at $19,500 and fell to about $9,000 in early January.

For Bitcoin investors, the residential real estate market offers some stability from the whiplash highs and lows. A property’s price gets locked in based on its value in dollars. Someone paying for the property in Bitcoin or other cryptocurrency would pay the amount at a precise date and time.

Bitcoin operates through a series of blocks of code known as blockchain that creates a record of every transaction and every access point. Keyholders, who each have a unique access code, can access a blockchain from virtually anywhere and can share important data with all parties in a transaction. But the system is also vulnerable to hacking, as seen most recently when the Japanese exchange Coincheck reported losing $530 million in cryptocurrency.

In the residential real estate world, though many brokers are excited about its potential, cryptocurrency has yet to enter the mainstream. In South Florida, cash remains king.

In all of Florida, there has been only one known Bitcoin-to-Bitcoin deal, which closed in late December. That was for a $275,000 Miami condo purchased by a Bitcoin entrepreneur.

William Kakon, who launched the international cryptocurrency real estate listing company Blockchain RE with his brother, Nathan, has been involved in three cryptocurrency deals in Florida. None of them was fully completed with cryptocurrency. He has worked on fully cryptocurrency deals abroad, however, using both Bitcoin and Ethereum, which is currently valued at more than $1,000.

To avoid engaging in shady deals, Blockchain RE uses “Anti-Money Laundering” and “Know Your Customer” software, both designed to determine the source of funds that are paying for a property.

“It’s a very, very simple process. A lot of people don’t really understand how it works,” he added.

But for every digital currency evangelist there is a skeptic.

Diego Arnaud, founder and CEO of DA Luxury Realty, said his clients, most of them with a net worth of more than $20 million, aren’t interested in the digital currency world. Volatility isn’t their biggest concern. “There’s a negative perception in cryptocurrency that [buyers] can’t be traced,” he said.

There are also statewide limitations. All three of the Florida deals that Kakon did involving digital coins were ultimately reflected in dollars, out of necessity.

While blockchain contracts are accepted as legal tender in states like New York and Arizona, that’s not yet the case for the Sunshine State. But a bill introduced in the Florida House of Representatives earlier this month could legalize blockchain data and smart contracts. It would validate signatures registered through a blockchain as part of the electronic record, according to the proposed legislation.

But just as difficult as negotiating state law can be getting real estate investors as comfortable with digital currency as they are with the dollar. Digital currency proponents maintain Bitcoin and similar exchanges are simple, fast and effective methods of payment.

The problem is, most consumers don’t know how they work.

Educating the public has been part of the job for Michel Triana, founder and CEO of Intelerit, a Fort Lauderdale-based predictive real estate analytics platform for U.S. investors. The vast majority of sellers still want payment in dollars, he said. For some portions of a deal, that may not change soon, Triana acknowledged.

That includes the title and escrow process, said Marlen Rodriguez, president of the HomePartners Title Services, an affiliate of the Keyes Company real estate firm. Major insurance underwriters only accept dollars, she said.

As long as buyers convert their Bitcoin or Ethereum to cash for the title and escrow process, there would be no problem.

Once the seller converts the digital currency to dollars to pay the title company, “there’s nothing unique about that transaction moving forward,” said Andrew Hinkes, a partner at the law firm Berger Singerman.

In very rare cases, a buyer and seller will agree to skip the title process.

But for de la Vega of One Sotheby’s, those kinds of transactions only reinforce his feeling that now isn’t the right time for cryptocurrency in the real estate world.

“It’s about the gray area,” he said. “I don’t know how these people have gotten Bitcoin, how it has been exchanged.”

Closing a real estate deal using digital currency can be a complicated process. Here are some important points to keep in mind along the way:

Get comfortable

Surround yourself with real estate pros who are also fluent in cryptocurrency, particularly attorneys, said Ragnar Lifthrasir, founder of the blockchain real estate startup Velox.RE. Ask those same people if they own any digital coins.

“Anyone in real estate needs to get skin in the game. They need to own the coin themselves,” Lifthrasir said. “Until they’re comfortable using it themselves, they don’t know what they’re talking about.”

Agree on a price

The biggest step in the digital currency process is to agree on a price, then lock in a closing date and time. That’s when the dollar price will be agreed on in cryptocurrency. The purchase and sale agreement should include language about the risk involving cryptocurrency, said Hinkes of Berger Singerman.

Pay the necessary parties in dollars

Some attorneys, real estate agents, title and escrow agents will require you pay them in dollars. For that, you would need to convert your Bitcoin to dollars. Services like Bitpay or Changelly can convert the digital currency to cash.

What about title?

The seller may have liens on the property or an unpaid mortgage. If a seller has $500,000 left on his or her mortgage, they would convert that portion of cryptocurrency into dollars and pay the mortgage. “The title work is exactly the same,” Kakon said. But, he added, “you need somebody who really understands cryptocurrency.” Because most title and escrow companies aren’t set up to accept Bitcoin, “They just might not be sure,” added Lifthrasir.

Recording the deed

In the future, cryptocurrency supporters hope that recording deeds will be done with blockchain. The startup Propy recently launched a pilot program in Vermont to use blockchain technology to record real estate deals. Velox.RE created a similar program in Chicago’s Cook County.

Propy CEO Natalia Karayaneva said the technology could be replicated in South Florida. For now, deeds are recorded with each county’s property appraiser.

George Gleason, Chairman of the Board, CEO and President of Bank of The Ozarks (Credit: Insomnia Cured Here via Flickr, Pixabay, Public Domain Pictures, Wikimedia Commons)

Overlooking a small lake in a quiet area of Mid Beach, The Ritz-Carlton Residences, Miami Beach was pegged as an upscale European oasis in South Florida.

Ophir Sternberg, a native of Israel who moved to Miami in 2009, tapped Italian architect Piero Lissoni to design the project, where homes would range in price from $2 million to $40 million. It was Lissoni’s first U.S. venture, and Sternberg hoped to use him to deliver product that was “more European” and “more Italian” than anything Miami had seen before.

But when Sternberg’s Lionheart Capital needed financing to finish the project in the summer of 2015, he looked not to the old world, but toward an obscure regional bank smack in the middle of Arkansas.

Lionheart secured a $105 million construction loan from a lender called Bank of the Ozarks, which included assuming $10 million in existing construction financing. It was one of the first major construction loans in South Florida by the bank. By the following year, however, press releases and news articles made clear that Ozarks, a name that people were more likely to associate with a popular TV show, was shaping up to be one of the area’s biggest construction lenders.

During a period when banks across Florida were hesitant about lending on large construction projects, Ozarks was on a tear: With just over $22 billion in assets on its books, it provided more than $1.2 billion in construction loans in the Miami metropolitan area from 2013 through 2017, according to the company’s annual reports. In Miami-Dade alone, the bank was the largest condo construction lender for the county’s biggest projects, responsible for 26.5 percent of the total dollar volume of loans issued to the 25 biggest projects during the last five years, an analysis by The Real Deal shows. Compare that to Wells Fargo, the next biggest condo lender in Miami-Dade, which was responsible for 18.4 percent of the dollar volume of loans to those projects. Wells Fargo is the third-largest bank in the U.S., with nearly $2 trillion in total assets – that’s nearly 100 times the size of Ozarks.

Ozarks’ deals include a $259 million construction loan for Turnberry Associates’ 54-story oceanfront luxury condo tower in Sunny Isles Beach and a $138.3 million loan for CMC Group’s Brickell Flatiron. The 10 biggest construction projects it’s backing in Miami-Dade are slated to bring 3,289 new residential units to market, a mix of condos, rentals, and senior housing.

“We are proud to be contributing to the economic vitality of South Florida with our loans to many of the region’s marquee properties,” a spokesperson for Ozarks said.

But while some believe that Ozarks is a disciplined lender that’s merely filling a big void in lending activity, others question if it is overly exposed to one of the country’s most speculative real estate markets. Its critics draw comparisons to Corus Bank, a Chicago-based lender that aggressively financed condo construction in South Florida and was seized by regulators in 2009 after the condo market collapsed.

Like Corus, critics say, Ozarks could face challenges with maintaining its capital levels if there is an economic downturn, and point to the bank’s last annual report which shows that its concentration of construction loans is more than double its guidance. They also point to the bank’s high rates on deposits, its non-syndicated lending, as well as the sudden resignation of the bank’s chief lending officer as warning signs.

“There are some people out there that feel that this bank is almost like the Wizard of Oz – Dorothy thought that the Wizard could do everything,” said Kenneth Thomas, a Miami-based banking analyst. “All of (Bank of the Ozarks) numbers look amazing on paper, but it’s just a bank.”

Rendering of Ugo Colombo’s Brickell Flatiron. Bank of the Ozarks provided a $138.3 million construction loan for the project.

The South Beach diet

Founded more than 100 years ago in Jasper, Arkansas as a small community bank, Ozarks’ growth in South Florida and other large metropolitan areas stems directly from the Real Estate Specialities Group. George Gleason, a 64-year-old former attorney who leads the bank, has previously said that 2003, the year in which this group was formed, was the most important year in the bank’s history.

Based in Dallas, the group was led for most of its existence by Dan Thomas, a CPA and a former executive at a development group. Staffed by a team of attorneys and real estate professionals, it operates almost akin to a splinter group, responsible for the bank’s underwriting and overseeing the company’s debt on ground-up development projects. By the end of the first quarter of 2018, it accounted for more than $8.7 billion, or 64 percent, of the bank’s total non-purchase loan portfolio, according to an investor presentation.

The group started to attract interest in 2012, when it ventured into the New York market. Some banks, wary of regulatory concerns, had pulled back from financing ground-up projects, and Ozarks carved out a niche in originating medium-sized, non-recourse loans at attractive rates. (Non-recourse loans are generally riskier for lenders because in case of default, the lender can only go after the collateral.)

By the end of the second quarter of 2016, Ozarks had made $1.9 billion in real estate loans in New York City, with construction loans totaling $1 billion.

It then began to move into South Florida. In July 2016, the bank purchased Tampa-based C1 Financial, giving the institution about $1.6 billion in assets and 33 branches across the state. That year, Ozarks increased its construction-loan activity in South Florida to $312.2 million, up 214 percent from $99.2 million in 2015, according to its annual report.

“They are the lender of first resort to borrowers and also the lender of last resort,” said Thomas, the independent analyst, who noted that borrowers sometimes look to the bank when they can’t get financing from other places.

Ozarks’ borrowers and brokers who’ve worked with it, however, describe it as a disciplined lender that works with developers who’ve shown a strong track record.

“In general, they are wonderful lenders,” said Charles Penan of Miami-based debt brokerage Aztec Group. “They’ve been able to diversify their locations and they have had discipline.”

Penan noted the bank has the ability to make very large loans and offer non-recourse financing, which is unusual in the development lending business today.

“They are not the cheapest bank in town, but they are offering non-recourse and a lot of borrowers are offering to pay for non-recourse,” he said.

In a recent investor presentation, Ozarks also said that it reduces its risk because it “is always the senior secured lender” meaning that if a project did fail, it would be the first one to get repaid.

Michael Rose, an analyst with Raymond James who has a “strong buy” rating on Ozarks, believes its approach is conservative, in part, because its deals are structured with about 50 percent equity in the project from the developer or sponsor.

After the equity portion, there is generally subordinated and mezzanine debt in the project, which means that Bank of the Ozarks is typically only financing 13 to 35 percent of the project value, he said.

“The reason they don’t lose money is because there is so much equity in deals,” said Rose. “It’s really hard to see how they would lose money, they are always the senior secured lender.”

Rendering of Turnberry Ocean Club Residences. Bank of the Ozarks provided a $259 million construction loan for the project.

Making it rain in the Sunshine State

In 2017, Ozarks issued $1.15 billion in real estate loans in South Florida out of which about $746.5 million was construction financing, according to its annual report. Notable projects include Miami Worldcenter and Turnberry’s Sunny Isles Beach project in 2017, and the Magic City Innovation District in 2018.

For comparison’s sake, Miami Lakes-based BankUnited, which is South Florida’s largest bank by assets ($30 billion-plus), only had $165 million in construction loans on its balance sheet in the second quarter of 2017. Ozarks’ one loan to Turnberry of $259 million was about 1.5 times the size of BankUnited’s total construction-loan portfolio.

“With banking in particular, the locals understand the local market better than the out-of-towners,” said Peter Zalewski, a principal with the Miami real estate consultancy Condo Vultures. “You got to scratch your head and say, ‘what do the out of towners know that the locals don’t know?’”

Frank Gonzalez, who oversees the audit department at the accounting and advisory firm MBAF, said tri-county banks are generally not doing much construction financing.

“The regulators are focusing on that (construction lending) especially in South Florida,” Gonzalez said. “From our end as a financial auditor, it’s one of the key areas of focus, when we see it (construction lending on bank’s balance sheets) we kind of cringe.”

Ozarks’ mentions in its most recent annual report that its commercial real estate loan portfolio “may subject the company to additional regulatory scrutiny.” The bank also reported that it has more than doubled its guidance, set in part by the FDIC, for its concentration of construction lending relative to its capital levels at 209 percent.

Gleason, who purchased a controlling interest in Ozarks when he was 25, is a major backer of Republican candidates who support repealing provisions of the Dodd Frank Wall Street Reform and Consumer Protection Act. According to the National Institute of Money in Politics, Gleason has donated more than $89,000 over the past 14 years to Republican candidates, while his wife, Linda Gleason, gave another $82,000.

Going the distance

Adding to the concerns over the bank is the abrupt departure last July of Thomas, the longtime head of the Real Estate Strategies Group.

Thomas, who rarely spoke in earnings calls or gave media interviews, served as the chief lending officer at Ozarks from August 2012 to July 2017, and was widely seen as the catalyst for the bank’s massive real estate push. When news of his departure hit, the company’s stock dropped 12 percent.

“You are there for over 14 years, it was a great run. I moved to a different company and they’ve moved on to new management,” Thomas, who is now president of Dallas-based LandPlan Development Corp., said in an interview with TRD. He noted that he no longer owns any of Ozarks’ stock.

A spokesperson for the bank said that the real estate group’s “focus is on building a loan portfolio with the lowest credit and interest rate risks utilizing discipline and expertise.”

Some, however, have questioned whether its strategy is sustainable.

Carson Block, a well-known short seller who made a name for himself exposing fraud in Chinese companies, warned in a presentation in 2016 that Ozarks is overexposed to commercial real estate and construction lending in particular. He said the bank had too many unfunded balance sheet commitments, meaning it will need to continue to make acquisitions in order to fund its lending.

The bank has acquired 15 banks since 2010 and Gleason indicated it will continue on this trajectory.

“We expect we will make additional acquisitions, many of them in the future,” he said in the company’s January earnings call. “We’ve got a great organic model, and as we’ve always said, acquisitions are icing on the cake in addition to that organic growth model.”

And in a few months, the lender is set for a big change: Bank of the Ozarks will drop the reference to its origins and rebrand as Bank OZK.

“It frees us from the limitations of a name tied to a specific geographic region, ” Gleason said in a statement at the time.

A name-change, however, will only add to the mystique of the lender perhaps most responsible for shaping Miami’s condo market today.

“Bank of the Ozarks,” said Zalewski, “Is the most marketed bank in South Florida that no one understands.”

Panorama Tower

A program that was once described as the “crack cocaine of real estate financing” no longer seems to hold the same addiction for South Florida’s developers.

In 2014 and 2015, Rodrigo Azpurua’s Riviera Point Development Group financed two projects entirely with capital raised from the EB-5 program, which gives foreign investors a green card in exchange for investing in job-creating U.S. projects.

At the time, Azpurua described such investors as “happy campers.” Non-Chinese citizens could get a visa through the program in a matter of months, and that made them a great target for developers looking for money at far lower rates than traditional lenders would offer.

But things are different now. Today, Azpurua will target EB-5 funds for just a third of his project’s total cost, and is looking to slash that reliance even further for future projects. Other developers in South Florida, too, are looking elsewhere, saying that there are more financing options available.

Charles Penan

“Two years ago it was one of the most widely talked about equity sources,” said Charles Penan of Miami-based debt brokerage Aztec Group. “Now, not so much.”

Highlighting this decrease, Invest in the U.S.A, a prominent industry trade group for EB-5 regional centers, reported that direct foreign investment in EB-5 fell nationally to $3.81 billion in 2016, a 13 percent year-over-year drop from $4.37 billion in 2015.

Adding to these concerns for developers and investors is how Congress will treat the program in the long-term, and whether new rules related to minimum-investment thresholds and quotas will hinder its success. 

Some contend, however, that as long as EB-5 keeps getting extended, it’ll remain an important part of a developer’s financing toolkit.

Developers are generally interested in using EB-5 so that they can finance the gaps in a project’s capital stack, which is the portion between the senior debt and its equity, according to Daniel Shiff, a managing director of EB5 Capital, which owns and operates five EB-5 regional centers across the country. As the size and total costs of projects rise, so could these financing gaps.

“As long as legislation can be enacted to preserve the program … there is every reason to believe EB5 will continue to be a very viable part of every developer’s capital stack,” said Julian Montero, an attorney at Saul Ewing Arnstein and Lehr in Miami.

South Florida’s EB-5 history

Founded under the Immigration Act of 1990, EB-5 provides foreign entrepreneurs lawful permanent residence in the U.S. in exchange for creating jobs and investing in the community. However, it only started attracting the attention of developers after the Financial Crisis in 2009. At the time, traditional banks were reluctant to lend to developers due to heightened scrutiny from regulators.

“In 2008 or 2009, developers could not find other accesses to capital,” said Stephen Yale-Loehr, a professor of immigration law at Cornell University who has testified before Congress about the EB-5 program.

As a result, developers turned to EB-5 for financing, which offered lower rates than traditional mezzanine financing.

“It’s money at a very low cost, and it’s money that takes a junior position in the construction loan,” said Joseph Kavana, the developer of Metropica, a $1.5 billion, 62-acre mixed-use community adjacent to Sawgrass Mills Mall. Kavana said he plans to use EB-5 money only to pay down an existing construction loan on the project.

A rendering of Metropica

Under the program’s current guidelines, foreign investors are eligible to apply for a green card if they invest at least $1 million – or $500,000 in a high-unemployment area or rural area –

in an enterprise and create at least 10 jobs.

For Chinese investors, who are the vast majority of EB-5 investors in real-estate projects, it provided a chance to gain a visa in just about two years, which was much less than what other visa programs would take.

Numbers detailing EB-5 investment are hard to come by, but based on the most recent data from the trade organization, Invest in the U.S.A, the program took off in Florida between 2011 and 2013.

In Florida, EB-5 investment increased from $10.5 million in 2011 to $150.5 million in 2013. The group projects that the total gross domestic impact from EB-5 was $179 million in 2013, supporting 2,755 jobs.

This included not only some of South Florida’s biggest projects such as the Panorama Tower, but also local restaurants, bars and hotel. Tapco Restaurant Group’s Tap 42 Craft Kitchen & Bar used EB-5 funding to finance a majority of its four locations.

Second thoughts

Aztec Group’s Penan said that today, however, none of the developers he’s worked with in Florida are using EB-5 for financing or are looking to use EB-5.

“It’s really (due to) the uncertainty of the program,” said Penan. “You don’t want to put all this time and money in (to a project) and then not get the money.”

“It is creating jobs without taxpayer money and it is a great program to stimulate the economy,” Azpurua said.

There is also waning interest from Chinese investors due to a growing backlog of visa seekers, which is adding significantly to the waiting period for a green card. The U.S. government only issues about 10,000 new EB-5 visas per year, well below the demand for the program from Chinese investors.

“They don’t want to wait over a decade to get EB-5 Green card,” Yale-Loehr said of Chinese investors.

Chinese investors have instead been turning to private equity to invest in U.S. real estate projects, according to Ronald Fieldstone a partner at Saul Ewing Arnstein & Lehr.

“Many EB-5 funding sources, especially including migration agents in China, have established equity funds that are seeking to raise capital to invest in US real estate” Fieldstone wrote in a blog post for legal blog JD Supra.

Chinese interest could be boosted by the introduction of a direct flight between Miami and Asia, according to Abteen Vaziri, a director in Greystone’s EB-5 group, a private real estate lending firm that specializes in underwriting EB-5 projects.

“Once that direct flight starts we (South Florida) will see a huge increase (of EB-5 investment),” said Vaziri.

Vaziri also said once larger Chinese projects come to South Florida, it will catch the attention of more Chinese investors, who may not be familiar with the area. He added that when Hong Kong-based developer Swire Properties’ built the $1 billion Brickell CityCentre, it served as a catalyst for more Chinese investment in the region.

In addition to the political uncertainty of EB-5, the program has also been the victim of fraud and abuse.

One of these alleged cases involved a condo hotel in Palm Beach known as the Palm House Hotel that solicited EB-5 funds from Chinese and Iranian investors. The U.S. Department of Justice alleges that about 60 investors were defrauded out of a total of $50 million. The project was never finished and instead prosecutors allege went to fund another condo project that the developer of the project owned, according to prosecutors.

According to the lawsuit, the defendants falsely claimed that famous celebrities and politicians such as Bill Clinton, Donald Trump and Celine Dion would serve on the Palm House’s advisory board. Both defendants, the developer, Robert Matthewsm and real estate attorney Leslie Robert Evans pleaded not guilty to wire fraud and bank fraud charges.

“All EB-5 investors need to be careful about what project they are investing in and the negative publicity makes it more difficult to find EB-5 investors,” said Yale-Loehr.

There have been, however, a few recent success stories with EB-5 in South Florida. Hollywood Circle, a mixed use project in Hollywood, Florida, raised $109 million in EB-5 funds, mostly from Chinese investors, where EB-5 funds accounted for nearly half of the project’s total costs.

Last year, Brightline’s parent company Florida East Coast Industries closed on $130 million in EB-5 financing for its mixed-use MiamiCentral station in downtown Miami, property records show. The station, which will span 180,000 square feet, connects the privately funded high-speed train to Miami from Fort Lauderdale and West Palm Beach.

LatAm demand grows

Latin American investors are quickly emerging as the next target for developers.

The U.S. saw 282 Brazilian immigrants come through the EB-5 program last year, and the country rose to become the third-largest user of EB-5 visas, a recent report from the U.S. Department of State shows.

In Brazil, new visas increased 88 percent increase on a year-over-year basis. In 2015, just 34 EB-5 visas were issued to Brazilians.

“The rise of Brazil is due to the fact that developers are spending more time and resources trying to raise money in Brazil,” said Saul Ewing Arnstein’s Montero. “It takes some time to be digested by people in the market.”

“In China, people were very familiar with the process,” Kavana said. “In Latin America, it is a new thing … it is our duty to explain it to them.”

Resistance to change in the real estate industry is fading away as new technologies become ingrained in the day-to-day business of buying, selling and developing properties. The creators and backers of new real estate tech say they hope to change things in the same way that disruptive new services have revolutionized other aspects of modern life, such as Amazon changing the way we shop and Uber changing the way we get around. 

Unicorns like WeWork and Compass have made their mark — the former has earned billions in investments and the latter hundreds of millions — with tech-heavy offerings, but there’s also an ecosystem of startups exploring the next steps on a smaller scale.

Adoption of new technologies is “beginning to be a seismic shift,” said Roy Abrams, the CEO and founder of RealConnex, a firm that develops AI-powered networking software. With 25 years in the real estate tech space, Abrams has seen the progression from resistance to acceptance from even the most old-school colleagues. “In the beginning it’s possible, then it’s probable and now it’s inevitable,” he said.

The Miami area is home to its fair share of entrepreneurs and is looking for more. “I think there’s an aspiration and a desire to be a major player in innovation in South Florida,” said Tony Cho, CEO of development and brokerage firm Metro 1. Cho is also a founding partner in the $1 billion Magic City Innovation District planned for Little Haiti. The 17-acre mixed-use development will include a 15,000-square-foot innovation center to house startups and a coworking space.

Cross-pollination is already happening within the real estate tech community. Metro 1 has partnered with Miami Beach-based JM Studios to develop augmented-reality applications for visualizing real estate and helped ReThink, an Austin-based firm, roll out its CRM software to a national audience.

“We get requests from technology companies all the time for us to join their betas because they know we’re an integrated real estate company and not a more traditional company,” said Martin Bravo, Metro 1’s marketing and research manager.

AI-powered platforms

RealConnex, which was founded in Miami in 2013, aims to eliminate another pain point in the industry: the difficulty of finding the right opportunities at the right time. The artificial intelligence-backed platform connects professionals from across the industry, including brokers, developers, investors, designers and engineers.

With “well in excess of 700,000” entries on the platform, Roy Abrams, RealConnex’s founder and CEO, says the company’s computing power can mine all that data to determine trends, in addition to presenting personalized information for each user.

“When people come on the platform and say who they are and what they’re doing given their unique experiences, the way every single person lands on the platform will be unique to them depending on what’s important to them,” Abrams said. “We’ve had to devise our own AI architecture around that.”

In February, RealConnex won the “Commercial Product of the Year” award from the Miami Association of Realtors. It’s a recognition, Abrams said, that shows how willing the real estate community is to adopt new technologies.

After raising $3.5 million in funding in March 2017, RealConnex is ready to launch an app store for real estate technology vendors in June; it will give users the chance to find the latest services and platforms to help their businesses.

“We’re aiming to be the LinkedIn meets Amazon meets Match for professional real estate,” Abrams said.

Unlocking Blockchain’s potential

One innovation that could fundamentally change property deals is blockchain, the technology behind cryptocurrencies like Bitcoin. By creating encrypted electronic records that are stored across computers, blockchain offers the potential to limit fraud and errors by increasing transparency. Deeds and contracts stored on blockchain create an irreversible record of every transaction, which is updated in near real time.

A Deloitte report on the potential impact of blockchain on commercial real estate identified multiple areas in property sales and leasing that could be improved by using the technology, including making property searches better by eliminating fragmented listing data, pre-contract due diligence and the use of smart contracts. In fact, Deloitte theorized that there were few points of the process that would not benefit from an eventual widespread adoption of blockchain technology.

“Blockchain right now is what the World Wide Web was in the early ’90s,” said Keller Williams Realty broker Javier Perez-Karam.

RealConnex’s Abrams, who gave his first talk on blockchain two years ago to an audience that had never heard of it, has seen an entire industry grow around the technology since.

“Things like blockchain become inevitable, specifically when relating to transactions,” Abrams said. “I mean, it doubles down on my assurance of title, why wouldn’t I use it?”

Despite the potential, however, the industry is still waiting to see how the processes evolve and, perhaps more importantly, what action, if any, regulators
will take.

Jason Doyle, Gridics

Easing the pain in planning

One Miami startup that is expanding beyond South Florida is Gridics, which has created software to visualize real estate data and streamline the plan approval process. The firm’s Zonar.City platform can be used by architects, developers and municipalities to check site-specific plans against zoning codes.

The company partnered with the city of Miami last year to ease the time and workload of reviewing development plans.

“For the type of reviews they used Zonar for, there was anywhere between a 50 and 70 percent reduction in the amount of time, depending on the complexity of the review,” Gridics CEO Jason Doyle said. “It was taking them about 12 hours to do this type of development review, and we reduced that to four to six.”

In November, Gridics raised $1.6 million in a seed funding round led by South Florida developers BH3. “It really provides an avenue to exponential growth through efficiency and data capture, and that was intriguing to us,” said BH3 co-founder Daniel Lebensohn, “which is why we led the last round and why we’ll be leading the next round.”

The firm signed new city partnerships with Fort Lauderdale in February and Delray Beach in January, but Doyle said the expansion is nationwide. His colleagues recently finished loading the New York City zoning code into the platform, and he expects to announce a new municipal partnership in California in the coming weeks.

(Credit: Pixabay, Mapswire, Public Domain Images)

Despite the residential market’s lackluster year, foreign investors spent $7.1 billion on South Florida homes in 2017, up nearly 15 percent from the previous year’s $6.2 billion.

Leading the pack in South Florida was Argentina with 15 percent of all foreign purchases last year, according to the Miami Association of Realtors. Venezuelans spent the second most in Miami-Dade, Broward, Palm Beach and Martin counties with 11 percent, followed by Canada and Colombia with 9 percent each, and Brazil with 8 percent.

Foreign buyers picked up 15,400 residential properties last year, up more than 40 percent from the 10,900 homes international buyers closed on in 2016, according to the report.

In Miami-Dade, which captured 51 percent of foreign deals in South Florida, Venezuelans spent the most of any other country with 12 percent, as the wealthy continue to move their money to the U.S. amid the political and economic crisis in their home country. The South Florida cities of Doral, nicknamed “Dorazuela,” and Weston, also known as “Westonzuela” are home to large Venezuelan populations.

Buyers from Argentina and Brazil spent the second-most in Miami with 9 percent. Colombians represented 5 percent and French buyers accounted for 4 percent. Ecuador and Italy tied for the fifth spot with only 3 percent.

In Broward and Palm Beach counties, foreign residential investment is led by Canadians. Canadian investment represented 12 percent of all international purchases in Broward last year, and a whopping 31 percent in Palm Beach.

Here’s the breakdown:

Broward

1. Canada: 12%
2. Argentina: 8%
3. Brazil, Colombia and Venezuela: 6%

Palm Beach

1. Canada: 31%
2. Brazil: 15%

(Illustration by Neil Webb)

Greenberg Traurig land-use attorney Iris Escarra works on the front line of real estate law in Miami-Dade County, and these days, she’s busy. Very busy. With much of Miami’s prime land already built on, many developers are looking to buy and repurpose lots with vertical projects that combine retail below and offices and residences above, sometimes with a hotel and public transit access, too. That gives Escarra extra work with government agencies to revamp zoning and secure approvals for multiple uses in one building or compound. Greenberg’s footprint across the country and worldwide means Escarra sometimes works with developers, investors or other real estate stakeholders in New York, London and additional far-flung locales, talking by videoconference or welcoming them on visits to Florida.

More complex, pricier projects are among the reasons Greenberg has added real estate lawyers at its Miami headquarters, with its headcount now up to pre-recession levels. More attorneys specializing in the real estate practice may be hired this year, too — not only for work in South Florida but also for the firm’s clients that are active across the United States and beyond, said Escarra, who is co-chair of Greenberg’s Miami land development and zoning practice.

The firm’s client roster features South Florida’s condo giant Related Group, as well as Argentina’s Melo Group, which is currently developing Art Plaza, a two-tower apartment project in Miami’s downtown core. Greenberg is also involved with portions of some of Miami’s megaprojects, completing the zoning and a bond issuance for the $2 billion Miami Worldcenter project and handling due diligence for land purchases and the leasing for the $1.5 billion-plus Brickell City Centre, now in its second phase, Escarra said.

It’s perhaps little wonder then that Greenberg came out on top in The Real Deal’s inaugural ranking of the firms with the largest real estate law practices in South Florida. The ranking was sourced from the listings of active members of the Florida Bar Association as of May 14, 2018. Real estate attorneys were defined as those registered under the real property section of the Florida bar. Only lawyers based in Miami-Dade, Broward, and Palm Beach counties were considered, and each firm was contacted in order to confirm its total. Those not registered under real property in the Florida bar were included if they spent at least half of their time on real estate, whether on contracts, land use, finance, construction, environmental or other related work.

Greenberg — founded in Miami a half-century ago with a focus on real estate — had 104 real estate lawyers and 283 lawyers total in the region as of this ranking. Akerman ranked second, with 68 real estate lawyers in South Florida. Holland & Knight was third, with 46.

How real estate law firms compete in Miami-Dade

To expand their practices, the 15 largest real estate law firms in South Florida use a range of strategies that often leverage their size, whether it’s big or boutique. The larger firms, for instance, tend to emphasize their “soup-to-nuts” offerings, drawing on their vast U.S. and international presence and recommending clients in other offices to their Miami services.

Greenberg’s Miami office now works with real estate investment trusts that buy and sell across the country, said Nancy Lash, co-chair of the firm’s real estate arm in the Miami office.

Smaller law firms, by contrast, tend to highlight their agility as more niche players.

Bilzin Sumberg, which, with 43 real estate lawyers, placed fourth in TRD’s ranking, touts an entrepreneurial approach. The firm offers nimble solutions for developers and other risk-takers, said Suzanne Amaducci-Adams, who leads the firm’s real estate and finance practice. “We pride ourselves on problem-solving,” she said. “Entrepreneurs don’t want the perfect 100-page memo. They want an answer.”

Meanwhile, Berger Singerman, which tied for 10th place in the ranking with 19 real estate lawyers in South Florida, finds an edge in partnering with firms outside the state or overseas for handling contracts or other local real estate work. “I get referrals from international firms that have offices in New York, Washington, D.C., California or wherever, who don’t see me as a competitor, because I don’t have an office in their city,” said Jeff Margolis, co-manager of Berger Singerman’s business, finance and tax team.

The right pricing can also make smaller law firms competitive against the Goliaths in the game. Consider the moves by South Florida’s Weiss Serota Helfman (the firm did not make the top 15 cut for top real estate law firms). Long known for its work as counsel for municipalities, Weiss Serota has been expanding into private business, doubling its headcount of real estate lawyers to more than a dozen in the past year. And it offers hourly rates that can best the biggest firms. 

“Since the recession and even before, there’s been tremendous pressure from clients on legal fees,” Joseph Hernandez, who leads the firm’s real estate practice and previously worked for a global law firm. He said Weiss Serota’s hourly rates are in the $400 to $550 range, versus $600 to $800 at larger firms. “Firms aren’t better because they’re bigger. I look at the value proposition: Which firm can provide the best value?”

Lawyers at larger firms such as Akerman said they increasingly offer “alternative fee” structures by project or components within a project, instead of billing by the hour, in response to pricing pressure from clients.

Growth areas for real estate law

For decades, Miami law firms counted on legal work with condo development as their bread and butter, but that business is cooling now, sources said. What’s hot are more vertical “live-work-play” projects spanning homes, offices, retail and more, often located by transit hubs. Some are private-public partnerships, which require legal work that includes contracts and financial terms for leasing public property.

“Governments have a lot of land in prime locations, so we’re starting to see land-swap deals,” said Bilzin’s Amadduci-Adams. She said Bilzin helped with government contracts and other matters for All Aboard Florida on its $2.5 billion-plus Brightline high-speed train project, which already links Miami and West Palm Beach and will eventually connect Miami to Orlando.

Akerman is among the law firms that focuses on urban re-development since adding a key land-use department a decade ago. Neisen Kasdin, managing partner for the Miami office, is working on revitalization projects in Miami Beach, where he was the mayor from 1997 to 2001. The department is also active in mixed-used projects in Miami’s Wynwood, Design District and Little Haiti neighborhoods, among others. The office is working on portions of the Brickell City Centre, and it represents soccer star David Beckham’s development group, which aims to build a stadium for Miami’s forthcoming professional soccer team, he said.

“Miami is different than it’s ever been. It’s a mature market,” Kasdin said. He believes Miami has reached such critical mass it will no longer suffer boom-and-bust swings, instead seeing gentler business cycles as different areas of real estate pick up the slack from a slowdown in condos or any one category.

Some lawyers also see opportunities for business as a result of U.S. tax reform under the Trump administration. They expect the reform will prompt more companies in northern states with higher tax rates to move to Florida (see page 10), where there’s no state income tax, and state corporate tax can dip below 5 percent.

“I’ve been getting phone calls from Northeastern companies that are considering moving their operations down here,” said Barry Lapides, co-manager of the business, finance and tax team at Berger Singerman. “I get inquiries every other week,” mostly from the company principals, he said.

Challenging tasks

While business is booming, there are some factors that make the work itself more difficult for South Florida’s real estate lawyers.

“The permitting and approval process in the municipalities and the counties takes so long. It’s basically taking double the amount of time they normally should [compared to the post-recession period],” said Berger Singerman’s Lapides. “Governments haven’t hired enough staff to keep up with demand,” worried that if the market dips, they’ll be stuck with excess, he said. Understaffing makes it hard to move ahead with projects that require zoning changes, delaying construction and other legal work for firms, Lapides said.

What’s more, even with the Dodd-Frank rollback signed into law in May (see page 54), U.S. banks remain cautious about lending after the recession. That means developers have to be more creative with financing, often turning to investors and lenders abroad, lawyers said.

Vivian de las Cuevas-Diaz, deputy leader of Holland & Knight’s real estate department, said her team rarely closes on a local real estate deal with traditional bank funding these days, often working with private equity funds, joint ventures or private-public partnerships instead.

Even the well-heeled developers are careful about how they structure deals, so that buyers or leasees can more readily secure their own funding. After Greenberg helped Hong Kong’s Swire Properties buy downtown land for Brickell City Centre, it structured those holdings so “all the components are separately owned: retail, condo, office, parking and hotel,” said Gary Saul, co-chair of the firm’s Miami real estate practice. That setup gives Swire more flexibility to buy, sell and fund each part of the massive project and ease the financing for all involved, Saul said.

It’s seeing those major projects come to completion that’s most rewarding for some local real estate lawyers.

Greenberg’s Escarra worked to get much of developer Moishe Mana’s nine-acre Wynwood project approved under a new zoning code that Miami launched in 2010. Approvals took nearly three years of work with the government and community, but “the master plans can’t be downzoned for 30 years,” said Escarra with evident satisfaction.

Gables Aventura (Credit: Facebook)

Gables Residential just sold the 400-unit mixed-use apartment complex, Gables Aventura, to RREEF Property Trust, an arm of Deutsche Bank asset management.

RREEF affiliate RAR2 20080 West Dixie Highway LLC paid about $372,500 per unit for the apartment and townhome community at 19920 West Dixie Highway in the Ojus neighborhood, near Aventura, according to property records.

Atlanta-based Gables Residential completed the 16.3-acre development in 2016. The multifamily development and management firm acquired the site in 2007 from Turnberry Associates for $11 million, according to Real Capital Analytics.

Earlier this year, Gables Residential sold the Gables Marbella apartment complex at 22182 Bella Lago Drive, just west of Boca Raton, for $112 million, or $377,000 per unit.

Last fall, RREEF, a publicly traded real estate investment trust, sold a Publix-anchored shopping center in northwest Miami-Dade for about $34 million to Jamestown.

Deutsche Bank asset management had roughly $789 billion of assets under management as of the end of March.

Renderings of Wood Stone Plantation

Parkstone Capital is moving forward with plans to build a 248-unit apartment complex in Plantation.

The private equity firm, based in Mt. Kisco, New York , recently received site plan approval from the Plantation City Council to develop a 10-acre site on North State Road 7 into a $50 million to $55 million project with six apartment buildings and a two-story, 1,500-square-foot clubhouse.

Wood Stone Plantation will have 108 one-bedroom units, 106 two-bedroom units and 34 three-bedroom units. Rents will range from about $1,200 to $3,000 per month, according to Still Hunter III of CBRE in Fort Lauderdale.

Parkstone purchased the property in a foreclosure sale in February 2016. The site, at 311 and 339 North State Road 7, just north of Broward Boulevard, had been on the market for a long time, said John Voigt, the developer’s attorney.

Some nearby residents spoke out against the project because they didn’t want residential development on a commercial site, but Voigt said that commercial developers didn’t find the site attractive because of poor access.

Parkstone will demolish the three vacant commercial buildings to make way for the new development.

Also in Plantation, developer Art Falcone is working on redeveloping the former Fashion Mall property into Plantation Walk, a $350 million development with 700 apartments, 200,000 square feet of retail stores and restaurants, and office space.

Earlier this year, Mill Creek Residential closed on a Plantation development site and secured construction financing for a 330-unit apartment complex at 1240 South Pine Island Road.

After a month of inspired World Cup play in Russia, 32 teams have been narrowed down to eight, with the quarterfinals set for Friday and Saturday. Nearly all of the 736 players who began three weeks ago will go home empty-handed, having failed to win the title for their country.

But where will they go? The soccer stars from around the world may want to return to their home countries, or perhaps they may want some time away in their second or third homes.

A handful of the World Cup players from Colombia, France and Brazil have owned homes in Miami, taking up residence in different places, including Related Group’s SLS Brickell, the 55-story condominium tower in the financial district.

Another player, Zlatan Ibrahimovic, the Swedish striker, owns an apartment in Manhattan’s Tribeca neighborhood. Ibrahimovic backed out of playing for his home country just before the start of the World Cup.

Here’s a look at the players and their homes in the U.S., compiled by The Real Deal’s analysis of property records.

Steven N’zonzi, SLS Brickell in Miami

Steven N’zonzi, a midfielder playing for the French national team, paid $963,000 for unit 3505 at SLS Brickell last year. Related and Allen Morris Company completed the development in 2016. Nzonzi, who plays for Sevilla Fútbol Club, won on Saturday against Argentina.

The French team advanced to the quarterfinals, where they will play Uruguay on Friday.

At his luxury Brickell condo, Nzonzi has access to amenities that include two restaurants led by high-profile chefs. Jose Andres leads Bazaar Mar and Michael Schwartz helms Fi’lia. The complex also includes the Ciel spa and a fitness center along with a pool deck on the 10th floor with three pools. It has an outdoor dining and private cabanas, a private screening room and a sky roof.

Abel Aguilar, Oceanfront Plaza in Miami Beach

Colombian midfielder Abel Aguilar owns two condos at the Oceanfront Plaza in Miami Beach.

Aguilar paid $1.2 million for units 906 and 907 at the building in 2014, according to property records. He plays for Deportivo Cali, a Colombian sports club based in Cali.

Aguilar’s Columbia national team was eliminated on Tuesday, when it lost to England in a shootout on penalty kicks in the round of 16.

Marcelo Vieira da Silva, Palmetto Bay home

Marcelo Vieira da Silva of Brazil owned a five-bedroom home in Palmetto Bay between 2011 and 2012.

The left back and left winger paid $710,000 for the house at 14201 Southwest 82nd Court in 2011, and sold it the following year for $775,000, records show. The 4,200-square-foot home sits on a 15,900-square-foot corner lot in Palmetto Bay, and was built in 2006.

Brazil, which beat Mexico earlier this week, will face Belgium on Friday in the quarterfinals.

Zlatan Ibrahimovic, 101 Leonard Street in Manhattan

Zlatan Ibrahimovic made headlines when he backed out of playing for the Swedish national team in this year’s World Cup, just before the start of the tournament last month.

Ibrahimovic owns an apartment at The Leonard, on 101 Leonard Street in Tribeca, property records show. He paid $2.2 million for a unit in 2015, and transferred the title to an LLC in 2016, according to property records.

The former Manchester United and Barcelona forward said he had retired from international soccer, but still plays for the LA Galaxy in Los Angeles.

Downtown Fort Lauderdale (Credit: iStock)

South Florida’s once-booming office market is slowing down, according to a recent report by JLL.

After numerous consecutive quarters of growth, net absorption went into the red in all three counties as supply surpassed demand in the second quarter.

Broward, Miami-Dade and Palm Beach counties also saw vacancy rates rise, signaling a slowdown in the market.

In Miami-Dade, net absorption was negative 153,700 square feet year-to-date in the second quarter of 2018, down from 167,200 square of positive net absorption in the second quarter of 2017. Vacancy rates rose 1.4 percentage points to 14.2 percent in the second quarter of 2018.

While the report highlighted some bright spots in the market, including delivering new office space at Three MiamiCentral and Canal Park Office, the slowdown was due to an “underperformance” in Class B office space as more tenants moved out of lower quality space in the most recent quarter.

Broward’s office market also cooled down with a year-to-date net absorption of negative 107,000 square feet in the second quarter of 2018, down from a positive 202,070 square feet absorbed in the second quarter of 2017.

Vacancy rates, however, declined in the most recent quarter to 12.7 percent from 13.4 percent in the second quarter of 2017. KEMET Corporation expanded by more than about 45,000 square feet in downtown Fort Lauderdale and Spaces leased 32,000 square feet in Las Olas Square also in downtown Fort Lauderdale.

In addition, rent growth in Broward increased to $31.95 per square foot from $29.52 per square foot. But rent prices are not projected to move higher, according to JLL, as asking rents have hit or surpassed the previous cycle’s peak.

Meanwhile, Palm Beach’s office market activity continued its slowdown due to a lack of Class A office space. No new major new office space is currently under construction, according to the report. Net absorption was negative 243,000 square feet in the second quarter, marking the biggest shift in the market since 2008.

Some of the negative absorption was due to the lack of large tenant move-ins, as well as smaller tenants leaving their buildings or downsizing. Two large move-outs included Shoes for Crews leaving 37,700 square feet at One Clearlake and NTT America moving out of a 56,000-square-foot office at Boca Raton Innovation Campus.

Rendering and Lara Swanson divison president at Mattamy Homes in South Florida

Canada’s largest homebuilder just closed on 2,950 acres in Port St. Lucie for $24 million, giving the company control of 7,800 home sites in one of the largest residential deals in southern Florida in recent years.

The firm, the biggest privately owned home builder in North America, recently expanded to South Florida with acquisitions in Boynton Beach and the Lake Worth area.  It also owns land in Orlando, Tampa, Sarasota and other parts of the state.

The move into Port St. Lucie potentially marks a shift north for new mid-priced home construction as a result of rising land costs and a shrinking supply of land. Despite strong demand for affordable, single-family homes, the country is facing a huge shortage of those homes, with the National Association of Homebuilders projecting that 2018 will have a shortage of almost 400,000 new homes compared to the population growth.

With Tradition, a master-planned community in Port St. Lucie, Mattamy Homes plans to target buyers looking for new homes in the $200,000s as home prices rise in neighboring Palm Beach County. Mattamy acquired 2,780 acres of residential land and 150 acres of commercial land along Village Parkway, just south of Tradition Parkway.

The company plans to complete development of single-family homes and multifamily homes within 10 to 15 years. Prices will range from the low $200,000s to the $400,000s. The homebuilder is also targeting active adults seeking more affordable communities.

In all, Tradition encompasses 8,200 acres with about 11,000 single-family home sites, schools, office and retail space, home to The Landing at Tradition, Tradition Medical Center, Keiser University and the Florida Center of Biosciences. Target, LA Fitness, Publix and others anchor the town center, according to its website. City Electric Supply is also planning to move into a 400,000-square-foot facility.

Developers like Pulte Homes have built and sold houses within the Tradition. Port St. Lucie, the eighth-largest city in Florida, is immediately north of Palm Beach County and about 30 miles away from Jupiter.

Tradition Land Co. sold the nearly 3,000 acres to Mattamy. Tradition took over the land after the original developer, Core Communities, defaulted on its loan in 2010. (Core Communities was tied to Fort Lauderdale developer Woodbridge Holdings.) Mattamy beat out other homebuilders that include CC Homes, led by developers Armando Codina and Jim Carr, in purchasing the property, according to Tony Palumbo, director of land acquisitions for Mattamy’s Southeast Florida division.

The deal with Mattamy was contingent on the city purchasing more than 1,200 acres of vacant commercial land designated for economic development, said Lara Swanson, president of the Southeast Florida division. The city is hoping to attract new employers and commercial developers to expand on the recently opened Tradition Surgery Center.

In June, Mattamy paid $12 million for a 37-acre development site at the former entrance of the Gulfstream Polo Club west of Lake Worth, and $5.5 million for 39 single-family home lots in Boynton.

2110 Southwest Third Avenue and Tom Cabrerizo

CFH Group principal Tom Cabrerizo and Maurice Cayon of Cayon Development Group just picked up an apartment complex on Coral Way near Brickell for $12.8 million, property records show.

Dalton Properties Inc., led by Alfredo Sesana and Paul Garcia, sold the 88-unit complex at 2110 Southwest Third Avenue for about $145,700 per apartment. The two eight-story buildings were completed in 1994 on a nearly 1-acre lot. The property last sold for $760,00 in 1988.

Cabrerizo and Cayon’s TMC Apartments LLC financed the deal with a $10.7 million loan from City National Bank, according to property records.

This isn’t the first time the investors work together. Cabrerizo and Cayon recently completed a 226-unit apartment development in Hialeah called Las Palmas.

The Coral Way apartment complex is close to the Brickell neighborhood, where recently completed developments include Brickell City Centre and Related Group’s SLS Lux.

The New York City skyline (top) and the Hong Kong skyline (bottom) (Credit: Pixabay)

London-based wealth manager LJ Partnership is eyeing a global expansion.

Dilmun — a family office in New York that originated in the Gulf region — acquired a 40 percent stake in LJ Partnership, Bloomberg reported. The deal ties Dilmun with a Hong Kong real estate family that has also broadened to the U.K. and China.

“It’s been very important for us to match long-term capital from Asia, particularly Hong Kong, from the Gulf, Europe and the Americas,” CEO Alex de Meyer told Bloomberg.

Dilmun manages money for a member of the Qatari royal family, the report said. LJ Partnership has close ties to the Peterson Group, which is known for investments in Hong Kong real estate such as the LKF Tower hotel. Peterson has a 35 percent stake in the firm.

LJ Partnership advises on $15 billion from about 250 clients. The firm is rebranding to Alvarium Investments next year — and aiming to attract large institutions and sovereign wealth funds. The firm was formed in 2009 after the financial crisis, when property prices slumped. [Bloomberg] — Meenal Vamburkar

1635 North Fort Lauderdale Beach Boulevard

Mattress Giant co-founder Sam Katz is listing his cushy oceanfront Fort Lauderdale Beach house for nearly $18 million.

Katz built the five-bedroom, 8,000-square-foot home at 1635 North Fort Lauderdale Beach Boulevard. It features a pool, motor court with a three-car garage, a one-bedroom guest house, a cabana, home office and a wet bar. Property records show Katz paid just over $1 million for the 0.8-acre site in 1998, and hired Ellemar Luxury Construction to build the house three years later. The gated Fort Lauderdale Beach estate includes about 250 feet of ocean frontage.

Kevin Kreutzfeld of Premier Estate Properties is the listing agent. Kreutzfeld said the property offers a better value to a comparable home in Miami-Dade or Palm Beach, where the same home would go for double or triple the price.

Katz co-founded the Miami-based mattress retailer in 1986. The company grew to 360 stores in 14 states before its remaining stores were acquired by Mattress Firm in 2012 for $47 million. The Fort Lauderdale Beach home was Katz’s primary residence, and he’s now planning to downsize, Kreutzfeld said.