Lennar CEO Stuart Miller and 22 Star Island

Lennar CEO Stuart Miller landed a $40.5 million loan for his residential property at 22 Star Island, according to Miami-Dade County records. 

Bank of America was the lender, records show.

At a Miami Beach Design Review Board in April, Miller received unanimous approval to build a new two-story mansion and relocate a Mediterranean-style building to another part of the property to make room for the new building.

Miller had previously sought to demolish his 7,000-square foot home that was once part of the Star Island Yacht Club in the early 1920s, owned by Colonel Edward Howland Robinson Green, according to a report written by Planning Director Thomas Mooney. Those plans caused an uproar among preservationists, including the Beach-based Miami Design Preservation League.

Miller paid $7.5 million for the 1.35-acre property in February 2012, according to Miami-Dade property records.

Rendering of 3711 Northeast Second Avenue, the current site and Lyle Chariff

Power Studios’ former site in Miami’s Design District has traded hands for $14 million, with plans to develop it into a two-story retail and entertainment venue, The Real Deal has learned.

A partnership, majority owned by former banker Leonard Abess, as well as Chariff Realty Group partners Lyle Chariff and Mauricio Zapata, and others, sold the site on Tuesday, Chariff, president of Chariff Realty Group, told TRD.

The group had purchased the property at 3711 Northeast Second Avenue in May 2013 for $8 million. They knocked down Power Studios building, first built in 1925, about a year ago, Chariff said.

The buyer is an affiliate of Wharton Equity Partners, a New York City-based real estate firm founded by Peter C. Lewis and David E. Eisenberg, with offices in Miami. Wharton has been active in the Miami market, and is currently building District 36, a 500,000 square-foot, mixed-use project at Northeast 36th Street and Northeast First Avenue on the edge of the Design District and Midtown. Wharton also owns a more than 2-acre development site in the heart of Miami’s Central Business District, zoned for more than 3 million square feet of mixed-use development, including more than 2,200 residential units.

Plans for the Power Studios site are to build a two-story, 20,000-square-foot retail project, with a 9,000-square-foot rooftop entertainment deck, Chariff said. The sale includes the construction plans, designs by Touzet Studio, entitlements, construction bids that are ready to be signed, and permitting. One of the conditions that the purchaser made was that Chariff Realty Group stay on to be the exclusive leasing agent, he said.

“It’s mixed and ready to bake,” Chariff told TRD. “Just put it in the oven, and it’s done. And Wharton is going to step right in and finish it off.”

Power Studios’ inception dates back to 1998, when David Wallach, owner of Mango’s Tropical Cafe on Ocean Drive in Miami Beach, partnered with his friend Ross Power, a metal sculptor who worked out of a cavernous old warehouse with artists studios, in what was then considered the derelict Miami Design District.

Wallach bought the property in 1990 for $90,000, and envisioned turning the space into a restaurant, nightclub, cinema, and recording studio, and a venue for performance art. Power Studios opened to the public in 2000, with the Poets Cafe, a gourmet dining room/art gallery, three performance stages, a recording studio, and a movie theater on the rooftop.

Wallach had listed the property for seven years with Metro 1 before Chariff and his partners purchased it in 2013, Chariff said. “I was sitting at lunch with one of my partners, and we decided it was a great deal and put a contract on it that day and closed immediately,” he said.

Since 1990, two sets of owners have made a combined $13.9 million in profits.

Now, he said Wharton “made us an offer we couldn’t refuse,” and will redevelop the site. “We think that the building, if built today, would be worth at least $30 million, but we all agreed we were very pleased with our return, and we were happy to hand it over to Wharton and allow them to go through the whole process of building, and take the risk of building it, and allow them to make the profit,” Chariff said.

Chariff and his partners have been involved in several recent sales of Design District properties at escalating prices, as Craig Robins’ Dacra transforms the area into a luxury shopping destination.

Two weeks ago, a property at the edge of the Miami Design District — whose tenants include Michael Schwartz’s Cypress Room — traded hands at triple its 2012 price. A partnership between Lyle Chariff, Mauricio Zapata and Shawn Chemtov — sold the 5,186-square-foot building, at 3620 Northeast Second Avenue for $5.5 million.

Last week, a Design District property across the street from the Palm Court Garage traded hands for $6.9 million — up nearly 3.5 times in less than three years. The seller of the building at 170 Northeast 38th Street was a partnership between Avra Jain and Miami-based investment firm 13th Floor Investments, in a deal brokered by Chariff and Zapata.

Wharton Equity Partners’ Eisenberg said in a statement that the firm is “thrilled to be developing such a special property” in the Design District. “Touzet Studio has designed an iconic building that will serve as an enduring landmark,” he said, “anchoring the 2nd Avenue entrance to the Design District.”

A rooftop shot of Downtown Miami

1. Miami hotels will stay hot for real estate investors [Daily Business Review]
2. Hialeah is trying to build its own arts district [Miami New Times]
3. Solitair Brickell gets $108M construction financing from JP Morgan Chase [The Next Miami]
4. The Forge’s Shareef Malnik has an insane Ocean Drive crib [Miami New Times]

— Sean Stewart-Muniz

Current reader favorites:
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3. Fontainebleau Miami Beach units to be auctioned
4. Wynwood property with an artsy past lists for $11M
5. SLS South Beach sells to Guernsey investors for $125M

Clockwise from left: two renderings of the River Landing riverwalk (top), rendering of the Biscayne Line and a proposed design for the Underline.

Imagine a world where the bike path underneath the Metrorail tracks was a lush, safe, redeveloped linear park.

Where condo towers activated their waterfront spaces with restaurants, native plants, retail and outdoor activities.

Developers in Miami, which ranks 94th out of 100 cities for park acreage per 1,000 residents, are increasingly incorporating plans for linear parks in their projects.

Miami offers 2.8 acres per 1,000 residents, compared to 4.5 acres in New York and 6.2 in Los Angeles, according to the Trust for Public Land.

Local governments are now pushing developers to include park space in their plans.

The Miami River in the 1940s.

Developer Andy Hellinger is setting aside nearly 1 acre of waterfront space to create a linear park along the Miami River for River Landing, a $300 million development that will include 426,000-square-feet of retail, 475 apartments and more than 2,200 parking spaces.

The riverwalk at River Landing will be 850 feet in length and 50 feet in width, Hellinger told TRD.

“The way we designed our property, we wanted to invite people to enjoy the river,” he said. “We found some early drawings from the 1940s with people in the river. We wanted to bring that back to the urban community.”

Some portions along the 6-mile long river are not open, Hellinger said, but “all of the riverwalk is intended to be connected.”

River Landing’s waterfront park will be landscaped with native plants and materials and include access to development’s retail — a win-win for developers and residents.

Biscayne Line survey

The Related Group, along with ArquitectonicaGeo, has its own vision for the linear waterfront that runs parallel to Biscayne Bay: Biscayne Line.

Part of the Biscayne Line, Carlos Rosso, Related’s condo division president said, will link Edgewater’s bayfront, the Julia Tuttle Causeway and Museum Park in downtown Miami.

Related donated the park at Icon Bay, slated to open on June 26, to the city of Miami in April. The park, at 455 Northeast 28th Street, is designed by ArquitectonicaGEO, and will include water fountains, and exotic and native plants.

The goal, Rosso told TRD, is to activate green spaces with parks and restaurants, and “to create a fantastic public walkway for Miami.”

The developer unveiled plans for a Michael Schwartz-helmed restaurant at Paraiso Bay in Miami’s Edgewater neighborhood last month, also meant to activate the waterfront, he said.

Linear parks encourage connectivity, livability and walkability, according to Ken Krasnow, managing director for CBRE’s South Florida offices.

“There’s no easy way to quantify the impact of green space on an individual commercial property per se, but green space, including linear parks like the Highline in New York and the Underline soon to be developed in Miami, have an energizing effect — activating areas that were previously blighted or underutilized — which then draws investment to the area, and ultimately increased tax revenue,” Krasnow told TRD.

Map of the Metrorail path

The Underline, a proposed 10-mile long bikeway and linear park that runs underneath the Metrorail tracks in Miami-Dade, has the potential to encourage development and increase property values nearby.

“I spent most of my career in New York and witnessed firsthand the transformation,” Krasnow said, referring to the High Line’s effect on residential and commercial development.

The High Line, a 1.45-mile long elevated linear park in New York City, generated $3 billion in real estate development and an additional $1 billion in tax revenue, according to Krasnow. James Corner Field Operations, which led the design team for the High Line, was tapped earlier this year to design the Underline.

At meetings held by Friends of the Underline, the group behind the campaign to redevelop the M-Path into a linear park, city and county officials have reinforced the need for outdoor public spaces and supported the project.

“It would be impossible to put a number on it, but the hope is that the Underline will have a similar, positive impact on commercial real estate values in Miami,” he said.

Just last month, a 6,000-square-foot building near the proposed linear park sold for $4.25 million — three times the price the 19,000-square-foot lot last sold for in December 2012. Next to that is a planned 184-unit apartment complex, which is being developed by Grass River Property.

“There is a clear multiplier effect in terms of value — where people want to be living, working, playing [is] near these parks,” Krasnow said.

Rendering of the Shanghai Tower in Shanghai, China

Nothing suggests the height of human achievement and economic prowess quite like a skyscraper.

The newly completed 2,073-foot-tall Shanghai Tower is officially the second-tallest building in the world (behind Dubai’s Burj Khalifa) and the tallest in China.

And taller skyscrapers are planned, such as China’s Sky City and Saudi Arabia’s Kingdom Tower.

But as “cool” as all of these buildings are, glitzy construction booms have historically coincided with the beginnings of economic downturns, according to Barclays’ “Skyscraper Index.” (For all you economics wonks out there, basically, skyscrapers can be considered a sentiment indicator.)

Using Barclays’ index, we pulled together 10 skyscrapers whose constructions overlapped with financial crises.

The Equitable Life Building in New York

Equitable Life Building (1873)

The Long Depression, 1873–1878

The Long Depression, a pervasive US economic recession with bank failures, coincided with the construction of the Equitable Life Building in New York City in 1873.

The 142-foot building was the world’s first skyscraper. (You could stack 14 of these on top of one another, and they still wouldn’t be taller than China’s new Shanghai Tower.)

The New York World Building (left)

Auditorium (1889) and New York World (1890)

British banking crisis, 1890

Chicago’s 269-foot-tall Auditorium, completed in 1889, and New York’s 309-foot-tall New York World, completed in 1890, coincided with the British banking crisis of 1890 and a world recession.

Milwaukee City Hall

Masonic Temple, Manhattan Life Building, and Milwaukee City Hall (1893)

US panic marked by the collapse of railroad overbuilding, 1893

Chicago’s 302-foot-tall Masonic Temple, the 348-foot-tall Manhattan Life Building, and the 353-foot-tall Milwaukee City Hall coincided with the US panic of 1893 marked by the collapse of railroad overbuilding.

It also overlapped with a string of bank failures and a run on gold.

Philadelphia City Hall

Park Row Building and Philadelphia City Hall (1901)

First stock market crash on the NYSE, 1901

The construction of the 391-foot Park Row Building presaged the US stock-market crash and panic of 1901, as did the completion of Philadelphia City Hall, which stood at a height of 511 feet.

Singer Building in New York

Singer Building and MetLife Building (1907)

The Bankers’ Panic and US economic crisis, 1907–1910

The construction of New York’s 612-foot Singer building and the 700-foot Metropolitan Life Building corresponded with the panic of 1907.

The Bankers’ Panic was a financial crisis that occurred after the New York Stock Exchange fell nearly 50% from its peak, and it reflected a monetary expansion brought about by the establishment of trust companies.

Empire State Building

40 Wall Street (1929), Chrysler (1930) and Empire State Building (1931)

The Great Depression, 1929–1933

The construction of three record-breaking buildings coincided with the onset of the Great Depression.

40 Wall Street, which on completion in 1929 reached 927 feet, was followed by the 1,046-foot Chrysler building (1930) and the Empire State building (1931), which towered over the others at 1,250 feet.

Willis Tower in Chicago

World Trade Center (1972-1973) and Sears Tower (1974)

US and worldwide economic crisis, 1973–1975

The 1972 construction of One World Trade Center, the 1973 completion of Two World Trade Center, and the 1974 construction of the Sears Tower in Chicago coincided with a period of speculation in monetary expansion from foreign lending.

It also coincided with the collapse of the Bretton Woods system, a rise in oil prices that caused a global economic crisis, and speculation in stocks, property, ships, and aircraft.

Petronas Towers in Kuala Lumpur

Petronas Towers (1997)

Asian economic crisis, 1997–1998

The Asian economic crisis, currency devaluation, and speculation in stock and property coincided with the completion of the Petronas Towers in 1997.

At 1,483 feet, the Petronas Towers were the tallest buildings in the world and heralded a crisis in that region.

Taipei 101 in Taiwan

Taipei 101 (1999)

Dot-com bubble, 2000–2003

The construction of the 1,671-foot-tall Taipei 101 began in 1999 and was completed in 2004.

The duration coincided with the tech bubble and the recession in the early 2000s.

Burj Khalifa in Dubai

Burj Khalifa (2010)

The Great Recession, 2007–2010

The 2010 completion of the tallest building in the world, the 2,717-foot Burj Khalifa, coincided with the global financial crisis.

The building surpassed Taipei 101’s height on July 21, 2007.

Rendering of Sky City near Changsha, China

Construction on Sky City in China is underway

Sky City, outside Changsha, China, is expected to be around 2,749 feet tall. The 220-story building is expected to take seven months to build at a cost of $628 million. Its construction, however, has been halted by authorities.

This building’s (possible) construction comes amid uncertainty regarding China’s economic and political stability.

That said, we won’t know for several years whether this record-breaking skyscraper coincides with an economic bust…

The office building at 600 West Hillsboro Boulevard in Deerfield Beach

A Texas-based investment firm just picked up a four-building office portfolio in Deerfield Beach for $22 million — a small markup from its last sale in 1998.

TriGate Capital, which operates out of Dallas, was the purchaser of the buildings on 600-700 West Hillsboro Boulevard. The properties are split into three lots. They include a pair of two-story buildings averaging 50,000 square feet, plus a four-story and six-story building on one lot that measures a combined 201,231 square feet.

The seller, Parkway Properties, is an Orlando-based investment trust that buys and leases office properties, primarily in the Sun Belt, according to its website.

Jeff Yarckin, a managing member of TriGate Capital who was involved in the purchase

Parkway paid $21.185 for the four buildings, along with a fifth building at 660 West Hillsboro Boulevard, in 1998. Though a deed for the fifth has yet to be recorded in Broward County property records, it is possible that TriGate also purchased it to complete the portfolio.

Parkway signed a deal two years ago to assume $66 million in debt and stocks in exchange for ownership of Lincoln Place, an eight-story office and retail building on South Beach.

The company also paid $146 million last year for the Courvoisier Centre in Miami’s financial district.

Casa Casuarina and pictured from left: Jill Eber, Joe Nakash and associate Eli Gendi

The Nakash family has put Casa Casuarina, formerly known as the Versace Mansion, up for lease, less than two years after buying the storied property, The Real Deal has learned.

Cushman & Wakefield confirmed that the firm is marketing the former estate of slain Italian fashion designer Gianni Versace at 1116 Ocean Drive in Miami Beach.

The property features 10 luxury suites, a wellness spa, restaurant, swimming pool, rooftop lounge and event space. The three-story, 23,462-square-foot building sits on a 19,500-square-foot lot, according to Miami-Dade property records. It was built in 1930.

Jordache Enterprises paid $41.5 million for the famed site at an auction in September 2013.

“We bought history,” Joe Nakash, the chairman of Jordache Enterprises, told reporters in 2013, dismissing the possibility of a massive renovation or teardown. “We paid $41.5 million for it and it’s going to stay as it is,” he said at the time.

The house was sold with the furnishings, stain glass and mosaic arranged in the eccentric, baroque style of Versace. Features include a 24-karat gold-lined swimming pool and a guest suite fitted out for once frequent visitor Madonna.

A spokesperson for Jordache Enterprises said the property is not for sale, but that he receives unsolicited offers “all the time.”

“When we buy real estate, we essentially want to own it forever,” Jonathan Bennett, managing director of Nakash Holdings, told TRD. “We’re looking for the right operator. There are folks out there who are specialists.”

The new listing describes potential uses for the mixed-use property, including luxury retail, financial advisory services, high-end dining and lounge space, a hotel, auction house or art gallery, among others. Kazuko Morgan, Eva Marie Santiago, Frank Begrowicz, C. Bradley Mendelson, Alan Schmerzler and Greg Masin of Cushman & Wakefield are the listing agents.

The Nakash family has other holdings in South Florida, most recently, in December, paying nearly $90 million for the Setai Hotel in South Beach.

An earlier version of this story incorrectly stated that Casa Casuarina is for sale. The property is now available for lease. 

From left: Adam Neumann, a unicorn and Miguel McKelvey

From the New York website: In November, news broke that the shared-office provider WeWork raised $150 million in February from a number of high-profile investors, including Boston Properties’ Mort Zuckerman. The deal valued WeWork at $1.5 billion and catapulted it into the limelight. It was suddenly a “unicorn,” Silicon Valley-speak for a company that races to a $1 billion-plus valuation based on fundraising.

Over the next few weeks, there was little news from the startup, save for a couple of conference talks by co-founders Adam Neumann and Miguel McKelvey and a new lease signing in New York at the Durst Organization’s 205 East 42^nd Street. Then, on Dec. 15, the firm made another announcement:  It had just raised an additional $355 million, valuing the company at a staggering $5 billion.

In just nine months, WeWork had tripled in value. It was suddenly worth more than twice as much as global brokerage giant Cushman & Wakefield.

WeWork will open at the 350 Lincoln Road building in Miami Beach in July, TRD first reported in May.

Real estate is a slow-moving business. Skyscrapers take years to build. Families amass fortunes over decades, and hold on to them for generations. By these standards, WeWork, launched just five years ago, is the industry’s equivalent of Usain Bolt.

It has leased more than 3 million square feet of office space globally, with 1.85 million square feet of that in New York, making it one of the city’s largest tenants. But its impact eclipses its physical footprint. Landlords now say WeWork shapes their design decisions, and it’s changed the way startups think about their office needs.

“There are a lot of companies that start out in a WeWork environment, and that has influenced the design of our building,” said Toby Moskovits, CEO of Heritage Equity Partners, of her upcoming Williamsburg office project.

Budding real estate entrepreneurs are also eager to piggyback off the company’s success, with “We’re like WeWork, but for…” becoming a common sales pitch. WeWork, it seems, is everywhere.

But is it here to stay? Some argue that the firm’s lightning growth makes it vulnerable. “I definitely don’t think that now, at an all-time high [for office rents], they should expand,” said Juda Srour, founder of rival shared-office provider Jay Suites. “There’s a huge risk.” Others consider the firm overhyped and overvalued.

So will WeWork continue speeding ahead, or is it bound for a crash? The Real Deal took a closer look at the budding giant to get to the bottom of its business, its numbers and its prospects for the future. What emerges from talks with insiders, onlookers and investors is the portrait of a company that is less vulnerable than one might think.

Strength in numbers

If you think $5 billion seems like a lofty valuation for a startup, you’re not alone. “I don’t understand their valuation,” said a real estate tech entrepreneur who spoke on the condition of anonymity. “They seem to be valued the way a tech company is valued, but they are a commercial real estate company.” Even Neumann, in an interview with the Wall Street Journal, acknowledged that if it were viewed as a traditional real estate concern, its valuation wouldn’t be as steep.

WeWork declined to provide any information for this article, and doesn’t disclose its earnings, but sources said it is valued around 100 times earnings. That’s an extraordinarily high price tag. SL Green Realty, the city’s largest commercial landlord, currently trades at 20 times its earnings. Regus, the world’s largest shared-office provider and a WeWork rival, trades at 34 times earnings. The average for all stocks listed on Nasdaq is 23.

And yet, the valuation is hardly an outlier during a venture-funding boom that has some observers worrying about a new dot-com bubble. “At least from a dollars and cents perspective, we’ve seen crazier things,” said a partner at a venture capital firm that hasn’t invested in WeWork but holds stakes in other real estate tech startups. Another venture investor, also unaffiliated with WeWork, said the valuation is high but “could be very justified” in the long run.

Tech startups attract funding based less on their current earnings and more on the promise of future growth. And if Neumann has his way, the growth will be immense. “In the next five years, we’re going to take over more than 50 million square feet [of office space],” he said at TechCrunch’s Disrupt conference in May.

From left: 110 Wall Street and Michael Rudin

WeWork rents out large tracts of office space with terms of 10 to 15 years, and then sublets small chunks to firms on a month-to-month basis. In exchange for this flexibility, as well as a plethora of amenities and networking opportunities, WeWork’s customers, dubbed members, pay a significant premium.

Zachary Ehrlich, founder of brokerage Mdrn., estimates he pays up to $200 per square foot at WeWork’s 261 Madison Avenue location. WeWork pays rents starting in the low-$40s per square foot for the space, according to real estate data firm CompStak. This likely allows for a comfortable profit margin, even after accounting for the company’s large investments in renovations, on-site management and amenities.

In some cases, landlords provide WeWork with discounted space in exchange for its commitment. Rudin Management, for example, gives WeWork a discount at 110 Wall Street. Michael Rudin, a vice president at the family firm, argued this makes business sense because WeWork is leasing the entire 300,000-square-foot building — which was previously 60 to 70 percent occupied — and is assuming much of the cost of renovation.

“At the end of the day, we have this growing company that’s taking the entire building and doing a nice buildout, and we are spending significantly less than we would have with a complete repositioning,” Rudin said. “Worst case, if WeWork went out of business, we would be left with a better building than before Hurricane Sandy.”

WeWork is getting similar discounts at a minimum of six of its 15 current New York locations, according to CompStak. Observers reckon each location generates millions in profits for the company, and its potential for profitability only increases with each new location, as does the appeal of its much-touted member network. Jason Bauer, whose brokerage Voda Bauer is headquartered at a WeWork space on East 42^nd Street, said the rent premium he pays is more than offset by the business he gets from other WeWork members. Voda Bauer is WeWork’s official residential partner in New York, giving it first crack at a huge pool of potential clients.

From left: Goldman Sachs’ Lloyd Blankfein, Benchmark’s Bruce Dunlevie, Mort Zuckerman and JP Morgan Chase’s Jamie Dimon

The founders’ unusual backgrounds — Neumann grew up on a kibbutz in Israel, McKelvey in a five-mother collective in Oregon — led WeWork to place huge emphasis on community, something that has clicked with investors.

“I thought they really did think not just about real estate space but about establishing a community, which I thought then and still think now would attract a lot of people,” Mort Zuckerman, co-founder and chair of Boston Properties, told TRD. He said he chose to invest based on his belief in both WeWork’s business model and in Neumann, whom he described as “enjoyable,” “inspiring” and having “a great feel” for his work.

“I am, shall we say, very happy (with the investment),” Zuckerman added.

The test to come

Rapid growth and glowing assessments like Zuckerman’s have led many to conclude that the future belongs to WeWork. It’s certainly managed to attract top talent. Recent hires include Arthur Minson, former CFO of Time Warner Cable, Michael Gross, former CEO of Morgans Hotel Group and Todd Bassen, former head of New York acquisitions for Invesco.

But doubts persist about its ability to weather a downturn. WeWork is signing long-term leases at historically high rates, despite the favorable terms it may get. Will it still be able to charge members, who have no long-term commitment, the rates it needs to stay profitable if the real estate market, or the economy as a whole, tanks?

From left: Todd Bassen and Arthur Minson

At an April event in Brooklyn, McKelvey addressed this question, as first reported by Bloomberg.

“Everyone said our business wouldn’t succeed then because it’s a downturn,” he said, referring to WeWork’s predecessor Green Desk. “And now they’re saying it won’t succeed because it’s a bubble. I think that whole idea is bullshit. Because as we all know sitting in this room, the world has changed completely.”

A third venture investor unaffiliated with WeWork, also speaking on the condition of anonymity, said he goes “back and forth” on the question of the company’s viability.

“Because you look at their spaces,” he continued, “and it’s all these small businesses, and if there’s a major downturn in the economy, do they get fucked? I don’t know, because it seems like there are not just tech startups there. I think they’ve done a pretty good job of building out their diversity.”

WeWork is often portrayed as a haven for tech startups, but that’s only partially correct. Walking through the hallways one is also likely to see lawyers, flacks, budding hoteliers and tailors, among others. What is true though, is that small businesses make up the bulk of WeWork’s membership.

Conventional wisdom says that small firms are vulnerable to downturns. However, a look at the available data shows that heavy reliance on small businesses may not be a disadvantage during tough economic times – on the contrary.

The chart above shows changes in the number of businesses by employee count between 2007 and 2011, based on research from the federal Small Business Administration. The data show that small businesses didn’t disappear at a higher rate than their larger counterparts during the economic crisis that began in 2008. In fact, firms with between 100 and 499 employees saw the steepest decline. Meanwhile, the number of firms with less than 10 employees, which make up a large chunk of WeWork’s members, barely declined. Simply put, for every small firm that folds, a large firm downsizes enough to keep the total number of small firms more or less constant. The takeaway: Demand from small firms for shared office space is unlikely to fade in an economic crisis.

This is exactly what Regus experienced in 2009. “They did extremely well during the last downturn, when a lot of people were downsizing, especially in the financial sector,” said CBRE’s Mark Ravesloot, who has represented Regus in New York for nearly a decade. Firms tend to be wary of making long-term overhead commitments during a crisis, he said, meaning many prefer short-term leases despite them being pricier. Moreover, staff reductions mean the demand for the kind of shared services — such as accounting, legal and IT — provided by WeWork and Regus is likely to grow.

Midtown office leasing data compiled by Savills Studley corroborates Ravesloot’s observation. The chart below shows average asking rents between 2006 and 2015 broken down by office size. Offices with less than 5,000 square feet saw rents dip significantly in 2009 and 2010, but the decline was short-lived. In comparison, rents for larger office spaces recovered far slower in 2010 and 2011.

Still, no two crises are equal, and just because Regus fared well during the last downturn doesn’t mean WeWork will do as well during the next one.

According to Ravesloot, Regus tends to sign leases during market troughs, when rents are cheaper, and has remained reluctant to commit to large chunks of space in Manhattan over the past year. WeWork, on the other hand, is piling on leases at peak pricing. But expanding during a boom comes with a big plus: it has arguably never been easier to raise capital.

To date, WeWork’s founders have raised nearly $570 million from investors, according to CrunchBase. And they’ve given up at least a 37 percent ownership stake, according to PitchBook, a data firm that tracks private capital markets. No other real estate startup raised even remotely as much. While WeWork looks to be investing a sizeable chunk of that money in its expansion, it will also be able to set aside cash reserves. This, observers say, boosts its ability to weather a downturn despite the high rents it pays.

Stewart Butterfield, CEO of the corporate-messaging app Slack, said in a recent New York Times interview that raising as much capital as possible now makes sense for startups because it makes them more resilient to vagaries of the market. “It’s a hedge, and a hedge that’s unbelievably good for us,” he said. “In the case where everything turns to [expletive], we will look pretty smart.” This argument applies to WeWork as well.

So, with fat cash reserves and a rapidly-growing customer base, WeWork is likely to stay hungry. Just how big can it get? Take it from McKelvey. On a recent Thursday, he sat on a panel in blue jeans, bright green sneakers and a green plaid shirt. When the moderator said in passing: “I don’t know how much more space you’re going to acquire in New York City,” McKelvey interjected, jokingly: “All of it.”

Rendering of Link at Douglas

Adler Group and 13th Floor Investments’ proposal for a massive, mixed-use development at the Douglas Road Metrorail Station has won the recommendation of a Miami-Dade County selection committee, The Real Deal has learned.

As the highest ranked proposal, Adler and 13th Floor will now negotiate with the county before the deal goes to the county commission for approval.

The joint venture was competing against the Related Group in the county’s request for proposal for the 7-acre site.

Responding to the RFP, in March, Adler 13th Floor Douglas Station LP proposed “Link at Douglas,” a project that would include 970 residential units, 150-key hotel, 70,000 square feet of retail and a public plaza.

In a 300-plus page proposal obtained by TRD, the developers described Link at Douglas as a “connector among residential, office, hospitality and leisure/entertainment, not only within this development, but throughout Miami-Dade County.”

Phase 1 would include a hotel at the corner of Douglas Road and U.S. 1, spanning across the Miami-Dade Metrorail track, a pedestrian plaza and a 25-level residential tower with 288 units, and retail space, according to the proposal.

“One option for brand affiliation for a hotel at Link is a hotel brand such as Hilton Garden Inn,” the proposal states.

Phase 2 would consist of a 302-unit residential tower, with parking and ground-level retail. A third, 25-level residential tower would be part of Phase 3, with more retail and parking. And Phase 4 would add mid-rise residential units and retail space.

Members of the selection committee weighed both Adler 13th Floor’s proposal and Related’s, according to minutes from the evaluation committee’s May 29th meeting. Among the points of discussion were square footage, costs and phasing.

Adler 13th Floor’s proposal totals 261,165 square feet, with an $82.8 million cost price, and the phasing would take eight years, as noted in the minutes.

The selection committee members opted not to request oral presentations before adding up scores and choosing the highest ranked proposer. The top ranked choice was confirmed to TRD by the county.

13th Floor Investments’ Managing Director Arnaud Karsenti declined to comment on the selection committee’s recommendation, but provided a statement.

“The county’s proposed Douglas Station project would be a significant step forward for improving interconnectivity throughout the region,” Karsenti said in the statement. “Our team would be privileged and honored to be selected for this endeavor, however we respectfully decline comment until the procurement process has concluded.”

Firehouse Subs in Miami Beach

Commercial real estate on Washington Avenue just got hotter.

A Firehouse Subs in Miami Beach sold for $2.5 million, according to Marcus & Millichap, or about $766 per square foot.

The 4,322-square-foot property at 1429 Washington Avenue last sold for $1.95 million in February 2009, according to Miami-Dade property records. 

The seller, 1429 Washington Avenue LLC, lists Miami Beach investor Peter Neary on its corporate records.The buyer was Black Condor, a Miami Beach-based LLC. Cesar and Guillermo Manzur are listed on the buyer’s records.

Marcus & Millichap’s Arthur D. Porosoff, Ronnie Issenberg, Gabriel Britti, Scott C. Sandelin and Alejandro D’Alba represented the seller.

The single-story building was constructed in 1920, records show. The sale joins a number of commercial properties on Washington Avenue that have sold recently.

In March, the Waldorf Building, at 1334 Washington Avenue, sold for $6.2 million, six times its last sale price in 1993. Also in March, a pair of New York real estate investors purchased a Miami Beach hostel at 235 Washington Avenue for $8.28 million.

The Miami Beach Land Use and Development Committee recently approved a series of wide proposals designed to breathe new life into Washington Avenue. The proposals, which will be forwarded to the Miami Beach Planning Board for its June 23rd meeting, include raising height limits for buildings on Washington Avenue from 50 feet to 55 feet, widening sidewalks, adding bike lanes and even closing down one lane of traffic along much of the avenue to allow parklets — parking spaces converted to temporary patios for outdoor dining.

“The City of Miami Beach has been discussing increasing the buildable square footage to the east side of Washington Avenue,” Issenberg said in a statement. “The city’s plan is to attract new hospitality developments, which in turn will continue driving retail rates northward.”

A construction photo and rendering of InTown in Little Havana

As rising property prices and a shrinking supply of land drive developers west, Miami’s Little Havana has attracted renewed attention from those looking to duplicate the success of neighborhoods like Brickell.

Little Havana saw scattered interest during the years leading up to the real estate bust, but most of those projects fell apart. Morrison, a 395-unit development once considered the biggest condominium project proposed for Little Havana, was the most notable plan to fizzle out during the bust.

But that was then. Now that the market has recovered and a bevy of new projects are underway in Miami’s most popular areas, firms like the Astor Companies are banking on land prices in Little Havana that haven’t caught up to the premiums of Brickell or Miami Beach.

Astor recently started construction on InTown, a mixed-use development that will house 312 condos between two 14-story towers, along with eight townhomes and 18,000 square feet of ground-floor retail. Construction is expected to finish by the end of 2016.

Henry Torres, founder of the Astor Companies

Henry Torres, founder of Astor, told The Real Deal,during a tour of the construction site that the company is marketing its units as “affordable luxury.”

The intent, he said, is to give young professionals another option besides Brickell, where rental price have greatly appreciated.

“I truly believe in Little Havana,” he said. “The neighborhood had a bad stigma 10 years ago. That’s not this neighborhood today.”

The project marks Astor’s second foray into the neighborhood, after Brickell Vista at 900 Southwest 8th Street. That development was completed in 2005 and sold out before the bust.

Torres said other developers have begun purchasing properties in the area, and he expects property prices to climb. A Brooklyn-based investment firm just picked up the recently built Miramar Apartments at 1023 Southwest 6th Street, and Torres himself is in preliminary talks with the owners of the popular Ball & Chain lounge about possibly buying more land in the neighborhood. The Chetrit Group is proposing a massive project nearby with four 60-story towers along the Miami River, and an investment group paid $5.3 million for a portfolio of apartment buildings in the neighborhood earlier this year.

Domino Park, a well-known Little Havana landmark (Credit: Infrogmation)

But not everyone is welcoming the change. An initiative led by the city of Miami to upzone the area and entice development has met stiff criticism from preservationists, who argue that blanketing the area in high-rises would destroy one of Miami’s most important landmarks.

Their efforts helped establish the “Riverview Historic District” earlier this year, which now protects a few square blocks of East Little Havana that housed Latin American refugees and immigrants who came to the United States during the first half of the 20th century.

Daniel Ciraldo, a member of the Miami Design Preservation League, told TRD that a balance must be struck between revitalizing the neighborhood, which has pockets of run-down buildings, and protecting sites that are genuinely important to Miami’s history.

“There is a treasure trove of historic buildings in Little Havana,” he said. “What we need is first to survey the neighborhood and determine what those properties are.”

Following the success of The Real Deal‘s Broward County Forum & Showcase in April, and our Miami event last October, we’re thrilled to announced The Real Deal’s South Florida Real Estate Forum & Showcase this fall.

The event will take place October 15 at the Moore Building in the Design District, bringing together everyone in the South Florida real estate industry — from brokers, developers and designers to investors and homebuyers — for a day of networking and learning.

Didn’t make it to our last Miami event? Here’s a look at what you missed:

All attendees will receive a copy of the South Florida Market Report, and the publication will be distributed to subscribers along with the October issue of The Real Deal magazine. Check out the April edition of the South Florida Market Report online.

For sponsorship opportunities email forum@therealdeal.com or call 212-254-7400 to reserve your spot now.

Cervera Real Estate’s office at 1492 South Miami Avenue

A fire broke out inside Cervera Real Estate’s main Brickell office in the middle of the night Tuesday, resulting in smoke damage, the firm said Wednesday.

No one was injured in the fire at 1492 South Miami Avenue, which took place in the office’s computer server room. The exterior of the building was not affected, though a few windows were blown out, a spokesperson for the firm said.

It is not known what caused the fire, which was quickly extinguished. Cervera has a backup of its company files on an external cloud-based server, according to a statement from Managing Partner Alicia Cervera Lamadrid.

“The building structure was not damaged and clean-up from the smoke damage is already underway,” she said in the statement. “We will have the Brickell office back up and running as soon as possible.”

In the meantime, the office’s brokers and staff, totaling about 50 people, will operate from other offices nearby, she said. Cervera Real Estate has 18 offices in the Miami area.

Interior of the jugofresh store in Coral Gables (Credit: Gesi Schilling)

Jugofresh, a local juice, smoothie and vegan foods brand, is opening its North Miami Beach store on Monday. 

The new store, at 14871 Biscayne Boulevard, marks the company’s seventh, according to a press release. Other locations include Sunset Harbour, South Pointe, Wynwood, South Miami, Coral Gables and Whole Foods in downtown Miami.

The 975-square-foot store in North Miami Beach is located inside Biscayne Commons shopping center. The shopping center, anchored by Publix and Costco, is around the corner from the planned $4 billion SoLē Mia master-planned development, formerly known as Biscayne Landing. — Katherine Kallergis

Hyatt Centric South Beach Miami, a new lifestyle hotel developed by Miami-based Robert Finvarb Companies and its partner David Martins, celebrated its recent opening with a ribbon-cutting ceremony.

Miami Beach Mayor Philip Levine was among those in attendance at the 105-room hotel. The property, at 1600 Collins Avenue, represents the first Hyatt Centric-branded hotel in Miami Beach, and the second Hyatt Centric property worldwide, after Chicago. Another 15 rebranded hotels are on tap for New York, Paris and other destinations, Robert Finvarb, CEO of Robert Finvarb Companies, previously told TRD.

Kobi Karp designed the 10-story glass tower in Miami Beach, which sits above an historic building façade. As an added plus, the hotel’s ground floor has 9,300 square feet of retail space facing Collins Avenue. — Katherine Kallergis and Sean Stewart-Muniz

The Spirit Airlines CEO’s home at 900 Ponce de Leon Boulevard

1. Spirit Airlines CEO puts Fort Lauderdale home on the market [Sun sentinel]
2. Miami-Dade County is planning to extend its MetroMover to include a proposed soccer stadium at the former Orange Bowl site [Southern Legion]
3. Worker shortage hammers builders [Wall Street Journal]
4. Proximity is the key factor in All Aboard Florida’s impact on home values [Palm Beach Post]

— Sean Stewart-Muniz

Current reader favorites:
1. SLS South Beach sells to Guernsey investors for $125M
2. Take an early look at the new Miracle Mile
3. Former Power Studios site in Design District sells for $14M
4. Linear parks to bring new life to Miami-Dade
5. Condo prices, rents flattening in downtown Miami: DDA report

Renderings of Le Jardin and Pearl House (bottom left)

The Verzasca Group’s Pearl House condominium project in Bay Harbor Islands is now sold out, amid a boom in development in the once-sleepy enclave, The Real Deal has learned.

Pearl House, a seven-story, 15-unit development at 1170 101st Street is scheduled to break ground in September, on a a single-family home lot, Tim Lobanov, Verzasca’s managing director, told TRD. Prices started in the upper $500,000s, to the low $900,000s. The project is designed by Frankel Benayoun Architects. Units will range from 1,300 square feet to 2,200 square feet, averaging 1,500 square feet, Lobanov said.

Seventy-nine percent of buyers are foreign, with most from Latin America, and 21 percent are from the United States and Canada. Among Latin American countries, Brazil ranks first, then Argentina, Colombia and Mexico, he said.

Verzasca, which first entered the United States by launching sales for Pearl House in December, is also planning a nearby condominium development, Le Jardin, at 1150 and 1160 102nd Street. The seven-story project, also designed by Frankel Benayoun Architects, will have 30 residences, with square footage similar to Pearl House, Lobanov said.

“With these first two projects we have to over deliver,” he told TRD. “We’re a small player now in the South Florida market.”

Bay Harbor Islands is undergoing rapid redevelopment, with 24 new condo developments announced in the community of low-rise residential apartment complexes and single family homes.

Miami-Dade property records show Verzasca paid $1.1 million in October for the Pearl House site, and 2.3 million in January for the two vacant lots to be developed as Le Jardin.

Michael Internoscia, principal of DevStar Realty, which is marketing both projects, said Le Jardin is now 50 percent sold and “progressing nicely.” Bay Harbor Islands, he said, is an area that “was greatly overlooked for years, and undervalued.” Now, he believes, it will become “the next big thing.”

Unlike some other cities, including Miami Beach, Bay Harbor Islands allows monthly rentals, as do the condo documents for Pearl House and Le Jardin, Lobanov said.

Verzasca is investing $100 million in its two Bay Harbor projects, and will raise another $600 million over the next six years. The Russian developers are planning “the tallest building in Edgewater,” and a condominium tower on the current site of a Denny’s, on the west side of Collins Avenue in Sunny Isles Beach. Last month, the Sunny Isles Beach City Commission deferred action on the proposal to build a 19-story condominium on the site, giving Verzasca more time to respond to complaints that the development, at 17550 Collins Avenue with a ground-floor restaurant, would create too much traffic congestion.

Sluggish bank repossession leaves zombie homes to roam the market

As foreclosure rates continue to drop across the nation, one particularly undead type of repossession has seen a drastic reduction in the counties of Miami-Dade, Broward and Palm Beach.

Zombie foreclosures, or homes that are vacant but aren’t yet repossessed, decreased by almost 50 percent in the second quarter of 2015 when compared to the same time period last year, according to a RealtyTrac report. The tri-county area had a total of 7,021 zombie foreclosures, ranking it fourth in the country for vacant homes in foreclosure. The region most plagued by these homes is New York and New Jersey, which have a staggering 19,927 residences shambling through the market with no owner.

Florida’s cities saw some of the country’s most drastic improvement, but still lead the nation for zombie foreclosure rates

On a statewide level, Florida still leads the nation for zombie foreclosures with a total of 27,808 during the second quarter. Only New York came close, with 17,043 undead properties.

Florida also took the top spot for foreclosure rates in general, coming in at 3.3 percent of all its mortgaged homes.

“In South Florida, we continue to see a dramatic improvement in the foreclosure arena. Zombie foreclosures have dropped 46 percent year-over-year. The wheels of our judicial process turn slowly, but the good news is we are in the last rounds of this fight,” said Mike Pappas, CEO and president of the Keyes Company, in a statement. “Occupied homes always outperform vacated properties. It behooves the banks to work with the homeowners to maximize the property value for all.” — Sean Stewart-Muniz