Traffic in Miami in 2016 (Credit: Getty Images)

South Florida’s rapidly growing traffic problems are nearing a point where they could limit economic growth, experts warned at a conference on transit and real estate Wednesday in Fort Lauderdale.

Central to this issue is the region’s ability to attract new businesses and talented millennial employees who want a variety of mobility options, especially high-quality public transportation.

These were the key points made by Brett Porak, director of preconstruction at Moss Construction Mangers, as he opened a conference on “Intersections between real estate and transit.” The conference, organized by the Urban Land Institute Southeast Florida/Caribbean, brought together developers, builders, transportation officials from Miami-Dade, Broward and Palm Beach counties, plus experts in urban planning to discuss South Florida’s mobility issues and solutions.

Porak’s introduction framed the burgeoning dilemma for the tri-county region: “South Florida, at 6 million people, is crossing the threshold where cars and roads become so congested that gridlock sets in and the ability to increase the velocity of moving people, goods and ideas – which is critical to innovation and economic growth – stalls.”

The average Miami commuter, for example, wastes more than a week of work (52 hours) annually stuck in traffic, the 12th worst level in the country, he said, representing almost $3 billion in lost productivity.

After removing the undevelopable areas of the Everglades, South Florida has the third highest population density in the country and an economic output greater than both Singapore and Hong Kong, Porak said, citing studies done on the region. But while 78 percent of the region’s workers drive to work, only 60 percent drive in San Francisco, 50 percent in New York City, 40 percent in Singapore and 13 percent in Hong Kong.

This is happening in South Florida as Miami, Fort Lauderdale and West Palm Beach compete to attract new companies and employees that will grow demand for commercial and residential real estate, especially highly trained and highly paid millennials who generally don’t want to live in a place where they need a car and seek different options for getting around, including walking, bikes and efficient public transportation.

“Employers are relocating offices to urban cores as opposed to suburban office complexes,” Porak said, citing the higher growth of rents and lower vacancies in urban office product vs. suburban offices.

Participants discussed a range of ongoing and potential solutions, including new rapid transit facilities, like the fast train, Brightline (to link Miami and Orlando), extensions of existing train lines, self-driving mini-buses, Uber or similar services, as well as rezoning of mixed use development, and reducing the space dedicated to parking for commercial and residential real estate to encourage use of public transport options.

The executive directors of metropolitan planning organizations in Miami-Dade, Broward and Palm Beach counties outlined their current and long-term efforts to relieve traffic congestion and provide options – such as the trolley service in Fort Lauderdale, bike rentals in downtown West Palm Beach and adding express lanes and express bus service on I-95 between Fort Lauderdale and Miami.

The first Brightline trains are scheduled to begin moving passengers between Fort Lauderdale and West Palm Beach in late June of this year, said Alison Soule, public affairs director at the privately-owned passenger rail company. Service to Miami is expected to start in August, she said. While Brightline still is not releasing data on ticket prices, the company says that once its Miami-West Palm Beach segments are operating, traffic should be reduced on I-95 and the turnpike in South Florida.

One company is building small electric vehicles that can help fill the first-mile, last-mile gap for urban commuters or move people directly from home to school or work. 

Local Motors has developed Olli, an electric, self-driving mini-bus that offers a clean, easy-to-build vehicle for urban transportation, said Dan Sturges, the Arizona-based director of urban mobility design at the company. “Olli can hold 12 people and is smaller than a Mini Cooper,” said Sturges, who previously designed vehicles for GM. Olli, one of Local Motors’ “reinvented” vehicles, can be built economically in mini-factories and an Olli body recently was “manufactured” on a 3-D printer.

Two developers talked about tackling issues such as developing mixed-use projects, now in higher demand, and controlling the expense and space required for parking facilities, even as cities try to discourage the use of private vehicles in crowded downtown areas.

“It’s difficult to be a developer,” said Peter LaPointe, principal at Grass River Property. “It takes so much time to develop a project because of permitting. We try to build mixed-use projects, but in commercially zoned areas it’s very difficult to change the zoning.”

Developers are interested in reducing space and investment in parking garages and are keen to promote multimodal transportation, “but we still live in a world where people have cars,” LaPointe said. Clients want developers to build big parking structures for commercial and residential projects, but in 20 or 30 years, they’ll be obsolete.

Developers see trends in urban development where there will be more rapid transit, better and more extensive bus or trolley lines, more use of services like Uber and greater emphasis on walkways and parks for pedestrians and bicycles. As this is happening, millennials are shunning car ownership while cities and/or commercial operators are making parking in congested urban areas increasingly expensive and trying to offer “last mile” options for commuters going to and from work.

Shared parking in hotels and office buildings (day and night ) could be an answer, LaPointe said, “but the market determines what will be built. Retailers, for example, want to make sure there is ample parking space for their customers.” One alternative: Offer clients in residential buildings cheaper rent if they do not take a parking space.

Moreover, he said, while biking is a desirable means of urban transportation, “it’s still very dangerous in South Florida. We’re a long way from a safe biking environment.”

Ryan Shear, principal at Property Markets Group, agreed that developers face a formidable task in trying to reduce space for parking in urban development. Although some developers want to reduce parking, “You have to build parking to get financing,”  said Shear, whose company is working to redevelop the moribund Las Olas Riverfront property in Fort Lauderdale by erecting residential high-rise buildings. “We’re pushing for a 1 to 1 ratio (parking space to residential unit), but people want multiple spaces. It will be a fight.”

People talk about re-purposing large parking garages in the future for other uses, he added, but there are limited options. “Parking garages are not a fit for residential units,” and the most likely use for them would be storage.

The Miami-Dade Commissioner for District 13 and chairman of the Board of County Commissioners, Esteban L. Bovo Jr., said that the county has been working on the foundation and groundwork for relieving traffic problems for years, but warned that “we need to deliver something soon. Life for a commuter in Miami-Dade is being stuck in traffic.”

He noted that the county did not use a special tax approved for transit improvements properly, and that it must use those tax funds, plus monies from municipalities and other sources, to “invest in a transit system that works, that contributes to economic development and improves the quality of life.”

Bovo pointed to a number of projects currently under development – including expansion of the Tri-Rail Coastal Link between Miami and Jupiter, saying that financing for part of this expansion is still a problem.

The county continues to push for federal investment in regional projects and is waiting to study proposals from Spain, Israel and China to invest in public private partnerships. It also is looking at “lasagna” financing options, or mixtures of county, federal, and private funds, plus tax incentive financing and other mechanisms. Since major transportation projects take years to develop, “It’s urgent that we do something now,” he said.

Terra Group President David Martin and a rendering of the firm’s Pines City Center project

Miami-based Terra Group has pre-leased 70 percent of the retail space in the first phase of Pines City Center, a 47-acre mixed-use development in Pembroke Pines.

So far, the development’s tenant roster includes Publix Super Markets, Carl’s Patio, Cooper’s Hawk, BurgerFi, Smoothie King, PizzaRev, Bento Café and The Halal Guys.

They will occupy the initial 200,000-square-foot retail phase of the development, which is under construction and scheduled for completion in late 2018.

The second phase of Terra’s development will include 100,000 square feet of commercial space and 385 apartments. The site of the 300,000-square-foot development is the southwest corner of Pines Boulevard and Palm Avenue.

Pines City Center will have “a strong food and beverage component,” David Martin, president and co-founder of Terra, told The Real Deal. “Families and individuals are living in smaller houses, smaller apartments.” So “people are spending less time entertaining at home and spending more time out, looking for entertainment and food-and-beverage experiences.”

Publix alone accounts for about a quarter of the retail phase of the development. Publix last September signed a lease for 45,600 square feet at Pines City Center. The lease has an initial term of 20 years and eight options that each allow the Lakeland-based supermarket company to renew the lease for five years. The Courtelis Company is handling the leasing program for Pines City Center.

“When we announced Publix, which is such a strong anchor, there was just a natural progression of tenants,” Martin said. “We have more tenants we’re going to be announcing soon.”

Terra last year paid $15.9 million to the City of Pembroke Pines for 17.23 acres at the corner, which the firm needed to build the first phase of Pines City Center.

Terra last year also closed on a $54.3 million loan from Oakland Finance & Investment to finance the mixed-use development, according to county records.

“That’s a development and construction loan, so we’re fully funded to complete the project,” Martin said.

Vertical construction of the first phase of Pines City Center will start within 30 days, following about six months of site work, he said.

Almost 400,000 people live within five miles of the Pines City Center site, and 1,500 residences are within walking distance, according to Terra.

Next door to the Pines City Center site, the City of Pembroke Pines has opened a new civic center with a 3,500-seat performing arts center, a conference hall, an art gallery and new chambers for the city commission.

Pines City Center is one of three Terra developments under way in Broward County. Terra is planning another mixed-use development in Pembroke Pines, called 16000 Pines Market, and is developing a 121-acre master-planned residential community in Weston called Botaniko, featuring 125 contemporary-style homes designed by architects Chad Oppenheim and Roney J. Mateu.

Rendering of the downtown development

The city of Boynton Beach tapped a private developer to partner on its master plan to develop a downtown, a project that could cost roughly $250 million and include residential, hotel, park, assisted living and parking components.

Boynton will begin negotiations with E2L Real Estate Solutions of Winter Park and create a public/private partnership contract for the 16-acre site, which is east of I-96 off of Boynton Beach Boulevard. The contract would be up for a vote in June, the Palm Beach Post reported.

E2L’s team includes JKM Developers and REG Architects, the latter of which is led by Rick Gonzalez.

Out of the estimated $250 million project cost, the development could cost the city about $65 million. Unlike nearby cities like Delray Beach, which has Atlantic Avenue, Boynton lacks a real downtown. The proposed project, which is called Town Square, would have a new three-story city hall, a renovated high school, more than 450 apartments, townhomes, three parks, a new police department and fire station, and more.

Community workshops will be held through August, the newspaper said. The commission will vote on E2L’s plan after that. [Palm Beach Post] – Katherine Kallergis

Las Olas Riverfront renderings (Credit: ArX Solutions) Inset: Ryan Shear

The Fort Lauderdale City Commission on Wednesday approved a total of 745 new units to be developed by the Related Group and Property Markets Group along the Tarpon River.

The first proposal, which is the third phase of Related Group’s New River Yacht Club, calls for 190 units at South Andrews Avenue and Southwest Fifth Street.

Rendering of the Related Group’s New River Yacht Club project

The eight-story building will be built just south of the property’s 26-story riverfront tower, which was completed in spring of 2014. “I think it’s a great concept,” said commissioner Dean Trantalis. “I think it fills in a spot that has long needed a change.”

The second proposal was for phase two of PMG’s plan to replace the western half of the now-empty Las Olas Riverfront retail space at Southwest First Avenue and West Las Olas Boulevard with a 1,214-unit mixed-use development.

The 42-story tower will include 555 market-rate units geared toward millenial renters, anchored by 35,000 square feet of commercial space.

PMG recently bought most of the Las Olas Riverfront property from Fort Lauderdale-based developer Dev Motwani and his partners for $29 million.

PMG acquired about 2.4 acres on the western portion of the property. Motwani and his partners retained 1.3 acres on the eastern portion.

No opposition was voiced to either project, and both were approved unanimously, but commissioner Romney Rogers urged the commission to be strategic about continuing to allocate units at market rate, noting that the Broward County Unified Land Development Regulations require that of the 5,000 units Fort Lauderdale has available for allocation this year, 15 percent must be affordable.

“5,000 gets eaten up pretty darn quick,” said Rogers. “I know I’ve looked at projects the last two weeks that might eat up that many.”

“Before we issue the building permit for the [2,501st] unit, we have to make sure 375 affordable housing units have been allocated,” explained assistant city attorney D’Wayne Spence.

“We have to address it, but if you have a project that everybody likes,” said Mayor Jack Seiler, “I don’t want to hold them up.”

Seiler closed the discussion on the Riverfront proposal by requesting city staff come up with a recommendation to ensure the city is meeting its affordable housing obligations.

Our third annual Broward County Real Estate Showcase and Forum is underway!

Follow along or add your two cents to the conversation by using #TRDForum on Twitter and Instagram. We’ll be providing live updates throughout the day, so keep an eye on @trdmiami on Twitter and @trdsofla on Instagram, as well as The Real Deal South Florida‘s Facebook page.

Enjoy the show!

Louise Sunshine, Jerome Hollo, Jimmy Tate, Shahab Karmely and moderator Hiten Samtani

Developers are embracing a Trump presidency and its potential impact on new development in South Florida amid a slow market.

Louise Sunshine, Shahab Karmely, Jimmy Tate and Jerry Hollo discussed financing their projects in the current market, and challenges like traffic congestion and sea-level rise, during The Real Deal’s Broward County Real Estate Showcase & Forum on Thursday.

Tightening costs are key to operating in a tougher lending environment, the developers said during the first panel, which covered the economics of new development amid a new administration and continuing global market fluctuation.

Hollo, whose firm Florida East Coast Realty is building the tallest residential tower south of Manhattan, Panorama Tower, said sponsorship is a big issue. “They’re going to make sure you have a track record of being able to finish a project,” he said. FECR secured one of the biggest construction loans this cycle in 2015 for Panorama, which is slated to open later this year.

“From our point of view, buy cash, be very well financed,” Karmely, who’s developing One River Point on the Miami River, said. He said the presales model is one of the main points that drew him to South Florida.

Sunshine, wearing sunglasses, chimed in. “I’d like to think I really developed the art of the presale in New York City,” later adding that she doesn’t believe the “art of the presale” has completely developed in South Florida.

At the Four Seasons in Fort Lauderdale, presales stand at about 25 percent and at the Four Seasons in Surfside, which is just starting to record closings, the project is about 85 percent presold, according to Sunshine.

In a slow market, Sunshine said location is the most important. “I was taught that Trump buildings were worth $1,000 per square foot more than the buildings next door and I had to justify the reasons why that was so,” Sunshine, a strategic adviser for Fort Partners, said during the panel at the Design Center of the Americas in Dania Beach. “Brokers should always be looking to create value rather than to lessen value.”

The president’s campaign promises, which include tax reform, investing in infrastructure, and changes to Dodd-Frank, “should help spur growth,” Tate said. Tate’s projects include the proposed redevelopment of the Bahia Mar resort and marina.

But developer Jerry Hollo, whose firm is building Panorama Tower in Brickell, said the president’s unpredictability is problematic. “Certainty is more important than uncertainty,” he said.

Tate and others don’t expect the market to crash like it did in 2007 and 2008, but ebb and flow. Distressed opportunities are fewer than in the last cycle, and his advice was to focus on commercial when residential slows down, and vice versa. “You will see there’s always opportunities. We’re not just a one-trick pony.”

When getting projects approved, Tate said traffic is a big issue. So is sea-level rise. “I wasn’t going to mention sea-level rise,” he said, replying to a question from the audience. “Obviously, it’s a concern. It’s something we all need to pay attention to. As a developer, I believe we can develop our way out of it,” by raising roads and properties.

Bahia Mar’s sea walls are at 3.9 feet, and Tate plans to raise them by about 2.5 feet. But Fort Lauderdale’s code doesn’t allow for sea walls taller than 5 feet.

Generally, the panelists said they aren’t seeing elements of shakiness, and few examples of projects that have imploded.

Karmely may have said it best, comparing development to surfing. “There are times you’re out there and it’s smooth and everyone is catching a ride, and they are times you’re being held under…. Don’t panic …. You’re going to catch another wave.”

Paula Silberberg, Tim Elmes, Mike Pappas and Peggy Fucci

The residential real estate market in Broward County is strong and stable, a panel of top brokers and agents said Thursday at The Real Deal‘s Broward Showcase and Forum.

“We have an incredibly stable market” in Broward, said Peggy Fucci, president and CEO of One World Properties.

Panelists said foreign buyers and residents of the Northeast compose large segments of the Broward residential market, not just the Miami-area market.

Fucci, whose firm is handling condo sales for the Paramount Fort Lauderdale Beach development, said 30 percent of the buyers are residents of foreign countries, “mostly Latin Americans.”

Foreign buyers of Broward homes are coming from such countries as Canada, Brazil, Venezuela and the United Kingdom, said Paula Silberberg, managing broker of the Fort Lauderdale offices of Douglas Elliman Real Estate.

In addition, “we are seeing a huge influx from the Northeast,” she said, citing lower taxes in South Florida.

While some sellers of South Florida homes are cutting their asking prices, “our pricing continues to go up, steadily up” in Fort Lauderdale, Silberberg said. She also said Fort Lauderdale home prices remain below the levels of 2008.

“We’re very bullish [on Broward] because we’ve run out of land in Broward,” said Mike Pappas, president of Keyes Company and Illustrated Properties.

Pappas also said the state of the residential market in Broward varies by type of property.

For example, Broward has a 30-month supply of condos priced over $1 million, but in the single-family home market, “under $500,000 it’s tighter than a drum,” Pappas said. While prices of single-family homes in the under-$500,000 market are firm, “the high end has to be reduced,” he said.

Tim Elmes, broker with Coldwell Banker in Fort Lauderdale, said the residential real estate market in Broward is “much more stable” than in the Miami area, which has lost property buyers to the more affordable Broward market in recent years.

“We’ve seen more traffic from Miami in the last two years than in the previous 10 years,” Elmes said.

“We’re seeing major money coming from the Northeast,” Elmes said. “I think the Northeast is just finding us,” and over the next 10 years, the residential market in Broward will undergo “a renaissance  … particularly on the high end.”

Panel members said people seeking homes where they can walk to work and to restaurants and shops are increasingly finding live-work-play locations in Broward.

“I think you’re going to have a downtown in every town,” Pappas said. “You’re going to see a downtown in Coral Springs. You’re going to see a downtown in Plantation.”

Sea level rise remains a long-term concern for the residential market in Broward, though its impact on sales is muted, panel members said.

“Our government is going to fix it, our municipalities are going to fix it, because they have to,” Silberberg said.

But Pappas warned that limestone-laden land in South Florida is too porous to adopt flood-control techniques found in areas of the Netherlands that are below sea level: “I don’t think the Dutch model will work here.”

Beth Butler, Diego Saavedra, Richard Sarkis and Hiten Samtani

South Florida developers, brokers and investors are slowly embracing virtual reality tours, immersive online presentations and data collection applications as tools to help them find and close deals, according to a panel of tech savvy real estate professionals.

“The best brokers and developers are using data applications as a complement to their Rolodex and local knowledge they have curated over their professional career,” said Richard Sarkis, CEO of Reonomy, a company that has developed a wide-ranging search application for commercial real estate markets. “I don’t see it as a replacement for that human connection, but the goal is to provide a tool that makes data collection easy to digest.”

Sarkis joined Compass Florida President Beth Butler and Diego Saavedra, sales and project manager for ArX Solutions, which develops virtual reality tours of residential projects, during the last panel of The Real Deal’s Broward County Real Estate Showcase & Forum on Thursday. Butler provided insights into a mobile application developed by Compass that gives real-time national data to potential home buyers and renters.

“We don’t just rely on the [Multiple Listing Service] for information.” Butler said. “We use other sources for the base of information. You can see an entire building and what every unit sold for — and not just the ones that sold in the last 24 months.”

Compass’ team of more than 50 software engineers then take that data and make it simple and easy for people to digest, Butler explained. “It’s like the Pinterest of real estate,” she said. “Instead of sending a link with a readout, it’s a nice, beautiful presentation of properties you want to look at.”

Both Butler and Sarkis assured brokers attending the panel that the applications are not designed to replace them.

Saavedra said ArX is helping South Florida developers and brokers showcase their projects across the globe with a click of a button. He said the company is already working with companies such as the Related Group, Property Markets Group and ISG.

“A lot of developers are starting to think ahead,” Saavedra said. “Most realize that they have to change in how [they] reach new clients. They are starting to test out the technology.”

Still, a slowdown in the real estate market could dampen developer interest in new technology tools. “When the sun is out and everyone is making hay, companies are more willing to spend on technology as a money generating tool,” Sarkis said. “But when there are headwinds, they start seeing tech as more of a cost center.”

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Downtown Miami (Credit Azeez Bakare Studios)

It’s a real estate question that historically has had an easy answer: Do single-family detached homes appreciate in value faster than condominiums?

The standard answer has been: Of course single-family homes appreciate faster. They are what most Americans prefer to live in, so there’s stronger demand. They come with their own piece of land — and we all know that land is a crucial driver of value.

Condos, on the other hand, tend to be smaller on average in square footage and more complicated. They come with boards of directors, association fees, rules and restrictions.

But hold on. New research conducted for this column by Trulia, the online realty marketing and information company, suggests that these old assumptions could be giving way to changing market trends. According to data compiled by Trulia on millions of properties in the 100 largest metropolitan areas between February 2012 and February of this year, the median appreciation rates of condos outpaced those of single-family detached houses.

It wasn’t even close. Median condo market values rose by 38.4 percent over the five-year period, while median single-family detached homes appreciated by 27.9 percent. In some local markets, especially those that have seen either significant new condo construction downtown or that have little available land suitable for detached housing, the median value of condos exceeds median values of single-family detached homes in the surrounding suburbs.

The most extreme example is metropolitan New York, where median condo values are now at 138 percent of median single-family detached home values. In Detroit, the median condo value is 125 percent of median single-family home value. Major urban areas where condos are appreciating faster than detached single-family units include Seattle, San Francisco, San Jose, Atlanta, Dallas-Fort Worth, Denver, Syracuse, San Diego, Boston, and dozens of others.

Single-family home values continue to be higher in the vast majority of markets but the gap is narrowing in many, thanks to the faster appreciation rates of condos in recent years.

Ralph McLaughlin, chief economist at Trulia, says one reason for the relative change in values is that in many urban markets, condos are “located in areas that are becoming more desirable because they are closer to amenities” — employment, transit and other attractions.

Some metro areas, such as Washington, D.C., that have high-cost single-family homes in parts of the city and in the close-in suburbs, are seeing only slight increases in median condo values relative to single-family homes. The D.C. market has experienced modest growth in values during the past five years, but condos have appreciated a smidge faster — 22.4 percent compared with 21 percent during the same period for detached single-family homes.

Other major metro areas, such as Chicago, aren’t seeing the pattern noted by Trulia. In the past five years, median Chicago condo values are up by 23 .3 percent, but median single-family values have risen by 25.5 percent.

Trulia’s analysis may be controversial. It derives from the massive database it maintains on millions of housing units nationwide. Using an automated valuation model that incorporates a wide range of data available on individual homes, it estimates ongoing property values both for properties that are on the market and those that are not.

Some housing economists take issue with Trulia’s conclusions on condo appreciation. The National Association of Realtors reports that based on closed sales prices– not automated value estimates — single-family homes appreciated an average of 4.7 percent annually between 2010 and 2016, while condos averaged 3.4 percent. Rob Dietz, chief economist of the National Association of Home Builders, says that based on construction starts of condos, which totaled just 28,000 in 2016, he does not see demand pushing up prices faster on condos compared with detached homes.

But Trulia’s McLaughlin insists that using automated estimates of value produces a more accurate picture. “Sales prices are susceptible to significant bias because of the mix” of houses on the market at any given point, he says. “We estimate the value of all houses … and take the median of that number instead. This approach is prone to less bias than taking median sales prices.”

What to make of the new Trulia data? Clearly condos are playing a key role in some cities’ downtown revivals. In other markets, they continue to be more affordable than detached single-family homes and may be appreciating in value faster as a result.

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Randy Ely and Nicholas Malinosky

Top Palm Beach County luxury agents Randy Ely and Nicholas Malinosky left the Corcoran Group and joined Douglas Elliman.

Also known as the Randy and Nick team, the Delray Beach-based duo have closed more than a $1 billion in sales in markets like Delray Beach, Gulf Stream and Manalapan, according to a press release. So far this year, Ely and Malinosky closed more than $75 million in sales. Ely, a former Boston real estate developer sold his brokerage to Corcoran.

The team’s recent deals include the $18.5 million sale of the waterfront Gulf Stream estate at 3333 North Ocean Boulevard.

Elliman Florida has been expanding in Palm Beach County, and opened its 19th office in Delray Beach earlier this year. The firm said it has nearly 1,000 agents in South Florida.

FirstBank hired Matthew Kobasa as vice president and commercial banking officer. He was previously a commercial lending officer at Apollo Bank.

Jay Jacob joined Fuse Funding as a principal. He has worked for a number of community banks in South Florida, most recently as a senior vice president with Stonegate Bank specializing in commercial lending.

Brown Harris Stevens Avatar hired a new broker associate, Richard Merrill Kahn, in its South Miami office. He has more than 35 years of industry experience.

Brodson Construction hired Marco Lorenzo as a senior estimator, where he’ll manage the preconstruction of the South Seas Hotel historic renovation and other Brodson commercial projects.

Golden Sands General Contractors brought Scott Burgess on as the company’s marketing manager. He previously worked for Coldwell Banker Commercial Advisors and Regency Centers Corporation.

Residential buildings in Beijing, China (Credit: Getty Images)

From TRD New York: Chinese authorities looking to cool the country’s overheated housing market are now focusing on trust companies, which they believe are funding the burgeoning development sector.

China’s banking regulator will take action against trusts that lend through partnerships, asset management plans or related businesses, Bloomberg reported. It’s a $2.9 trillion industry.

The China Banking Regulatory Commission’s action is the latest measure to tackle the red-hot property market. In February, authorities suspended property-related private equity investments in cities with “excessive” home prices. They also banned private equity lending to developers for land purchases or down payments.

“Trusts are one of the few financing channels that are still viable for property firms,” said Liu Dongliang, senior analyst at China Merchants Bank Co., told Bloomberg. “The CBRC’s requirements may further limit this channel and will have negative impact on the real estate industry.”

Although regulators are taking steps to cool the market, home values in December jumped 11 percent year-over-year, the most in six years. In addition to measures to cool its own housing market, China has cracked down on investments in real estate abroad.

The CBRC told companies to limit the size of real estate trusts in major cities, and it plans to study ways to monitor liquidity risks of the real estate trust industry. The authorities think some trust companies have been bending rules and providing financing to developers. [Bloomberg] — E.B. Solomont

A screenshot of Gridics’ Zonar application. Inset: investors John Dyett and Avra Jain

Miami-based real estate tech startup Gridics just raised a $1.1 million round of seed funding, including from developer Avra Jain.

Dune Road Capital led the round, which also included John Dyett, managing director of Salem Partners, and Robert Kall, CEO and co-founder of Cien.ai,  the company announced on Thursday. Jain is active in the city of Miami, where she owns the Vagabond and the historic Miami River Inn and plans to develop the Bayside Motor Inn.

Gridics, which stands for Grid Analytics, has raised more than $2 million since it was founded in 2015. The data and software company said its applications allow users to visualize real estate data and streamline the development plan approval process.

The latest round of funding will go toward its Zonar.City app, which automates the development feasibility analysis and simplifies planning and zoning processes by digitizing and automating zoning codes. Cities and developers can check development plans against site-specific zoning requirements, making the approval process more efficient, Gridics said.

The startup is also developing a “market intelligence” app, which lets members of the Miami Association of Realtors conduct hyper-local analysis. Gridics, which has signed up about 1,000 Miami agents on the beta launch, plans to open it up to other Realtor associations.

At The Real Deal’s Broward County Real Estate Showcase & Forum on Thursday, a panel of real estate tech professionals said South Florida developers, brokers and investors are slowly embracing virtual reality tours, immersive online presentations and data collection applications. “The best brokers and developers are using data applications as a complement to their Rolodex and local knowledge they have curated over their professional career,” Reonomy CEO Richard Sarkis said. – Katherine Kallergis

Aerial view of homes in Broward County

From TRD New York: The number of home resales across the country jumped in March to reach its highest pace since 2007.

Last month, sales hit a seasonally adjusted rate of 5.71 million, the Wall Street Journal reported, citing figures from the National Association of Realtors. That’s a 4 percent increase over the prior month.

Compared to the same period of time in 2016, sales in March jumped nearly 6 percent.

Sales are “doing much better than I anticipated, particularly in light of affordability challenges,” Lawrence Yun, the chief economist at NAR said, according to the Journal. He said it’s surprising that demand has remained so strong despite rising prices and tight inventory.

Sales of previously owned homes grew through most of 2016, but fell in December —  largely because of rising mortgage rates. Last month, the Federal Reserve increased its benchmark interest rate to a range between 0.75 and 1 percent.

Fed officials have said they expect to raise interest rates twice more in 2017. [WSJ] — Miriam Hall

Palm Beach

March was a good month for South Florida home sales.

All three counties posted increases in closed residential sales compared to March 2016, according to the Miami, Greater Fort Lauderdale and the Palm Beaches Realtors’ associations. The figures are a stark contrast from February’s numbers, including double-digit drops in closed sales in Miami-Dade and Broward counties, and minimal gains in Palm Beach.

In Miami-Dade, residential sales increased by 5.6 percent in March compared to the previous year, to 2,603 closed sales from 2,465. Condo sales rose 2.3 percent year-over-year and single-family home sales increased by 9.2 percent, according to the report. In all, total sales volume for all properties in Miami-Dade was $1.17 billion last month, up 17.4 percent from the $996.5 million in sales volume for March 2017.

The Miami Association of Realtors attributed the strong month to low mortgage rates and the expectation that interest rates will rise. Distressed sales also continued to fall, reflecting a nationwide trend. In Miami-Dade, distressed sales declined 39.4 percent year-over-year, to 291 from 480.

Condo and home prices also rose in March. Single-family home prices jumped by 15 percent, to $322,000 from $280,000. Condo prices increased 7.4 percent to $225,000 from $209,500, excluding new development.

Broward posted less dramatic gains in residential sales and home prices.

Residential sales increased 3.2 percent year-over-year to 3,168 closed sales from 3,068, according to the Greater Fort Lauderdale Realtors. Single-family homes fared slightly better than condos and townhouses, increasing by 3.8 percent to 1,495 from 1,440. Condo and townhome sales rose 2.8 percent last month compared to the previous year, to 1,673 closed sales from 1,628.

While sales increased across the board, it’s interesting to note that Broward had fewer cash buyers than a year ago. Cash sales of single-family homes fell 17.5 percent, and condo and townhome cash deals dropped by 1.4 percent.

The inventory of homes, condos and townhouses fell about 8 percent to 10 months of supply, down from 10.9 months of residential properties available for sale.

Palm Beach County closed $866.4 million of residential sales in March, up 21.7 percent from the previous year. Closed sales increased to 1,676 deals, which represented a 10.3 percent increase from March 2016. The median sales price jumped by 8.9 percent to $325,000.

The Real Deal’s Broward Showcase & Forum

South Florida’s real estate industry flocked to The Real Deal‘s third annual Broward Showcase & Forum on Thursday, as developers, brokers and other professionals hobnobbed among the exhibits and gleaned insight from panels.

About 2,000 attendees descended on the Design Center of the Americas in Dania Beach, where 25 exhibitors set up shop and three panels of experts explored the latest trends in development, the Broward residential market and new technology.

A Tesla on display inside DCOTA’s entrance served as selfie central, as attendees lined up to take photos of themselves beside the luxury sedan. Exhibitors ran the gamut from developers, brokerage firms and lenders to a kitchen manufacturer and government agency. Among the group: Douglas Elliman, Adagio Fort Lauderdale, K. Hovanian Homes, Meridian Capital Group, OneWorld Properties and the U.S. Immigration Fund.

“We’re doing something different in a different market, so it captured people’s interest,” said Dave D’Ambrosio, managing director of Grove Resort & Spa in Orlando, one of several new projects on exhibit in the showcase.

Down the hall, in an open-air atrium topped by a colorful art installation, panelists examined the South Florida market. Shahab Karmely, founder and CEO of New York-based KAR Properties, said he chose to enter South Florida in part because he saw “incredible value in land relative to New York.” He was also drawn by such factors as “water — river or ocean, … an area where it is not so established that we are overpaying and competing with people who have a land bank already… and something at the cusp of change.”

Louise Sunshine, Jerry Hollo, Jimmy Tate, Shahab Karmely and Hiten Samtani

Karmely, who is developing One River Point along the Miami River, also offered advice to brokers: “I would tell brokers that because it’s a market with headwinds, look at the product, look at the financial stack of a developer, and if it had a lot of debt I’d probably run away from it.”

Amid the current market slowdown, finding funding for new developments can be challenging, panelists acknowledged, yet “there is financing out there,” said Jimmy Tate, CEO of Tate Capital, which is redeveloping Bahia Mar in Fort Lauderdale. “It’s all about the product and the underwriting and the developers.”

Tate and other panelists said they don’t expect the market to crash like it did in 2007 and 2008, but ebb and flow. Distressed opportunities are fewer than in the last cycle, and his advice was to focus on commercial when residential slows down, and vice versa. “You will see there’s always opportunities.”

Later in the afternoon, brokers analyzed the future of the residential market in Broward, and said residents of the Northeast are composing a larger segment of the market. Peggy Fucci, CEO of OneWorld Properties, which is handling condo sales for the Paramount Fort Lauderdale Beach development, said 30 percent of the buyers are residents of foreign countries, “mostly Latin Americans.”

From left, Paula Silberberg, Tim Elmes, Mike Pappas, Peggy Fucci

Mike Pappas, president of Keyes Company and Illustrated Properties, said the state of the residential market in Broward varies by type of property. The county has a 30-month supply of condos priced over $1 million, but in the single-family home market, “under $500,000 it’s tighter than a drum,” Pappas said. While prices of single-family homes in the under-$500,000 market are firm, “the high end has to be reduced,” he said.

“We’re very bullish [on Broward] because we’ve run out of land in Broward,” he added.

Tim Elmes, who heads the Elmes Group at Coldwell Banker in Fort Lauderdale, said the residential real estate market in Broward is “much more stable” than in the Miami area, which has lost property buyers to the more affordable Broward area in recent years.

“We’ve seen more traffic from Miami in the last two years than in the previous 10 years,” Elmes said. “We’re seeing major money coming from the Northeast,” he said. “I think the Northeast is just finding us,” and over the next 10 years, the residential market in Broward will undergo “a renaissance  … particularly on the high end.”

Yet sea level rise remains a long-term concern for the residential market. “Our government is going to fix it, our municipalities are going to fix it, because they have to,” said Paula Silberberg, managing broker of Douglas Elliman’s Fort Lauderdale offices.

Beth Butler, Diego Saavedra, Richard Sarkis and Hiten Samtani

Meanwhile, South Florida developers, brokers and investors are embracing virtual reality tours, immersive online presentations and data collection applications as tools to help them find and close deals, according to a third panel of experts who explored the how technology is transforming the South Florida real estate industry.

“The best brokers and developers are using data applications as a complement to their Rolodex and local knowledge they have curated over their professional career,” said Richard Sarkis, CEO of Reonomy, a company that has developed a wide-ranging search application for commercial real estate markets. “I don’t see it as a replacement for that human connection, but the goal is to provide a tool that makes data collection easy to digest.”

Ocwen CEO Ronald Faris and Florida AG Pam Bondi

More than 20 states, including Florida, and the U.S. Consumer Financial Protection Bureau are suing Ocwen Financial Corp., alleging it mishandled mortgages.

The West Palm Beach-based mortgage servicer’s shares plunged to $2.42 as of Friday afternoon, down from $5.45 at the opening of the market on Thursday. It has also been banned from acquiring new servicing rights in North Carolina and other states, the South Florida Business Journal reported. The company services 1.4 million loans nationwide with a principal balance of $209 billion, and Florida represented 9.1 percent of its portfolio as of December.

The Florida Office of Financial Regulation and Florida Attorney General Pam Bondi’s civil complaint seeks financial penalties and to compel Ocwen to follow the law. They said Ocwen and its subsidiaries filed illegal foreclosures, mishandled loan modifications, misapplied mortgage payments, failed to pay insurance premiums from escrow and collected excessive fees, according to the South Florida Business Journal.

The lawsuit alleges that Ocwen intentionally ignored advice from regulators about how to update its technology. Ocwen’s faulty loan servicing system generated improper fees, which led to borrowers defaulting and for some of them, foreclosures, according to the complaint. In addition to allegedly ignoring regulators’ advice, Ocwen is being accused of not adequately responding to customer complaints and requests for assistance.

It’s not the first time Ocwen finds itself in hot water. The loan servicer agreed to a $2.1 billion settlement in 2014 for 49 states, including Florida. [SFBJ] – Katherine Kallergis 

Rendering of American Dream Miami

Speaking to a Greater Miami Chamber of Commerce crowd, an American Dream Miami consultant said construction on the massive theme-park-oriented mall may not begin until 2025, three years after all roads and expressway interchanges into the development have been completed.

In the meantime, fostering more development around public transit hubs is the key ingredient in creating the kind of critical mass that will transform Miami into a true urban center, according to a panel of downtown and Brickell developers.

“Bringing in the [Brightline] commuter train into downtown is going to be transformative for the city,” said Greg West, president and chief development officer at ZOM. “It not only elevates Miami, but all of South Florida on the global stage. It should bring more population.”

West joined Swire President Kieran Bowers and Henry Pino, managing member Strategic Properties Group and Alta Developers, in a discussion about builders capitalizing on Miami’s continuing evolution. It was the second of two panels during the Greater Miami Chamber of Commerce 2017 Real Estate Summit held at Jungle Island on Friday.

Pino said his companies have plans to develop two mixed-use sites near Miami-Dade Metrorail stations south of Miami. “We are trying to expand our projects to be closer to the train stations,” he said. “We just closed on a property that will be 900 feet from the Dadeland South Station,” Pino said. “We have another one in South Miami that is across from city hall and within walking distance to another Metrorail station.”

Earlier this week, Alta paid $11 million for a 1.45-acre industrial site at 9600 South Dixie Highway to complete an assemblage that also includes a 6,250-square-foot site with a retail building at 9514 South Dixie Highway and a 3,125-square-foot site with an office building at 9516 South Dixie Highway. Alta plans to seek county approval to redevelop the sites into a mixed-use project that includes 420 apartments, roughly 20,000 square feet of ground-floor retail, a pool, a fountain and a fitness center.

Bowers said Brickell is a good example of how residential development close to a Metrorail station creates critical mass and encourages people to use public transit. “My experience with Metrorail is that it is fine once you get on it,” Bowers said. “But getting [to the stations] is the real problem.”

During the earlier panel, three developers building massive projects in the northwest area of Miami-Dade discussed the challenges they face breaking ground, noting it can take years to cut through the regulatory red tape. The panelists were Jose Gonzalez, vice president of corporate development for Florida East Coast Industries, Stuart Wyllie, CEO of the Graham Companies, and Edgar Jones, president of Edgar Jones & Co., which is part of the development team building American Dream Miami.

Gonzalez talked about the hoops Florida East Coast jumped through simply to prepare a former landfill for development into an industrial park. “We bought the land in 2004,” he said. “We literally just broke ground last year. And it will take 10 years to build out that park.”

Jones said that construction of American Dream cannot begin until the state and county finish building all the roads and expressway interchanges that provide access to the gargantuan entertainment and shopping destination. “That will be completed in 2022,” Jones said. “Construction [of the mall] won’t start until three years after that.”

Jones also groused about amount of time the developers have been required to spend on traffic studies to convince county officials that American Dream will create more gridlock in an area already plagued by traffic congestion. The development team has widened the scope of the areas that may be impacted by more traffic so much that “we now know the traffic impact in Santa Monica, California,” Jones said in jest.

He also claimed that if American Dream opponents succeed in killing the project, the massive assemblage of land would be developed into industrial parks. “You will have trucks on the road at significant levels,” Jones said. “Those trucks will be out during rush hour.”

Blackstone CEO Stephen Schwartzman (Getty Images)

From TRD Los Angeles: Thanks in part to some major real estate sales, the Blackstone Group has $32.2 billion in dry power to invest in global real estate.

That allocation represents about one-third of the $94.3 billion it has to invest across all asset classes, IPE Real Estate reported. Blackstone’s total real estate assets under management are worth about $101.2 billion, according to its most recent earnings report.

The company sold $21 billion in real estate over the past year, including a 25 percent stake in Hilton Worldwide Holdings Inc., which sold to China’s HNA Group. In Los Angeles, it’s selling the Wilshire Palisades building in Santa Monica for about $287 million, or $1,400 a square foot, sources told The Real Deal.

Last year, Jon Gray, the global head of real estate for the Blackstone Group, said he has a “favorable bias” on Miami and Florida as his firm invests across sectors in South Florida. “I’m a believer in Miami. I’m a believer in the state of Florida. The key here is having the staying power,” Gray said.

Blackstone CEO Stephen Schwarzman was appointed by President Donald Trump to chair the White House Strategic and Policy Council last year. Schwarzman has recently come under scrutiny from lawmakers, who have questioned the potential for him to shape Trump administration policy to benefit Blackstone. [IPE] — Subrina Hudson