Restaurant reformation takes place in South Beach

May 12, 2012

Paola Iuspa-Abbott

2012-04-03 12:00:00 AM

When real estate investor Nelson Fox walked into a dilapidated warehouse in South Beach a few years ago, he

saw abandoned vans stored atop each other.

“It was like a scene from the movie Escape From New York,” he said, referring to the 1981 science fiction action

film featuring Manhattan as a giant maximum-security prison. “It was surreal.”

Now, the space is a fine-dining restaurant called Fogo de Chao. The neighborhood, in the southernmost tip of

Miami Beach and home to some of South Florida’s most luxurious condos, is known as SoFi, for south of Fifth

Street.

After spotting the rundown warehouse, Fox and his partner Lyle Stern assembled a group of investors, bought the

space, gutted the place and built in the restaurant. Piece by piece, over six years, the partners have assembled a

half-block and turned old warehouses into high-end restaurants like Fogo de Chao.

“We saw the development that was taking place and realized there was going to be a void of quality retail and

restaurants south of Fifth,” Stern said.

One of the newest additions to the collection on First Street between Washington and Jefferson avenues is

upscale Greek fishery Estiatorio Milos.

Milos’ entrance to SoFi underlines a trend that is transforming one of Miami Beach’s oldest neighborhoods into a

fine-dining destination. The small area, south of Fifth Street and between Biscayne Bay to the west and the

Atlantic Ocean to the east, has more than 14 restaurants, most of them for fine dining.

Some of the recent additions to SoFi include, along with Fogo de Chao, Lolita Cocina & Tequila Bar and Symcha’s. They join older high-end restaurants like the legendary Joe’s Stone Crab and Smith & Wollensky.

The growing number of high-end eateries on the tip of the island makes it stand out.

“South of Fifth has one of the greatest concentrations of fine-dining restaurants south of New York and east of

Las Vegas,” Fox’s partner Stern said.

Lynne Hernandez said she began noticing the influx of upscale restaurants in the last couple of years.

“More obviously, in the last year,” added Hernandez, who is South Florida regional director of the Florida

Restaurant & Lodging Association.

Hernandez said other pockets in the region, including Delray Beach, South Miami and Miami’s Wynwood and

Design District, are becoming fine-dining destinations that don’t compete with SoFi, but complement it and each

other.

“But the beach is its own animal,” she said, referring to SoFi.

At least two new restaurant spaces there are already permitted, and the owners are looking for high-end tenants.

“The city didn’t do anything to promote that area as a dining” destination, Miami Beach City Planner Thomas

Mooney said. “It sort of evolved on its own.”

HOUSING BOOM

Milos’ interior build-out is almost finished, now that the snow-white marble for the flooring has arrived from Greece — along with a Greek marble installer.

Milos, with locations in Montreal and New York, is set to open its SoFi doors this month.

Restaurateurs began pouring into the area after the recent housing boom, when SoFi’s shoreline was walled with

luxury high-rises. It became a magnet for affluent condo buyers from around the world.

Yet, most of the customers seen waiting in line for tables at the pricey restaurants are tourists and business

people who drive over from the Brickell corridor, Aventura and Coral Gables.

The trailblazing restaurateurs have transformed dilapidated and historic properties into some of the nation’s most

successful eateries. That was the case of Prime One Twelve, a steakhouse that serves 500 to 1,000 customers

on any given day — the average check is $110 per person — and grosses more than $20 million in annual sales,

owner Myles Chefetz said.

“The only restaurant in Miami that does that kind of [sales volume] number is Joe’s, which has been around for

100 years,” he said. “Typically, a successful restaurant would do $6 million to $8 million a year,” he said.

Chefetz opened the Prime One Twelve steakhouse in a restored historic hotel in 2004. Two years ago he opened

Prime Italian across the street on Ocean Drive.

When he opened his first SoFi restaurant in 1995, the area was still a ghost town of abandoned properties. Back

then, he rented a space for the now-defunct Nemo, a restaurant at 100 Collins Ave., for about $10 per square

foot.

Today, the high demand for restaurant space has pushed rental rates up to $60 a square foot, not too far from the

$100-per-square-foot rate that landlords charge restaurateurs on trendy Lincoln Road in Miami Beach, Chefetz

said.

POSITIVE IMPACT

Fox and Stern recently bought an old two-story, wood-frame apartment building at 850 Commerce St. and got city

permits to turn it into a restaurant with a courtyard dining area. Stern is talking to several interested high-end

restaurateurs to lease the space, he said.

“The fact that they are restoring and preserving it speaks very highly of their intentions and the positive impact

that an adaptive reuse like that can have on a property,” said Mooney, the Miami Beach planner.

On the other hand, Milos will open in one of the properties assembled by Fox and Stern. The partners brought in

developer Russell Galbut to build a robotic parking garage next to Milos and serve their warehouses-turnedrestaurants.

The mechanical garage will have 104 spaces and a penthouse home for Galbut, Stern said.

Even during the economic downturn, Fox and Stern push forward with their redevelopment plans. They built

Clarke’s, Fogo de Chao and Jeronimo’s Bar in a row.

Stern said they put together the abutting properties to be able to determine the look and feel of First Street. (To reade the entire article visit http://www.dailybusinessreview.com)

 

 


Margaritaville project up against clock for funding

May 12, 2012

Paola Iuspa-Abbott

2012-03-09 12:00:00 AM

The title of Jimmy Buffett’s 1981 song “Somewhere Over China” seems especially appropriate as the developer of the Margaritaville Hollywood Beach Resort turns to that nation for funding to build the long-discussed oceanfront project.

Buffett, a minority owner, and Hollywood developer Lon Tabatchnick are seeking to raise $75 million from 150

investors at $500,000 apiece, said Tabatchnick, a principal with Hollywood Resort Partners. He is also president of the Lojeta development firm in Hollywood.

“We have 25 percent already committed” from Chinese investors, said Tabatchnick, sitting in his conference room with a six-inch binder spelling out U.S. government rules on how to handle foreign investment. “Raising the first $25 million is the toughest. Raising the last $25 million is easy.”

The question is whether Tabatchnick will be able to raise the funds quickly enough to meet a May 15 deadline.

The city, which owns the land that Margaritaville will be built on, set that date for the developer to line up all the financing for the project. Tabatchnick said that won’t be a problem because he is in the process of securing gap financing, such as a letter of credit or a bridge loan. He declined to provide additional details. The gap financing would give him time to recruit all the needed investors from China.

Tabatchnick is courting Chinese investors through the EB-5 Visa program. The program requires foreign

investors to invest $500,000 in a U.S. government-approved project and for the developer to create or preserve 10 jobs per applicant.

In exchange, the investors receive an EB-5 visa, which could lead to permanent U.S. residency for the them andtheir families.

Construction of Margaritaville is estimated to cost $131 million. If he raises the required money, Tabatchnick plans to start construction of the 360-room resort in June. The project, at A1A and Johnson Street along Hollywood Beach’s Broadwalk, would also include multiple restaurants and bars, including one named after Buffett’s duet with Alan Jackson, “It’s Five O’Clock Somewhere.”

99-Year Lease

The city of Hollywood signed a 99-year lease with Tabatchnick’s company a year ago to redevelop the site, now home to parking lots and a garage.

The developer is to receive building permits on March 15. But before the city turns control of the land over to him, Tabatchnick needs to meet several financial conditions.

He has to invest at least $10 million in the project, of which he has already spent about $7 million. He also needs to have the $75 million from EB-5 investors or gap financing in place, said Cathy Swanson-Rivenbark, Hollywood’s assistant city manager.

“EB-5 financing is more affordable than traditional financing, so there is an incentive on his part to get the EB-5, but he doesn’t want to delay to take possession [of the site] and commence construction,” Swanson-Rivenbark said.

In addition to Tabatchnick’s obligations, a community development district, which will issue $38 million in bonds, was approved in Broward Circuit Court on Feb. 29.

Tabatchnick said he will meet the May 15 deadline.

“Once we have all the permits, the necessary funds will come available,” he said. “We are very confident we are going to start construction in June.”

Tabatchnick is running a bit behind the schedule established in the 2011 lease.

Swanson-Rivenbark said Tabatchnick is to ask the City Commission at a March 21 meeting to push back Margaritaville’s opening from January 2014 to August 2014.

“We don’t look at it as a sign that the project is in jeopardy, instead, it is a sign that the project is almost ready to commence construction,” she said.

Life Science Project

If successful, Margaritaville would be one of the few real estate projects in South Florida to be funded through the EB-5 program.

The University of Miami Life Science & Technology Park west of downtown Miami was partially built with funds from EB-5 investors, said Fred Burgess, who helps match EB-5 investors in government approved projects across the country, specially South Florida.

He helped raise a “substantial” amount of the $20 million raised through the EB-5 program to fund the nearly $140 million UM building during the recession.

Since construction financing is difficult to obtain, “there are a lot of projects looking for money,” he said.

But landing capital from China, isn’t easy. (To read the entire article visit http://www.dailybusinessreview.com)

Copyright 2012. ALM Media Properties, LLC. All rights reserved.


Hefty cost overruns hidden, Jeffrey Soffer memos show

May 12, 2012

Paola Iuspa-Abbott

2012-02-13 12:00:00 AM

Jeffrey Soffer is facing new claims that he allegedly sought to hide from lenders hefty cost overruns tied to the

construction of his failed Fontainebleau Las Vegas project.

The information comes from internal memos plaintiff attorneys obtained from Turnberry West Construction, a

general contractor Soffer formed to build the Las Vegas project.

Soffer and Turnberry West are being sued in Clark County (Nevada) District Court by 44 lenders seeking to

recover more than $1.5 billion. The suit also names Fontainebleau Resorts and executives Albert Kotite, Bruce

Weiner, Glenn Schaeffer, James Freeman Devendra Kumar and Howard Karawan.

According to the Feb. 1 proposed amendments to a March 2011 lawsuit, the memos show that Fontainebleau

Resorts used two sets of books to hide the true cost of the project from the lenders. The lenders claim the

developer kept a “bank budget,” in which the construction costs “appeared to be in balance” and kept a “Jeff

Soffer budget,” which reflected the cost overruns.

Through a representative, Soffer declined to comment.

“FBR insisted that TWC Inc. must manipulate the cost and schedule estimates and projections to meet the

guidelines dictated by” FBR executives, according to the amended complaint, citing the memos obtained from

Turnberry West. “The charade began in August 2007 and continued until January 2009. TWC Inc. repeatedly

warned FBR that the farce was ill advised.”

Fontainebleau Resorts could obtain payouts from the $1.85 billion construction loan only by submitting advance

certificates to indicate that the project was on budget.

The lawsuit claims the developer began construction already $100 million over budget. That grew to about $430

million by February 2009. If the lenders had known of the cost overrun, they would have stopped the loan

withdraws, according to the lawsuit.

By late 2008, a few months before work on the project was halted, Turnberry West executive Robert Ambridge

told Soffer and other Fontainebleau Resorts executives he would not sign the contractor’s advance certificate

“because he believed it to be false,” according to the recent filing.

Soffer then personally signed the certificates for November and December 2008 draws, according to the new

documents.

WORSENING FINANCES

The company’s financial situation worsened in December 2008 when another lender, Lehman Brothers Holdings,

stopped funding a $315 million loan to pay for construction of the Fontainebleau Las Vegas’ retail component.

Lehman had filed for Chapter 11 bankruptcy protection in September 2008, helping trigger the global financial

crisis.

In June 2009, Soffer’s Fontainebleau Las Vegas Holdings, controlled by Fontainebleau Resorts, filed for Chapter

11 bankruptcy, which later was converted to Chapter 7 liquidation. The unfinished project was acquired in

February 2010 by Icahn Nevada Gaming Acquisition for $150 million, a fraction of the total debt incurred by Soffer

companies to develop the resort.

The lenders hope the new filing will convince Clark County District Court Judge Mark Denton to amend the yearold

lawsuit to again include Kotite, Schaeffer, Weiner, Kumar and Karawan as defendants, plaintiff attorney Kirk

D. Dillman said in an interview.

Last December, Denton dismissed Kotite, Schaeffer, Weiner, Kumar and Karawan from the initial lawsuit. Denton

denied Soffer and Freeman’s motions to be dismissed from the suit. (To read the whole article visit http://www.dailybusinessreview.com)

Copyright 2012. ALM Media Properties, LLC. All rights reserved.


Opposition to casino gambling bill getting stronger

May 12, 2012

Paola Iuspa-Abbott

2011-11-30 12:00:00 AM

Walking down the streets of downtown Kuala Lumpur, Grace Solares says she saw very few tourists eating at

local restaurants or shopping at the Petronas Twin Towers. Early this month, Solares was part of a group

attending a convention at Malaysia’s Kuala Lumpur Convention Centre — nearly 45 minutes away from the city’s

main recreational destination, the Genting Highland. The sprawling resort boasts more than 10,000 hotel rooms,

a casino, convention and exhibition space, a theme park, a skyway, performance halls, restaurants, clubs and

shops. Buses drive tourists from the airport to the resort destination on a mountain peak and then back to the

airport, she said.

“The impact that that project has on Kuala Lumpur is visible … the downtown is empty… it is a ghost town,”

Solares asserted. She is a founder of Miami Neighborhood United, a coalition of neighborhood associations in

Miami.

Solares said her six-day trip to Kuala Lumpur cemented her opposition to a casino resort destination bill that

would allow three massive casino resorts in Miami-Dade and Broward counties. She fears the casino destinations

would suck the life out of existing businesses and hurt entire neighborhoods that now benefit from tourism.

Solares is part of a grassroots movement that is beginning to organize with one goal in mind: kill the bill being

pushed by the Genting Group, Las Vegas Sands, Wynn Resorts Limited and other casino operators that are

eager to make South Florida the next Las Vegas. The Florida Legislature will vote on the bill during the 2012

session beginning in January.

Malaysian-based Genting has already acquired nearly 30 acres in downtown Miami, where it plans to build a 10-

million-square-foot casino and entertainment resort. The project, called Resorts World Miami, is planned for the

site now occupied by the Miami Herald, east of Biscayne Boulevard and north of Interstate 395.

“It is not hard to figure out that whoever goes there is not going to come out and subsidize the businesses around

the area,” Solares said. “You are not going to have people go to Little Havana to eat arroz con pollo. You are

going to have the arroz con pollo right there. Tourists won’t go to have ceviche on 7th Street and 38th because

you are going to have the Peruvian restaurant there.”

Her group, Neighborhood United, is hosting a free casino forum in Miami City Hall on Dec. 14. She hopes to

recruit neighborhood associations at that event to help with the fight to defeat casinos.

Genting representative Chris Goode said his company has a developed a plan to protect local businesses. He

said casino goers collect points when they gamble and those points can be redeemed at local restaurants.

“Two to three dozen restaurants already signed up to participate,” Goode said Tuesday in an interview at a

gambling forum conducted by the Fort Lauderdale Chamber of Commerce. He said the list of Miami area

participants is growing.

The Forge of Miami Beach, City Hall in Miami and Garcia’s Seafood Grille and Fish Market on the Miami River

are among the signees reported by Genting.

“The Forge and Garcia’s are also considering opening a second location at the Resorts World Miami,” said Tadd

Schwartz, a Genting spokesman.

Lobbyist Nick Iarossi said his client, Las Vegas Sands, would cater to out-of-state travelers attending large

conventions.

That business model would bring new patrons to the area, rather than taking commerce away from existing

restaurants and hotels, he said Tuesday.

‘Cannibalistic industry’

Former state Sen. Dan Gelber counters that resort destinations are designed to keep visitors inside their walls,

providing little benefits to existing businesses and most likely stealing their business away. Gelber recently

became chairman of the grassroots South Florida No Casinos to help organize the opposition, which until now

has remained largely silent.

“Gambling is basically a cannibalistic industry,” Gelber said. “It preys on people, hotels, restaurants and other

businesses,”

Last week, his group hired a South Florida coordinator and a statewide executive director to reach out to

community groups and business leaders for support.

Gelber said opposing the massive expansion of gambling is “almost a business decision.”

Disney-backed No Casinos is lobbying elected officials to kill the bill and plans to become a forum for residents to

speak up and let Tallahassee know how they feel.

“The Florida Legislature needs to know that South Florida is not for this,” said Gelber, a lawyer and former federal

prosecutor who is volunteering his services to No Casinos. “Gambling proponents are trying to create the

perception that South Florida wants casinos and that is not true.”

Opponents fear gambling would create a spike in crime, divorces, personal bankruptcies and other social

problems.

Many of their concerns are based on a 2009 report published by the Congressional Quarterly, a publication

owned by The Economist Group. The report, based on data from the FBI and the Census Bureau, showed

Nevada had the highest rate of divorces, robberies, violent crimes, car thefts and personal bankruptcies in the

country. Nevada, lagging behind New York, had the nation’s second highest cost per capita in police protection.

Goode said the opposition blames gambling for everything, “except terrorism,” because they need to be educated

on the benefits of resort destinations.

“Let’s sit down and talk about the facts,” he said.

Grassroots organizing

Gregory Bush, director of the Institute for Public History at the University of Miami and an associate professor of

history, recently revamped his website, http://www.commonsensemiami.com, to feed the casino opponents.

“It is kind of a coalition building,” said Bush, also vice president of the nonprofit Urban Environment League in

Miami. “At this stage, we don’t need a lot of money. We just need to bring people out of the woodwork to email

elected officials and do things like that.”

In the blog, he posts news articles, essays and opinion by him and community leaders, including car dealership

mogul Norman Braman and developer Armando Codina.

Bush said the UEL, which is against expanding gambling, plans to host a free casino forum on Dec. 10 in

Wynwood to help fuel the grassroots movement.

“I am nervous about it,” he said. “We don’t want to have Genting busing in all sort of people paying them $50 to

demonstrate, which happens sometimes.” (To read the entire article visit http://www.dailybusinessreview.com)

 

Copyright 2012. ALM Media Properties, LLC. All rights reserved.


Downtown Miami’s urban core left behind by the boom

September 5, 2011

Paola Iuspa-Abbott, DBR Staff Writer

06-13-2011

A massive building boom reshaped Miami’s skyline. Huge modern glass and steel structures tower into the air. From afar, downtown looks like a booming metropolis.

But in the shadows of the sleek buildings lies an ugly truth. The urban core of downtown Miami is a blighted district pocked with vacancies and deteriorating buildings. While there are glimmers of hope, vast challenges remain to turn around the struggling area dominated by low-end retail and still largely dependent on office workers, most of whom depart before sundown.

At the same time that Miami enjoyed the largesse of a real estate bubble, the revenues of the agency created to spur business development in Miami’s historic downtown have exploded, and critics say there is little to show for all that money.

Area retailers and new residents say there no evidence the money has done anything to revitalize the long-neglected area or Flagler Street, its principal retail hub.

“There are many things that could be changed, like restoring historic buildings, but I don’t know what the Downtown Development Authority is doing with our taxes,” resident Jaime Acosta said. “At night downtown going west is so dark. On Sundays, if you go for a walk there is nothing open. It is totally dead.”

A construction boom in Miami’s business district helped boost the agency’s revenue by about 80 percent, from $2.84 million in 2005 to $5.1 million last year. Its revenue is set to rise nearly 11 percent next year when the taxable value within its district hits $10.9 billion, up from $9.8 billion in 2010, according to the Miami-Dade Property Appraiser’s Office.

The agency levies property taxes at a rate of 50 cents per $1,000.00 of taxable value on all properties — from giant office towers to modest condo units — within the authority’s boundaries.

The authority saw 22,439 new condos and two Class A office buildings built in its district from 2004 to 2009, which includes the Brickell Avenue financial district south of the Miami River. Two luxury hotels with nearly 900 rooms opened in recent years.

That windfall brought some cosmetic improvements to the area, including the installation of large sidewalk pots that hold trees, the launch of a sidewalk cleaning program and the deployment of “ambassadors” who provide directions to visitors.

But commercial and residential owners say the DDA has made few meaningful improvements and are looking for more than minor cosmetic changes. They want the agency to help spur new development and upgrade buildings to attract better quality retailers and services for the thousands of new condo residents, guests of the new hotels and area workers.

“They need to do something to make Flagler look better, make it enjoyable for the people who live in the area,” said Acosta, who lives in a unit he bought in 2007 at the 50 Biscayne condominium on Flagler Street and Biscayne Boulevard. “There are many things that could be changed here, like helping restore the historic buildings. But I don’t know what the Downtown Development Authority is doing with our taxes.”

DDA executive director Alyce Robertson said her agency wants downtown to look nice to attract people. That’s why her board is focusing on cleaning streets, improving landscaping and hiring so-called ambassadors.

“If it looks good, it is going to make people feel good,” said Robertson, who joined the agency in 2008 following a management overhaul after a public outcry over its poor performance.

But critics say the area remains unappealing. Despite the DDA’s beautification efforts the business district continues to be a hot spot for code violations, parking and lighting problems, aggressive panhandlers and a low-quality retail mix. The area, north of the Miami River and south of Interstate 395, continues to be a ghost town after dark.

Old Infrastructure

Some downtown property owners say many buildings are prime for demolition and should be replaced with new apartment buildings and retail centers.

“But owners alone can’t do it,” said Sergio Rok, whose family owns 17 buildings with 200 tenants in the business district. In the last year and a half, Rok said he has spent hundreds of thousands of dollars to upgrade his buildings to accommodate higher quality tenants, including Lime Fresh Mexican Grill and Tre Italian Bistro on Flagler Street.

Rok said the DDA should press city and county officials to come up with a development program to overcome some of the challenges that aging infrastructure present to owners like him.

“Flagler’s infrastructure is old, which makes it difficult to deal with,” he said. “It is clearly going to be hard work. Developers will need assistance from the city to formulate a plan that will make sense.”

He said any plan should include transferring development rights from historic structures to nonhistoric buildings, parking variances, a centralized valet parking system, expanded incentives for facade improvement, wider sidewalks for outdoor seating and the relocation of utility lines along Flagler Street.

Pushing those issues is “a major role the DDA is supposed to do,” said real estate consultant Matthew Schwartz, who was the agency’s executive director from 1988 to 1994.

He said the DDA has the potential to help bring development to the area as it did in the 1980s, when it pushed construction of Bayside Marketplace and Bayfront Park on Biscayne Bay.

“Back then, the DDA’s emphasis was on major capital projects,” he said, adding that occurred before his time at the DDA. “It worked hand-in-hand with the city of Miami to make things happen.”

‘Fancy office space’

Since then, the DDA has focused on complementing basic public services the city of Miami is supposed to provide.

“The reality is, the city is not going to do it because it doesn’t have the money,” Robertson said. “We’ll fill the gap until the city can pick it up.”

But city’s Solid Waste department said it shouldn’t be any gap to fill. Solid Waste currently has people sweeping the streets during the day and a mechanical sweeper cleaning the streets of the business district at night, Solid Waste Director Fred Hobson said.

“In addition, we have a mobile crew that assists in cleaning this area during the day as needed,” he said.

Hobson said the city hasn’t slashed services to downtown, despite budget cuts.

“We have continued to provide the same level of sanitation service and the department has not cut any of these necessary services,” he said.

Some question why taxpayers are funding the DDA to do what they already pay the city to do.

“How do you justify the existence of a DDA when the city could do what the DDA is doing?” said Frank Schnidman, director of Florida Atlantic University’s Center for Urban Redevelopment Education in Fort Lauderdale. “Does that justify their fancy office space and a large number of staff?”

The authority pays about $294,000 a year in rent for an office on the 29th floor of one of the city’s priciest office buildings. Its headquarters at the Wachovia Financial Center has panoramic views of Biscayne Bay and the Port of Miami.

Including the rent, the agency spent $834,000 on administrative expenses last year. In addition, it spent about $100,000 on conferences, professional development, mobile phones and other expenses. Its staff of 18 also earns $1.2 million a year, including $172,8000 to Robertson and $110,700 per year to a deputy director, Javier Betancourt.

About 43 percent of the DDA’s revenue goes toward personnel and administrative costs, according to a Daily Business Review analysis of DDA financial statements.

The agency also pays the Downtown Miami Partnership, a nonprofit group hired by the DDA, up to $65,000 to manage its shutters-and-facade improvement program and more than $90,000 to a Miami-based public relations firm to market the DDA district.

Last year, the DDA spent $840,116 on a beautification program and to hire its sidewalk ambassadors.

‘There is no urgency’

Business owner Jose Goyanes — one of the DDA’s 15 board members — is a critic of how the agency spends taxpayer money. Goyanes said he proposed cutting expenses by moving out of the Southeast Financial Center and acquiring a small office building while values are low.

The agency has not acted on his suggestion. “There is no urgency,” he said.

Goyanes estimates the agency could buy its own space for about $2 million and make loan payments of about $180,000 a year, about $100,000 less than it pays in rent.

“They can put the [savings] back on the street to fund services or pick up the slack where the city has left off,” said Goyanes, who owns Tre Italian Bistro, Churchills barbershop and several Metro Beauty Center stores. “Not only that, they would be at ground level. You know how much more exposure they would have?”

Robertson said the agency’s lease expires in early 2014 and said its board would study Goyanes’ suggestion at that time. But that will likely be too late to take advantage of deep discounts available during the real estate downturn.

Al West, a DDA board member and the authority’s treasurer, said the group has come a long way in the last three years. It used to have a reputation of spending too much money on staff and “not enough money was going to the street,” he said.

But a recent city report concluded there were serious financial and administrative problems at the DDA.

In 2008, a city of Miami audit showed that from 2003 to 2006 the authority lacked proper internal financial controls and record keeping. Employees were overpaid and DDA funds were shifted among bank accounts without proper authorization or documentation.

West contends those issues have been addressed.

“Now, we are going in the right direction,” said West, who is also senior vice president and chief financial officer of the Greater Miami Convention & Visitors Bureau. He added that Robertson has reduced payroll by 21 percent since she joined the DDA.

The city inspector general does not regularly audit the authority and no review of the agency’s finances is planned in the near future.

Unprepared for challenges

Some suggest the DDA needs to be restructured and perhaps have its mission adjusted. For one, the areas it is responsible for developing are very different and that diversity could prove daunting. Perhaps rather than a sprawling district that flows from 15th Road on the south to 24th Street on the north should be reduced to allow the DDA to focus on the area with the most need, downtown Miami.

Rok, who sat on the board before the building boom, said it’s time to rethink the structure of the agency, which now spreads its resources and attention among four subdistricts: The Brickell financial district, the central business district that includes Flagler Street, and the Park West and Omni neighborhoods. Each area grew significantly during the housing boom. Each district is in a different stage of maturity and has different needs, making it difficult for the authority to focus on revitalizing Flagler Street, said Rok, president of Miami-based Rok Enterprises.

“The CBD needs a lot of work and maybe the DDA is too big and can’t handle it all,” he said. “I don’t know if the structure of the DDA benefits the districts individually. It needs to be looked at to see if there is a better way to deal with each district.”

The DDA offers incentives to help pay for tenant improvements, replace window shutters and improve building facades. But the program has not been effective largely because landlords must foot part of the bill, and that doesn’t happen often, said Josie Correa, director of the Downtown Miami Partnership, which administers the program.

But one expert says those incentives are not enough to transform downtown.

G. Lamont Blackstone, a New York real estate consultant who helps cities develop public-private partnerships to revitalize downtowns, said a typical incentive program calls for cities or downtown development authorities to provide tax breaks to developers and building owners.

“That can work to attract certain retailers to an area,” Blackstone said. Blackstone has not worked for the Miami DDA.

Miami developer Jorge Perez, who built most of the condos in the business district during the boom, said there are several sites around Flagler that are candidates for redevelopment. But he can’t do it without government incentives and public policies that make it feasible to build downtown.

“The reason the Loft was built is because parking was provided by the Miami Parking Authority, and we didn’t have to build a garage so the savings went to the buyers,” he said, referring to Loft II.

For that project to become reality, he had to lobby the city and the parking authority. Perez, chair and president of the Related Group of Florida, said the DDA played no role in facilitating construction of his downtown projects.

“We would to be able to go back to the CBD and hit that market segment that can only pay $200 a square foot,” he said. “But given that my construction cost is $200 a square foot, I can’t do it without some form of partnership with the public sector.” [Cont.]

To read the entire article, visit http://www.dailybusinessreview.com

 

Copyright 2011. ALM Media Properties, LLC. All rights reserved.


Miami real estate market may benefit from Italy’s economic woes

September 5, 2011

Paola Iuspa-Abbott, DBR Staff Writer

08-23-2011

When Miami Beach broker Pietro Belmonte walks into the garden of Casa del Popolo on Rome’s Piazza del Popolo next month, affluent Italians savoring summer cocktails will be waiting for him.

Armed with brochures promoting condo projects in Miami Beach and New York, he will spend an evening speaking about prices, neighborhoods and the fast-appreciating condos in South Beach. While he doesn’t expect to walk out into the urban square that night with signed contracts, he does expect to emerge with a lengthy list of quality leads. Unlike any other year, more Italians have signed up to attend the Rome event, he said.

“This year we are expecting a bigger size [crowd],” said Belmonte, a broker with Douglas Elliman Florida of Miami Beach. “It has to do with the economy in Italy.”

Staggering beneath the weight of an enormous sovereign debt and a soaring budget deficit that is 3.9 percent of its gross domestic product, the Italian economy in is on the brink of collapse.

Early this month, the European Central Bank agreed to buy some of Italy’s debt in exchange for pension cuts and tax increases, among other austerity measures. Some experts said the deal — still in the making — could determine Italy’s political and economic future.

Italy’s national crisis could, in a way, benefit Miami real estate, according to Belmonte and other brokers. They expect more wealthy Italians to invest in Miami real estate, especially condos, as they search for ways to preserve capital until their nation’s economy stabilizes.

Italian investors are also concerned that the euro will weaken with the looming eurozone financial crisis which has the capacity to erode the price-discount advantage they’ve enjoyed when buying real estate in the United States. They now buy properties at more than a 40 percent discount because of the weak dollar.

“The fear that the euro will go down and the dollar will get strong makes us a safer place to park their money,” said Belmonte, who represents the luxury Mondrian South Beach, a new condo hotel project. “They want long-term investments.”

A Growing Presence

The crowd at Casa del Popolo set to gather Sept. 15 will most likely pay attention to Belmonte’s analysis of the South Beach condo market, where some properties have appreciated 25 percent in the past 18 months, he said.

Some of the fast-appreciating high-rises are Continuum, Icon South Beach and Murano Grande, located south of Fifth Street in Miami Beach. Many of those luxurious buildings are already dominated by Italians, said Vanessa Grout, president and CEO of Douglas Elliman Florida. She lives in the Continuum’s north tower.

“The majority of my neighbors in my building are Italians,” she added.

Those buildings have great amenities and have direct ocean views. Their fast appreciation is a rarity in a real estate market that continues to struggle to overcome one of the worst value drops in more than half a century.

Italians represent a small percentage of the pool of foreign buyers snatching Miami real estate, said broker Melissa Rubin, vice president of Coral Gables-based Platinum Properties.

Venezuelans, Canadians and Brazilians lead the pack, according to the Miami Realtors.

Rubin, who works closely with French buyers, said she has seen an increase in the number of French investors coming to Miami, as France’s economy is also uncertain. She said French investors represent 6 percent of all foreign buyers in Miami.

“French … are buying because the economy is challenging there,” she said, adding they prefer Aventura and Miami.

Real estate broker Philip Spiegelman said he has noticed a jump in inquiries from Italians looking to buy condos in Miami.

“For the last couple of weeks at our sales office, we’ve seen an increase in traffic, which we are attributing directly to the instability of what is going on in Europe,” said Spiegelman, a principal with Related ISG, a real estate firm that caters to international buyers.

Spiegelman said his company has money allocated for off-shore marketing, and he is looking at “whether we need to rebalance or reallocate some of it” to target the Italian market. For now, most of Related ISG marketing money goes to enticing Latin Americans to the Miami condo market. Yet, that could change if he thinks Italian buyers are ready to come in draw.

“The whole volatility in Italy and Europe has increased in the last couple of weeks and we are very much in tune with that and looking at how we can expand if there is an opportunity,” he said.

Capital Flight

Italian restaurateur Cristoforo Pignata, who moved his family from Naples, Italy, to Key Biscayne three years ago, said some of his friends in Naples are considering relocating to Miami or buying condos in the area.

“I have a lot of people calling me because they want to come here,” said Pignata, owner of Puntino restaurant, with locations in downtown Miami and Key Biscayne.

Pignata said some Italians want to take their money out of Italy and place it in a location they think is safe.

Commercial real estate broker Luigi Mercurio said the cash-strapped Italian government is going after the wealthy in a hunt for tax evaders, he said.

“If you have money, the government has a magnifying glass on you,” said Mercurio, who moved to Miami from Italy in the 1990s.

“Taxes there are more than 40 percent, and it is easy to find loopholes to take the money out of the country and avoid paying taxes.”

Mercurio, with Esslinger Wooten Maxwell Realtors in Miami Beach, said Italians like Miami because they share similar industries, including tourism and hospitality.

Like Pignata, many Italians who move to South Florida either open restaurants or boutique hotels in Miami Beach, Mercurio said.

For wealthy foreigners, obtaining a visa to live in the United States is not hard, he added.

“The real kicker has been the immigration law that allows you to get a visa with a $500,000 investment,” he said, referring to the EB-5 visa for immigrant investors. [Cont.]

To read the full article, visit http://www.dailybusinessreview.com

Copyright 2011. ALM Media Properties, LLC. All rights reserved.


Tony Goldman’s Big Bet on Miami’s Wynwood

July 24, 2010

June 28, 2010 By: Paola Iuspa-Abbott

Tony Goldman

ony Goldman made his name and a sizable fortune turning around dilapidated neighborhoods in which only he saw development opportunity.

First came New York’s Soho neighborhood in the late 1970s, when he bought and restored more than a dozen buildings and filled them with high-end boutiques and restaurants, helping to create one of Manhattan’s trendiest districts.

DBR TV: Tony Goldman made his reputation turning around dilapidated neighborhoods. Now he wants to revitalize the industrial district of Wynwood

Then came South Beach in the 1980s. While drug wars simmered in South Florida, Goldman acquired neglected art deco hotels and brought them back to life, helping put South Beach on the map.

Yet, despite the challenges and rewards of his past ventures, his latest bet is probably his riskiest. As the region struggles to shake off the lingering effects of the recession, Goldman wants to revitalize Miami’s Wynwood, a former industrial district that’s home to aging warehouses and factory buildings.

Unlike some developers, Goldman shuns the idea of bulldozing old buildings. Rather, he plans to covert them into office, galleries, stores and restaurants. The challenge is to attract quality tenants, he said, adding that 30 percent of his properties are vacant.

“Needless to say, we are all affected by this terrible economic downturn,” said Goldman, 66, chairman and chief executive of Goldman Properties, which has offices in New York and Miami Beach. “We were doing fine until this happened; but we will persevere.”

$23 MILLION STAKE

When the economy was humming in 2004, Goldman set his sights on the area between some of Miami’s roughest neighborhoods. He borrowed more than $23 million from various lenders to buy almost two dozen warehouses.

Real estate is a business dominated by “location” and Wynwood’s is less than stellar.

Wynwood has no impressive architecture. No historic significance. No beach. No inspiring views. There is nothing distinctive about Wynwood, the site of race riots in 1990 and 1992.

And while Goldman has earned the title “visionary,” he didn’t see his biggest challenge coming: the deepest recession in decades. It drove down the value of his properties by more than 30 percent and put any redevelopment prospects on hold for years.

In a market where even South Florida’s most desirable districts are depressed, it remains to be seen how Goldman will salvage his Wynwood play.

Goldman says he has no doubts that he will succeed.

“There is no question that the economic crisis has set back our momentum and all it does is it puts more years on the plan,” he said while sipping iced coffee with milk at Joey’s, a family-run restaurant in Wynwood. “But you will never see us go away as a result of these crisis — never.”

Goldman said his company has the financial resources to carry on with his plans. Goldman Properties, a privately held company, does not disclose its finances.

Goldman is selling a few of the more than 20 properties he owns, but just to streamline his portfolio, he said, not to abandon his vision for the area.

“And so what?” Goldman said about selling a few buildings. “If you are in it for the long term, then you have to make some adjustments. If you have to sell a piece or two, you sell a piece or two. But the big picture is, you maintain your Monopoly [board] that drives your vision.”

Unlike many developers who amassed property before the real estate downturn and now face foreclosures and lawsuits from lenders, public records do not show any actions against Goldman. Public records do show that he has continued to pay down at least 17 mortgages on properties in Wynwood.

CRITICAL MASS

His love affair with Wynwood began in 2004 when his son, Joey, discovered the district, once home to bustling clothing manufacturing operations.

The area was plagued by crime and blight, but a few art galleries and studios of emerging artists were renting cheap space.

“I thought there was a wonderful critical mass of a certain style of industrial architecture,” Goldman recalled. “It’s not just what you are looking at; it’s what you see beyond. Most people will see the reality of deserted streets, boxy buildings and warehouses.

“But there is more than that. There are sidewalks and street grids that will have pedestrians in the future. There are warehouse boxes that will be occupied by galleries and restaurants and cafes and very interesting, creative shops.”

Goldman liked the area and with his son began drawing what they call their “Monopoly board.” On the board, they mapped the properties they would need to acquire to connect streets and establish a pedestrian flow.

“We always strategize the whole thing at the front and spend a decade actualizing the original plan,” Goldman said.

SECOND CHANCE

Goldman believes in giving neighborhoods a second chance; something that he has experienced himself.

Two years ago, Goldman, who was suffering from a lung condition that hampered the transfer of oxygen to his blood stream, received a double lung transplant.

The major surgery gave him the opportunity to return to jazz singing, one of his many passions.

“I am working on my second record,” said Goldman, a theater major at Boston’s Emerson College. “It’s been 15 years since my first one. I think I am going to call it ‘The Second Time Around,’ but I am not sure yet.”

Goldman, wearing fashionable Y-3 sneakers and baseball cap, said the CD will include his favorite song, “Ol’ Man River,” a song that describes the hardship and struggles of African Americans in the early 1920s working along the Mississippi River.

“And you ask, why’s an old Jewish guy singing that song?”

He explains that the song talks about overcoming adversity, possessing a discipline and work ethic that makes someone keep going, even if that person has reasons to give up.

ACQUISITIONS

Goldman encountered little adversity when he began investing in Wynwood and before values surged.

A few were acquired at the height of the market in 2007, when properties traded at an average of $130 per square foot, real estate broker Danny Zelonker said.

“Now the average is about $80 per square foot,” he said.

As both a broker and owner, Zelonker sold a number of properties to Goldman in 2004 and financed some of the deals.

Not long after he finished assembling the properties, the recession hit. Yet, Goldman has pressed ahead.

He opened a restaurant, Joey’s, in late 2008 and is months away from opening another one.

He recently signed a lease with the Miami Light Project, a group that produces dance, music and theater events.

Goldman believes the Miami Light deal is key to the area. He hopes live performances will bring people to the streets of Wynwood.

“This is a perfect example of creating something valuable that everybody benefits from,” he said. “[It] is going to bring hundreds of people a week into Wynwood and [they] will support restaurants, other galleries and facilities that are there and will stimulate even more growth.”

Goldman plans to charge Miami Light and other nonprofits a base rent of $8.50 a square foot, about 35 percent below the area’s market rent, according to a business associate.

“Just from a cold-hearted real estate point of view, you need to … proactively think outside the box as to how to create something from nothing,” he said.

Remodeled warehouses is Goldman’s nod to the future
Paola Iuspa-Abbott
Wynwood already has the art galleries, which are busy during the week of Art Basel every December. Now, artists from the worlds of dance, music and theater are moving into the former industrial district north of downtown Miami.

The move is a victory for New York developer Tony Goldman, whose family has been on a lengthy journey to revitalize the neglected industrial neighborhood.

Goldman took an unconventional path when he brought the Miami Light Project, a nonprofit that presents live performances, to one of his remodeled warehouses.

He agreed to join Miami Light in applying for a $400,000 matching grant so the group could build a theater, exhibition area, rehearsal space and offices in a former clothing factory. With Goldman pledging to pitch in another $400,000, the John S. and James L. Knight Foundation awarded Miami Light the grant in November, to be paid over three years.

“This initiative is going to energize and stimulate the neighborhood,” said Dennis Scholl, the foundation’s Miami program director and vice president of arts. “The grant will help get the space built out and help the developer reduce rent for a period.”

Goldman, chairman and chief executive officer of Goldman Properties, pursued the nonprofit at a time when finding tenants for large spaces was, and continues to be, extremely difficult.

Goldman’s former tenant, the Museum of Contemporary Art of North Miami, closed its satellite location in the 12,000-square-foot warehouse in September.

In April, Goldman and Miami Light signed an eight-year lease.

The Light Box at Goldman Warehouse, at 400 NW 26th St., is to open in early 2011.

Goldman owns about 300,000 square feet of warehouse space plus vacant land in Wynwood. Since the recession started in late 2007, he has seen the vacancy rate in his properties creep up to about 30 percent, Goldman said.

In a depressed economy, vacancies are a landlord’s worst enemy since they push property values down even deeper. So Goldman did whatever it took — including offering up $400,000 — to get Miami Light in one of his properties.

“This is about being creative, about creating what doesn’t exist as opposed to waiting around for someone to call you,” Goldman said. “Developers today are in trouble if they follow the traditional models that have served them over the last decade. That game is over.”

Miami Light will share the space with about four other similar nonprofits. Their goal is to share expenses, from telephone service to rent.

It is rare that nonprofits in the performing arts share a home, said Miami Light executive director Beth Boone.

“This is going to be probably the first time [for this collaborative effort] to be put into practice in this manner, at least in Miami,” she said.

Boone began exploring ways to reduce expenses three years ago when corporate donations and government funding began to decline.

“Individuals were starting to tighten their belts,” she said. “There were warning signs that contributed income to support our organization was starting to dwindle and shrink.”

Miami Light, with an annual budget of about $600,000, was paying close to $60,000 a year to rent space in a building at Biscayne Boulevard and 30th Street.

By the time the lease expired in December, Boone had decided to move to a more affordable place.

At the Wynwood location, rent will be about $12 to $14 per square foot, including operating expenses. She paid $22 a square foot at the organization’s former home, she said.

Goldman wants his warehouses to become offices and retail space. He is not interested in keeping them as industrial and storage space.

“The future is in adaptive-reuse for low-cost offices and studios and retail spaces, and it is not in the $6 to $7-per-square-foot range,” Goldman said. “The future is in the $14, $15, $16, $17-a-square-foot range. That means that you’ve got to have … the balls to invest the necessary dollars to make sure that your spaces are clean, marketable and ready for that next level of clientele.”

Paola Iuspa-Abbott can be reached at (305) 347-6657.

Goldman said bringing in the right tenants has been the key to revitalizing other districts. And to entice them to his properties, Goldman is willing to make serious concessions.

For an example, look to South Beach, said Nancy Liebman, a former Miami Beach City Commissioner and community activist who fought for the redevelopment of the art deco district.

She remembers how Goldman used free rent to lure high-end boutiques like Armani Exchange to his restored buildings on Collins Avenue until the area caught up, she said.

“It was amazing the way it worked,” Liebman said. “One by one, they all started to come. Now, Collins Avenue is a vibrant shopping street.”

It’s now home to a plethora of top retailers, including Banana Republic, Gap, Kenneth Cole, Club Monaco, Ralph Lauren and Diesel.

Liebman points to Goldman’s organic approach to reviving neighborhoods. He goes beyond restoring properties, she said.

For example, Goldman helped put together the Wynwood Arts District Association early last year. Some property owners tried a similar effort years earlier, but it didn’t gain much traction, said David Lombardi, the second-largest property owner in the district after the Goldmans.

Like he did in the ’80s for South Beach, Goldman brought with him the credibility to engage public officials and other leaders and the gravitas to bring together disparate constituencies behind the goal of improving Wynwood.

Goldman is following a model that worked well for him in South Beach, where he helped create the Ocean Drive Association.

“When we go into a neighborhood, it is our responsibility to reach out to others,” said Goldman, who doesn’t use computers or smart phones to communicate. “I don’t expect others to come to me.”

The Wynwood association has grown to nearly 130 members. It printed and distributed 90,000 maps showing art galleries and eateries, contracted for security and hired residents from the Lotus House, a homeless shelter for women in Wynwood, to clean the streets.

“Goldman put up money of his own for those initiatives,” said Lombardi, a longtime Wynwood activist.

Goldman said his contribution is relative to the amount of real estate he owns.

“We carry our own weight proportionately,” he said. “And it’s not just about one big player. It’s about a lot of interesting players [who] are equally important to each other and for each other. Developing a neighborhood is a very embracing, holistic approach.”

The association recently launched Wynwood.com to promote the district.

Impressed by the changes in the warehouse district, Miami City Commissioner Marc Sarnoff last month gave the association a $100,000 grant from his office’s discretionary fund.

“We are trying to give them a leg up,” Sarnoff said.

FOLLOW THE FOOD

Just like food can cure the blues, Goldman believes restaurants can reawaken neighborhoods. His daughter, Jessica, 40, plans to open Wynwood Kitchen and Bar in November. Jessica Goldman has spent the last 12 years running the family’s historic Park Central Hotel and The Hotel in South Beach.

“No business brings people like restaurants,” Goldman added. “It’s been part of our formula. We had 12 restaurants in our history, and we always used restaurants to ignite neighborhoods.”

Property owner Lombardi said the Goldmans’ first restaurant in the district, Joey’s, is helping draw people to the neighborhood.

“Joey’s was an enormous shot in the arm for this area,” he said.

Joey Goldman, 37, joined his father’s business 20 years and runs Joey’s.

Opening restaurants in Wynwood was almost impossible before Goldman came to town. He campaigned to have the district rezoned to allow up to 25 restaurants in former warehouses that didn’t meet the city’s parking requirement. His effort led to the creation of the Wynwood Café District.

It’s a tried and true page from the Goldman playbook.

Street cafes helped fuel the revival of the art deco district, Liebman said.

Goldman also organized Ocean Drive property owners in the late 1980s to pass a $3 million bond initiative to improve the Ocean Drive sidewalks from Fifth to 15th streets.

“As soon as the sidewalks were finished, those cafes were up and running,” she said. “It brought people to the area. That really woke the city when they saw all that activity.”

FAMILY TIES

Goldman got his start in the business by managing properties for an uncle and later brokering deals. He launched Goldman Properties in New York in 1968, renovating brownstones on the Upper West Side.

“I didn’t start with a bundle of money,” he said.

In addition to being a businessman, Goldman is also an art lover, a historic preservationist, a singer and was once an avid roller-skater.

He finds ways to merge his various passions with his business.

For example, in December, he invited graffiti artists to cover the exterior walls of some of his properties with art, creating a mural garden in the heart of Wynwood.

“He is kind of an artist and approaches real estate as an artist would approach art,” Commissioner Sarnoff said. “He sees it as sort of a canvas.” [Cont.]

 

To read the full article, visit http://www.dailybusinessreview.com


Paola Iuspa-Abbott can be reached at (305) 347-6657

Copyright © 2010, ALM Properties, Inc.