Condo developer betting on Greater Downtown Miami



A family-run, South American residential development company is prepared to bet its fortune that the Greater Downtown Miami condo market is on the verge of entering a new growth phase in the real estate cycle.

The development company, the Melo Group, founded by father Jose Luis Melo with sons Carlos and Martin, is moving forward with plans to build and self-fund an 18-story condo tower in Greater Downtown Miami, despite more than 3,200 new units built in the district during the boom still remaining unsold as of March 31.

Preconstruction sales for the proposed 96-unit tower — dubbed 23 Biscayne Bay condominium — in the Biscayne Boulevard Corridor neighborhood of Greater Downtown Miami are already underway with an initial focus on South American buyers. With a purported 48 percent of the proposed condo project already presold overseas, the developer plans to broaden the preconstruction sales and marketing effort to include U.S. buyers.

Prospective buyers are betting on the development company’s previous success in Greater Downtown Miami, a 60-block stretch from the Julia Tuttle Causeway south to the Rickenbacker Causeway, Interstate 95 east to Biscayne Bay. Building residential projects is nothing new to the Melo Group, which has developed at least four towers with more than 700 units in the area, including the One Plaza at 1800 SW 1st Ave. in the Brickell Avenue area and the 1800 Biscayne Plaza condominium at 275 NE 18th St. in the Biscayne Boulevard corridor.

Initial pricing for the proposed 23 Biscayne Bay condominium tower starts at $230 per square foot, much less than the $348 per square average sales price achieved for new condo sales in Greater Downtown Miami in the first quarter of 2011.

Construction of the 23 Biscayne Bay development — which will feature nearly 3,100 square feet of office space — could begin as soon as May with completion scheduled for early in the third quarter of 2012.

The proposed 23 Biscayne Bay condominium tower is one of three new projects proposed for Greater Downtown Miami.

For the last 18 months, developer Evangeline Gouletas has been attempting to build the proposed SkyPalace condo tower on top of the Publix Super Market at the Mary Brickell Village.

In recent months, the Related Group has intensified its effort to obtain the necessary governmental approval to build a 276-unit tower on a development site immediately west of the existing two-tower 500 Brickell condominium complex in the Brickell Avenue Area.

Talk of constructing new condos in Greater Downtown Miami is growing following a strong 2010 when buyers purchased nearly 3,700 new units at reduced prices. The 2010 new condo sales — some 1,600 of which transacted to bulk buyers — reduced the number of unsold developer condos in Greater Downtown Miami to less than 3,600 units. It is worth noting that the unsold developer inventory does not include the condo units that bulk buyers acquired and are now attempting to resell at a premium price.

It is unclear if the desire to develop new condos in Greater Downtown Miami may wane going forward following a 54 percent slowdown in new condo sales activity in the first three months of 2011.

Buyers purchased 333 developer units for an average of $468,400 each in Greater Downtown Miami between January and March of 2011, according to Miami-Dade County records.

Compare the 2011 new condo sales volume to the same 90-day period in 2010 when 717 units were purchased for an average of $322,300 each. Buyers acquired 376 units for an average of $395,150 each in the same time span in 2009.

Developers constructed nearly 22,250 units in Greater Downtown Miami since 2003. Some 14 percent of the new units are still available for purchase as of March 31.

At the current new condo sales pace of 111 transactions per month in the first quarter of 2011, Greater Downtown Miami has about 29 months of unsold developer unit inventory remaining. .

As the Melo Group prepares to ante up for its new condo development bet, odds makers will undoubtedly factor in the more than 1,300 units built since 2003 that are currently on the resale market.

Regardless of whether the Melo Group bets right, the pool of investors anxious to once again play the preconstruction condo investment game are sure to make their way to the table for at least a look if not a wager.

Peter Zalewski is a principal with the Bal Harbour-based real estate consultancy Condo Vultures. Zalewski, who has had a Florida real estate license since 1995, works as a consultant for private equity groups and institutional investors.

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