Miami Makeover Attracts Investors
Byline: Hortense Leon
In June, Miami Mayor Manny Diaz visited the Manhattan Institutes Center for Civic Innovation to deliver a message: his citys government has been restructured and is more efficient than in years past. As a result, Miami is taking its place among the most respected cities in the U.S.
During Diazs tenure, the citys bond rating has climbed from junk to investment status, although a budget shortfall is forecast for fiscal year 2005. In addition, the cleanup of city government - once famous for mismanagement, malfeasance and general buffoonery - has sparked a turnaround, elevating Miamis image into one of respectability and fiscal responsibility, say the mayors supporters.
But do changes at city hall really matter to developers who are in the process of developing an estimated $3 billion to $4 billion of new construction in and near downtown? Yes, says Michael Cannon, managing director of Integra Realty Resources of South Florida, an appraisal and real estate consulting firm. "Investors wouldnt come here unless city government was revamped."
Miamis newly minted reputation for integrity and efficiency in city government does not negate the fact that the city has been named the poorest of the 100 biggest U.S. cities in a report by the Brookings Institution. This dubious distinction was based on the fact that Miami had the lowest median household income - $23,483 - in this group of 100, according to the 2000 U.S. Census.
Grand Plans
Although most developments are condominium projects with varying amounts of retail, one developer is planning office space downtown. MDM Development Group, the developer of Metropolitan Miami, a mixed-use complex that will include 1,500 condominiums and 222,000 sq. ft. of retail, has received approval from the city of Miami to build a 500,000 sq. ft. office tower. It replaces the original plan for 10,000 sq. ft. of office space.
In June, MDM was negotiating with three potential office occupants - law firm Steel, Hector & Davis, which gave MDM a letter of intent to buy a 100,000 sq. ft. office condo; accounting firm Morrison Brown Argiz & Farra, which is negotiating to buy 40,000 sq. ft. of office space; and insurance group Aon, which has existing offices in Miami and also is negotiating to buy a 40,000 sq. ft. office condo. MDM is planning to rent out an additional 300,000 sq. ft. of office space.
But not many developers are opting for office space. Cousins Properties of Atlanta and Americas Capital Partners of Miami are reportedly scrapping their plan for a high-rise office building in downtown Miami in favor of a residential condominium development.
Mixed-Use Proliferates
A few miles north of downtown, a population explosion is about to take place on a once barren railroad yard. The Miami-based Midtown Group and Developers Diversified Realty - a Cleveland, Ohio-based REIT - are developing a 56-acre site, formerly the Buena Vista rail yard. The Midtown Group is planning 3,000 residential units on half of the site, and Developers Diversified is developing the other half with 600,000 sq. ft. of retail and up to 900 apartments. It is estimated that the two developers of the project, known as Midtown Miami, will invest $1.2 billion over seven years.
"Midtown Miami is widely regarded as the most significant urban redevelopment deal in the country," says Craig Werley, principal of Craig Werley & Associates, a real estate advisory firm in Miami. "Nowhere in the middle of a major city do you have 56 acres" available for development, he says.
Although condos like the ones planned at Midtown Miami are popular, the cost of these units has skyrocketed. Seven years ago, buyers paid $150 to $200 per sq. ft. for a luxury unit, says Gene Berman, regional manager of the Ft. Lauderdale office of Marcus & Millichap. Now, buyers pay $350 to $800 per sq. ft., he says.