By James R. Hagerty – Published in the Wall Street Journal 05/13/2010
The banks taking over ownership of two flashy condo towers in Miami’s Brickell neighborhood are bringing in the Argentina-born property developer Edgardo A. Defortuna to help them sell the homes.
As we reported Wednesday, Related Group, a Miami-based property developer led by Jorge Perez, has turned over ownership of two of the three towers in the Icon Brickell condominium complex to a group of lenders led by HSBC Holdings PLC.
Related Group described the settlement with the bankers as “friendly.” The company said it will remain a co-manager of sales and marketing at the towers. The new co-manager of sales and marketing is Mr. Defortuna’s Fortune International, a Miami-based developer and real estate brokerage empire known for its ability to attract buyers from Latin America.
The deal came after months of talks between Mr. Perez and several dozen banks led by HSBC. Those talks were complicated by the divergent interests and priorities of the many lenders. A person familiar with the situation said HSBC, which has financed developments by Fortune International, wanted to involve that firm in sales of the Icon Brickell condos. A spokeswoman for HSBC declined to comment.
Reached by telephone Wednesday afternoon, a few hours after the agreement was announced, the 53-year-old Mr. Defortuna said he believes the deal passing ownership to the banks will help sales of the condos. Some potential buyers, he says, had shied away because of fears that any fight between the banks and Mr. Perez might lead to a messy foreclosure that would hurt values. Now that has been averted, and Mr. Defortuna is ready for the hard sell: “This is probably the best value in South Florida,” he said.
Mr. Defortuna, whose father owned a manufacturing business in Argentina, moved to the U.S. in 1980 to study business at the University of Miami. He also began helping people he knew back home invest in U.S. real estate and in 1983 set up his own brokerage in Miami. Today, that brokerage has more than 1,000 agents in South Florida. In the mid-1990s, Fortune International diversified into property development, specializing in seafront properties.
A Related affiliate, Related Cervera Realty Services, is to remain involved in selling the Icon Brickell condos, but the sales office for the two towers now owned by the banks will be “under the Fortune umbrella,” Mr. Defortuna said.
In December, Mr. Perez said Related had invested about $1 billion in the Icon Brickell, including $15 million for giant statues of heads that resemble those on Easter Island. He said loans secured by the three buildings totaled around $700 million.
Most of the Icon Brickell was completed in 2008 and 2009, but presales of the units began in 2006. After property prices crashed in 2007 and 2008, many of the original buyers decided not to complete their purchases, and Related slashed asking prices.
Related said it continues to own and operate the third tower of the complex, financed by a different group of lenders, led by Bank of America Corp. That tower includes the Viceroy Hotel. A Bank of America spokeswoman declined to comment.
Related said it has sold 401 of the 1,276 condo units in the two towers whose ownership was passed to the lenders. Peter Zalewski, owner of Condo Vultures, a Miami real estate broker, said units in those towers have been selling for an average of about $440 per square foot this year, down from a peak of more than $600 on units sold before construction.
Related Group has been counting heavily on Latin American buyers able to pay cash for condos at Icon Brickell, which is in the Brickell neighborhood adjacent to downtown Miami. The buildings feature eccentric décor and sculptures designed by Philippe Starck. The complex includes restaurants, a two-acre garden terrace with a 300-foot pool and a cave-like lobby that resembles an abandoned castle.
Return to lender: Developer hands back much of ICON Brickell
Ownership of the majority of ICON Brickell will revert to its lenders, with developer The Related Group keeping the rest and co-managing sales, in a deal reached late Tuesday
BY INA PAIVA CORDLE
Published in the Miami Herald 5/13/2010
Miami-based The Related Group has deeded two 57-story towers of ICON Brickell — an ultra-luxury $1 billion condominium project emblematic of Miami’s real estate boom — back to its lenders, the company said Tuesday.
In a “friendly settlement,” Towers 1 and 2 of the financially troubled project will return to a syndicate of lenders led by HSBC, and The Related Group and Fortune International will co-manage the project’s sales and marketing efforts.
For months, developer Jorge Perez, chairman and chief executive of Related, has said he was in final negotiations with lenders regarding the future of the three-tower, 1,793-unit development in the 400 block of Brickell Avenue.
Recently, sales at the project, which Perez regarded as the pinnacle in his long career, had picked up — albeit at deep discounts. Late last year, Related won approval from its lenders to slash prices by 30 percent in a bid to get buyers to close.
Project lenders also agreed to start making five-year loans to buyers.
But it wasn’t enough to prevent the two towers from reverting to the lenders.
Working with a separate bank syndicate led by Bank of America, Related will continue to own and operate the 50-story Tower 3, which is anchored by the Viceroy Miami hotel, and will continue to sell and market its condo-hotel units and condominiums together with its sales affiliate Related Cervera Realty Services, the company said.
Analysts had been predicting Perez would lose ownership after delivering the opulent ICON, which features an infinity pool the size of a football field, in one of the worst housing markets in South Florida history.
Over the past two years, troubled developers behind on construction loans have been turning over title to projects in so-called “friendly foreclosures” to avoid costly and lengthy litigation.
In July 2009, Related surrendered ownership of its then-new 420-unit CityPlace South Tower in West Palm Beach to a group of partners led by Toronto-based Scotia Capital.
In creating ICON, Perez had spared no expense.
Designed by Arquitectonica with creative flourishes by renowned designer Philippe Starck, ICON features more than 100 22-foot columns that mimic the statues of Easter Island around its entrances, an immense outdoor fireplace crafted of French limestone, and oversize chess pieces adorning a walkable chessboard on the two-acre pool deck.
“I don’t think we’ll ever see another project like ICON Brickell built again,” said Peter Zalewski, principal of Condo Vultures, a real estate brokerage and research firm. “No one will ever say that Jorge Perez and Related don’t dream big. Unfortunately, they weren’t able to close it.”
When the towers were opened with great fanfare in the fall of 2008, sales in the bleak market were tepid.
But lower prices brought buyers. So far, 433 units, or 24 percent of the 1,793 units, have been sold, according to Condo Vultures.
In 2008 and 2009, 125 ICON units closed, at an average of $543 per square foot, said Zalewski. This year 308 units have closed at an average of $403 per square foot, showing the spike in sales as prices dropped, he said. Pre-construction prices were more than $600 per square foot.
“I think as history is written and people look back and reflect on that period of 2003 to 2010, Jorge Perez and Related will come out in a very positive light,” said Zalewski. “Unfortunately, some people will not have that positive opinion of him — and those people will be the ones who lost significantly by investing with him.”