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| October 22, 2007 |
By: Polyana da Costa |
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arties at Miami’s famous Versace mansion, cocktails at the Four Seasons, a visit to Trump Hollywood Tower and golf tours — that’s Heather Goulding’s flash tour of South Florida for deep-pocketed foreigners looking for real estate.
The real estate agent goes out of her way to entertain Russia’s elite when they come to South Florida to spend a little piece of their fortune on multimillion-dollar houses and condos.
Early this year, she hosted a group of 75 Russian millionaires and billionaires who she said showed a tremendous interest in the region’s luxury real estate.
“I have two more groups coming at the end of the year to look at homes and condos for vacation, investments, for their family and friends,” the MTM Realty agent said. “They are very astute business people. They know there will be some very good prices in this current market and that discounts are expected.”
Goulding wouldn’t disclose her potential client’s identities but describes them as the “new wealth of Russians that have come to the forefront in the past 10 years and are looking to diversify their portfolio.”
Most of them are in their late 30s, and some of the billionaires are under 40, she said.
According to the latest rankings by Forbes magazine, Russia has 53 billionaires with an average age of 46. In 2006, only 34 Russians made it to the list. The country saw the world’s largest year-over-year increase in the number of billionaires.
Most are self-made tycoons and have built their wealth in oil, steel aluminum, natural gas and minerals. Others built their wealth in the retail sector, banking and even gambling.
The Russians who are shopping in South Florida are interested in Fisher Island and South Beach as well as oceanfront properties in Palm Beach, Boca Raton and Delray Beach, Goulding said.
Anolan Dragitsch, a former real estate agent at Sol Sotheby’s International Realty in Miami and a friend of Goulding, said she was amazed when she was introduced to the Russian market.
“My broker took me to London last year for a Russian art sale, and within 60 days we had sold $10 million in properties,” she said.
Dragitsch, who has a marketing background, saw an opportunity and launched a Russian-language magazine featuring luxury South Florida homes for sale.
“I wanted them to have something in their language,” she said.
Ticket to Moscow
The foreign networking takes a lot more effort than the typical local marketing efforts by brokers — sending mail and e-mail and posting updates on the Internet — she said as she prepared travel arrangements for another trip to Moscow.
“I’m planning on going there every month,” Dragitsch said.
But she’s also looking to generate business from other parts of the world.
She left Sotheby’s last week to focus on hosting “Luxe World,” a television show featuring different destinations and luxurious properties on E! Latin America.
About 40 percent of Sotheby’s sales are to foreigners, said Carlos Justo of the luxury real estate firm.
Of the 12 sales by Sol Sotheby this year with an average price of $7 million, three were to Russian buyers, Justo said.
“We are working on a few others, and we are expecting to close about 10 more in the next 12 months,” he said. “There is a large interest from the Russians. … An interest we hadn’t seen before, but it’s a long-term commitment.”
Some buyers already own places on Fisher Island and in New York, Justo said.
But in some cases, the buyers were on their first trip to Miami, Goulding said.
Strong Russian interest in U.S. real estate, in particular in signature locales like Miami and New York, also has been noticed by real estate lawyers.
Joe Hernandez, a Hogan & Hartson attorney who left Greenberg Traurig about a month ago, said the real estate team at his former firm had noticed the trend.
“If I think back two or three years ago, I don’t remember many Russian buyers at all,” said Hernandez, who represents developers. “All of a sudden we were getting all these inquiries. We’ve noticed a tremendous increase over the last couple years.”
Agents who have thousands of dollars tied up in the deals are very careful about protecting their billionaire clients’ identities.
Speaking generally, Dragitsch said at least six of the 46 wealthy Russians she has networked with so far are billionaires.
Politics have a major influence on the investment choices of wealthy Russians. Some are waiting for Russia’s March 2008 presidential election before committing to purchases, sources said.
Russian tax authorities announced last month the creation of a unit to investigate tax evasion by moneyed Russians.
The theory among South Florida real estate specialists is that political instability and uncertainty encourage foreign investments.
Political worries
Politics also are influencing the way Venezuelans invest.
Hernandez said he has received many inquiries from Venezuelans looking to buy condos and commercial properties in South Florida.
“They want to get their money out of the country for fear of what’s going to happen with Chavez,” he said, referring to Venezuelan president Hugo Chavez.
Since the beginning of the year, Chavez has consolidated power and nationalized companies in different industries.
Many Venezuelans have concentrated their South Florida real estate purchases in Miami’s Brickell area and Broward’s Weston.
South Florida is flooded with thousands of empty condos and homes for sale. There are more than 20,000 condos planned and under construction in and around downtown Miami. The local surplus of properties and a deepening national housing recession — the worst in 14 years — are driving some in the real estate business to look overseas for clients looking for investment opportunities.
The weakening dollar combined with falling home prices have also bolstered foreign interest in the U.S. market.
The allure of Florida
Since not every real estate broker is lucky enough to land a wealthy Russian client, South Florida remains dependent on its connection and appeal to Latin American, England and Canada.
Florida was the No. 1 destination for buyers from Mexico, the United Kingdom and Canada seeking residential properties, according to a survey released in June by the National Association of Realtors. One in four foreigners who bought a home in the U.S. last year chose Florida to make their investment, the NAR reported. California was second with 16 percent of foreign buyers.
“There is no question in my mind that most of it was in Miami-Dade, Broward and Palm Beach counties,” said Maurice Veissi, a principal of Veissi and Associates in South Miami and president of the Realtor Association of Miami and the Beaches.
Nearly one in five NAR members sold a home to a foreign buyer in the past year, according to group’s survey.
Cautious strategy
Like others, many potential investors are trying to calculate when the market will bottom out.
Dragitsch said many of her clients, including top Brazilian airline executives and entrepreneurs, have looked at Miami condos with prices starting at $750,000, but they plan to wait until the end of the year to buy.
Unwilling to wait, South Florida developers are trying everything to get the Brazilians to change their minds and invest now.
A few months ago, Frank Guerra, president of NEO, which built Miami’s NEO Lofts, was in Brazil for pre-construction marketing of Cima, a 52-story, 500-unit condo tower planned on the Miami River.
The marketing was done in conjunction with the Brazilian offices of SOL Sotheby’s International. During the visit, Guerra said the project, which has not broken ground, would be completed by the end of 2009.
As Florida’s top trading partner last year, Brazil plays a major role in South Florida’s economy, said real estate attorney Vivian de las Cuevas-Diaz, a partner in the Miami office of Broad and Cassel.
De las Cuevas-Diaz was recently appointed to the board of Enterprise Florida, the state’s economic development agency, which is encouraging increased business contacts with Brazil. Gov. Charlie Crist and the agency’s board plans to travel to Brazil next month to drum up business.
Despite the weak dollar, de las Cuevas-Diaz said, she has noticed a decrease in Latin American interest in South Florida.
“At some point you had the Argentines coming by the dozens, then the Venezuelans. At least from my experience, I have not seen as many lately,” de las Cuevas-Diaz said.
She is not alone.
For 20 years, Elisa Garcia worked as an independent real estate agent, bringing Latin American buyers to Miami-based companies like Cervera Real Estate, Fortune International and ISG.
But when she saw Miami’s condo market crashing, she decided to switch and sell real estate in foreign countries to U.S. buyers.
“The market is just not as hot as it used to be,” Garcia said. “We have our local listings, but most of our focus is on the international market for now.”
Garcia and business partner Graciela Gonzalez founded Genesis International Realty this year and claim to have sold about $100 million worth of real estate so far.
They are taking Europeans, Canadians and Americans to condo projects with units priced from $400,000 to $1 million in Mexico, Panama and Costa Rica.
“It’s a strategy,” Gonzalez said. “It doesn’t mean we don’t believe in Florida. We are going to have a project in Florida when it’s the right time. We have our eyes set on one project already but the developer is going to wait for the right time as well.”
Gonzalez said most of the inquiries she receives for South Florida properties are for rentals.
“We are getting a lot of rentals, but anything under $400,000, you just can’t sell it. If you have a $1 million and up condo, then it’s not a problem,” she said.
Veissi, of the Realtor Association, said buyers should be weary when investing abroad.
“I know there is a lot of interest in Costa Rica, Nicaragua, Panama … and I know folks who have invested in units there, but I would feel enormously uncomfortable putting an investor of mine in an arena where I was unfamiliar with the reliability of title,” Veissi said.
The Miami-based Related Group, the largest builder of high-end condos in the U.S., is in the midst of launching its first foreign projects.
The company formed Related International and started construction of Icon Vallarta, a luxury condominium on five beachfront acres in Puerto Vallarta, Mexico, scheduled for completion in 2009.
Related plans to invest about $1 billion in Mexico over the next two years, including projects in the resort towns of Acapulco and Zihuatanejo.
“Why Mexico?” asked Harold Gallo, vice president of Related International. “Because of the natural beauty, the proximity to the USA, and the synergy between the two markets.”
The group also is targeting markets in Panama, Colombia, Uruguay and Argentina, he said.
Spaniards take notice
Investors from Spain also have come forward with interest in commercial properties in South Florida.
“It’s a fairly recent trend,” said Hogan & Hartson attorney Hernandez, who has represented and received inquiries from several high-profile Spanish developers. “They are bigger, sophisticated investors that have developed a lot in Spain, Central and South America and used to perceive the U.S. as a more difficult market to get involved with.”
Without disclosing his clients, he said they are looking for ways to take advantage of the troubled condo market.
Spanish real estate firm Ponte Gadea is one of three investors in a $280 million construction loan that will be used to build the first phase of the Epic hotel, condo and marina complex on the old Dupont Plaza site in downtown Miami. The syndicated financing was led by Spain’s Banco Santander.
A $173 million financing package for construction of a 38-story office tower at 1450 Brickell Ave. in Miami was led by Spain’s third-largest savings bank group, Caja de Ahorros de Valencia, Castellon of Spain.
Also in the Brickell district, developer Tibor Hollo brought in Spanish partners at his planned Villa Magna condo project, but sources said the newcomers agreed to buy the entire project. The same group bought an acre diagonally across the street at 1390 Brickell Bay Drive for $35 million in January. Both parcels are vacant.
“In general, these foreign investors, especially in the commercial segment, are very savvy,” Hernandez said. “They are not just coming in and dumping their money here. They see a potential in South Florida, and they know how to adapt to the market.”
The Spanish interest in South Florida is not limited to local acquisitions. They also are coming to the area to hunt for buyers.
Spanish-based developer Grupo Mall opened its U.S. headquarters in Miami this year to market two condominium projects in Panama and Mexico.
“Florida is a natural market for us and for our projects,” said Patricia Fernandez, general subdirector for the company’s European operations.
The 50-year-old, family-owned company, which develops retail and condominium properties, has offices in Ireland, the U.K., Toronto, Panama, Mexico and Argentina.
“The U.S. has always been part of our strategy,” Fernandez said. “The Spanish have a great interest in Florida. Just look at bank acquisitions. Banco Sabadel and Banco Popular both bought banks there.”
Polyana da Costa can be reached at pdacosta@alm.com or at (561) 820-2065.
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