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July 29, 2010 |
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| February 10, 2010 |
By: Paola Iuspa-Abbott |
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n the latest sign of Jorge Perez’s downsizing, his Related Group is no longer a partner in the Trump Towers luxury condo in Sunny Isles Beach.
Multimedia: Real estate analyst Michael Cannon discusses the shrinking empire of condo developer Jorge Perez
“We have no comment other than to confirm we have satisfied The Related Group’s lender obligations, and we have sold the two projects (Trump II and Trump III at Sunny Isles) to former partners In these developments,” Betsy McCoy, Related’s vice president and associate general counsel, said in an e-mail.
This comes after Related and its lenders — likely to take title soon to the Icon Brickell towers — slashed prices on the nearly vacant Miami project. And Related no longer owns a site in downtown Miami where Perez planned another condo tower.
“In an economy like this, when developers like the Related became so big, they actually contract,” said Michael Cannon, executive director of Integra Realty Resources in Miami. “What [Perez] is going through is a contraction rather than an expansion, and this is what a lot of developers are doing.”
Related was one of the most prominent condo developers in South Florida during the past decade. The company built Murano at Portofino, Icon South Beach and Apogee in Miami Beach, plus 50 Biscayne, 900 Brickell and Loft Downtown in downtown Miami.
But when the housing market and economy collapsed in 2007, Related and its joint venture partners were left owning thousands of new luxury condos.
Perez’s personal net worth has also declined. He was ranked at No. 197 on the Forbes 400 list of the wealthiest people in 2006, when his net worth was estimated at $1.8 billion. Last year, he fell off the list when his net worth dipped below $900 million, according to Forbes.
One of Related’s partners was the Dezer family. Related and the Dezers co-developed the Trump Towers, but the relationship ended on Dec. 31, according to four people familiar with the project who declined to be identified.
“It wouldn’t surprise me, unless he had a major stake in the [Trump Tower] project, that he would terminate the agreement and move on,” said Cannon, who had no direct knowledge of the deal.
Related had a 50 percent share in TRG Sunny Isles VII, the company behind the oceanfront project, until Jan. 13. That’s when the Dezers took full control TRG Sunny Isles, according to the Florida Division of Corporations.
The Dezers did not return phone calls.
Related and the Dezers joined forces more than five years ago to build the three-tower oceanfront Trump project on Collins Avenue and 160th Street. Each 45-story tower has 271 condos.
In 2007, TRG Sunny Isles obtained a $345.7 million construction loan from Wachovia Bank, now owned by Wells Fargo. On Dec. 31, Wachovia modified the loan and extended its maturity date. A mortgage filed with Miami-Dade County did not disclose the due date.
One tower is sold out, another has a few units sold, and the third is vacant. The unit prices have dropped nearly 40 percent since pre-sales started around 2005.
Trump Towers condos are selling from $350 to $400 per square foot, down from about $550 to $650 per square foot a few years ago, said Craig Studnicky, president of the International Sales Group in Aventura. His company represents buyers of Trump Towers units.
Studnicky, who said he was not aware of any change in ownership at Trump Towers, said the current prices are below construction costs. “At $350 a foot, there is not going to be any profit realized by the developer,” Studnicky said.
Dozens of Trump Tower buyers have sued to recover deposits on units they say are worth less than the contract price.
DOWNTOWN PARCEL
Related also took a big loss on the sale of a downtown Miami parcel where the company planned to build condos.
Related sold a 28,500-square-foot lot at Northeast Third Street and Second Avenue for $4.37 million on Dec. 29 to Miami investor Rafael Kapustin. The developer bought the land from Kapustin for $12 million in 2007, as the condo market was beginning to deteriorate. After reacquiring the site, Kapustin sold it to Miami-Dade College for $5.47 million.
Kapustin declined to comment.
Related paid off a $5 million mortgage with HSBC Realty Credit Corp. at the time of the sale.
Now Related is working to resolve its problems at Icon Brickell. The company has nearly 1,500 condos to sell and is delinquent on construction loans totaling nearly $700 million.
Related’s McCoy last week said the developer was negotiating to hand over Icon’s three towers to the lenders with the condition that the company continues to run the project.
“We are in a workout process so we would continue to manage [Icon,]” McCoy said. She pointed to Related’s CityPlace South Tower in West Palm Beach as a workout template.
Last August, Related turned the project over to the Bank of Nova Scotia. Related was behind on a construction loan of about $119 million. “We are hoping to achieve a similar structure as we did with CityPlace,” she said.
Related reportedly paid an undisclosed amount to the lender to be partially released from further financial liability.
In mid-December, Related and lenders HSBC and Bank of America cut prices almost 30 percent on units in Icon Towers I and II and almost 50 percent on Tower III, home to the luxury Viceroy Miami Hotel.
The towers opened in phases, with the first coming on line in late 2008.
HSBC leads a group that funded construction of Tower I and II. Bank of America heads a syndicate that financed construction of the condo-hotel tower.
Since Related defaulted on the construction loans, lenders have increasingly become involved in running the project, several sources said. The discounted prices have helped increase sales, according to Penni Chasens, a broker with Cervera Real Estate who handles sales at Icon.
Chasens said more than 200 purchase contracts have been signed since price cuts went into effect.
Miami real estate broker Emilio Palomo said he began showing units at Icon three weeks ago. “Before the [price cuts,] I stayed away from it,” he said. “The pricing and number of units didn’t make sense for investors.”
Palomo, with Riteway Properties III, an investor from Argentina, is in the process of buying two units. One unit is selling for $450 per square foot; the other for $490 per square foot.
Hoping to take title to the projects soon, lenders are pressuring Related to resolve lawsuits brought against it by contract holders who want their deposits back.
Many signed contracts before property values plummeted.“The lender on the Icon wants the litigation terminated,” McCoy said last week. She said Related is reaching out to buyers and trying to settle.
Miami attorney David Reiner, who represents nearly 25 Icon contract holders, said the developer has shown a change of attitude in the past several weeks. Related is now willing to return a bigger portion of their 20 percent deposits to clients than in the past, he said.
“They are willing to give back more than the 5 percent [of the purchase price] to get rid of the lawsuits, but just not enough more,” he said. “They are going to have to come up a little further on their offer before our clients are ready to settle.”
Paola Iuspa-Abbott can be reached at (305) 347-6657.
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