Ultra Luxury Condos Planned Near Miami, Even as Market Signals Potential US Weakness
Published On: CoStar
The real estate adage that a property can defy a soft market if it’s unique is getting put to the test in South Florida.
Jules and Eddie Trump, South African brothers not related to the current U.S. president, are preparing to build two 50-story, ultra-luxury condominium towers in a small, seaside community north of Miami even as analysts say the Miami-Dade County market is soft and getting softer.
An oversupply of luxury condos in and near Miami helped usher in the housing bust that began more than a decade ago. Starting in late 2011, foreign buyers scooped up units at bargain prices, leading to a market rebound that prompted developers to begin another wave of building. Now analysts are concerned the market is overbuilt, with Miami providing a sign of potential trouble looming for other parts of the country.
That is the challenge facing the $1.6 billion Estates at Acqualina set to rise at 17901 Collins Ave. in Sunny Isles Beach, Florida. The development will feature 245 oceanfront condos priced from $4.2 million to $14 million, with penthouses up to $35 million.
The three- to seven-bedroom units will range from 3,200 to 9,000 square feet each. The Trump Group says the first building is 65 percent sold and scheduled to be complete in late 2020, and the second tower is expected to follow in late 2021.
Units will have imported stone countertops, his and her bathroom suites, marble floors and ocean-view showers. Amenities include an ice skating rink, golf simulator, multiple swimming pools, a spa and fitness center, basketball and bocce courts, a soccer field, a dog park and a beachfront restaurant.
“Basically, we believe our product is super unique,” said Oren Shmueli, a senior vice president of the Trump Group of Aventura, Florida, a Miami suburb near Sunny Isles Beach, referring to the combination of oceanfront land, high-end finishes and the variety of specialty amenities such as the ice skating rink.
The Trump brothers have plenty of experience in South Florida’s luxury condo arena, having built Acqualina Resort & Spa and The Mansions at Acqualina, both in Sunny Isles Beach. In Boca Raton, Florida, they built oceanfront Luxuria Residences.
In the mid-1980s, the firm built high-rises on Williams Island, an exclusive neighborhood in Aventura.
Sunny Isles Beach already is one of the worst condo markets in the region, noted Peter Zalewski, a principal of the Condo Vultures Realty, an industry consulting firm in Miami.
Sunny Isles has a 32-month supply of existing condo units, meaning it would take that long to sell every one if no more were listed for sale, according to Condo Vultures. For luxury units priced at $1 million or more, there’s a 56-month supply.
A market balanced equally between buyers and sellers has about six months of supply, industry observers say.
Meanwhile, asking prices for luxury condos in Sunny Isles Beach are 55 percent higher than the actual sales prices, according to Condo Vultures.
Despite the timeline offered by the Trump Group, Zalewski said he expects the firm ultimately is building The Estates at Acqualina for 2022 or later.
“Overall, the project will probably do fairly well, depending on when it’s delivered,” he explained. “If they’re planning to deliver in 2020 or 2021, they might have some real challenges. I don’t see how all the Sunny Isles units will get absorbed by then.”
Ken Johnson, an economist and real estate professor at Florida Atlantic University in Boca Raton, Florida, said it’s clear that the South Florida real estate boom is in its late stages.
“Condos are very much like a canary in a coal mine,” Johnson said. “If there are changes in the market, we look at condo sales first to see what’s going on.”
Starting a project now is extremely risky, according to Johnson.
“All signals are, don’t do this,” he said. “Don’t put a spade in the ground because you could get caught holding the bag.”
Shmueli insists the Trump brothers are undeterred, reiterating that the condos are unlike existing units for sale and offer good value to luxury buyers. The firm’s track record also makes a difference, he said.
What’s more, Shmueli points to a $558 million construction loan that the firm secured from Bank OZK, formerly Bank of the Ozarks, as evidence of lender confidence in The Estates at Acqualina.
Shmueli said site work already has started. He expects the general contractor, Miami-based Coastal Construction Group, to begin vertical construction in the first quarter of 2019, about the same time as the Trump Group launches sales for the second tower.
“We’re following the (condo) statistics,” he said. “We do think there are some areas that are overbuilt, but not specifically here.”