Foreign investors dominate in South Florida real estate purchases

In order to help his clients close on units at the luxury St. Tropez condominium in Sunny Isles Beach, developer Joe Milton recently put up $100 million of his company's cash to set up a mortgage company to fund loans.

That's because foreign buyers -- a key factor in the recent surge in home sales in South Florida -- are often locked out of the market if they don't have cash in hand.

``Sixty percent of our buyers are foreign,'' yet there are no loans being made to foreign nationals, said Milton, president and chief executive of J. Milton & Associates in Coral Gables.

While foreign cash buyers have certainly boosted sales, Milton wants to make sure financing isn't the issue keeping even more from owning a home in South Florida.

``International buyers are activating this market and reactivating sales,'' said Jenny Huertas, the international sales director for Condo Vultures, a Bal Harbour-based brokerage and consultancy.

Huertas returned two weeks ago from Bogotá where she conducted an investment seminar for about 50 people at Gran Estación, one of the city's largest shopping complexes. She's part of a growing caravan of real estate professionals trekking to Latin American and elsewhere to recruit new investors.

The spectacular meltdown of the region's once white-hot housing scene has caught the attention of global buyers who may have once considered U.S. real estate out of reach.

A weak dollar is also giving them an edge. In many areas, residential real estate is selling for 50 percent less -- and even lower -- compared to peak prices. On Friday, the euro closed at $1.473, a penny away from a 14-month high against the dollar.

``The Swiss, Spanish, groups from Italy and England who already own some stuff down here are seeing it as a good time to buy, leveraging the economy and the currency effect,'' said Mike Lapointe, vice president of Baybridge Capital Advisors in Miami.

The Florida Association of Realtors reported recently that the median home price in Miami-Dade fell to $190,900 in September, down 30 percent compared to a year ago. The median condo price fell to $132,900, a drop of 37 percent.

In Broward County, the median single-family home price fell to $200,000 from $259,300, a fall of 23 percent. The median condo price dropped to $78,000 from $129,000 last year, a 40 percent decline.

It adds up to a handsome opportunity for thousands of global buyers. ``Investors are aware that assets have never before been so depreciated in a country like America,'' said Gabriela Guimaraes, a partner with Integra Solutions, a Miami real estate consultancy that advises mostly Brazilian nationals.

Walter Defortuna, chairman of Fortune International Realty, said that for the first time in his 30-year career it's cheaper to buy an apartment in Miami than in major Latin American cities, such as Buenos Aires, Mexico City and large cities in Brazil.

The average price per square foot of a newly built condo in the stylish Recoleta neighborhood of Buenos Aires is about $236, according to Ariel Szeinbaum, general manager of 4RentArgentina.com, which specializes in short-term apartment rentals and sales.

In Miami's Brickell area, new construction is selling for between $200 and $250 per square foot, although in other parts of South Florida the prices drop off significantly, especially on foreclosures and short-sales where lenders allow units to be sold for less than the mortgages owed against them.

``We were always two to three times more expensive than them, and today we are cheaper. They perceive that, no question,'' Defortuna said

Throughout the boom, foreign investors were wooed by developers and brokers seeking deposits and high sales commissions. They responded, and their presence helped drive development and prices to historic highs.

But this new wave is different, said Defortuna. They are buying for the long-term. ``There is no speculating for the short-term,'' he said.

Because the recession is global, brokers say the ranks of foreign buyers have been thinned, even though foreign sales still outpace the activity of U.S. buyers.

U.S. STOCK LOSSES

``The question is whether or not those buyers were hurt by the international economy or the economy in their particular country,'' said Jack Winston, a real estate analyst with Miami-based Goodkin Consulting. ``Even those foreign investors who are very sophisticated still had a lot of money in American securities, and they may have lost as much money in the stock market as a lot of Americans have.''

South Florida's appeal remains strong among foreign jet setters, who are drawn to the beachfront metropolis as much for its palm trees and fine weather as its United Nations-like cultural inclusivity. There's also a sense that the market may only get marginally worse before bottoming and mending

Almost one in four foreign sales in Florida this year have taken place in the Miami-Fort Lauderdale-Miami Beach area, according to a July survey conducted for the Florida Association of Realtors.

South Florida was the most popular Florida market for Canadians, Latin Americans and Western Europeans, excluding Brits, who tend to prefer the Orlando-Kissimmee area, according to the survey.

LATIN AMERICANS TOP LIST

Latin Americans, not surprisingly, made up 52 percent of foreign buyers, with the next highest category being Europeans, who comprised 26 percent. The top countries of origin among South Florida's foreign buyers are Venezuela, Argentina and Canada.

More than half of these buyers are paying all cash, with European and Canadian buyers most likely to eschew financing. The loan programs that are available to them often come with terms deemed unacceptable.

Bernardo Manrique, a Venezuelan expatriate who owns Miami Realty Partners in Doral, says South Florida tends to benefit whether its closest neighboring nations are doing well or poorly economically and politically.

``Miami is a place that all people from Latin American find really nice. If Latin America is getting worse because of the economic conditions, Miami is the option. If Latin America is getting better and people are making money and economies are good, then Miami is an option,'' Manrique said.

A strong Brazilian economy, for instance, is piquing Brazilians' interest in residential and commercial properties for long-term investments, said Paulo de Melo, a partner at Integra Solutions, a full service real estate advisory firm that caters primarily to Brazilians.

``Brazilians are becoming much more sophisticated investors,'' de Melo said. ``They know they have to diversify investments and diversify their exposure out of Brazil a bit. They feel the growth is sustainable, but they know they have to hedge their bets.''

Venezuelans, on the other hand, are concerned with political instability and safety issues in the capital Caracas, said Manrique.

That's partly why Jorge Gomariz, a telecommunications professional who lives in Caracas, said he was looking to buy a second home in Coconut Grove or Key Biscayne in the next couple of months. The other reason, of course, are the steals.

``In some cases you can find [Class A] properties at very, very good prices. It's a great time to invest,'' Gomariz said. He said he plans to travel to Miami soon to choose a condo.

SEEKING INCOME ABROAD

In Israel and Spain, high real estate prices are driving investors to hunt for bargains for income-producing commercial and residential properties.

Dizengoff Trading Group, an Israeli real estate development and commodities firm, recently expanded to South Florida for that reason. It plans to target shopping centers and half-sold condo communities. In all, the firm plans to invest $100 million.

``We feel it is the right time to start building a portfolio. We might even see a little more deterioration, but I am quite positive that if we're looking on the curve of prices, we are closer to the bottom, especially on the residential side,'' said Ronen Saban, Dizengoff's U.S. region manager who is based in Boca Raton. Property in Israel is also extremely expensive as it is in other countries such as the Czech Republic, Austria and Romania, which are popular among Israeli second-home buyers, according to Ronen Rubin, the broker-owner of Rubin Group Real Estate.

THE 2-10 ADVANTAGE

``It's like 10 years [of] salary to achieve buying a condo there, but here today, with the prices so low, it's about two years of salary, which is very good,'' Rubin said.

Rubin, who primarily handles commercial real estate sales for mostly Israeli investors, said he recently had to hire a Hebrew-speaking real estate agent to deal with a new swell of Israeli residential buyers.

``There are not too many places in Israel where you can buy a nice condo at $60 a square foot. They have to pay $300 a square foot,'' Rubin said.

Tapping global markets, however, still requires connections and established relationships in countries where potential buyers abound.

Huertas, from Colombia, said she used to work for the former president of Fedelonjas, Colombia's equivalent of the National Association of Realtors and the group that helped coordinate the seminar two weeks ago.

Manrique's father owns one of the largest brokerages in Venezuela and that has been a pipeline to potential customers, Manrique said.

Defortuna also has long-established relationships with brokerages throughout Latin America. He rallied those resources recently to close out 1060 Brickell Avenue, a condominium that had been struggling with sales. Defortuna said at least 80 percent of the new unit buyers were foreign and 98 percent of all buyers paid cash.

INVESTOR'S GREEN CARD

Foreign buyers these days are also looking for an added return on their investments. Developers are taking advantage of a little-before-used visa program that makes it easier for them to get green cards when they invest between $500,000 and $1 million in projects that create jobs for U.S. workers.

Manrique is working with Sergio Pino's Century Homebuilders, which has launched an investor visa program to finish developing 350 acres at its Century Grand community in Doral. He was in Venezuela last month speaking to interested buyers.

``For them, to stay here legally and work legally, they have to have a visa, that's why the program is of huge interest to them. If you have the option to buy a house, but you don't have papers to live and work here, you start wondering what you're doing,'' Manrique said.

During the boom, real estate agent Evelina Dobyshava said Russians were snapping up condos in Sunny Isles Beach. When immigration plans fell through, she would simply sell for them. Now, she said, fear of not being able to land a green card is keeping many Russians from buying.

``They would rather come and rent something for $10,000 or $12,000 a month because still it will be much less money. Before it made sense because property was growing in price,'' she said.

A Russian developer, however, is hoping to launch its own investor visa program to raise money to finish the 50-story Solis Resort Spa & Residences project in Sunny Isles Beach. So far, 11 stories have been finished.

Dobyshava said she's confident Russian buyers will return. ``If they only have to invest half a million dollars,'' she said, ``I feel like I could sell those apartments in three days.''

Source: http://www.miamiherald.com/business/business-monday/story/1310794.html
BY MONICA HATCHER
mhatcher@MiamiHerald.com