Article Courtesy of The Miami Herald
By Rene Rodriguez
Published August 9, 2018
“Nobody knows anything,” screenwriter William Goldman famously said about
the movie industry’s ability to predict a box-office hit.
But in the real estate industry, experience imparts
knowledge, expertise and insight — and few in South Florida are as
experienced as The Related Group CEO and chairman Jorge Pérez.
Since 2010, the company he launched in 1979 has completed, planned or began
construction on more than 33 million square feet of residential and 965,000
square feet of commercial properties throughout Miami-Dade, the U.S. and
Latin America — at a combined value of more than $17 billion.
Pérez, 69, was also voted the single most knowledgeable person in the
business in the 2016 Miami Herald Real Estate Survey. He recently sat down
for a wide-ranging interview at Related’s most recent project, the 57-story
condo/hotel tower SLS LUX Brickell at 805 S. Miami Avenue, which opened its
doors in May. (You can read his comments on sea level rise from that same
Q: The Related Group broke ground last May on a five-year, $307 million
redevelopment project of Liberty Square. You have said you want that project
to be part of your legacy. What makes this one so special to you?
Pérez, chairman and CEO of The Related Group, one of the biggest
real estate developers in South Florida.
A: The reason why that project is so important is because
this will be one of the first affordable housing projects done in the U.S.
after the recession, in a formerly segregated neighborhood of Miami where a
wall literally used to separate black people from white people. And we want
this project to not just be a housing development, but the start of a
transformation for that entire area.
The original affordable housing built in Liberty Square was beautiful. But
the developers forgot about the issues. If you concentrate poverty in one
area and don’t include businesses and training and employment and all the
other things you need to generate household growth, that area will become a
ghetto. You can see that now in Liberty City, with all of the gang activity
and the killings.
We’re taking a more holistic approach with Liberty Square. We want to
include businesses, retail, shops, artist studios, maybe even a museum or
performing arts center. We’re not going to just build affordable housing.
We’re going to mix incomes and add retail and employment opportunities. That
will make the neighborhood sustainable. This will not just be a project that
looks nice. That’s why I think this could be a great legacy project and why
we’re devoting so much time and thinking to it.
Q: Last year, as part of a wider probe of fraud in Miami-Dade, the federal
government started an investigation of a low-income apartment building for
seniors your company built in Shenandoah. Is that investigation complete?
A: We haven’t heard anything more. When you build affordable housing — which
is publicly-subsidized housing — you have a whole other level of inspection
aside from the usual inspections, because the federal government wants to
make sure there is no abuse of subsidies. But we have been doing this for 40
years without any issues whatsoever. When the government decided to look at
this one project — which is a 32-unit project that is so small it barely
registers in the realm of projects in our company — we turned over all our
records. All our employees were interviewed by outside counsel to make sure
nothing inappropriate was done. We are 100 percent sure that nothing
But there is a greater level of scrutiny with affordable housing, as there
should be. That’s why those programs should be very competitive. The Liberty
Square project was very competitive.
Q: Some analysts believe the cost of housing in Miami was caused by all the
foreign buyers, who embraced the 50 percent-down payment model and drove up
prices even though they don’t live here.
A: The 50 percent down payment doesn’t bring them to Miami. Miami is what
brings them to Miami. How they made their payment has nothing to do with
housing affordability. Nothing.
Q: But hasn’t interest from foreign buyers driven up prices?
A: Demand is what drives prices up. Miami is an international city. The cost
of housing is set by two simple parameters: What is the price of land and
what is the price of the construction of a building?
I could not build a high rise in downtown Miami with parking underneath
today and sell it for less than $500 per square foot because I would lose
money. That means that the lowest price for an 800-square-foot, one-bedroom
condominium is going to be $400,000, which prices out a lot of the local
But look at what foreigners have done. They are buying these units for
investment purposes and putting them back into the rental market. So
millennials and young professionals who can’t afford to pay a 20 percent
down can live downtown at a relatively cheaper cost than buying.
I would argue that foreign investors put some pressure on costs and kept the
land prices up. But foreign investment in general has been great not just
for developers, but for the entirety of Miami and making accessibility of
rental units accessible to the middle class.
Q: A group of small business owners in Little Haiti were recently displaced
by a new landlord who wants to redevelop the properties. What is your
opinion on gentrification?
A: It’s a difficult question because there are pros and cons. I can take the
liberal side and tell you what’s bad about evicting minority tenants from a
place where they have been there a long time, and I can give you the other
side, too. But we live in a capitalist society that has a rule of law. If
you’re paying very low rent and you have a short-term lease and somebody
comes in and buys that — not just a shop in Little Haiti but anywhere in the
U.S. — chances are the landlord is looking to improve the property and
maximize income. If we didn’t have that system, we would be a socialist
society. Nobody can buy this property, that belongs to the government and
we’re going to keep the rents at a certain level.
What happens if you keep the rents at a certain level? Very simple: You
create ghettos. You will not improve the property if there is not a return
on the improvement of the property.
Q: There’s a lot of this happening around Miami-Dade now. Wynwood, for
example, is starting to experience it, too.
A: Gentrification and the process of investing to get higher returns is what
has made this country great. It’s very hard to change that system. I go to
Wynwood and I see all these incredible galleries that have made that
neighborhood so great. But now they are being priced out. So you either
become a different gallery and sell at a higher price or you have to go find
a new location, like galleries did in New York when they moved to the
Meatpacking District. And now the Meatpacking District is unaffordable! So
they went to Brooklyn.
That’s the urban process and it does cause hardships. The government should
maybe help in easing those hardships. But if government starts interfering
with the private sector, that creates a lot of other problems. If a tenant
has a shop where he pays $100 a month and the lease comes up and the
neighborhood is now charging $400 a month, you can’t expect the landlord not
to charge $400 a month. Business people are not in business to provide
social services. They’re in business to make money.