Offers suddenly appeared under the doors
of units at an oceanfront Miami Beach condo building one
sweltering day in July, adding an unexpected twist to a
drawn-out bulk buyout of the property.
Mast Capital CEO Camilo Miguel Jr. was already in contract
to purchase a majority of units at Amethyst, a 120-unit
building that was constructed almost 60 years ago. But after
negotiating with sellers for more than two and a half years,
and repeatedly extending the closing date for many, Miguel
lost trust among sellers.
Enter David Martin, CEO of Terra, one of the largest
development firms in Miami. A Terra affiliate sent
unsolicited offers to unit owners days after The Real Deal
reported on the fallout.
Developers are attempting more condo buyouts and
terminations across South Florida, from Brickell and Miami
Beach up to Fort Lauderdale and West Palm Beach. But lately
deals are falling apart, put on hold, or resulting in messy
legal fights. That’s due to a combination of factors: high
interest rates and construction costs, difficulty securing
enough support from owners and pullback from lenders and
equity partners.
“There’s no doubt that the real estate market, as red-hot as
it is in South Florida, we’re not as red-hot as we were last
February or March,” said attorney Jose Rodriguez, of Rennert
Vogel Mandler & Rodriguez.
After successfully completing a buyout/termination, a
developer will typically demolish and redevelop the site
into a new luxury condo tower that will then sell out for
hundreds of millions of dollars.
Miguel was successful next door to Amethyst at La Costa
after going through a court-ordered sale to acquire the
remaining ownership interest in the property. He partnered
with billionaire Barry Sternlicht’s Starwood Capital Group
to launch sales of a planned boutique condo building in its
place, called Perigon Miami Beach, where asking prices for
units go up to $37 million for the penthouse.
Sites that are most in demand are waterfront properties with
favorable zoning. But completing a buyout requires all the
pieces to fall in line at the right time. One broker
compares it to successfully completing a Rubik’s Cube: You
may get one side, but good luck with the rest.
Reaching the finish line
Sellers at Amethyst and other condo buildings with deals in
the works are increasingly frustrated by the delays. They
say the deals are shrouded in shady tactics, with a lack of
communication from the developers themselves. Some Amethyst
sellers say they have never seen or spoken to Miguel
directly since his firm began reaching out to owners in
early 2021. Martin also hasn’t been spotted at the property.
And the offers and contracts will oftentimes just name an
LLC.
Developers showing up in person can go a long way — but they
typically don’t want to.
“They don’t have the time, [and] they don’t want to engage
with anybody,” said Jeff Cohen, a Brown Harris Stevens
broker who almost exclusively works on such deals.
Developers want to know how many owners would sell.
“Otherwise they won’t get out of bed.”
Still, “buyers need to be present and engaged throughout the
process to really give the sellers the confidence that
they’ve got all the information, they know who they are
dealing with and it’s not just some made-up group out
there,” said Ken Krasnow of Colliers. Colliers is working
with a number of condo associations in the Miami area,
including the massive Castle Beach Club. (Terra offered $500
million for the Miami Beach property this year.)
“This is a very hands-on process. It’s not just about the
numbers,” Krasnow said.
About the time that Terra sent offers to owners at Amethyst,
a pair of sellers in contract with Mast sued the developer.
Days later, the condo association filed its own lawsuit over
the deal — fueling uncertainty over what will happen next.
Florida law allows 5 percent of a building’s ownership to
challenge terminations, which is why developers may look to
secure just over 95 percent of a building’s units.
“Until people really get into it, they think it’s so easy
and that you then go retire to the French Riviera,” Cohen
said. “It’s not so easy. You have to get everyone to agree.”
Corporate raiders
Using real estate brokers, developers often employ scare
tactics to persuade owners to sell. Even before the Surfside
collapse, developers would use a building’s age and the cost
of maintaining and repairing it to drive sellers to sign
with them.
That ramped up after the June 2021 collapse of Champlain
Towers South, which killed 98 people, and the passage of new
condo safety legislation. State law now requires buildings
to have a structural integrity reserve study completed.
Associations must fully fund their reserves by the start of
2025, and buildings must pass inspections statewide. All of
that, coupled with the doubling or tripling of insurance
costs, is putting an unsustainable strain on many owners. In
theory, that gives developers more leverage.
“With that pressure mounting, developers are going to have
more opportunities and are going to be met with more
reception from specific condo owners,” said Berkadia broker
Omar Morales. Morales said he is speaking with owners or
condo associations “probably every week.”
Attorney Jonathan Goldstein, a partner at Miami-based Haber
Law, pointed to the fact that many associations waived the
reserve funding requirement for decades — before the law was
changed in 2022.
“That obligation is coming fast. Can the association afford
these things? And will the association go into a sort of
collection death spiral?” Goldstein said. “That creates a
terrible situation of waste.”
At Amethyst, unit owners allege that Mast created safety
issues in the building by doing unpermitted work in the
units it acquired, and by committing to closing dates that
have come and gone.
With the expectation that they would have already sold to
Mast by now, some unit owners have stopped paying their
monthly fees. And if Mast doesn’t close soon, Amethyst will
have to pass its 60-year recertification, due next year.
Developers will often start buying units one by one in an
attempt to stay under the radar. They sometimes use
different LLCs or straw buyers. Miguel’s firm already owns
at least eight units at Amethyst.
“It’s basically a corporate raider approach. Groups are
going in and taking positions here and there,” said Peter
Zalewski, a former journalist and longtime real estate
market analyst.
Zalewski compared Terra entering the picture at Amethyst to
a white knight walking into a hostile takeover. By signing
contracts with a majority of owners, Miguel’s firm tied up
the Amethyst building and kept other developers from wanting
to touch it — with the exception of Martin.
“At the end of the day it comes down to closing. The
associations are at the mercy of whoever they sign with,”
Zalewski said. “Some of it can be posturing just to ‘shit or
get off the pot,’ as the saying goes.”
But unlike a typical commercial deal where a developer is
dealing with a sophisticated real estate investor, most of
the time the developers are working with sellers who don’t
understand contracts.
Cohen, who has been working with developer Vivian Dimond to
acquire units at a waterfront building in Miami’s Edgewater
for about two years, said he speaks to the remaining owners
every day from 10:00 a.m. to 2:00 p.m., in addition to other
regular outreach.
Time’s up
While some buyouts have closed over the past year,
developers are now pulling out of deals.
“The velocity of deals being looked at is increasing now,
[but] I still think these deals are going to remain
increasingly complex and rare,” Cohen said. “You’re going to
see more fall out than you’re going to see close in the next
nine to 12 months.”
In the spring, Martin sent out offers to owners at Castle
Beach Club, an 18-story, roughly 570-unit condominium at
5445 Collins Avenue in Miami Beach. It was months after
Jorge Pérez’s Related Group and Arnaud Karsenti’s 13th Floor
Investments withdrew their similarly priced bid for the
4-acre oceanfront property. But it’s still not clear if
Martin will close, especially since Related and 13th Floor
canceled their sale.
More recently, in June, Richard Meruelo rescinded his $200
million buyout offer for the historic oceanfront Casablanca
condo-hotel at 6345 Collins Avenue. Meruelo’s deal was
reportedly contingent on his family selling the
now-demolished Deauville Beach Resort nearby for half a
billion dollars to billionaire developer Steve Ross. The
latter is either canceled or on hold.
“There’s a lot of false starts,” said Jaime Sturgis,
broker/owner of Native Realty in Fort Lauderdale. “This is
the holy grail of real estate. It’s the Rubik’s Cube.”
At Castle Beach and Casablanca, unit owners are, for the
most part, on board with selling their properties. Many
units are operated as short-term rentals. But prices may no
longer pencil out. And it’s unclear if a new buyer will be
able to close on Casablanca at a lower price.
“Associations want, like most sellers, prices that were here
18 months ago,” said Morales of Berkadia.
Sellers are also less interested in waiting. And even if the
association is on board, 5 percent of the building can fight
it. It’s the “We love living here; this is our paradise;
we’ll never sell” mentality that can crush potential sales,
Cohen of Brown Harris Stevens added.
But the upside for developers is huge. It has to be,
otherwise it wouldn’t be worth the “brain damage,” one
broker said.
Krasnow of Colliers also predicts more fallout. “The deals
that are worth fighting for will continue to get done.
There’s still capital out there,” he said. “There’s still
people confident about our market and where it’s positioned.
But they’re only going to back the better deals with the
better sponsors, developers.”
In the long run, buildings like Amethyst will get sold,
regardless of whether Miguel, Martin or another developer
steps in. Zalewski said all you have to do is drive around
to identify the ideal targets — older buildings with rail
balconies and large surface parking lots.
“All of those are going to be terminated at some point,” he
said, “either because of insurance or special assessments.”