Look Who’s Buying Up Miami Real Estate Now

Look Who’s Buying Up Miami Real Estate Now

Read the PDF version »

By Kenneth Rapoza, Forbes contributor

Everyone loves the new Miami, it would seem. The Russians are all over Sunny Isles. The Brazilians and the Argentines are all about the new Brickell City Centre (yes, they spell it like the Brits because its developer, Swire Properties, is British). Even the Chinese are moving in, the new Paramount Worldcenter downtown was advertised almost exclusively to the foreign Chinese market. Wait what happens when there is a direct Miami to Shanghai direct flight at some point in the next two years.

Miami: one part scoundrel city, one part playground to the nouveau, foreign rich, the city that fictional Vice detective Sonny Crocket and the Cubans made popular is becoming more than a place to launder money into condos. Miami developers are building new downtowns, to make it a place to live. Think northeastern cities, complete with new trains and tiny metro-movers, shopping malls, art galleries and entertainment, and the ubiquitous, cool flavor-of-the-month restaurants. The "lifestyle", that's what the big luxury developers call it. They're no longer in the property building business, they're in the lifestyle building business.

Who's moving here now? The Turks. They've discovered south Florida. The lifestyle pitch is paying off.

"The Miami lifestyle makes me love Miami," says Neslihan Havutcu, the wife of Tayfur Havutcu, a well known coach for the Besiktas football club in Istanbul. She bought one of the units at Armani Residences in the Design District; starting price: $2.2 million. London is closer. Paris is closer. Miami is cooler. And warmer.

"It was my first choice for a vacation home," she says. She has two children, aged 17 and 8.

Like most foreigners in Miami, wealthy Turks are buying vacation homes and not looking to migrate here. Others are buying it just as an investment. In Miami, a buyer can rent a $350,000 property for around $2,500 a month. In Turkey, the same priced property gets you $700, says Turkish broker Nasra Bozkır from Viens Consulting in Istanbul. Most of those buyers are in it for the cash flow and are buying Miami sight unseen, Bozkir says.

"When we started to promote Miami pre-construction projects in Turkey in 2015, there weren't any Turkish companies selling them, so we came in and we were able to sell Miami to well-known people who brought us even more buyers," Bozkir says. Other Turkish brokers followed suit.

"The Turkish economy is not stable right now and people are looking for alternatives to make money. You're not getting a return on investment here for 35 years. In Miami, you'll get your money back in 18 to 20 years," Bozkir says, adding that direct flights between Istanbul and Miami is what really opened the door to the Turks last year.

Bozkir has been selling the 32 story, condo and hotel project called Hyde Midtown Suites & Residences near the Design District. FORBES billionaire Jorge Perez's Related Group is the main developer. One bedroom apartments start at $490,000. The Hyde, which went on sale in December 2015, is almost fully sold and -- in typical Miami fashion -- 70% of it is has been sold to foreigners.

Look Who's Buying Up Miami Real Estate Now

Jorge Perez, chairman and chief executive officer of the Related Group of Florida, is known as the region's "Condo King". He has been through many ups and downs in Miami's real estate market. For the last seven years, it's been all up. (Photographer: Eliot J. Schechter/Bloomberg)

The country flow of people into Miami has fluctuated over time. First came the Cubans fleeing Fidel Castro. Then Argentines became a huge part of the new Spanish speakers in town, followed by Colombians in the 80s, Brazilians in the 90s, Russians in the 00s and now in the emerging market universe, it's the Turks that are buying.

"For us at Hyde, we are looking at mostly New Yorkers and Turkish buyers right now," says Javier Cuadros, vice president of development for Related. "That direct flight opened the flood gates. We are working with 10 Turkish brokers that have been selling because of the political situation there," he says.

Last year, Turkey's president Recep Tayyip Erdogan crushed an opposition uprising, causing some to wonder if the country was tilting towards dictatorship. The currency lost 17% of its value against the dollar last year. It's up 2.08% this year and the stock market has recovered.

This could very well be a blip on the radar that is about to go dim. The Turkey stock market is up over 40% this year, recovering all of last year's losses. The political crisis continues, however.

Like every other foreigner, the wealthy buyers have offshore bank accounts in dollars where they can transfer funds into the U.S. Many of them pay for the property in full. Some send it through "unconventional channels", one broker told me, and others risk the tax hit and pay fees to bring it in through Western Union.

"I was in Istanbul this summer selling W Hotel condos to them," says Craig Studnicky, a principal with RelatedISG. Studnicky's International Sales Group (ISG) signed a joint venture agreement with Related in 2010, creating RelatedISG. The Residences at W is in nearby Fort Lauderdale. The beachfront hotel and residence goes for around $850 per square foot: a steal compared to any other world class American city. Buyers are mostly New Yorkers and Brazilians who can rent out their rooms to the W Hotel when they are not in town.

With all these foreigners buying in and all these properties going up, when will Miami's bubble burst again? And ultimately wash the Turks, and the Russians, and the Brazilians out of the market?

No one knows. The market has gotten softer, for sure, with Related pausing on their Auberge Miami project, according to local press reports.

Miami developers have learned from the housing bubble. Back then, they were highly leveraged, and so were their buyers. A lot of the mortgages sold to the domestic market were unsubstantiated and it came down hard in 2008, hurting other projects more geared towards the foreign investor.

Today, foreign buyers are seen by the market as the most secure because of hefty down payments, if not outright cash acquisitions. According to the Related Group, 70% of their projects are being bought by foreigners in cash deals. They are not alone. Other developers like Swire Properties are seeing the same thing, and that makes them less reliant on loans when building.

No one wants to see their million dollar investment turn into a $700,000 one. For the Turks looking for a financial safe house, a crash like that would take them out of the market. There are nice climates nearby in Cyprus and Greece that also sell at Miami prices.

"I'm really curious why the Turks loved Miami so much," says Studnicky. "Their cities of choice are London and Miami. Why not New York? Too expensive and the weather is bad. Our weather is better," he says, "Plus it has some Latin sex appeal which makes us tempting."

Courtesy of Smith Aerial Photos
The new Hyde Midtown Suites & Residences in Midtown, Miami. Some newcomers from Turkey have discovered it, according to the property's broker Fortune International. The property will be completed in the fourth quarter of 2017.

Kenan Ercetingoz, 55, a well known media personality in Turkey, says that even his dog Bidik prefers Miami.

"Miami is going to be an amazing city in five to 10 years," he predicts. He bought a condo at Hyde Midtown in November 2015. He says he put a 50% down payment on the condo. "There is almost no place I have not seen in this world. Miami has always been one of my top three choices," he says, including Hawaii and Cape Town, South Africa. His son studies in Miami and will move into the Hyde next year. Eventually, Ercetingoz wants to spend half his time in Turkey, half his time in Miami.

"I have been in the media business here for 40 years," Ercetingoz says. "I want to settle down and have a calmer, different lifestyle from now on. My son can take over and build his career in Turkey's TV news business. I'll be enjoying Miami."