Related Group's Next Generation Talks South Florida Real Estate After Surfside, And During COVID
Jorge Pérez built Related Group into one of the leading condominium and apartment developers in the region, reshaping the South Florida skyline — especially along the waterfront. Now his two oldest sons have taken over the day-to-day running of the company after the Surfside collapse and during a pandemic.
One of the most visible and prolific real estate development companies, that reshaped the waterfront skyline in South Florida, is not interested in more than an acre of beachside property on the Atlantic Ocean.
The site is where the Champlain Towers South condominium building stood until the early morning hours of June 24. It collapsed, killing 98 people.
The cause of the structural failure remains under investigation, new regulations are being discussed, and lawsuits have been filed. It was one of the deadliest building failures in American history.
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The plot of land has been cleared of debris and the property, at 8777 Collins Ave, is officially for sale. Even before it hit the market, $120 million was offered by a private, unnamed bidder. A judge overseeing dozens of lawsuits has been urging the sale of the property to help pay victims of the catastrophe. A public live auction is expected to be held early next year.
But South Florida real estate developer Related Group is not interested. The company founded by Jorge Pérez is known for waterfront high-rise luxury condos. Pérez’s two oldest sons, Jon Paul and Nicholas, now run the daily operations of the company and they say they are not interested in the Surfside site.
"We were able to go and bid on that site and we're not going to bid on the Surfside site," said JP Pérez during an interview at the company's new headquarters in Coconut Grove. "We internally made a decision that we just didn't want to be a part of that unless there was a way that we would do it almost for free so that the profits would go to the people and families who were affected."
He called it a "quick internal decision" with his brother Nick, a vice president at the company, and their father Jorge Pérez, who remains chairman and CEO of the firm he founded in 1979.
Surfside Market Impact
The Surfside tragedy is one of the forces in play in South Florida’s real estate market. Several months after the collapse – and as the COVID-19 pandemic continues – the housing market remains red hot.
The collapse led Related Group to order more examinations of its buildings.
"We actually went and commissioned our own additional inspection reports just to make sure — to triple check — that the buildings that we do maintain and own are in compliance and there are no issues," said JP Pérez.
Related hired structural engineers to visit and review their projects. When WLRN spoke with the brothers, those reports were still being prepared, and Pérez said nothing other than minor "touch-up and paint" issues had been identified.
"I don't think we were ever worried about our processes — designing a building, structural integrity, permitting," said Nicholas Pérez.
The collapse has led to a reassessment of mandatory inspections of older buildings, and the Pérez brothers said it also has accelerated what they called the "flight to new" — increasing demand for newer constructed condominium buildings, especially along the waterfront.
"We've seen in our condominium products, especially closer to the water, that there has been a flight to newer product. And we're seeing that all across the board," said Nick Pérez.
The tragedy has not dampened Related's appetite to find and build along the coast. While the collapse has brought scrutiny of building and maintaining waterfront condos, Nick Pérez said the broader uptrend in the housing market has lifted prices even for older buildings.
"The prices have gotten to a point where they are now, where you're going to see a lot of older buildings on the along the coast or along the waterway transacting more. They don't feel safe," said Nick Perez. "They can get a pretty good amount of money for their current unit and then move to a new building."
Hot Housing Market
Prices for all kinds of property have been hot, especially in the housing market. The potent combination of low mortgage rates, a big stock market rally, pandemic practices and restrictions elsewhere, and the ever-present hype of Florida real estate, helped propel the housing market to new heights.
July was the best July ever for Miami-Dade County’s home market. It continued a five-month streak of record sales. The number of deals in July surged 57% from a year ago. Condo sales more than doubled from last July.
And with the demand comes higher prices. The average price of a single family home is now over half a million dollars. For condos — its $340,000. Both have been rising each month for almost a decade straight.
It isn’t just Miami. Broward County single family homes average just shy of $500,000. Condos in Broward run $215,000 on average. The figures for both kinds of properies are about the same in Palm Beach County, which has been particularly helped out by properties selling for at least $1 million. Prices in the Keys also have shot higher, accelerating as the pandemic has worn on.
Demand is high for a piece of sunshine in South Florida, and supply is low.
"It's pretty amazing. During COVID," said JP Pérez, "all of a sudden, everything really just changed."
JP Pérez said as the pandemic began in March 2020, Related Group was considering bulk sales of about $200 million of unsold condos, but decided against it. Instead, according to JP Pérez, the company took about six months to sell those remaining condos at completed projects for about twice the expected bulk sale proceeds. "It was the right move," he said.
Related has launched four new projects during the pandemic, from Brickell to Pompano Beach to Tampa. Overall, the firm has more than 10,000 condo and apartments currently under development or under construction now across Florida, and in Phoenix and Atlanta. By next year, projects in Georgia, Tennessee, Texas and other states may account for more than half of the firm’s developments.
"I feel like Miami is becoming more diversified," said JP Pérez. "As opposed to being hospitality, fun-in-the-sun, the economy is now financial services firms, venture capital tech firms coming out of San Francisco. They are coming to areas like Wynwood, Coconut Grove, Miami Beach. We don't see a slowdown in that."
That demand has increased pressure on affordability — a long-standing challenge in South Florida. Miami consistently is one of the least affordable housing markets in the country. The high cost of housing along with the generally lower incomes in the region drive that deficit between what someone can comfortably afford and what buying or renting a home actually costs.
Even before the pandemic helped ignite an already strong housing market, housing affordability was a crisis.
A 2019 study found that nearly half of all households in Miami-Dade County were considered cost-burdened. That means hundreds of thousands of people pay more than 30% of their income on housing. Half of those struggling to pay rent are severely cost-burdened — spending at least half of their pay on rent.
The study came from the Pérez Metropolitan Center at Florida International University. The think tank is named after Jorge Pérez, who donated $1 million to the center two years ago.
Related has more than 2,000 affordable and mixed-income apartments under developer or under construction. That includes the third phase of its Liberty Square development in Liberty City.
That is a $300 million project adding more than 1,000 affordable and workforce apartments to the market. Federal and county tax dollars pay for most of the construction. Related collects several million dollars, and foregoes several million dollars more that stays with the county.
"The biggest issue with tackling that problem is land costs," said JP Pérez. "The ways that we've been able to tackle that issue is partnering with the county, working on its sites."