By Scott Meyer ’14 and Eoin O’Sullivan ’15
The first destination of 2014 for Columbia Business School Real Estate Association was Miami. On February 6-8, thirteen MBA students traveled to South Beach to gain a sense of the shifting market landscape and how Miami-based companies are taking advantage of local, national, and international opportunities. Miami has rebounded well from the recent downturn and investors have taken note. The group had informational meetings with real estate developers, a real estate finance and special servicing firm, and a real estate investment company.
The group first met with Fernando Herrero, Vice President Investments of Prudential Real Estate Investors (PREI), Latin America. Prudential Financial has more than $1 trillion in assets, of which PREI invests $40 billion in 23 countries worldwide. The focus of our meeting was the Latin American (LATAM) investments. In 2002, the bulk of its LATAM investments were in Brazil but PREI has since pulled out of all investments in Brazil, largely due to difficulties finding investors for exit opportunities. The firm’s LATAM investments are now focused on Mexico with 93 percent of LATAM funds allocated there, approximately $4 billion in assets under management (AUM). Mr. Herrero gave an overview of a mixed-use, large development PREI is working on in Mexico City. The growing middle class in this city has created a strong demand for private hospitals. Part of the mixed-use development includes a hospital, an unusual but very successful addition.
The LNR staff, headed by Isaac Pesin, Managing Director of Investments & Business Development, welcomed the group to its Miami Beach headquarters for a lunch meeting and stepped the students through some recent cases. As a special servicer, LNR’s cases centered around workouts, foreclosures and real estate owned (REO) resale. One notable case was the high-value office and condominium space in midtown Manhattan. When the landlord defaulted, LNR worked in conjunction with the mezzanine lender on the deal. In the workout, the mezzanine lender regained control of the property, which it had sold to the landlord just four years earlier at the height of the market in ’07.
Joseph C. Smith ’99, founder of 1754 Properties, introduced us to a current local project, Faena House. The mixed-used development is the brainchild of Alan Faena, an Argentinian fashion designer turned developer. Faena is building a jaw-dropping residential centerpiece over four blocks that will eventually be known as Faena District, containing a luxury hotel, an arts center, an “architecturally important” parking complex, a marina, and luxury retail space. The hotel will have more than 15,000 square feet dedicated to a luxury spa. The Faena project is raising the bar across the board as demonstrated by its subterranean car parks, previously unheard of in South Beach. The momentum is definitely shifting in South Beach. Higher net worth investors are beginning to consider South Beach and presented with the right environment, are choosing South Beach as a destination for their second homes. Faena’s duplex penthouse set a local listing record when it debuted with a $50 million list price. After breaking ground approximately one year ago with a scheduled completion date of fall 2014, Faena’s residential tower is over 60 percent under contract.
The LeFrak Organization is taking the former Gansevoort hotel in a new direction. Under the umbrella of One Hotel & Homes (One), the hotel is being redeveloped for a more eco-conscious and mature market. Both One and Faena House developments suggest the South Beach market is maturing beyond the clubs and high paced environment of the past. Michael Tillman ’11, Director of Florida Development with the LeFrak Organization, led the students on a guided tour of the site. The former Gansevoort Hotel is undergoing a complete gut renovation. Gone is the shark tank dividing wall for former Club Louis, and some may suspect the rooftop parties will not be returning either. The model apartments and common areas are distinctly nature inspired. When complete, One will be the only hotel in South Beach with unobstructed poolside ocean views corresponding to its eco-centric appeal. The day of meetings concluded with a presentation of the One concept and a generous reception hosted by the LeFrak Organization and One Hotel & Homes.
Thanks to student organizers, Marty Kielmanowicz ’14, Scott Meyer ’14, and Ian Schenkman ‘14 of the Real Estate Association, for arranging a robust itinerary with an impressive variety of company visits and site tours. A special thanks to the alumni hosts, Joe C. Smith ’99 and Mike Tillman ’11, and also to the trip facilitators from the Paul Milstein Center for Real Estate (PMC) and the Career Management Center. Students were accompanied on the trek by M. Leanne Lachman, Executive-in-Residence with the PMC, and Maricel Piriz, Assistant Director of the PMC.
Scott Meyer ’14 is a second-year MBA student and upon graduation will be heading to the LeFrak Organization, where he will focus on development projects in South Florida. Eoin O’Sullivan ’15 is a first-year MBA student with a background in engineering, and before coming to Columbia Business School worked for several years in the HVAC design industry, where he had the opportunity to work on many high rise buildings.