JPMorgan has backed a $430mn construction project loan secured by the luxury Miami condominiums, making it Florida’s biggest this year. Credit is scarce for developers at this time.
The loan will be used to fund the construction of Shore Club Private Collection in South Beach, a high-end condominium designed by Robert AM Stern, and a boutique-hotel on a 3-acre oceanfront parcel.
Witkoff said that the New York-based developer, Monroe Capital, which is leading the project, had sold two thirds of the Shore Club’s 49 residential units, at an average of more than $20,000 per unit, or more $5,000 per square feet. Both figures, if sustained, would break Miami Records, but other projects are also competing for this honour.
Alex Witkoff is the co-chief executive officer of this family-owned company. “A large number of our buyers move here permanently and are New Yorkers,” he said.
He attributed, among other things, the success of the project to Stern’s involvement. Stern is the designer behind some of New York’s most successful luxury building in recent years. This includes the “super-tall” 220 Central Park South, and its predecessor 15 Central Park West. He said that “we have tremendous credibility with the purchasing community.”
Witkoff has been able to keep up with the rapid growth of Miami real estate at a time that prices have slowed. Prices are still rising, despite the fact that sales volume has dropped and brokers report it’s taking longer to complete deals. A regional banking crisis and rising interest rates have made lenders more cautious in extending construction loan. Underwriters are more uncertain in Florida because of the recent surge in construction costs.
Calixto Garcia-Velez is the chief executive officer of Banesco USA in Miami. Garcia-Velez stated that Banesco is increasingly focused on the liquidity of the borrower and their ability cover any financial shortfalls.
Florida law allows developers to use the money they collect from downpayments, after the initial 10%, for construction.
“Lenders have become very, very selective in who they do business with,” said Suzanne Amaducci of Bilzin Sumberg. She did not take part in the Shore Club loan but is currently negotiating three south Florida construction loans. She said that “at a minimum, you have to have a strong sponsor and a strong project.”
Shore Club’s loan is larger than a $340mn loan for construction agreed in May by the Ritz-Carlton Residences, Palm Beach Gardens. Madison Realty Capital was the alternative lender who provided the loan. They marketed it as the largest in the state since the US Federal Reserve started raising interest rates last summer.
The Art Deco Shore Club, known for its large pool, traces its origins back to the 1930s when it was used as a beachfront cabana by the nearby Cromwell Hotel. In 2002, hotelier Ian Schrager assumed management of the club and it became part of South Beach’s renaissance. HFZ Capital was an aggressive New York developer who bought the Shore Club and planned to redevelop it. However, they were forced to sell it in 2020 when they went bankrupt.
Witkoff & Monroe purchased the three-acre parcel with the intention of attracting wealthy buyers to the neighbourhood, which was previously known as the spring break capital. Michael Shvo is renovating the historic Raleigh Hotel, just a block from where Witkoff and Monroe purchased their three-acre property.
Shore Club’s newest iteration features a 20-story tower, an eight-story Cromwell House and a private mansion for a single family. A botanical garden will also be included. Auberge Resorts is developing the 75-room hotel in partnership with Shore Club. They will also be servicing the residences.