April, 03, 2008

It may be impossible to know exactly where the market is headed and how long it will take to get there. But developers with insight, experience and nerves of steel know it is possible to set a course for the future.

Developer Avra Jain is doing precisely that — betting on South Florida's appeal to foreign buyers, her eye for unique projects and her sense of what appeals to high-end second-home buyers.

Jain, a principal in Murphy Baklot Partnership, sees the current market conditions as an opportunity, and not as a liability, for Miami. As a developer of luxury projects, including Regalia in Sunny Isles Beach and the Blue at Doral, her clientele is largely unaffected by the downturn. With buyers throughout the U.S. and around the globe, Jain's projects are in demand.

"The best hedge is to do something unique. Our niche insulates us from rest of the market," Jain explained. "Some of our Regalia buyers want us to build it again in other markets."

Regalia epitomizes the high-end market, with only a single 7,600-square-foot residence per floor; units are priced from $6.5 million. About 40 percent of the 40 units are sold, mostly to buyers from far-flung locations such as Moscow, London, Madrid, Venezuela, New York and Los Angeles.

Another of Jain's success stories is the Blue at Doral, a luxury condominium hotel in the fairways of the Blue Monster golf course. Closings have been ongoing since January at the 240-unit development, which Jain describes as a four-and-a-half-star property "as nice as the Four Seasons."

Jain became a developer almost by accident. As a successful Wall Street trader, she earned generous bonuses. With the extra money, she bought her first apartment in New York City. As the bonuses increased during her 15-year tenure at some of the most prestigious firms on Wall Street, she began trading up, renovating and selling properties. Before she knew it, her career as a real estate developer had begun. She left Wall Street and met with success in real estate through a series of residential conversions in Soho, Tribeca and the Bowery.

It wasn't long before Jain realized the high potential of some urban Miami areas, where the price of land was "cheap" compared to Manhattan. In 1999, she relocated to Miami and, with some of her New York development partners, bought her first piece of land on Biscayne Boulevard near the future Arsht Center for the Performing Arts. Over the next few years, Jain assembled a four-city-block parcel in the same area and, about five years ago, became partners with Paul Murphy.

"Avra is extraordinarily bright and has exceptionally high standards," said Murphy, a builder, developer and general contractor for the last 40 years. "She has a designer's eye, an engineer's exactness, is very creative when it comes to financing, and gifted when it comes to marketing and sales."

There is a consistency to Jain's Florida properties; these aren't meant to be first homes. Most buyers own numerous other properties and will use these as vacation residences. Of course, the definition of vacation has changed somewhat, thanks to the advent of the BlackBerry, Internet, faxes and video conferencing.

"I think second homes are getting more living time, they aren't just vacation homes anymore," said Jain. "People can work from anywhere in the world, so Miami isn't a hard sell. Technology plays a part in our success."

What is attractive to these high-end buyers is value. Costs here are significantly less than in other international cities. The price of a home in Regalia looks like a bargain when compared to a similar property in London, which would cost about 20 million pounds, or $40 million. Even in New York, penthouse space is three or four times the price it is in Miami, according to Jain.

But what about those who purchased condos as full-time residences? Not everyone is an über-wealthy buyer with multiple homes.

Jain believes some projects never should have been built, specifically those that are now in the resale market instead of the pre-construction market. She cites lenders who were eager to make loans, developers whose projects don't have the most functional floor plans, and investors who were looking to make a fast profit.

"Although some projects are going to have problems, there are still people who want to buy," said Jain. "Interest rates are low and prices are down, making Miami a good opportunity for buyers."

Buildings that sold a few years ago at pre-construction prices in the $350-to-$400-per square-foot range are closing now. Jain believes those buyers should do well in the long run. But for those who bought more recently, at $500 to $600 per square foot, closing may be more of a challenge. End user loans and appraisals will be scrutinized more closely.

"I couldn't build today at $500 per square foot. Prices have gone up," said Jain. "The math is simple: if your break-even point is $400 per square foot, to get a construction loan, I'd have to sell for $550 per square foot and sell out 60 percent of the building before I could get a loan. The bank won't lend money to break even, so prices have to go higher."

The future seems very clear to Jain. Once the existing inventory is absorbed, which she believes could take three to five years, the next price point will be even higher. Undeveloped waterfront property is scarce and demand for it will remain high, which brings her to the conclusion that this is definitely an opportune time to buy.

"We can't duplicate waterfront locations," she said. "People need to decide where they want to live, pick the best building and buy it to live there."

However long it takes for the market to turn around, Jain believes, historically, real estate has been a good investment and will continue to be so. Ever the optimist, she believes the long-term outlook for South Florida is positive.

"Right now, real estate is still your best investment," noted Jain. "This is a great opportunity to lock in the lifestyle you want. Real estate is an investment you get to live in and enjoy; and you can't do that with stocks."

By Beverly Bidney