The recent federal tax reform bill, which caps deductions for property and sales taxes, could also help lure more high-worth U.S. buyers to Florida, where there is no state tax.
"The first 60 days of this year has been one of the most active sales periods we'd seen in a while," said Ken Krasnow, executive managing director for Colliers International South Florida, a commercial real estate brokerage that helps companies relocate. "The interest in Miami has always been global. But the impact the new tax laws are having on New York and other high-tax states are only going to make that interest stronger."
How they did it
The process of identifying an older building and buying out its tenants for redevelopment is lengthy and involved. Gerard Yetming, a former broker at CBRE South Florida now working with Colliers, said the first step is to look at existing properties in desirable locations and figure out what the value of the land would be if it was vacant.
You also need to make sure the zoning codes at the location allow enough development to make the investment profitable. The building at 175 SE 25th Rd. was built in 1971 at a height of 11 stories. But according to the Miami 21 Zoning Code, the land is entitled for construction of a building with a height of up to 48 stories.
Once the potential worth of the land is calculated, the brokers figure out the price of improvements needed to bring the older structure to present-day building codes (stronger windows, new roofs, refurbished elevators).
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If the difference between cost of repairs and the value of the land is large enough, the property becomes lucrative to a developer, as long as a majority (90 percent) of the condo owners in the building are willing to sell.
Yetming said he met with the condo association and its members in April 2015 to see if they were amenable to a deal. They made specific offers to each of the 61 owners based on the size and location of their individual condos (units with bay views or higher floors, for example, got more).
"You have to put yourself in the owners' shoes," said Yetming, who is now an executive vice president at Colliers International. "The way they sell their condo should remind them of the way they bought it. You take everything into consideration from corner units to bay views in your offer, so the owners feel they are an active participant in the sale."
Four months after the initial presentation, Yetming said 100 percent of the owners in the building had agreed to sell, for a total price of $48 million.