Steve Kassin, founder, managing partner, Infinity Real Estate

Last week, Globest.com published a thought-provoking question and answer formatted interview with Steve Kassin, who along with his partners Etienne Locoh and David Berg, operate Infinity Real Estate, LLC, which has made headlines in Miami and elsewhere redeveloping historic buildings. Kassin is the founder and managing partner of the New York City-headquartered firm, which now owns and manages more than 60 properties in eight states and has completed more than $2 billion of real estate-related investments since 2005. The firm operates management offices in Washington, DC and Miami.

Here is the second part of our exclusive conversation with the 30-year-old real estate executive:

Globest.com: Previously, you said one of the challenges Miami could face is an overheated real estate market. Can you please expound on that a bit more and tell us where you think the real estate market in Miami may be a bit overheated?

Kassin: I see really two sectors of property showing signs of being an overheated or overbuilt market—one being residential condominium development and the other being high-end retail properties.

The struggles in Miami and Miami Beach as it relates to retail are far more limited in both the amount of assets and in the number of locations struggling than in New York for example. So, Miami is doing relatively much better fundamentally than places like New York where the rent cost run-up has so far eclipsed what makes these higher-end dry-use places profitable. In Miami, you have the same thing going on but in a much more micro level in places like Lincoln Road, Collins and the Design District. My experience is that consumer, stable neighborhood retail is doing just fine. We have actually participated a great deal in that sector bringing day-to-day neighborhood pedestrian-friendly retail uses to an area that has a ton of residential supply that is now absorbed, but never had local services and local retail at the doorstep of these residential communities.

There is no issue at all with those types of retail uses in those neighborhoods. It is the higher-rent corridors that kind of followed the high-rent corridors in the main cities like New York, Los Angeles and Chicago, where it has kind of crossed that inflection point and Lincoln Road is the perfect poster child for what I believe is that impending correction where retailers are simply not going to bridge the gap on money-losing stores much longer. Theoretically, properties all along that corridor that have been purchased in the last three to four years are probably between 20% to 50% underwater.

Globest.com: What do you see as the growth markets in Miami right now?

Kassin: We love Downtown; we love Edgewater. I think those areas are very strong. We also think there is great opportunity in kind of the northern sections of Miami Beach, let's say north of 50^th Street. There is a very underdeveloped, under-nurtured corridor there that is going through up-zoning and we believe will see a renaissance. I think the space between South Beach and North Beach there is still a lot of opportunity there.

In terms of the City of Miami, like I had mentioned Edgewater and Downtown and maybe even Wynwood, but the land pricing in Wynwood is keeping us out of the market. It just feels very priced in, even though I love the fundamentals of that area.

Globest.com: How does Miami fit into the vision for your overall portfolio?

Kassin: Our “Urban Century Initiative” is aimed at growing our presence in key gateway urban markets that are well positioned for sustainable population growth. Essentially, we aim to contribute to and participate in the creation and growth of pedestrian friendly, full-service “24-hour” neighborhoods in major U.S. cities that are diverse, cultured, and foster a healthy lifestyle. Miami is one of our five focus cities on the East Coast—along with New York, DC, Philadelphia and Boston—which are designed for today's and tomorrow's urban lifestyles. We have been delivering to these cities residential, commercial, retail and hospitality projects rich with high-quality amenities, convenience and services. Our footprint and investment in Miami is a measure of our belief that Miami is and will remain a dominant city for the foreseeable future. We have invested over $150 million into high-visibility real estate locally since 2013, and nearly every one of our projects here has required a material amount of reinvention or significant physical enhancement.

Globest.com: What are you expecting to be the next big real estate market?

Kassin: Infinity is always looking at new and emerging submarkets and neighborhoods in our focus cities, and at the same time maintain our primary strategy of fixing and activating the most neglected product within established locations. There are still a lot of properties in city centers that haven't been adapted for current uses and have remained blighted and dormant for decades. There seems to be an endless supply of properties to work on right under our noses, especially historic properties that can't be quickly and simply demolished and replaced with a new development. All it takes is some creativity, grit and a willingness to navigate the lengthy and convoluted process of executing an architecturally responsible but relevant transformation. Most investors don't have the interest in or risk appetite for the incremental complexities inherent to historic redevelopment, so this provides opportunity for groups like us.

Globest.com: Your core cities are all on Amazon's short list for a 2^nd World HQ. What can you say about that?

Kassin: I appreciate being in good company, but the serious answer is we have chosen the markets we are in based on very specific and defined attributes. We prefer to focus our time and resources in cities defined by innovation, an empowered and educated workforce, affordability and quality of life. I imagine these are the attributes the teams at Amazon also considered when choosing location options for a second world headquarters. Perhaps (Jeff) Bezos and I think alike.

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