The Economic and Legal Realities of Condo Development in Florida

Is condo development in Florida slowing down and if so, why? Globest.com asked Joseph Hernandez, a member of the Miami-based law firm Weiss Serota Helfman Cole & Bierman, for his views on the condo market in Florida and where he expects new condo development to take place.

The chair of the law firm’s real estate practice group boasts more than 30 years of transactional real estate and corporate experience as a real estate and corporate banker throughout his legal career. He represents a variety of clients, including real estate developers, financial institutions, private equity firms, high net worth individuals, and public entities in all phases of complex commercial real estate and business transactions.

Globest.com: Although statistics show new condo development is slowing down, are condo transactions moving along at an aggressive pace?

Hernandez: Although new condominium projects are slowing down the search for development sites continues to be very active. Even when developers are not starting new projects, they continue to look for an inventory of buildable sites. The work I do relates more to acquiring the site.

Globest.com: You have handled various condo terminations—should we expect to see an increase in condo terminations going forward?

Hernandez: Yes. Available land in South Florida is limited by the fact that we have an ocean to the east and the Everglades to the west. Also, the economic reality of most condominium development requires that developers find desirable sites located on waterfront or other desirable areas. Since most desirable areas have been developed, the search for aging and functionally obsolete projects located in desirable areas is of high interest. This is part of the “infill“ trend.

Globest.com: What drives the decision for a developer or unit owners to terminate a condo building?

Hernandez: Generally, developers must terminate the condominium since they usually plan a completely new project with different size units and a different number of overall units and amenities. The factors that influence how a condominium is terminated are largely dictated by the language in the declaration and what version of the Florida Condominium Act governs the condominium.

Globest.com: Are there any bills being considered by the Florida Legislature that could impact the real estate sector?

Hernandez: The Florida legislature is currently considering a “glitch“ bill to amend certain aspects of the Condominium Act. Some of the proposed amendments will affect chapter 718.117, which is the chapter that governs terminations.

Globest.com: With raw land continuing to dwindle, what alternative development options are being considered?

Hernandez: As stated earlier, developers are actively looking for functionally obsolete buildings in desirable locations. Some of these are condominiums and some are apartments. Regardless, that has become the primary way for developers to find development sites in this market. As stated above, developers are actively looking for functionally obsolete buildings in desirable locations. Some of these are condominiums and summer apartments. Regardless, that has become the primary way for developers to find desirable development sites in this market.

Globest.com: What other major real estate trends or issues is your practice group monitoring?

Hernandez: We are noting that there are opportunities for investment in retail centers, which are underperforming due to Internet sales. Many centers are being repositioned with “Internet-proof“ tenants such as restaurants, salons, gyms, etc. We are also monitoring the housing market. Despite the difficulties in finding suitable land at prices that make projects feasible, there is still strong interest in developing affordable housing projects. Some developers are now planning multi-family projects with “micro-units.”