Espais Pursues US Expansion with Distress

Espais is pursuing similar strategies in New York City and South Florida, although with "slightly different scale and velocity" for each of the two markets, the company's Andres Hogg tells GlobeSt.com. And there are different circumstances in each, notably the fact that distressed properties have come onto the Miami market in much greater volume than in Manhattan thus far.

"On the Miami side, we're more focused on doing joint-venture partnerships with local banks," says Hogg, the New York-based head of US operations for Espais. Banks with vacant land "still believe they can make some of those projects work by bringing a new face to the table. We're seeing that they're getting their hands on a lot of projects where they need our help."

That scenario, Hogg says, will be the model farther north when more REO properties come into the market. "New York as a market hasn't been that opportunistic," he says. "It's a little more protected, with fewer investors and less flipping. We're having conversations, but we haven't put our hands on a specific project yet." The company's investment strategy in the Manhattan distressed arena, which it's pursuing in a JV with an undisclosed mortgage broker, is "cautious," he adds.

Although the Barcelona, Spain-based company's South Florida activities to date have mainly involved working with banks on unfinished projects that other developers may have started, it made its US debut with an Espais original. The 34-story Twenty9th Park Madison, a 142-unit condo at 39 E. 29th St., was named Best High-Rise in New York this past November by the Americas Property Awards. Notwithstanding a difficult residential market, the project has been one of the best sellers in Manhattan, and Espais paid off the $114-million construction loan ahead of schedule in the summer of 2009.

"Now that Espais has successfully finished its first New York project, we may do something similar but a little more sensitive in scale due to the financial world we live in today," Hogg says. "We're also coming into the hospitality business with our own brand Alma as well as with European brands to be their local partners. Now that we've established our team, we're also working with some other foreigners to help them do their first projects here too."

He says Espais' US-based team is "leveraging our expertise on the local market to bring in foreign money to invest in New York." The investors include Spanish financial institutions and other developers, along with companies based in South America and the UK, says Hogg. Espais is also looking for domestic financial partners as well.

Along with developing hospitality properties here, the company's goal in New York is "to have a residential project on the way within the next year," says Hogg. "Based on today's market, there's about a 70% chance it will be a rental property."