Biscayne Boulevard: The Next Fifth Avenue

I heard Miami condo prices were in a bull market, so I went there – and posed as a buyer - to get the real story.

First, I made a quick circuit of downtown Miami in the back of a cab. I counted over a dozen skyscrapers under construction. I was hoping the taxi driver would tell me “the construction crane is Florida’s official state bird.” Steve Sjuggerud says whenever you hear that line, you know there’s a bust coming.

Unfortunately, I didn’t hear that line. The cabbie didn’t speak English.

First stop, the showroom for Metropolitan Miami...

Right now, Metropolitan Miami is just a huge clearing in downtown Miami. It used to be a parking lot, but when it’s finished, it will be a swanky “urban complex” of retailers, movie screens, office space, a large hotel, and of course, hundreds of condos.

There will be four buildings in total. The tallest will be a 76-floor glass tower. It should be ready in three years, and it’s projected to be the tallest residential building south of New York. It will hold around 700 condos.

Only one building – the 40-story Met 2 building – is already under construction. So far, it’s nothing more than a few stories of iron girders covered in plastic sheets.

I walked into the showroom. It was a white cabin to one edge of the clearing. The salesgirl handed me a brochure and asked me to fill out a form.

“Metropolitan Miami is all about residential chic,” says the pamphlet. I have it by my side right now. “Classic living. Retail swank. Progressive epicureanism.”

For the next 30 minutes, the girl showed me models of the complex, explained pricing, and handed me floor plans. She was aggressive... and when I told her I was concerned about a turndown in the market, she made me feel ignorant.

“Stop asking me stupid questions,” she was thinking. “I already told you most of our condos are sold. Open your eyes. Can’t you see we’ve already started construction?”

50% of Met 3 (the tower) and 90% of Met 2 has been sold.

She offered me a 2 bed/2 bath, 1,262 sq. ft unit on the 21st floor for $640,000... or a similar apartment on the 32nd floor for $670,000. I passed on the deal.

For my next stop, I looked up a local condo broker.

Nell Kellett founded MiamiCondoExpert.com. I told her about DailyWealthand my suspicion of a supply glut in the Miami market.

“You all have bubbles on the brain,” she said. “But the numbers don’t support it.

There has been no downturn in either prices or interest. The majority of the major projects are sold out before they even break ground.”

I asked her where the money was coming from. “Baby boomers support the condo market, but it’s the international money that supports the overall real estate market. So much is coming from Asia, Europe and South America.”

I also asked about speculators and the practice of flipping condos.

“You can’t flip condos anymore. The developers got wise a few years back. You can only sell a condo once it’s paid for, and most of the time, you can only sell it through a secondary offering organized by the developer.”

In other words, you can only sell when the developer allows you to. What about those buyers with too much debt, I prodded, won’t they get hurt?

“Look. The only ones who are sad are the bubble-brains who didn’t buy two years ago. I see it all the time. Two years ago they decided to wait. Now they’re coming back to buy. They can’t wait anymore.

Miami real estate will eventually be priced the same as New York,” she concluded.

That last claim reminded of something real estate developer Leon Cohen once said. In May 2005, Cohen announced he was building the highest residential buildings in the world in downtown Miami – twin 110 story scrapers – called the Empire World Towers - on Biscayne Boulevard.

"Miami is what New York was in 1945," said Cohen. "Biscayne Boulevard will become Fifth Avenue."

At the annual Investment U conference over the weekend, Steve Sjuggerud kept us in check on how to make money... "Be fearful when others are greedy, and be greedy only when others are fearful," he said. That's a quote from the world's second richest man, Warren Buffett.

On this trip to Miami, I didn't see one ounce of fear from the realtors.

In other words, it’s time to be fearful when it comes to Miami real estate... in Friday’s edition of DailyWealth... I’ll show you how to act on it.

Good investing,

Tom