Related Group Closes Out IconBay; Inventory Concerns Loom For Investors
As reported a few days ago by South Florida Business Journal, Related Group has closed on all 300 units at IconBay. Without question, that is a tremendous milestone for what is considered the first luxury condo development to be completed in Edgewater during Miami’s most recent construction boom. However, not all is sunshine and rainbows for IconBay and, in particular, for its investors; inventory continues to mount and owners are finding it increasingly difficult to sell and/or rent their units.
Let’s first examine the rentals at IconBay. Currently, a total of 68 units are on the market for rent. That represents a whopping 23 percent of the development’s 300 total units. More concerning, however, is the lack of rental activity. According to the MLS, since June, when initial units first began to hit the market for rent, there have been 15 closed rentals, an average of just 3 units rented per month. As a result, and as one might expect, asking prices have fallen along the way; in some cases, the drop has been significant. For example, in late June, when the first 1 bedroom + den unit at IconBay hit the market, it was priced at $4,000 per month. That unit – unit 2102 – ultimately ended up renting for $2,700 per month. Since then, a unit located in the exact same line but four floors higher and with a similar build-out – unit 2502 – rented for $2,500 per month. And prices are still trying to find a bottom. Unit 2802 – another unit of the exact same floor plan that is currently listed for rent – is asking $2,500 per month. And the 2 bedroom + den units at IconBay haven’t fared much better. They have rented for as low as $3,000 per month (in fact, three separate 2 bedroom + den units have rented at that price). In other words, 2 bedroom units are renting for 25 percent less than where the initial 1 bedroom unit was priced.
In regards to resales at IconBay, currently, there are 72 units listed for sale on the MLS. That represents a staggering 24 percent of IconBay’s total number of units. Post-closing, just 4 units have exchanged hands:
- Unit 2401 – a 2 bed + den/2 bath condo with 1,435 interior square feet sold “decorator-ready” for $810,000 on October 1st ($564 per square foot)
- Unit 2601 – a 2 bed + den/2 bath condo with 1,435 interior square feet sold “decorator-ready” for $800,000 on October 16th ($557 per square foot)
- Unit 2901 – a 2 bed + den/2 bath condo with 1,435 interior square feet sold “decorator-ready” for $810,000 on October 27th ($564 per square foot
- Unit 307 – a 2 bed + den/2 bath condo with 1,003 interior square feet sold “decorator-ready” for $540,000 on October 28th ($538 per square foot)
According the MLS, no units have closed this month. Additionally, not one single unit at IconBay is under contract (pending sale). As with rentals, it appears that prices are still trying to find a bottom. For example, unit 3101, which is located on a higher floor than any of the aforementioned 01 units that recently exchanged hands, is currently listed for sale with an asking price of $780,000 ($544 per square foot). Unit 3101 has been listed at that price for 79 days, yet no takers. (I am scratching my head trying to figure out why on earth a buyer would choose to pay $20,000 to $30,000 more for a unit located two to seven floors lower.)
So what gives? Why does there appear to be a lack of interest for units at IconBay? Well, the complaint that I keep hearing, from clients and real estate agents alike, is the size of their floor plans, or, rather, their lack of size. The corner units aren’t so bad, but the interior units are unexpectedly small, especially the non-corner 2 bedroom + den units (lines 03, 04, 05, and 07) which range in size from 1,173 to 1,208 interior square feet. Another common complaint I hear is the neighborhood. People argue that it’s just not there yet, at least not at current asking prices. Edgewater is a work in progress. It’s unreasonable for investors to expect their units there to compete head-to-head with condos located in neighborhoods such as Brickell and Park West. Finally, the third gripe I keep hearing from people about IconBay has to do with their own expectations. With a name like “Icon”, one comes to expect a certain level of luxury, as what is found with its sister projects Icon South Beach and Icon Brickell, both considered outstanding and highly popular condo developments. Oftentimes, people who have visited Icon South Beach and/or Icon Brickell visit IconBay with very high expectations, only to walk away sorely disappointed. It’s like the first time you watched the movie Terminator 3: Rise of the Machines. You couldn’t wait for it to be released in theaters, because you just knew it was going to be amazing, just like the first two parts; yet, in the end, you walked out of the theater asking yourself, What was that crap?. Had you walked into the theater with different expectations, or, better yet, with zero expectations, perhaps you could have enjoyed the movie (actually, no, that was a horrible movie no matter how you slice it).
Of course, there are going to be those who say, Lucas is just being negative. Related Group was able to close all 300 of its units at IconBay. The development was a resounding success. Well, it depends from whose perspective you’re looking. For Related Group, without a doubt, it was an overwhelming success. For investors, not so much. In my opinion, it’s not surprising that all 300 units at IconBay closed. With 50 percent deposits on the line, contract holders weren’t left with much of a choice. (To me, walking away from such hefty deposit money doesn’t seem like much of an option.) If IconBay is such a resounding success, that success should translate into sizable profits for investors (not five or ten years from now, but right now), especially considering the fact that real estate prices in Miami have increased significantly since August 2012, when preconstruction sales launched for condos at IconBay. Recently, I read an article stating that the median sales price of existing condominiums in Miami-Dade County increased 52 of the last 53 months (a period spanning nearly four and a half years). Taking this fact into consideration, one could justifiably assume that initial investors of units at IconBay would have no problem locking in tidy profits post-closing. However, comparing the preconstruction price list dated September 6, 2012 for units at IconBay (shown below) with recent post-closing activity as reported on the MLS, that doesn’t seem to be the case at all. Take, for example, unit 2401 which, as mentioned earlier, closed for $810,000 on October 1st. After taking into account the developer’s fee, commission on the resale, and closing costs on both ends, that preconstruction buyer, by my estimation, likely broke even. And that’s for unit 2401. Units 2601 and 2901, two other units which closed last month and do not appear on the price list below, are located on higher floors; so one could assume that they presold at even higher prices. And let’s not forget about unit 3101, another unit I mentioned earlier in this post; it’s currently asking $780,000 and has been on the market for 79 days.
I leave you all with a thought of the day from Joe Biden. I hate to admit it, but perhaps Joe is finally onto something.