How Much Should The Owners Of Brickell Harbour Expect From Their Buyout?
December 23, 2016 by Lucas Lechuga
Earlier this month, we reported that the owners of Brickell Harbour are being solicited for a buyout by a mystery developer. Well, the offers have come in and unfortunately (yet expected), we cannot talk about what has been offered because they are bound under a tight confidentiality clause. What we can talk about is how much the sale is likely to garner for the owners if a good deal is made.
It is common in condo buyout deals for the developer to hold the owners under a contingency stating that the sale will only take place if 90% of the residents agree to sell. Otherwise, it makes no sense for the developer to own the building since they would not be able to develop. There are always those last few owners who hold out for the most money and sometimes it works, but sometimes it just ends up throwing a wrench in the entire deal. So, how much is a realistic number for Brickell Harbour as a development site?
First, let's look at the most recent comparable sale. The development site at 25 NE 25th Road is just over 1 acre of waterfront land with 155 linear feet of bay frontage. It is around 300 feet deep. Once you break down the final purchase price of $48 million, that works out to just over $1,000/ft of land. The units combined are comprised of 76,291 square feet of livable space or $629/square foot ($800,000 per unit for the 61 units).
[caption id="attachment_22300" align="alignnone" width="710"]
25 Bay Tower Development Site[/caption]Now let's look at Brickell Harbour. In comparison to 25 Bay Tower, Brickell Harbour is a far superior development site. Its location at the south end of Brickell Bay drive is closer to the hustle and bustle of Brickell's city vibe, yet secluded enough to offer peace and quiet along the bay. The site offers 275 feet of linear bay frontage and half an acre more of developable space. Both sites are in the same zone for height restrictions, allowing up to 600 feet of building height. Variances can be given, but this is where we are today.
Another feature of the site at Brickell Harbour that sticks out as a big upside is the marina. Building new marinas is extremely tedious from a permitting standpoint due to the environmental impact they cause, making them nearly impossible to add. Given all of these factors, I estimate that a final sales price of Brickell Harbour would be far north of the $1,000/square foot of land that 25 Bay Tower received.
Now that we've looked at the comparable and determined why Brickell Harbour is worth more, let's get down to the numbers. Using the same price per square foot of developable land as OKO Group's purchase would amount to a $70 million purchase for Brickell Harbour. That breaks down to an average of $380,000 per unit at Brickell Harbour, or an average of $512/square foot of livable space. Add in the increased desirability of the lot size, location and added marina, we could see a purchase of $80 million!
How much do you think the owners will end up garnering at the end of the negotiation? Do you think it will go through?
Is that $380,000 number a mistake? Why would it be less than 50% of the comparable units with a superior site?
No, there are 185 units to split the final lot price at Brickell Harbour. 25 Bay Tower only had to split between 61 units.
Don’t think it will ever go through. There are too many entrenched, long time owners who would not be able to find reasonably priced comparables as replacements in the Brickell area. The buyout prices would need to be significantly higher.