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 Miamis 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 andor rent their units

Lets 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 developments 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 $4000 per month That unit unit 2102 ultimately ended up renting for $2700 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 $2500 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 $2500 per month And the 2 bedroom + den units at IconBay havent fared much better They have rented for as low as $3000 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 IconBays total number of units Post closing just 4 units have exchanged hands

• Unit 2401 a 2 bed + den2 bath condo with 1435 interior square feet sold decorator ready for $810000 on October 1st $564 per square foot
• Unit 2601 a 2 bed + den2 bath condo with 1435 interior square feet sold decorator ready for $800000 on October 16th $557 per square foot
• Unit 2901 a 2 bed + den2 bath condo with 1435 interior square feet sold decorator ready for $810000 on October 27th $564 per square foot
• Unit 307 a 2 bed + den2 bath condo with 1003 interior square feet sold decorator ready for $540000 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 $780000 $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 $20000 to $30000 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 arent 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 1173 to 1208 interior square feet Another common complaint I hear is the neighborhood People argue that its just not there yet at least not at current asking prices Edgewater is a work in progress Its 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 andor Icon Brickell visit IconBay with very high expectations only to walk away sorely disappointed Its like the first time you watched the movie Terminator 3 Rise of the Machines You couldnt 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 youre looking For Related Group without a doubt it was an overwhelming success For investors not so much In my opinion its not surprising that all 300 units at IconBay closed With 50 percent deposits on the line contract holders werent left with much of a choice To me walking away from such hefty deposit money doesnt 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 doesnt seem to be the case at all Take for example unit 2401 which as mentioned earlier closed for $810000 on October 1st After taking into account the developers fee commission on the resale and closing costs on both ends that preconstruction buyer by my estimation likely broke even And thats 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 lets not forget about unit 3101 another unit I mentioned earlier in this post its currently asking $780000 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