Return to Lender: Developer Hands Back Much of ICON Brickell - May 12, 2010

Ownership of the majority of ICON Brickell will revert to its lenders, with developer The Related Group keeping the rest and co-managing sales, in a deal reached late Tuesday.

BY INA PAIVA CORDLE
icordle@MiamiHerald.com

Miami-based The Related Group has deeded two 57-story towers of ICON Brickell -- an ultra-luxury $1 billion condominium project emblematic of Miami's real estate boom -- back to its lenders, the company said Tuesday.

In a "friendly settlement,'' Towers 1 and 2 of the financially troubled project will return to a syndicate of lenders led by HSBC, and The Related Group and Fortune International will co-manage the project's sales and marketing efforts.

For months, developer Jorge Perez, chairman and chief executive of Related, has said he was in final negotiations with lenders regarding the future of the three-tower, 1,793-unit development in the 400 block of Brickell Avenue.

Recently, sales at the project, which Perez regarded as the pinnacle in his long career, had picked up -- albeit at deep discounts. Late last year, Related won approval from its lenders to slash prices by 30 percent in a bid to get buyers to close.

Project lenders also agreed to start making five-year loans to buyers.

But it wasn't enough to prevent the two towers from reverting to the lenders.

Working with a separate bank syndicate led by Bank of America, Related will continue to own and operate the 50-story Tower 3, which is anchored by the Viceroy Miami hotel, and will continue to sell and market its condo-hotel units and condominiums together with its sales affiliate Related Cervera Realty Services, the company said.

Analysts had been predicting Perez would lose ownership after delivering the opulent ICON, which features an infinity pool the size of a football field, in one of the worst housing markets in South Florida history.

Over the past two years, troubled developers behind on construction loans have been turning over title to projects in so-called "friendly foreclosures'' to avoid costly and lengthy litigation.

In July 2009, Related surrendered ownership of its then-new 420-unit CityPlace South Tower in West Palm Beach to a group of partners led by Toronto-based Scotia Capital.

In creating ICON, Perez had spared no expense.

Designed by Arquitectonica with creative flourishes by renowned designer Philippe Starck, ICON features more than 100 22-foot columns that mimic the statues of Easter Island around its entrances, an immense outdoor fireplace crafted of French limestone, and oversize chess pieces adorning a walkable chessboard on the two-acre pool deck.

"I don't think we'll ever see another project like ICON Brickell built again,'' said Peter Zalewski, principal of Condo Vultures, a real estate brokerage and research firm. "No one will ever say that Jorge Perez and Related don't dream big. Unfortunately, they weren't able to close it.''

When the towers were opened with great fanfare in the fall of 2008, sales in the bleak market were tepid.

But lower prices brought buyers. So far, 433 units, or 24 percent of the 1,793 units, have been sold, according to Condo Vultures.

In 2008 and 2009, 125 ICON units closed, at an average of $543 per square foot, said Zalewski. This year 308 units have closed at an average of $403 per square foot, showing the spike in sales as prices dropped, he said. Pre-construction prices were more than $600 per square foot.

"I think as history is written and people look back and reflect on that period of 2003 to 2010, Jorge Perez and Related will come out in a very positive light,'' said Zalewski. "Unfortunately, some people will not have that positive opinion of him -- and those people will be the ones who lost significantly by investing with him.''

Miami Herald Staff Writer Hannah Sampson contributed to this report.

Read more: http://www.miamiherald.com/2010/05/11/1624875/return-to-lender-developer-hands.html#ixzz0njFTtelX

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