Condo developers look to commercial uses
Plans called for six soaring condominium towers and more than 4,000 residential units with views of Biscayne Bay. But then the condo boom went bust.
Now it's not new condos that Argent Ventures wants to build on the 11-acre site of the shuttered Omni International Mall in Miami, but scads of offices, a renamed hotel, new shops and restaurants.
Such are the decisions South Florida developers continue to wrestle with as the housing downturn shows little sign of turning around. Many builders who hatched ambitious plans for new condos -- and often went through lengthy and expensive governmental approvals for them -- are now reconsidering. They're choosing instead to go commercial -- office, retail, hotel.
''You have to be able to twist and turn,'' said Mark Teitelbaum, chief operating officer of Argent Ventures in New York City, which owns the Omni. ``We went down that very tempting condo road, but then the road closed.''
Switching from residential to commercial is not new. In the last year, as the housing market slumped, more developers gradually have changed course to salvage their investment. But the trend continues to gather steam.
The Villa Magna condo planned for a swath of bayfront land near Miami's Brickell Avenue is now being reworked -- and renamed -- to incorporate more hotel and retail space. Paramount Park, a Biscayne Boulevard project destined for across the street from American Airlines Arena, is replacing planned condo space with office and hotel uses.
Earlier this month, builders of the proposed Spanish Village residential project in Coral Gables sold part of the land to an office developer.
The reason this approach is proving so popular is South Florida's commercial real estate market is going strong. Vacancy levels in office buildings remain low, and retailers and restaurateurs continue pouring into the region, as do hoteliers.
But successfully making the leap is no sure thing. The office market is an increasingly crowded field, with a host of projects already planned or under way.
Work has commenced, for instance, on three new office buildings in downtown Miami and Brickell totaling some 1.9 million square feet.
Hotels from the Shangri-La on Watson Island to the Viceroy on Brickell are planned. New and proposed retail destinations range from Mary Brickell Village and Midtown Miami to City Center, a big box mall slated for land adjacent to Argent's Omni Mall.
''Let's not all think we are going to build offices and hotels and it will be absorbed,'' said Dan Kodsi, the developer behind the proposed Paramount Park. ``You have to look at absorption rates and timing. We want to be more cautious and not let happen what happened with residential by oversupplying the market.''
Real estate analyst David Dabby said for many builders, changing won't be viable. Some, he said, will just have to hunker down and wait for the housing market to improve.
`ALL CAN'T SWITCH'
''They all can't switch,'' said Dabby. ``There is not enough demand for all of them. It's a few fortunate ones that can successfully find an alternative use.''
Argent Ventures is hoping to be one of those fortunate ones.
Instead of demolishing the gutted Omni mall and erecting new buildings for residents, Teitelbaum's Argent Ventures decided earlier this year to redo the current Biscayne Boulevard building a few blocks north of the Carnival Center to accommodate workers, shoppers, diners and overnight guests.
The Radisson hotel there is being reflagged as a Hilton, and renovations are underway for all 528 rooms. Construction workers recently started stripping off portions of the Omni's stark concrete facade to install windows. The hope is to to make the cement behemoth an inviting office destination.
Plans for structural modifications to attract retailers are supposed to start by the first quarter of next year.
Taken together, the sleepy former mall -- currently home to the Greater Miami Chamber of Commerce and Miami International University of Art & Design, but not much else -- aims to add 300,000 square feet of offices and 275,000 square feet of retail area.
Along with the hotel changes, it's adding new parking -- namely, level parking floors so shoppers' carts will not roll away, as they would on the current slanted floor garage.
The price tag for the changes is roughly $150 million, Teitelbaum said.
Argent has struggled to find the right plan for the Omni since buying a portion of it in 2000 (the company gained full control in 2005.) The firm first proposed turning the building into a telecom hub. That plan crumbled. Then it proposed condos. That went nowhere.
Although it's not clear whether the surrounding neighborhoods can support retail and office, Argent thinks it has the right mix now to succeed. It is betting it can beat other commercial builders to the punch by completing its renovations before others finish newly built projects. It also hopes to win on price.
''We are in the $35 a square foot rent for office space while new buildings will be in the mid to upper $40s,'' said Teitelbaum.
So far, the builder has signed one office tenant: the U.S. Passport Agency agreed to take 35,000 square feet.
Argent has yet to announce a retail tenant; its hotel is set to become a Hilton at the start of next year.
''We think we're creating a combination where each piece feeds off the other,'' said Teitelbaum, who added that he doesn't rule out building some condos down the road.
``We believe long term that downtown Miami is a place that many want to work and live, and condos will be viable again. But right now we have a new plan, and are pulling the trigger.''
BY MATTHEW HAGGMAN - Mon, Nov. 05, 2007 - Miami Herald
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