Terra’s $1.2 Billion Downtown Miami Deal Is Off. What Does This Mean For The Miami Real Estate Market?

 
Well, that’s a wrap. The record-breaking $1.2 Billion development site deal between Terra Group and Genting at 1431 North Bayshore Drive is not moving forward. What was heavily touted in every news outlet as the most expensive deal in the history of Miami is canceled. What does this signify about the market? Is the news media onto something that we are about to come to a screeching halt? Let’s break it down.

The Deal And Why It Fell

In order to really get ahold of what this signifies for the market, we first have to look into the development deal itself. Why it was a marker to begin with and why the deal failed.

Of course, the sheer dollar amount of the purchase is the reason that the deal was so newsworthy. Genting had big plans for the site. At the time, their purchase price of $236 million was in and of itself groundbreaking. But their plans did not make it through the governmental red tape and Downtown Miami is just not the spot for table games and gambling. Genting really did make a solid go of it too. I don’t really gamble, but that Superfast mini-cruise ship/Bahamas ferry was a lot of fun (for those who remember). Rather than continue to put good money after bad, they finally said forget it and flipped the property to someone with a different plan.

After a short period of collecting bids, Genting chose Terra Group’s bid of $1.2 Billion. The actual plans were very hush-hush, potentially because they were still in the conceptual state and not ready for press. But as quickly as the deal started, it stopped. It turns out that the problem with the deal was simply that Terra Group requested an extension of the due-diligence period for the deal and Genting said no.

This is pretty common in development deals, and in my opinion, the deal should have already passed the due diligence period before being released to the press because so many things can happen during this delicate time. It could have been that the soil testing came back in a way that needed more testing, the seawall needed more work than anticipated and they needed to get more bids. It could have been that the return on investment at sell-off needed some tweaking, it could have been ANYTHING. This is in no way an indicator that either party is acting in a negative way toward the other or that the market is too unstable to withhold a development of this magnitude.

What this does mean is that Genting is in a position of power. They have four other buyers eager to send them ten-figures for their land. Why should they give extensions? This is business and they are here to sell their land to the person who will close as quickly as possible and for the highest amount possible, so everyone can move along to their next deal. It’s a good position to be in.

Can Terra come back and bid again? Certainly. And we love Terra Group’s product, so we hope that this does happen. Either way though, we are as eager as everyone to see how this pans out.

Rendering of Casa Bella Rooftop Pool View North

What this means for the Miami Real Estate Market

In the time that the Terra/Genting deal was starting and failing, sales have not slowed down. Casa Bella Residences, which is gearing up to begin construction directly to the west of the development site at 1444 Biscayne Boulevard, has recently announced that they have sold over 70% of their 312 residences. They are now busy offering the 23 penthouses, which is the last step of the new development sales cycle. To reach this point in less than 18 months with the amount of competition the Miami new development market is offering is outstanding.

Rendering of EDITION Residences Edgewater Arrival

To the north of the development site is a flurry of action. Two Roads Development’s EDITION Miami Residences in Edgewater is located just to the north at 2121 North Bayshore Drive, and is gearing up to begin construction. Within a month of launch this spring, they had sold over $160 million of their 185 residences. This all happened before they were even able to open their $10 Million sales gallery.

Rendering of Villa Miami Entrance

And we cannot finish this analysis without looking at the all-star luxurious foodie-haven Villa Miami, which is also a Terra Group product in partnership with Major Food Group. This project has 75 super-luxury residences that embrace an array of culinary-focused amenities. The residences start at $4.5 million and have debuted in the market with much fanfare.

I’m not going to rule out the possibility that maybe Terra Group realized its plate is a bit too full (see what I did there?) with Villa Miami and other projects in its pipeline this month, so asked for another month to complete the due diligence on Smart City with Genting. I do not know this to be a fact, it is purely speculation.

My point is that nobody really knows why the Smart City transaction failed, but it doesn’t really matter either. Someone else will buy it (or maybe Terra Group will buy it again) and sales traffic has not slowed in the neighborhood. As long as there are new taxes and increased inflation in New York and other key areas of migration, there will be opportunity in Miami.

If you are interested in continued updates on the development site, stay tuned here. If you are interested in a private presentation, more details and/or specific pricing for any of these projects, please contact Michael Light, Broker and Executive Director of Luxury Sales at Douglas Elliman. You may reach Michael directly at (786) 566-1700 or via email at michael@miamiluxuryhomes.com.