Growing rapidly and steadily

Alex Wertheim

Invest: Miami speaks with Alex Wertheim, President, SPACiO Design Build

What demand is currently driving design services?

Over the years, we have seen significant growth in residential demand. Developers can execute large-scale projects, as the cost per square foot in South Florida is still much less expensive to buyers than in many other major cities within the U.S. This region offers a competitive cost of living as well as an advantageous tax structure. Growth in the residential segment has caused growth in the commercial segment as well, to the point that we are seeing more activity in the commercial real estate sector than in the residential market when it comes to construction in Miami.

What are the main profile trends of the client base for contractor and design services in Miami?

There was an important change in the profile of the clients after the crisis of 2009. We have started to see more Latin American clients reaching out to us to build-out their recently purchased high-end condos since then. This is expected to continue, as Miami is a melting pot for Latin Americans. However, in the past few years, we have begun to see an increase in the number of clients from the U.S. retaining our services, which makes me think the domestic market is coming back. Miami is attracting many retirees from the Northeast that are looking to take advantage of the lower cost of living. We have also seen an increase from international clients from other regions of the world such as Asia and Europe.

Miami is growing rapidly and continuously. In 2017, we will continue to see such growth driven by international and American buyers. We are also going to keep seeing continuous repositioning of real estate properties. As we run out of developable land, developers are rapidly buying up existing Class B and Class C properties in up-and-coming neighborhoods to turn them into Class A properties, from hotels to retail space. As a full-service general contractor, we are seeing – and we will continue to see in 2017 – an increase in retail space construction. We are currently involved in building out Breitling and very soon Swarovski in Brickell City Centre. The demand is a direct result of Miami’s evolution as a high-end shopping and dining destination.

Which sectors are expected to be the growth engines for design and contracting services the upcoming years?

Even though both residential and commercial sectors are growing simultaneously, commercial will start to see an important increase in the hospitality sector, especially restaurants. Miami has developed its culinary offerings extensively over the past couple years.  These new restaurants have made significant investments in design services because they understand the importance of aesthetics for their businesses. The Nobu restaurant in Miami Beach is a perfect example. Chef Nobu Matsuhisa sought the “best of the best” to build out the space.  For example, the stone flooring was imported from Italy, the oak flooring from Denmark and many other finishes are derived from around the world. Nobu truly adds an extra level of sophistication to the iconic Eden Roc. We were very fortunate to work under Chef Matsuhisa’s leadership building out that amazing space. Hotels – both new and existing – have also made important investments in design with an important emphasis on quality and that will continue to happen in Miami

What would you identify as the current major challenges in construction?

From a business perspective, one of the main challenges for the developers is making sure they hire the right architect and designer. Doing all the correct due diligence and pre-construction work is extremely important. Not many people realize the amount of work that goes into pre-construction and its importance. When done poorly, this ends up being a problem for developers as they execute their projects. The way to tackle this issue is by making sure their pre-construction work is handled by highly qualified professionals.  Another challenge is finding qualified construction workers, especially when you are working on high-end projects. We make sure we take good care of our people because we see value in loyalty and having an A team that we can move from job to job.

For more information on Spacio Design Build, visit: http://spaciodb.com

Modernizing transport network

Invest: Miami speaks with Charles Scurr, Executive Director, Transportation Trust

What have been the main achievements of the People’s Transportation Plan in 2016?

The Transportation Trust has an important role in developing the funding plan for the Tri-Rail Downtown Miami Link project. The Downtown Miami Link is a transformative public transit project that will provide riders in Miami-Dade County with a direct commuter rail connection with 26 direct Tri-Rail trains per weekday between Downtown Miami Broward and Palm Beach County. In downtown, Miami commuters can walk to their place of employment or conveniently transfer to the Metromover, Metrorail, the Miami Trolley or Metrobus to get to their final destination. This new service would significantly improve Miami-Dade’s mass-transit system. The Trust is proud to participate in this historic effort and we urge all of the funding partners to approve and find their respective portions of the project. Implementing this project presents a unique public-private partnership opportunity to use innovative funding techniques to fund this transformations project.

What other complementary sources of financing are there to enhance the public transportation network besides the ½ penny sales tax of Miami-Dade approved in 2002?

The People’s Transportation Plan (PTP 1.0) is the coordinated programs of transit and roadway projects that was approved by voters in 2002 and funded by the half-percent surtax.  Accomplishments of the PTP include: funding the Metrorail Orange line extension to the Airport, purchase of new Metrorail and Metromover vehicles, free rides for seniors and eligible military veterans with the Golden Passport/Patriot Passport Program, new buses added to the Metrobus fleet and the countywide traffic signalization system, which has been upgraded with an Advanced Traffic Management System (ATMS).

Recognizing this, the Trust initiated a series of special studies, projects and initiatives to advance major transit investments in Miami-Dade County.  A number of these initiatives were collaborative efforts with Miami-Dade County, the Greater Miami Chamber of Commerce, the Downtown Development Authority and the Miami-Dade League of Cities.  

The outcome of this partnership has been the development of the PTP 2.0, which offers a new approach for using innovative funding, technology and delivery mechanism to invest Surtax dollars tailored to each corridor. PTP 2.0 emphasizes innovative financing options and multiple transit technology alternatives in each corridor. In addition to PTP and FDOT funds, potential funding sources could include: tax incremental financing, contributions from municipalities, public-private partnerships, special assessment districts, USDOT TIGER grants, developer investments, naming rights and joint development. PTP 2.0 and it presents a vision and strategic plan for financing Miami-Dade County’s rapid transit projects.

What are the most important transport infrastructure projects planned for the upcoming years?

The Strategic Miami Area Rapid Transit Plan (SMART) was developed by Miami-Dade County and the Miami-Dade Metropolitan Planning Organization as a shared vision and strategic plan to improve mobility within Miami-Dade County. The design of the SMART plan connects areas like the North, Miami Beach, East-West, South Miami-Dade, Northeast and Kendall with six rapid transit corridors and a supportive bus network. All of the corridors are connected to the Metrorail system, the backbone of the transportation system in Miami-Dade County.

The six SMART line corridors were part of the original rail expansion plan approved by voters in 2002 and would be advanced to the Project Development & Environment stage to evaluate the implementation of a cost-effective, rapid transit system and infrastructure as part of an overall interconnected premium transit network.

The Trust believes that PTP 2.0 has the potential to be a major funding partner for the SMART Plan and implementation of these projects is a critical step forward in developing and implementing the community’s vision for a comprehensive and coordinated mass transit system.

What are the main environmental benefits of the new hybrid Metrobus fleet?  

Hybrid technology is becoming an increasingly vibrant segment in the public transportation arena to help lower greenhouse gas emissions and address climate change. The Miami-Dade Department of Transportation and Public Works has moved towards introducing new, state-of-the-art technologies that can help its bus fleet reduce emissions, as well as fuel consumption.

To learn more about the Citizens’ Independent Transportation Trust, visit their website: http://www.miamidade.gov/citt/

 

Bringing benefits of Short Term Rentals to the communities

Invest: Miami speaks with Tom Martinelli, Public Policy Director, Florida, Airbnb

 

Interview

To what extent does Airbnb produce economic benefits to communities in which you operate?

We look at it from two angles: from the host perspective and from the guest perspective. From the guest perspective, this is an incredible benefit to them because they are able to have choices. At the end of the day, they put the value on the product. From the host perspective it is even better, because now they are able to optimize their asset. There are other companies that optimize services and time, but we optimize what is often one’s greatest assets: their home. A specific segment of the population that benefits from Airbnb are empty nesters, senior citizens sand those on fixed income. As it relates to our Seniors, they are not only staying active, which is important considering what we know about the effects of isolation, but they are also gaining a revenue stream. Airbnb not only produces an economic impact, but also a societal one. We are very proud of this.

 

Miami ranks in Airbnb’s top five markets in the U.S., behind New York, Los Angeles, San Francisco and Boston. What has been the company’s strategy to achieve such an impressive growth? What are the main differences in terms of market performance between Miami-Dade and the other top markets?

I don’t think it has as much to do with what Airbnb has done, rather it is a testament to the great community and destination that is Miami. According to the last census, we have 800 people a day moving into Florida, in net terms. Those are the ones moving in permanently. We are breaking tourism records every single quarter. And as much as I would love to take credit for that, the credit goes to South Florida and, in particular, the Greater Miami Conventions and Visitors Bureau (GMCVB), which ensures national and international visibility through their marketing efforts. We have amazing weather, the best beaches in the world and great food. There is no reason not to come to Florida 12 months of the year.  We are the Gateway to the Americas.  If you’re flying in from Europe, Africa, South America, North America, or anywhere else, you’re going to stop in Miami. And we have options for everyone’s tastes and purpose – whether you’re traveling for business and need wifi and a printer, or you are in need of medical assistance and must be close to your hospital, we offer all the options. With such affordable rooms offered on Airbnb, who is not going to want to stay an extra couple of days?

 

Some cities across the U.S. have embraced the short-term rental service, while others have fought Airbnb head on. How is Airbnb finding Miami-Dade to do business when it comes to regulation?

Miami-Dade has 34 municipalities. When you look across the county, there are some cities that are excited about it, while other cities that simply don’t know about us. When we came to Florida, we came to educate, advocate and make sure that the communities came out benefiting from Airbnb. There is a lot of educating to do. Airbnb is part of the new economy, and as the communities learn about home sharing, I am confident they will be more comfortable with it. That is why we are not rushing. We want to do the right thing, which is paying our taxes, and have common sense regulations that ensure our host are operating safely, legally and fairly. We have had very important meetings with municipal authorities across the county because we want them to look at us as a partner.

 

How has Airbnb impacted an already competitive hotel market in Miami-Dade?

The GMCVB produces a report where they describe the state of the market. And their numbers are growing. This supports our position that we are not taking a piece of their pie. Instead, we are making the pie bigger.

 

What can be done to avoid speculation in Airbnb? What has been the impact of this speculation on gentrification effects?

We have to look at it in a case-by-case base scenario. Every city has its regulations. However, it is also true that the studies show that short-term rentals have very little impact to the affordability of housing. Even so, in the cases where there has been speculation, we need to work with the authorities and the communities so this doesn’t become an issue. However, when we think about Florida, we know that second homes are part of the fabric and tradition of our State since the days of Henry Flagler.

 

 

Strong fundamentals fueling growth in Miami’s financial industry

Invest: Miami speaks with Abel Iglesias, President and CEO, Professional Bank

 

How has Professional Bank evolved since its opening in 2008?

Professional Bank opened in 2008, right in the middle of the financial crisis. Despite the economic downturn, the timing was actually advantageous for us. As financial institutions were inward-looking, spending time and money cleaning their balance sheets, we were one of the few banks that were able to increase our activity by taking an outward-looking approach. We did not take on any bad loans or take on any toxic assets, but rather grew strong accounts enabling us to be highly rated by Bauer.

We began our journey as a full service commercial banking institution that caters to the professional community. However, we have evolved to also include residential lending, construction and commercial real estate financing, commercial business financing and SBA lending. Today, we are at roughly $400 million in assets with a diversified portfolio of assets. Technology, an area that we heavily invest in, has played an important role in leveraging our bank and has enabled us to cater to a growing number of clients with fewer offices. That said, we are planning to open a Palm Beach branch by summer 2017 and are actively looking at other markets in South Florida.

Which business lines are expected to rise faster in South Florida in the upcoming years?

Despite a strong dollar and the headwinds we are currently facing in Latin America, Miami continues to offer a strong business environment with expectations of growth in 2017. Our main growth driver in South Florida, commercial real estate, will continue to be a part of every community bank’s product set in Miami.  One area in this space that will continue to grow and do well will be construction loans for the middle market homes. We see a lot of opportunity in areas like West and South Miami-Dade. On the other hand, high rise condominium construction that you see predominantly in Downtown and Brickell is starting to see some saturation, and, therefore, we will start to see some pull back on lending activity in those markets.

As Miami businesses continue to grow and expand, we see great opportunity in commercial lending. SBA lending is at an all-time high and we anticipate this will continue to grow in 2017.

Lastly, we just recently opened our insurance agency and are quite excited and optimistic about growing this business in 2017.

What are the expectations of the performance of the mortgage lending segment in Miami-Dade County and South Florida for 2017?

Mortgage lending is an area where Professional Bank has done exceptionally well. Even so, I like to say that we are cautiously optimistic as the rates are increasing. While homes priced under a million dollars are doing very well and are expected to continue to do so, rising rates, higher inventories and a stronger dollar have caused a slowdown in the upper end of the market.

We are carefully watching the bond market, observing capital flow out of the bond market and into equities, which forces interest rates upwards. This is important as we don’t know how much higher rates will grow. This ultimately affects how many people will be able to afford mortgages. However, by historical standards, rates continue to be very low, and if people are in the position to purchase a home, this is still the right time to do so.

We are very bullish on bank profits as they are poised to do well with the anticipated Fed increases. Banks may see an increase in their profit margins, which would be good news for the sector.  This might cause an increase in M&A activity, as investors will be willing to pay greater multipliers now that banks’ profits are expected to rise.

What is the impact and challenges of the current regulatory framework on South Florida’s banking industry?

One item the banking industry anticipates is the possibility of some regulatory relief in the near future. Modifying the Dodd-Frank Act would be very welcomed by the banking sector as a whole, and by smaller- and medium-sized institutions in particular. Dodd-Frank has some good aspects, but it has also been very onerous on the residential lending front. We would like to see some common-sense modifications to diminish the difficulties associated with compliance. Unintended consequences and costs occur because of these difficulties, such as the distortion in the burden of compliance between big banks and small banks. The former has armies of people working on compliance, the latter does not.

In 2015, Florida banks grew loans at more than twice the average percentage growth of other U.S. financial institutions. What are the main differences in such growth for the different type of institutions?

With over 1,000 people coming to our state a day, Florida is one of the fastest growing states in the country. This fuels our economy. This has benefited the banking industry because, as the economy expands, so does the banking sector. In South Florida in particular, the resurgence of real estate values has fueled a lot of our growth. International banks have seen a slowdown due to currency devaluations, a strengthening dollar, regulations and socio-political issues they are currently facing in areas like Latin America.

Domestically, the banking industry overall has cleaned up their balance sheets, building strong reserves, allowing them to be more aggressive in business. However, in general terms, the current banking growth has not been accompanied by an increase in nonperforming loan thus far, so it is safe to say that what we are seeing is healthy growth.

Taking into account that the banking industry is quickly embracing technological advances, what are the main challenges and opportunities regarding security?

Cyber security is one of the main subjects that concern every bank. We can never be ‘too safe’ because there are always new ways of experiencing attacks and new threats. This is why investment in software security is a top priority not only for us but also for every bank. Small- and medium-sized banks have an advantage over big banks because security issues are handled by third party, specialized professionals that produce state-of-the-art security systems designed specifically for the bank. Larger banks struggle with this because of their size. Another challenge is the possibility of a high-tech game changer in the banking industry, like Uber has been to the transportation business. That being said, it is also important to underline the fact that technological advances have allowed us to grow exponentially with a smaller footprint. To be able to operate in Miami with only two branches is something that I find remarkable.

For more information on Professional Bank, visit their website at: www.professionalbankfl.com

Baby-boomers and international clients are increasing the demand for CFP services

Invest: Miami speaks with Andrew Carillo, President, Barnet Capital Advisors

What have been the most important milestones of 2016?

In 2016, we grew our client base substantially. Our assets have more than doubled. At the beginning of the year, we were handling $12 million, and now we are handling approximately $27 million. We have continued to focus on our performance and try to deliver the best value to our clients. International demand has been key to achieve such growth, specifically the fact that many Venezuelans have been seeking a safe haven for their assets in Miami. We are not seeing as many people from other countries coming in similar immigration waves.

As the Fed raises interest rates, how does this affect long-term and short-term investment opportunities?

The Fed’s raising interest rates will create a transfer from debtors to savers. This can put downside pressure on real estate and stocks, but I highly doubt they will raise rates much due to this fact.

If the Fed were to raise rates substantially, a long term real estate buying opportunity could be created if prices were to come down. Then, yield on income property (unsure of written text). Considering the affordability of real estate combined with higher rates, it’s likely that rates will not increase much more for the time being.

Additionally, if they raise rates, bonds are more attractive.

How would you comment on the Miami-Dade CFP firm environment?

It is a very competitive environment, with a lot of financial service firms in the area and a lot of baby-boomers reaching retirement age. However, I believe that is the normal situation in this industry, whether you are in Tampa, New York or Miami.

Looking into the medium term, what are Barnett’s plans for Miami-Dade?

We will continue to look after our clients and our strategies while focusing on delivering what our clients are expecting from us. Florida has a great competitive advantage in the sense that there is no state income tax. New York and California have been loosing a lot of businesses because they don’t have this competitive advantage. On the other hand, the growth fundamentals are really solid, not only for Miami, but for Florida in general. If policy focuses on fostering growth and creating more job opportunities, at the end of the day, that is going to benefit the economy as a whole, causing the state’s revenues to grow. This is a much better approach than the typical increase in tax rates, which affect business activities and aggregate demand and, therefore, in the long term it also harms tax revenues, which is the opposite effect than the one pursued.

To find out more about Barnett Capital Advisors, visit their website: http://www.barnettcapitaladvisors.com/