For Sam Nazarian, Standing Out in Miami’s Condo Market Is Very On Brand – Commercial Observer
Dozens of condo projects are being marketed in the Miami area. Only one boasts dining and entertainment concepts by actress Sofia Vergara and singer Marc Anthony.
That’s HQ Residences Miami, a 35-story tower at 422 Northeast 29th Street in Miami’s Edgewater neighborhood. Slated for completion in 2028, the project includes Toma Gourmet by Vergara, a Latin restaurant, and Marc’s, a speakeasy designed by the Grammy-winning singer.
“Miami is the capital of South America, as we always call it very proudly,” said Sam Nazarian, CEO of SBE Entertainment Group, part of the development team at HQ Residences. “And we have two of the biggest Latin American entrepreneurs as our partners.”
The building’s 229 units range from 721 to 2,074 square feet, with prices starting just under $900,000. HQ Residences will also include a wellness theme, space for yoga, saunas, steamrooms and plunge pools. Arquitectonica designed the tower, and the Agency is marketing the units.
Commercial Observer talked to Nazarian toward the start of the year about the Miami market for new development in general, where the buyers are coming from, and what’s with all the new restaurants.
The following conversation has been edited for length and clarity.
Commercial Observer: Your partners in this project include Black Salmon, the Boschetti Group and Constellation Group. What’s your role?
Sam Nazarian: HQ Hotels & Residences by SBE is the brand. We own the HQ brand and we own all the intellectual property in the building — kind of like Four Seasons or Mandarin would from a hospitality perspective.
What got us excited first and foremost was the collection of developers and partners in this particular project. What’s important to us as a brand is identifying great partners to be able to execute what our vision is, and what our brand can really become as far as drawing a unique differentiation in a very crowded market.
If you look at the 50 or 60 residential projects that are live today, a lot of them don’t have the same kind of differentiation or DNA that HQ Residences in Edgewater has. These are very approachable, high-quality units in the sense of pricing. They’re 100 percent designed for owners who want to live here or use them as an investment property, but they’re not short-term rentals at all.
The Miami residential market was super hot a few years ago, but it definitely has softened. How do you deal with that?
It’s a good question. I think every developer goes through that, especially in the South Florida market. We’ve been here since 2004, just seeing the kind of ebbs and flows of Miami.
From my perspective, good product always rises to the top. And I think when you bifurcate the classes of products, you could say the hotel industry is not doing well, but there’re luxury segments doing well.
I definitely do think that if we’re going back to 2020, `21, `22, `23, you have much more momentum.
That’s undeniable. It was just whatever was available, people were interested in reservations and ultimately converting those reservations to contracts and closings.
But, in today’s world, we’re going after a very specific segment. Let’s just say 60 projects are coming online in Miami. Then you start subtracting how many are super luxury, how many are condo-hotel environments, how many are not amenitized. When you start subtracting, and you’re left with fully integrated, branded solutions, you really come to a handful. It really starts differentiating.
The other point is that you look at price points, right? I think the approachability that we saw for this particular product also is a very unique differentiation. You could probably count on your hand how many buildings are selling studios at $1,100 per square foot.
You mentioned that this project is definitely not short-term rental or condo-hotel. Why not?
As somebody who’s been here for 22 years, you look at oversupply. Something works, and then everyone does it right now. We’ve done a lot of condo-hotels, and they’ve done exceptionally well, but there wasn’t a ton of inventory. So I do think that certain asset classes are over-indexing as far as just a lot of supply.
We see that in full-service restaurants — you see a lot of categories in South Florida that have now just been oversupplied. So I do think people who want to make an investment or want to live somewhere, I think they don’t appreciate the high volume of pressure that puts on a building, whether it’s the front desk, whether it’s not knowing who’s in the building, whether it’s running it as a hotel. HQ Residences Miami specifically does not allow or offer that. So I do think that certain buyers find that to be beneficial.
You bring up restaurant oversupply. Restaurants always struggle to survive, but what do you see happening now?
When Miami overperformed and went from a seasonal market to a year-round market in 2021 and 2022, everybody started really coming and building restaurants. It was very obvious that at some point there would be an oversupply, especially because Miami is the most expensive market right now to eat — an over $150 check average.
You have to charge more because there’s such a need for labor, so you’re paying a lot of money from the management all the way down to your line cook. Plus the cost of construction, the delays in construction. The infrastructure in Miami wasn’t set up to have all this inventory.
Miami’s lifestyle restaurant business, from what we see, is down 30 to 40 percent off its peak. That means it’s affecting a lot of people more, and obviously a lot of restaurants are either shutting down or have shut down. The great operators are doing good, and the good operators are not doing well. You have to be a great operator and a great planner to do well in this market.
In a market that has never absorbed this type of inventory, it’s going to be interesting to see what happens over the next 12 to 20 months. You’re seeing Miami go back to the normal seasonal nature of seven or eight months of business.
Is there any adjustment that needs to happen on the part of landlords, just in terms of rent reductions?
I think second-generation landlords who are taking back these restaurants definitely have to be much more flexible, whether it’s a percentage rent deal, whether it’s free rent.
Back to the HQ Residences in Edgewater, I’ve heard you talk about the “new consumer.” Who is that person?
You want to build for the next 20 years, not the last 20 years.
In the positioning of this building, it’s life balance. People are spending less time in their units. People aren’t cooking as much. We’re going after young professionals and young families. Maybe this is their first home, so that’s why the pricing is very important, which obviously affects what a mortgage looks like. The new consumer really values the amenities of the hotels they travel to or the building they live in.
We’re giving the flexibility of being able to have fun and indulge as they see fit, but also find an opportunity for them to really focus on a science-based approach to how they’re living. There is a very fast-growing subset of people who take their health very seriously.
What do you expect in terms of the breakdown between domestic and international buyers?
It’s right down the fairway: 50-50. I think the dollar being not as expensive does help. Your currency is a big component in terms of values that people feel that they can invest. Our first-round buyers have been Hispanic or Latino.
Jeff Ostrowski can be reached at [email protected].
