DEVELOPERS STEPHEN ROSS AND JORGE PEREZ SHARED THEIR ‘HITS AND MISSES’
Top Builders Talk About The ‘Bust,’ The New Boom
Rebeca C. Trujillo | Editor
In only its second edition, the University of Miami Real Estate Impact Conference has already become one of the area’s major forums, attracting the industry’s most engaged —and engaging— executives as speakers and panelists (indeed, all of South Florida’s top builders were in attendance again this year), as well as a substantial and varied audience, anxious to hear how these developers are transforming the “bust of 2007” into the “boom of 2013.”
Hosted by UM President Donna Shalala, who was introduced by Stuart Miller, president of Lennar Homes, and the university’s Schools of Architecture and Business Administration, the conversation generated during the conference’s Keynote Session confirmed just how damaging the 2007 downturn was for the afternoon’s panelists —and for most builders throughout the United States— and uncovered their strategies for recovery and, better yet, for a more enduring success.
“We never imagined that 95% of the buyers would walk away (and not close, during the crisis), even with a financial and legal responsibility” — Jorge M. Pérez, CEO, The Related Group
On the ‘hot chairs’ were Stephen M. Ross, chairman and founder, Related Companies, and Jorge M. Pérez, chairman, CEO and founder, The Related Group. Mssrs. Perez and Ross began a partnership 30 years ago developing low income housing. The company has evolved to become one of the largest, luxury high-rise developers in South Florida and other U.S. and international markets.
“Our company’s staying power is possible because of good selection of our people. They make all the difference,” said Ross.
For Pérez, who was a municipal planning official when he decided to “hang up his shingle” and join Ross, it’s the “attention to details, top design and craftsmanship that have made Related a builder to trust.”
“We started with low income housing were the margins are low and that taught us to watch every penny. This mentality came specially useful in the real estate crisis after 2007. We have studies that include scenarios like ‘what if 10 or 20% of the buyers with a financial and legal responsibility don’t close?,’ but we never imagined that 95% of the buyers walk away, even with a financial and legal responsibility. We have been hoarding cash and we had to write a lot of checks to get our of the crisis.”
According to Stephen Ross, “when the recession hit, we wanted to keep the employees that we had invested in and keep them employed, so we decided to go international. The Middle East and China were some of our first destinations.”
“China has proven to be a very frustrating experience for us since the central government controls everything and nothing gets easily done” —Stephen M. Ross, Chairman/Founder, Related Companies
Pérez mentioned that he, on the other hand, focused on Latin America and India.
“We went to Puerto Vallarta, Mexico, to cater to Americans wanting a second home. We built Icon Vallarta, which sold well. We were able to sell initially for more than 30% of the local prices. Then the market went sour. We still own land in the area.”
Pérez confirms that his company is now launching projects in Brazil and strongly recommends “a local, honest partner in order to proceed.”
But when the South Florida real estate boom went bust in 2007, he claims “it was Latin America which made a difference. Although I know the (Latin American) market, we underestimated it. Buyers began buying our condos with a large deposit and several installment for preconstruction units. Then, we said, why don’t you finance the construction? Now foreign buyers pay for up to 85 percent of a building without the need of the bank.”
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KEYWORDS: Miami, South Florida, University of Miami, real estate, boom, construction, builders, Stephen Ross, Jorge Perez.