When I was in business back in Florida\u00a0I had the priviledge of meeting and working on a deal with Jorge Perez of the Related Group.\u00a0 I watched in amazement over the years at the growth his company experienced and the massive amounts of money he made as he joined the ranks of billionaires in the world.\u00a0 I also watched the market being overbuilt and began predicting the “affordable housing boom” that would occur in 2006 when I decided to move to Panama.\u00a0\u00a0\u00a0 Bloomberg reports this story of an incredible man, his fortunes and his looses where he survived to fight another day.\u00a0\u00a0I am sure this would be good reading for some of the developers here in Panama.<\/p>\n
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Nov. 23 (Bloomberg) — Early this year, asJorge Perez<\/strong><\/a>\u00a0struggled to restructure more than $1.5 billion of debt on mostly vacant Florida condominium projects, doctors discovered a golf ball-sized tumor on his pancreas.<\/p>\n \u201cYou understand how vulnerable you are,\u201d Perez, 61, said while sitting in his Miami waterfront office, with a view of the skyline shaped by Related Group of Florida, the real estate company he founded in 1979. \u201cYou\u2019re here on a loan and you never know when they\u2019re going to call it.\u201d<\/p>\n Perez, known locally as the \u201cCondo King,\u201d survived the medical scare. In January, after nine hours of surgery to remove the tumor, doctors determined it was benign. Related Group, after absorbing $1 billion in losses, is still standing.<\/p>\n Last week, the company reached a foreclosure agreement with lenders holding a $223 million mortgage on Trump Hollywood, a 41-floor luxury-condo tower in Hollywood, Florida, where 22 of 200 units have sold. BH III LLC, a Miami property-investment firm, paid $160 million for the note, said Mark Pordes, chief executive officer of\u00a0Pordes Residential Sales & Marketing<\/strong><\/a>\u00a0in Aventura, Florida, who brokered the deal.<\/p>\n The sale put the last of Perez\u2019s seven troubled Sunshine State projects behind him.<\/p>\n \u201cThings are clearing now,\u201d Perez said in a Nov. 19 telephone interview. \u201cMost of the lenders will feel that way. And we\u2019re talking to many of them and trying to do deals.\u201d<\/p>\n Reputation Intact<\/p>\n Related Group lost four of the seven Florida developments to foreclosure, sold its interest in one to a partner and renegotiated payments on two others. In all but one deal, it retained a management or marketing role.<\/p>\n \u201cBanks have great respect for him and banks need him,\u201d said\u00a0Donald Trump<\/strong><\/a>, the New York celebrity developer who licensed his name to Perez for the Trump Hollywood. \u201cThey\u2019ll make a deal with Jorge whereas they wouldn\u2019t make a deal with other people.\u201d<\/p>\n Perez\u2019s reputation is so solid, Trump said, that lenders and investors work with him even though he was the biggest developer in the biggest condo bubble in the country. Related Group accounted for 5,500 of the 22,000 condos built in Miami\u2019s central business district from 2003 to 2008, with pre- constructionprices<\/strong><\/a>\u00a0doubling or tripling as speculators traded units like stocks, said Jack McCabe, a real estate consultant in Deerfield Beach, Florida.<\/p>\n \u201cHe\u2019s one of the faces of the boom-bust cycle that resulted in the great recession,\u201d McCabe said. \u201cHe\u2019s also one of the real geniuses, because he\u2019s been able to stay in business.\u201d<\/p>\n Back to Investing<\/p>\n As Florida struggles to recover,\u00a0Related Group<\/strong><\/a>, which has built or managed more than 77,000 housing units in the U.S. and Latin America, is investing again. Perez said he\u2019s using government financing to build affordable housing in Florida\u2019s Miami-Dade and Orange counties. He bought shopping malls in Phoenix and Birmingham, Alabama.<\/p>\n He returned last week from India, where he\u2019s an investor in a partnership to build middle-class housing in Amritsar, Udaipur, Lucknow, Coimbatore and Bangalore. And he hasn\u2019t given up on his dream of Miami as a tropical Manhattan, though he said it will take at least three years before the market is ready for more high-rise condos.<\/p>\n \u201cIf you went to a lender and asked for financing on a condo, they\u2019d either laugh so hard that they\u2019d die or they\u2019d shoot you right on the spot,\u201d he said during the earlier interview in his office.<\/p>\n Early to Restructure<\/p>\n By reaching out-of-court agreements with lenders, Related Group was able to accelerate its recovery and turn to new projects, said\u00a0Troy Taylor<\/strong><\/a>, president of the\u00a0Algon Group<\/strong><\/a>, an Atlanta investment bank that advised Perez on restructuring.<\/p>\n \u201cHe put his dirty laundry behind him,\u201d Taylor said in a telephone interview. \u201cThere are other developers who can\u2019t focus on opportunities because they are still cleaning up their problems.\u201d<\/p>\n Unlike many developers, Perez confronted his troubled projects while he still had some negotiating leverage, Taylor said. Related Group booked $1 billion in impairments in 2008, said Matt Allen, its chief operating officer, as condo buyers walked away from their deposits and lenders balked at financing amid falling prices. In January 2009, the company invited representatives from seven loan syndicates to a conference room at the Hilton Miami Downtown, where Perez presented a plan for a comprehensive workout.<\/p>\n \u201cI had 80 lenders, from all over the world, and each one of them could say no,\u201d Perez said.<\/p>\n They all said no, at first.<\/p>\n Losing Everything<\/p>\n Perez said that as a boy of 10 in Cuba he learned that forces beyond his power could shape his destiny. His father owned a pharmaceutical company and the family lived in a Havana home staffed by maids and a chauffeur, a lifestyle that ended with the 1959 revolution led by Fidel Castro. As the Perez family fled the country, he watched soldiers at the airport take his mother\u2019s jewels, including the rings on her fingers.<\/p>\n \u201cMy father left everything behind, every penny, and he had to start again,\u201d Perez said. \u201cI saw how things beyond your control could cause you to lose everything.\u201d<\/p>\n After finishing high school in Colombia, he moved to Miami to start community college, eventually earning a master\u2019s degree in urban planning at theUniversity of Michigan<\/strong><\/a>\u00a0in 1976. After graduate school, he returned to work for the city of Miami, where he said he felt at home as a Latin American immigrant. He worked at the city\u2019s planning department, followed by a job at Landauer Associates Inc., a real estate services firm. In 1979, when Perez was scouting for low-cost housing deals, he competed against a New Yorker named\u00a0Stephen Ross<\/strong><\/a>, founder of Related Cos.<\/p>\n Disappearing Wealth<\/p>\n \u201cA woman working for the city of Miami said, \u2018You guys should get together,\u2019 \u201d Ross, 70, said in a telephone interview. \u201cWe both had the same passion.\u201d<\/p>\n Ross, whose company\u2019s real estate portfolio is worth more than $15 billion, said he offered Perez 15 percent equity in Related\u2019s Florida division. Over time, Perez\u2019s share climbed to 75 percent, while Ross said he holds the other 25 percent.<\/p>\n To survive the real estate crash that began in 2007, Related Group cut 300 of 600 employees. Perez sold the company\u2019s Gulfstream III jet while retaining a share in a smaller Citation X. In 2008, Forbes listed Perez\u2019s net worth as $1.3 billion. Last year, he fell off the magazine\u2019s billionaire\u2019s list.<\/p>\n \u201cMy income has suffered tremendously,\u201d Perez said. \u201cBut I\u2019m not worried where my next meal is coming from.\u201d<\/p>\n Politics, Art<\/p>\n Perez\u2019s office shelves hold pictures of his family — the father of four is now in his second marriage — next to photos of the developer with Barack Obama, Hillary Clinton and Bill Clinton, whose presidential campaigns he supported. His collection of Latin American art includes works by masters such as Diego Rivera, Frida Kahlo and Fernando Botero. He donated $1.25 million to the University of Miami\u2019s\u00a0Jorge M. Perez Architecture Center<\/strong><\/a>, which opened in 2005.<\/p>\n Perez is also a vice chairman of the Ross-owned Miami Dolphins of the National Football League and attends home games in the owner\u2019s box. Ross and Perez vacation together, yachting in the Mediterranean and skiing in\u00a0Deer Valley Resort<\/strong><\/a>, Utah.<\/p>\n \u201cHe became probably the best of friends,\u201d Ross said. \u201cHe was there when most people would\u2019ve left.\u201d<\/p>\n When a recession hit New York\u2019s real estate market in the early 1990s, Ross said Perez helped Related Cos.<\/p>\n \u201cWe were doing well in Florida,\u201d Ross said. \u201cProfits of that company carried us and we recapitalized.\u201d<\/p>\n Loyal Partners<\/p>\n In August, Ross and\u00a0Dean Adler<\/strong><\/a>, co-founder of Lubert-Adler Partners LP, a Philadelphia-based private-equity firm, won a bid on a $157 million construction loan held by Bank of America Corp. on the\u00a0Oasis Fort Myers<\/strong><\/a>, twin 32-story towers developed by Perez where sales collapsed. After the auction, Ross and Adler, a partner of Perez in a $1 billion distressed real estate fund, turned management and sales responsibility back to Perez.<\/p>\n \u201cWe felt Perez and his organization were the superior team,\u201d said Adler, who declined to disclose how much he paid for the Oasis note. \u201cI\u2019d rather team up with a group that has significant experience. It\u2019s not necessarily Related\u2019s fault the market turned.\u201d<\/p>\n Shirley Norton<\/strong><\/a>, a Bank of America spokeswoman in San Francisco, declined to comment on the Oasis deal.<\/p>\n Related Group continued to run sales and management at City Place South, a 420-unit condo building in West Palm Beach, Florida, after reaching a \u201cfriendly foreclosure\u201d agreement in July 2009 with a seven-bank syndicate led by Scotia Capital Inc., which was owed about $119 million on the 20-story tower. On Nov. 9, the noteholders sold City Place South\u2019s last 305 units in a bulk deal for $64 million to\u00a0Gulfstream Capital Partners LLC<\/strong><\/a>, a closely held firm in Dallas. Gulfstream hasn\u2019t decided whether Related Group will continue to play a role at the property, managing partner Frank Howard Jr. said in a Nov. 17 interview.<\/p>\n Icon of Collapse<\/p>\n Perez\u2019s office window faces south toward the high-rise condos he built along Brickell Avenue. Among the tallest are the 57-floor\u00a0Icon Brickell<\/strong><\/a>\u00a0towers, a $1 billion condo and hotel project that embodied Related Group\u2019s highest aspirations and biggest failure. Designed by Miami architectural firmArquitectonica International Corp.<\/strong><\/a>, the complex includes a 150- room Viceroy Hotel, pillars resembling the stone heads of Easter Island and a 28,000-square-foot (8,530-square-meter) spa. Three rooftop pools stretch 300 feet end to end.<\/p>\n More than 90 percent of the Icon\u2019s 1,650 condos were under contract, with 20 percent deposits, before the September 2008 opening, Perez said. Nine months later, just three dozen units had closed.<\/p>\n \u201cWhen you sell a building 90 percent, with 20 percent deposits, you play every scenario,\u201d Perez said. \u201cWhat if 10 percent walk away? What if 20 percent? And then we went to 50 percent. People say nobody\u2019s walking away like that. Then we have 90 percent of the people that walk.\u201d<\/p>\n Equity Lost<\/p>\n Perez invested $5 million to start the Icon Brickell in 2004, financing construction through a combination of bank loans and buyers\u2019 deposits. After sales stalled, he paid $100 million out of his own pocket to honor personal guarantees on the Icon\u2019s construction bonds, he said.<\/p>\n \u201cAll those methods of leverage for which people said, \u2018My God, what a genius,\u2019 \u201d Perez said. \u201cNow people say \u2018My God, what an idiot.\u2019 \u201d<\/p>\n In May, he reached an agreement with a syndicate led by\u00a0HSBC Plc<\/strong><\/a>\u00a0on a $482 million note on two Icon towers. While he retained management of the property, he surrendered his equity and lost his marketing role to Fortune International Realty.<\/p>\n \u2018Timing, Timing, Timing\u2019<\/p>\n \u201cHe could have fought and the value of the asset would\u2019ve been depleted by the fight,\u201d said\u00a0Edgardo Defortuna<\/strong><\/a>, president and founder of Miami-based Fortune International. \u201cJorge is more interested in seeing that, at least, this isn\u2019t perceived to be a failure.\u201d<\/p>\n Juanita Gutierrez<\/strong><\/a>, a spokeswoman for HSBC in New York, declined to comment.<\/p>\n Since Defortuna took over in May, 296 of the two towers\u2019 1,273 units have closed at prices as low as $300 a square foot, half of the original asking price. Another 486 units are unsold.<\/p>\n \u201cA place like this, the profits could be awesome, but it came along at the wrong time,\u201d Defortuna said, sitting in the Icon\u2019s movie-screening room during a party to cross-promote condos with Versace fashions that featured models wearing purple chinchilla coats priced at $90,840.<\/p>\n \u201cBefore, the saying in real estate was location, location, location,\u201d Defortuna said. \u201cIt has to be replaced by timing, timing, timing.\u201d<\/p>\n Florida History<\/p>\n