Turning Point

Turning Point

By David R. Corder

Associate Editor

This spring marked a turning point for Abbey Berkowitz and Barry Appel. Over the past two years, the former Miami Beach hoteliers had taken profits from the sales of several hotel assets, created a pool of cash and invested it into condominium conversions.

Working their way up the Atlantic Coast, these two cousins converted rental apartment units in Miami Beach, Fort Lauderdale, Boynton Beach and Port St. Lucie. Along the way, they discovered opportunities on the other coast, in the Tampa Bay area.

Over the past six months, Berkowitz and Appel have closed on the acquisition of three Tampa area condo-conversion properties containing 1,614 units. Although they're not ready to disclose details, they have contracts on two more condo-conversion targets in the local market, which contain about 1,000 more units. And that's not all.

"We have another 1,000 in the pipeline," Appel says. "We are in negotiations."

There's a simple reason why the partners have focused so much recent attention on the Tampa Bay area. The Gulf Coast market fits perfectly into the market strategy they created in 2003 when they formed Abba Real Estate Development Group LLC. It's a strategy that targets entry-level condo buyers.

Rising land values over the past several years along Miami Beach account for why the cousins divested their hotel leaseholds and property holdings, Appel says. Those oceanfront properties became far more lucrative as luxury condo conversion targets.

"It just doesn't pay to operate hotels anymore," Berkowitz says.

That was a hard fact for a couple of entrepreneurs with such a rich history in the Miami Beach hotel industry. Appel for years operated the Rendale, Capri and Eastview hotels prior to divesting his ownership interests.

Berkowitz, the son of the late hotelier Murray Berkowitz, operated the Saxony, Shore Club and Ramada Crown hotels prior his divestures. The elder Berkowitz, a Holocaust survivor, founded the Miami Beach family hotel empire in the 1950s.

It became apparent early on in their new business venture that the partners had to focus on markets elsewhere in Florida. Competition for prized luxury condo conversion targets in South Florida made it much more difficult for them to find affordable properties that fit their entry-level market strategy. So they headed north.

The partnership first targeted the southern Palm Beach County market. There they converted 172 apartment units into the Belmont at Boynton Beach.

To manage and market that conversion project, the pair hired a real estate professional, Laurie Suquet. During the early 1990s, she sold distressed commercial properties for the Federal Deposit Insurance Corp. and the congressional Resolution Trust Corp. Later she worked for George Firestone, the former Florida secretary of state and Tecton Inc.'s chairman and chief executive officer.

"We sold out in nine months," Appel says about the Boynton Beach project.

The success in Palm Beach County encouraged the partners. Their search for affordable properties sent them to St. Lucie County. They found a 230-unit apartment property and converted it into the Belmont at St. Lucie West.

In Port St. Lucie, however, they departed slightly from their business plan. They decided to develop another 230 condo units on the 39.7-acre site in a phase two plan.

"Construction really is not our game," Berkowitz says. "We're not builders; we're buyers and sellers."

The partners again hired Suquet to manage and market the Port St. Lucie property. To manage her increased workload, she formed her own company, Broadmor Development Realty Advisors, LLC.

Because of reports they had heard, Berkowitz and Appel took an interest in the Tampa Bay market. It was apparent early on that the market's real estate prices fit with their market strategy to develop entry-level condos.

Rather than go it alone in a new market, the partners contacted the Tampa office of Cushman & Wakefield of Florida, Inc. The partners and Suquet began a search for Tampa-area properties with the help of Byron Moger, a senior director in C&W's apartment brokerage division.

The partners stepped somewhat gingerly into the market. In May, Berkowitz and Appel purchased 224 apartment units for $22 million, or about $98,214 a unit, in Zephyrhills. The pricing for the newly renamed Belmont at Ryals Chase fit into their business strategy.

Although sales are a little slower than originally anticipated, Berkowitz says a steady stream of buyers are attracted to prices that range from the low-to-high $100,000s.

"It's a 3-year-old property," he says. "It's a tremendous opportunity for a beautiful project that offers affordable prices."

The partners' experience in Zephyrhills only encouraged their interest in the local market. It was apparent to them the Tampa Bay market possessed market prices far below those they had seen in the South Florida market. They decided to take advantage.

"About six months ago market prices in Tampa were about 50% less than comparable properties in South Florida," Appel says. "Today, they're about 20% less. In a year, (Tampa) will be catching up."

That market outlook fueled the partners' decision in July to buy 1,000 apartment units for $87.5 million at Tampa's Grand Palm Village. At $87,500 a unit, the partners are convinced they negotiated a good deal.

The partners obtained a $98 million mortgage on the 1,000-unit property and remarketed it with Suquet's help as the Grand Oasis at Carrollwood. Besides façade renovations, they're replacing most of the heating, ventilation and air-conditioning units. Sticking with their market strategy, the partners priced the Grand Oasis units at between $99,000 to about $250,000.

As they explored Tampa's Carrollwood market, the partners became aware of other opportunities there. A month later, they acquired the 390 apartment units in the Arbors at Carrollwood for $46 million. The partners expect to market those units as entry-level condos, too; the company is in the early stages of pricing the units.

Meanwhile, Berkowitz and Appel have altered their market strategy just a bit. Besides their focus on Tampa, they're also looking at potential opportunities in Orlando and re-examining the South Florida market.

All of these opportunities may just be the first step to a larger stage, Appel says. "We're trying to become a national company."