What Happens to Renters After Developer Converts to Condos
Prospective apartment tenants at Property Markets Group and Greybrook’s downtown Miami tower have restarted their housing search after the developer decided to instead sell the units as condos.
The developers returned their deposits, offered to give the prospective tenants the equivalent of one month of rent, and told brokers they would pay their commissions, according to PMG.
After testing the market with condo reservations, New York-based PMG, led by Ryan Shear, Kevin Maloney and Dan Kaplan, and Toronto-based Greybrook, led by Elias Vamvakas and Peter Politis, announced last week that Society Biscayne is now The Elser Hotel & Residences. The 49-story, 646-unit short-term rental-friendly condo building is nearly completed and units now start in the $600,000s. It’s at 398 Northeast Fifth Street, around the corner from the planned Waldorf Astoria Residences and just north of the X Miami rental building, both PMG-led developments.
Preleasing at Society Biscayne began in December. The building was about 20 percent reserved at the time of the switch to condos, according to PMG. It’s unclear how many renters had reserved units because it was designed as a co-living rental tower with multiple applications per unit. PMG declined to provide the number of applications that were canceled.
Prospective tenants who each put down $600 to reserve apartments told The Real Deal that while PMG was in the process of determining if the units would be sold as condos, between April and May, they could not get in touch with the leasing team. Eventually they had to start their housing search from scratch – a challenge in today’s housing market. Miami, now the least affordable housing market, has experienced record rent hikes over the past year-plus.
Though they didn’t have leases, applicants said they knew which units they would be moving into and adjusted their living situations based on construction delays with Society Biscayne, ultimately with the plan to move in as early as July. By signing on early, many locked in lower rates.
On May 12, PMG notified its prospective tenants that it was considering selling the units as condos, but that it hadn’t made a decision yet. Investors are hungry for new condos with few to no restrictions on short-term rentals, prompting a wave of new projects in Greater Downtown Miami.
“You may be aware that pre-leasing activity has been paused… That is due to the development team exploring the possibility of selling units in the building as condos,” PMG wrote in an email to prospective tenants.
On June 15, Society Biscayne said it had canceled all leasing applications, would return the $600 deposits and offered the would-be tenants one month of base rent, according to emails the developer sent.
PMG’s senior director of asset management, Yechiel Ciment, said the developer informed the building’s applicants of the potential change to give them more time to find new homes, and offered the one month of rent, even though PMG wasn’t obligated to do so. Ciment acknowledged there was miscommunication with the leasing agents and those selling units.
The developer also said that while it tried to facilitate apartments at other downtown rental buildings that weren’t affiliated with PMG, that ultimately did not work out.
“PMG’s reputation was very important to us and the community, and we really just wanted to do as right as possible,” Ciment said. “It was very important to the PMG principals to again go above and beyond for our applicants.”
Still, not everyone was satisfied. One reviewer on the Apartments.com listing said that the developer shouldn’t have accepted deposits if it was considering not moving forward with rentals.
“Totally unfair and unethical to people who have given them thousands of dollars. Those decisions should have been made before accepting people’s hard earned cash,” the reviewer wrote.
One would-be tenant, who previously lived at PMG’s Society Las Olas rental building in Fort Lauderdale, told TRD they were waiting to move into Society Biscayne after securing a reservation for a unit on a higher floor. The renter said they locked in a monthly rate of $2,400 a month for a one-bedroom unit, expecting to move in in May.
Another prospective tenant, who did not wish to be identified, understood that it was the developer’s prerogative to lease or sell the building, but criticized how the situation was handled. After signing on with Society Biscayne in March, he planned to move into a two-bedroom co-living unit in July. By mid-April, the leasing team stopped responding to him.
“Things started to get a bit desperate at the end of May. The portal wasn’t working. I couldn’t get into contact with anybody from Society Biscayne,” said the prospective tenant, who expected to pay about $1,650 a month for his share of the apartment. (Now, he’s paying more than $2,000 for a two-bedroom unit farther away from where he works.)
He ended up getting in touch with a real estate agent through WhatsApp in late May – but it wasn’t a member of the leasing team. “He told me he was trying to sell the building for condos, and I thought that was kind of weird,” the prospective renter told TRD.
“No one gave us a heads up. I put down my deposit… then I was left scrambling a month before I was expected to move to find a new place to move to,” he said. “I understand it’s their building… but they could have been more transparent with that.”