In The Magazine

Marketing Miami

Sunday, March 1, 2015
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AVENUE: In the world of luxury residential real estate sales, we typically see two distinctive paths of bringing projects to market: hiring an experienced in-house sales director who assembles a sales team to work directly for the developer, or hiring an established real estate brokerage firm.
It is well known that on-site real estate brokerage firms charge somewhere between 2 and 3 percent of the total gross sales of the development. When you divide up that 2 to 3 percent, the sales director is compensated, the floor is compensated, and then of course the brokerage firm needs to be compensated. When totaled, the costs are greater to the developer. On the other hand, with a direct in-house team, the developer compensates the sales director and compensates the floor, but obviously does not have the compensation that goes back to the brokerage firm. The costs are lower to the developer, and the in-house team is only focusing on one project, not multiple projects. Alicia, ladies first. What’s the case for going with a larger real estate brokerage like Cervera to sell a project?

CERVERA: Well, for one, you get what you pay for: that is, inexpensive is oftentimes much more expensive in the long run. I think that the wonderful thing about a free economy is that we have these choices. I don’t really think that when a developer is looking at a $300 million project a choice is being madebased on a $3 million savings. Because in fact, that $3 million could turn into the failure of the project if the developer makes the wrong choice.

AVENUE: Edgardo, do you share that sentiment?

DEFORTUNA: Absolutely. The real estate brokerage provides such an incredible value to the developer. Having an international team with the knowledge and experience of the market and pricing, a client list and so forth, while also actively engaging in 15 to 20 projects at a time . . . Certainly it’s worth the $3 million.

AVENUE: Now we’ll take the conversation to the other side of the table. Jim Cohen, you’ve been working directly with developers and their projects with in-house teams for more than twenty years. What’s the case for that in-house direct sales model?

COHEN: For one, the developer can talk directly to the salespeople. For a developer that’s seasoned and has a track record within the market, that really understands the game, bringing an in-house team offers a lot more internal interaction. There’s also less competition. The sales director on the job is totally committed to that project alone, and so is their team.

AVENUE: Michael Neumann, let’s pivot to this idea of a motivated sales organization versus a dedicated sales team. What’s your perception of that?.

NEUMANN: At the end of the day, regardless of who you bring in, it always comes down to who is on your team. Making the right choice, be it brokerage or in-house, choosing the right team is critical. You can have the big, international companies behind you, but if they don’t have the right team on board from that firm, then the project is going to limp along. When you are doing the project yourself, you have the advantage.

AVENUE: Jay Parker, please give us your “elevator” pitch as to why a brokerage firm is better than in-house direct.

PARKER: Simply stated, the bandwidth and manpower that’s needed with the amount of competition out there is something that only a large brokerage house can offer. Furthermore, with South Florida becoming an international epicenter, the strategy, reach, technology and optionality is maximized by a sophisticated team that is regularly evaluating the landscape to ensure that its clients are offered maximum reach in each element of a successful development marketing plan. Douglas Elliman as a company attracts better talent for the sales force than a developer would alone. Top-tier talent would rather be with a large, respectable firm then a single developer. From an economic perspective, the developer still pays a fee to a sales team. The cost for a large marketing firm such as DE is minimally more, and we come with an entire team. To assemble a team that we provide would take a developer quite some time, not to mention the collective power of our team and its familiarity with working within our parameters. It makes us more effective in speed and efficiency, not to mention our buying power and relationships.

AVENUE: Michael Internoscia, you’re a very experienced real estate professional and presently the sales director at Marina
Palms for DevStar Realty. What’s your take on the benefits of having a dedicated internal team?

INTERNOSCIA: I would say that there is a compelling argument. If you’re a new developer in the market and you haven’t developed in South Florida, you look for the expertise of the Defortunas and Ceveras. They’re going to bring you the depth that you might not have. But like Jim said, a more seasoned developer will typically have a better grasp on the market and what’s needed to be successful, of where it can effectively lower costs and still have that control of the sales environment for the project.

AVENUE: Let’s talk about the sales director role, one of the most critical components to any project. How critical is that decision for a developer, choosing the right person or team?

DEFORTUNA: Absolutely critical. And they’re very, very hard to find. I have the utmost respect for everyone around this table: everyone is deeply experienced and knowledgeable about the market, and I think that’s something everyone at this table provides. Whether the decision becomes to go with a dedicated team or a larger brokerage, both provide the critical balance a developer needs.

AVENUE: Alicia, in terms of finding these established capable sales directors that lead these teams, how do you address that challenge?

CERVERA: There’s a myth out there that if you hire one of our companies you don’t get a dedicated, full-time sales team. But in fact, when you hire one of our companies, you do have a full-time, dedicated sales team, and a full-time, dedicated manager. That team is totally dedicated to the project at hand. And from day one, what Cervera has done is train project salespeople and project managers.

AVENUE: Let’s shift a moment and discuss how robust the internet has become in terms of marketing and selling real estate. How everybody is connected, everybody’s got the same “list” and everyone knows everyone else. Edgardo, how do you address that?

DEFORTUNA: I always say that a lot of people have the list. A lot of people even know the foreign brokers and the brokers. But very few people have the relationships with them for twenty years like we have. Very few people know these brokers’ wives. Very few people have their wives taking presents to their children when we go visit those countries. It comes to trust and those long-standing relationships.

AVENUE: While we’re still in the first quarter of 2015, as a group, what’s your take on what the year will hold for the South Florida real estate market?

COHEN: It’s competitive! And it’s going to get more competitive! Price has been driven to points where a lot of people can’t afford to buy. They might be coming from Europe or South America now, but not everyone is super wealthy. The U.S. market hasn’t really gravitated; we’re seeing some more business out of the Northeast, but at today’s prices working people can’t give themselves a raise–they’re just priced out of the market. So as a result we’re now starting to see a push going a little bit north to Broward County and into Fort Lauderdale Beach.

CERVERA: I say, “Welcome to Miami!” I
arrived in Miami when I was three; I’ve seen several cycles. And what you said about South America we’ve said every year, right? That’s the dynamic of it, and if you can’t take the heat, don’t come to Miami! Because that’s the reality of our market: we have tremendous highs, we have tremendous lows. But the reality is that we come back from those lows ever so much higher, and our city right now is being redefined in an absolutely staggering way.

DEFORTUNA: It’s definitely true: the world is in love with Miami. Of course, we’re going go through cycles, but from a development point of view we learn our lessons at least in part, and you know, we’re a lot more prudent about how we do things and the model of the 50 percent deposits on preconstruction. It’s such a huge impact on our overall industry. Yes, it may be slowed, but it’s not going to be a crash like we experienced before, because people not only want Miami, they really are in love with Miami.

NEUMANN: I think the market’s still there; what happens is there’s more competition now so it feels like it’s slowing down, but it’s not—they’re still coming. The luxury market is still on fire, and what continues to facinate me is not only how deep it is but how remarkably diverse too.

INTERNOSCIA: It’s interesting. Over the past 15, 16 years—and I’ve seen a lot of different countries—every other year there’s always a new country emerging, wanting to be Miami, as Alicia says. But now we’re seeing sales comes from every country! People from dozens of different countries are scrambling to invest in our market—and not just in real estate, but in business as well. So now when one country begins to struggle, others are opening up even more. And our broker networks—you know, this is what people do for a living when they work on commission: they’re always opening up new networks to introduce our city to many different countries. It’s a remarkable time to be in the South Florida market. I couldn’t be more optimistic or energized for the immediate and long-term future of this market.

PARKER: South Florida continues to present an opportune alternative to New York and California, and remains a growing mecca for lifestyle, high-net-worth individuals, and an investment safe haven for international investors. While I expect the market to continue its cycle—and with the release of the completed new construction, a leveling of pricing would not be unexpected—I see the South Florida real estate market continuing to expand and develop, to present great opportunities for residents and investors alike.

Len Dugow is the president and chief creative officer of LGD Communications, a Miami-based full-service branding and advertising agency with additional offices in Manhattan and Dubai. Dugow is an acknowledged expert in the marketing of destination resorts, hotels, travel, entertainment and high-end residential projects for the country’s most prominent companies. Under Dugow’s leadership, LGD has marketed more than $25 billion in residential real estate and currently represents more than 50 resorts and hotels around the globe.
Nearly 25 years on, LGD boasts a diverse client base ranging from local businesses to global brands in a variety of industries. All benefit from LGD’s strategic, creative solutions which place an emphasis on cohesive, multichannel branding across all media platforms, from traditional to digital/interactive and social.
To learn more about Len Dugow and LGD, please visit lgdcom.com.
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