- Michael Shvo and investors bought the Raleigh Hotel in 2019 as part of a luxury condo development plan.
- Now, the sales firm Newmark is pitching the development.
- Shvo says the effort is to buy out an investor in the luxury project.
The developer Michael Shvo has built a $3 billion collection of trophy real estate in a wager that luxury assets would outperform.
His most ambitious ground-up development project to date, a condo and hotel planned for Miami Beach, is now getting underway, Shvo told Business Insider.
“In the last three months, we’ve put a hundred million dollars of new money into the deal,” he said.
At the oceanfront site, called the Raleigh, Shvo plans a luxury hotel, an exclusive beach club, and a condo tower designed by the star architect Peter Marino.
One of the investors in the development, however, is seeking to pull out, Shvo said, declining to identify that investor.
The commercial real-estate sales and services firm Newmark has been hired to shop the investor’s stake. In recent weeks, Newmark has begun to distribute marketing materials to prospective buyers that describe details of the planned development.
Two Miami-based developers who were familiar with the offering said they believed it was a signal that the entire project could come up for sale.
Shvo denied that.
“There’s no sale of the Raleigh,” he said. “It’s a recapitalization of one of the equity partners.”
Shvo declined to say how large the partner’s ownership interest was or how much it was seeking to recoup in the potential sale.
He said that the project was on strong financial footing and was moving forward.
“We just literally just started major construction on the site,” Shvo said.
Newmark was previously hired by Shvo in September to find a buyer for a block of 44 unsold apartments at a recently finished Mandarin Oriental branded condo building that Shvo erected on Wilshire Boulevard in Beverly Hills after a tepid response from condo buyers.
A spokeswoman for Newmark declined to comment.
An appetite for glitzy trophy properties
Shvo, a 52-year-old former luxury residential broker turned developer, made a splash in recent years in the commercial real estate business by acquiring billions of dollars of pricey property assets across the country. The purchases included the Transamerica Pyramid in San Francisco and 711 Fifth Avenue in Manhattan.
An investment group led by Shvo bought three adjacent historic Art Deco hotels, the Raleigh, the Richmond, and the South Seas, along the Miami Beach waterfront in 2019 to amass the current development site. He paid roughly $243 million for the properties.
Shvo planned to renovate and redevelop the sites and tapped Rosewood, an upscale Hong Kong-based hospitality operator, to manage the new hotel and residences.
To help publicize the project, Shvo installed an elaborate temporary garden of lush plantings and fanciful animal sculptures by the late French artists Claude and François-Xavier Lalanne. And he held upscale dinner parties catered by the renowned Italian restaurant Langosteria, which has said it will open its first American outpost at the project.
Despite early buzz and luxury pedigree, preliminary site work had never progressed into full-bore construction.
One hurdle Shvo has appeared to face are pre-sales at the sky-high values he has sought to achieve at the planned condo — a prerequisite to securing a loan large enough to fund construction.
The developer has said publicly that he has secured roughly $250 million of pre-sales at the condo building and had locked more than a dozen of the project’s 42 planned apartments into contract.
But financial information being distributed by Newmark and reviewed by Business Insider state that as of December, Shvo had pre-sold 5 apartments totaling $67 million. According to Newmark, the sales were at an average price per square foot of roughly $4,400 — a lofty figure, but still short of the roughly $6,000 that Shvo had boasted the project would achieve.
A person who has access to a recent financial report prepared by the auditing firm Deloitte for Shvo and his partners in the Raleigh said that the document showed that the ownership group has had to pay enormous sums to carry the property for the past five years, including millions of dollars spent on taxes, insurance, and other costs annually.
In 2023, nearly $20 million was paid in interest on the property’s current $190 million mortgage alone, which is held by the Miami based lender BH3, according to the person, whose identity is known to Business Insider. The person did not want to be named because the financial information being shared was considered confidential.
That debt on the property was due to expire on January 16, but Shvo and his partners extended it for another six-month term, according to BH3.
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