- Michael Shvo and investors bought the Raleigh Hotel in 2019 as part of a luxury apartment development plan.
- Now, sales firm Newmark is doing the development.
- Shvo says the effort is to buy an investor in the luxury project.
Developer Michael Shvo has built a $3 billion collection of trophy real estate in a bet that luxury assets would be the best.
His most ambitious development project to date, an apartment and hotel planned for Miami Beach, is now underway, Shvo told Business Insider.
“In the last three months, we’ve put a hundred million dollars in new money into the deal,” he said.
In the oceanfront area, called Raleigh, Shvo plans a luxury hotel, an exclusive beach club and a residential tower designed by star architect Peter Marino.
One of the investors in the development, however, is looking to pull out, Shvo said, declining to identify that investor.
Commercial real estate sales and services firm Newmark has been hired to buy the investor’s shares. In recent weeks, Newmark has begun distributing marketing materials to potential buyers outlining details of the planned development.
Two Miami-based developers familiar with the bid said they believed it was a signal that the entire project could go up for sale.
Shvo denied this.
“There’s no selling Raleigh,” he said. “It’s a recapitalization of one of the equity partners.”
Shvo declined to say how much the partner’s ownership interest was or how much it was seeking to recoup in the potential sale.
He said the project was on solid financial footing and was moving forward.
“We literally just started major construction on the site,” Shvo said.
Newmark was before hired from Shvo in September to find a buyer for a block of 44 unsold apartments in a recently completed Mandarin Oriental-branded apartment building that Shvo erected on Wilshire Boulevard in Beverly Hills after a lukewarm response from apartment buyers.
A spokeswoman for Newmark declined to comment.
An appetite for fine trophy properties
Shvo, a 52-year-old ex luxury residential broker turned developermade waves in recent years in the commercial real estate business by buying up billions of dollars of expensive property assets across the country. Acquisitions 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, Richmond and South Seas, along the Miami Beach waterfront in 2019 to assemble the current development site. He paid approximately $243 million for the properties.
Shvo planned to renovate and redevelop the sites and tapped Rosewood, a Hong Kong-based hospitality operator, to manage the hotel and new residences.
To help publicize the project, Shvo installed an elaborate temporary garden with lush plantings and fantastical animal sculptures by the late French artists Claude and François-Xavier Lalanne. And he organized lavish dinners provided by the famous Italian restaurant Langosteria, which has said it will open its first American outpost in the project.
Despite the early hype and luxurious provenance, preliminary site work had never progressed to full construction.
One hurdle Shvo appears to face is the high-value pre-sales he has sought to achieve on the planned condo — a prerequisite to securing a large enough loan to finance construction.
The developer has said publicly that he secured approximately $250 million in pre-sales at the apartment building and had more than a dozen of the project’s planned 42 apartments under contract.
But financial information released by Newmark and reviewed by Business Insider says 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 high figure, but still short of the roughly $6,000 Shvo had boasted the project would fetch.
A person with access to a recent financial report prepared by auditing firm Deloitte for Shvo and its partners in Raleigh said the document showed the ownership group had to pay large sums to hold the property for five years. last, including millions of dollars spent on taxes, insurance and other costs each year.
In 2023, nearly $20 million was paid in interest alone on the property’s current $190 million mortgage, which is held by 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 supposed to expire on January 16, but Shvo and his partners extended it for another six-month term, according to BH3.