The lead partner of one of Miamis largest residential real estate development project, Midtown Equities Joe Cayre, has kept a low profile, until now. By Mike Seemuth
Joe Cayre is a rich businessman who got wealthier by developing a keen eye for opportunities unseen by other investors. Now, true to form, Cayre is trying to reshape the Miami metropolis where he spent his formative youth by building a 10-building real estate project called Midtown Miami a city within a city, as he describes it on an overlooked 56-acre tract that other developers refused to touch.
Formerly known as the Buena Vista rail yard, the site is located just south of Interstate 195 in Miami. When Cayre initially inspected the property, which had been an empty field used to store sea cargo containers, he recorded its blighted environs. We took movies, and we saw people shooting up drugs there and sleeping on the ground there. It was a problem area and I saw that, Cayre recalled in a recent interview with SouthFloridaCEO at the sales office of Midtown Miami. But I also saw what it could be.
Time will tell whether their investment in Miami pays off for Cayre and his partners in New York-based real estate investment firm Midtown Equities. The 56-acre site they bought is bordered on the north by Northeast 36th Street, the south by Northeast 29th Street, the west by Miami Avenue, and on the east by the Florida East Coast rail line. Over the next five to six years, Midtown Equities plans to develop $1 billion worth of homes, shops and restaurants on the land, which it bought in 2002 for about $34 million.
A lot of people that I grew up with here thought I was very foolish and I overpaid dramatically for this property, says Cayre, who attended North Beach Elementary School, Northwest Junior High and Miami Beach High School. He remains unfazed, though. Where can you buy 56 acres of land in the heart of a bustling city? I dont think anyplace in the United States today. To me, whatever price, it was cheap.
A co-investor of Cayre with local connections, Michael Samuel, moved from New York to Miami in 2002 and quickly brought the Buena Vista rail yard to Cayres attention. Samuel became familiar with the rail yard during frequent trips to visit his parents at their Miami Beach residence before he moved to Miami. One potential plus was the sites visibility from I-195, the short connecter highway between I-95 and Miami Beach, which runs along the northern border of the Midtown Miami site. Two handy entrance ramps to I-195 are near the site, all the better to serve its future residents.
Politically savvy from the get-go, Midtown Miami drew municipal support. The city government of Miami has been motivated to work with Cayre and his crew to develop a large tax base at the under-utilized rail yard, which in recent years stored cargo containers from the Port of Miami.
It was overlooked, says Samuel, a self-described control freak who moved to Miami because I have to be near my projects. Cayre shares that hands-on obsession, shuttling about every two weeks between his New York home and his Aventura condo to keep tabs on Midtown Miamis progress.
I like to do things in towns where I live. It doesnt get away from you if youre right there all the time, Cayre says. If you were doing a deal in Las Vegas, as nice as Las Vegas is, after going back and forth about 20 times, youd start to tire, and you might not want to go as often.
Having an exciting job is part of what makes Cayre tick, a personality trait demonstrated early and often in his career. A few years after he graduated from Miami Beach High, he moved to New York and wound up making a fortune there in the entertainment business.
Through a friend who worked in management there, Cayre landed a job at Columbia Records International overseeing sales of Spanish-language music. Though he spoke Spanish, he was only 20 years old at the time. Cayre took to the business, and soon wound up running his own company, called Caytronics, which went on to become a leading Spanish-language record and music publishing company during the 1970s.
I had the most successful Spanish [language] record company in the country. I sold that company to RCA Records for $125 million, he says. It was a lot of money, so I retired. He was 39 years old.
The father of five did not retire for long. For three months: I went to visit my children in school every day, and they got tired of seeing me, Cayre recalls. They said, Daddy, dont come to school anymore. Other kids daddies dont come as often as you do.
I just couldnt stay home every day. I ran around the world a couple of times, and that didnt do anything for me, either.
By the early 1980s, Cayre was getting ready to parlay his success in recorded music into a profitable video business, but was still looking for the right business model. He recalls a pivotal discovery about movies not fresh releases but older, overlooked films at a video trade show.
I saw all of these great big-name video cassettes for $79.95. Then I saw this one big booth with John Wayne movies and all these other kinds of movies for $14.95, he says. Cayre asked the low-price booth tender to explain the dollar difference.
He said these are public domain films. He said, I dont pay any money for them. I just buy the negatives because nobody owns the rights. They fell into the public domain, either because the studios didnt renew their licenses or copyrights, Cayre says. He wondered exactly how much entertainment was in the public domain at that time. A lawyer friend referred him to another attorney in California.
I called up and found out there were 50,000 films and television shows in the public domain, he says, and I decided to make that a business, which operated under the name GoodTimes Entertainment.
The start-up of GoodTimes led Cayre to a fateful meeting with Sam Walton, legendary founder of retail colossus Wal-Mart. Cayres discussion with Walton about video sales promotion included a trip to a nearby Wal-Mart. Sam asked me to jump in his truck and go to the store down the street, Cayre says. Once inside the store, Walton asked Cayre for his evaluation of its video department.
I said, Mr. Walton, with all due respect, I have never seen anything so bad in my whole life. I said, you have these things stacked up like a library shelf. I dont know if theyre books or videos, and as a consumer, I wouldnt know what to buy or how to buy. Cayre went on to suggest the design for an improved floor-display fixture for videos, which Walton approved and ordered implemented on the spot. Then the real payoff came.
We were the sole distributor of videos to Wal-Mart for 10 years, and I would say I did about $5 billion with Wal-Mart in that time frame, Cayre says. A lack of competition from major Hollywood studios helped. Today, the studios all sell to Wal-Mart, but at that time, they couldnt sell them anything. The studios were very arrogant and didnt really know how to sell to them.
After starting up GoodTimes Entertainment in 1984 and running it for most of the succeeding 10 years, Cayre finally cashed in his equity: I just sold it in 2003 for $280 million, he says. And as he started to accumulate wealth from his entertainment business interests (including an independent disco record label called Salsoul Records, specializing in a mix of salsa and soul) Cayre also began to do some defensive investing. The idea of passively parking his surplus cash with a group of investment advisers held no appeal for him. Ever the active investor, Cayre looked to real estate acquisition and development.
Around the time he founded GoodTimes, Cayre had started diversifying his personal net worth by investing in real estate, initially with a partner in the Washington market. I learned a lot from him. We currently still have about 5 million square feet there, Cayre says.
As the commercial real estate market nationwide went south during the late 1980s, a cold call led Cayre to invest in more than 100 properties that a big savings bank foreclosed on. They said, Look, we have 111 buildings in Manhattan that are all under foreclosure and wed like to sell the package to somebody. I said, Well, come right over. And I bought them with a helpful pile of incentives from the lending institution. I think I paid 1 percent down, no interest for 5 years, no principal for 2 years. How could we go wrong?
His brothers Ken and Stan Cayre, with whom he regularly invests, had serious doubts about the Manhattan buildings, a mostly non-descript portfolio of properties. One of my brothers said, What do we know about this business? I said, What is there to know? Did you ever hear of anybody coming up with a truck and stealing your building? I said, These investment bankers, I doubt they would steal our money, but they could sure lose it.
If the best investment an investor ever makes is the one he or she simply cannot sell, the 111 buildings in Manhattan would seem to qualify for Cayre, who never wanted to sell one. Indeed, only one has been disposed of; Cayre says the math was too compelling for even a sentimental investor to ignore: We finally sold one about seven or eight years ago for about 100 times what we paid for it, because we only put one percent down. So, if I bought a $5 million building, maybe I put down $50,000 but I got $25 million for it. So, $50,000 for $25 million, thats a pretty good run on your money.
As much as he loves them, those 111 buildings lack curb appeal. They are nothing to write home about, Cayre says. Not all of Cayres real estate projects have begun as diamonds in the rough. His decision to purchase partial ownership of an investor groups lease on the World Trade Center was clearly a venture into iconic real estate and a rocky one at that. Six weeks after he bought into the World Trade Center lease, the two main towers were destroyed and thousands of lives lost in the Sept. 11 terrorist attacks.
Now the investor group, led by managing partner Larry Silverstein, is proceeding with plans to build the first of five new towers around the hallowed parcel known as Ground Zero. At the same time, the investors are fighting in court with a group of property insurers who had covered the World Trade Center, arguing how much they will pay to settle the investors claims from the attack.
Its a big mess. But at the end of the day, there will be enough money to build all the buildings, Cayre says. Larry Silverstein is a terrific managing partner. He just works day and night on this. Its his lifelong dream. Its going to be spectacular.
Cayre is far more involved in the day-to-day operations of Midtown Miami, which he describes as his primary professional passion these days. And no wonder. A 339-unit condominium building called Midtown 2 was marketed for pre-construction purchase in 2004 and sold out in the first three days the units were on the market, at prices ranging from $199,000 to $3.5 million for a penthouse. The presale phase of a similarly sized condominium building, called Midtown 4, launched Jan. 18.
Meanwhile, demand from banks, art galleries, shops, restaurants and other potential tenants for commercial space planned at Midtown Miami is so high I was kind of shocked, Cayre says without naming any names. And the rents are pretty close to New York rents, which I couldnt believe.
Not all of the development burden on the 56-acre site will be borne by the Cayre camp. It has sold 26 of the acres to Developers Diversified Realty, a Cleveland-based firm that intends to create a landscaped, low-rise retail district, called Shops at Midtown, to serve local residents.
The Shops at Midtown project is being developed as a community-based retail center, not a massive mall that would be pulling patrons from cities throughout South Florida. If you werent planning on going there, you probably wouldnt, says Dan Herman, director of development in the eastern US for Developers Diversified Realty.
Miamis city government asked Hermans company to come up with an un-enclosed design for the Shops at Midtown, not a look reminiscent of a suburban shopping center. His company happily agreed to, Herman says. We dont do malls.
Anyone who has watched the condo construction boom in downtown Miami and Miami Beach might rightly conclude the residential component of Midtown Miami faces more risk than the retail component.
In fact, Cayre suggests that the developments first condominium building, Midtown 2, was something of a loss leader. We probably wont make any money on the first building.
But his dreams are bigger than his last transaction, as they usually seem to be. This is a long-term development, Cayre says. Were not looking to grab cash and run away. We know we have 10 buildings to do, so the customers in the first building have to say this is the greatest, because we believe word-of-mouth advertising will sell out all our buildings.