MIAMI-The Miami-based Related Group gave back two of the three towers at the approximately $1 billion Icon condominium/hotel development on Miami’s Brickell Avenue to its lender, a syndicate of banks led by HSBC. On May 11, developer Jorge Perez, chairman and chief executive of Related, gave the lenders a deed in lieu of foreclosure, after months of negotiations.

Although two thirds of the ICON property no longer belongs to Related, Perez, known for his successful projects in South Florida and elsewhere, until the economy turned sour, will stay on as co-manager of the project and has entered into an agreement with Miami-based Fortune International, to co-manage the project’s sales and marketing efforts. Fortune International and its president, Edgardo DeFortuna, have a long-standing relationship with Related.

Working with a separate bank syndicate, led by Bank of America, Related continues to own and operate the 50-story Tower 3 and will continue to market the property with its sales affiliate RCRS (Related Cervera Realty Services). The third tower contains the Viceroy Residences, the Viceroy Hotel and the Eos restaurant and rooftop lounge, Club 50.

Of the 1,793 units at the ICON, Related sold only 433, or about 24%, even though, late last year, the developer got permission from his lenders to discount the units by 30%. In spite of Icon's prestigious location and design features, it could not overcome the glut of condominiums which hit the region in recent years, especially in Miami, where thousands of condominiums built during the boom could not find buyers. Only now, with deeply discounted prices, and some units being filled by renters, is the glut disappearing.

Between Everglades on the Bay, a downtown condominium with 849 units, less than a mile from the Icon, and Icon, these developments have the most inventory in downtown and Brickell to be sold off, says Michael Cannon, executive director at Integra Realty Resources-Miami.

The Icon, which sits at the juncture of the Miami River and Biscayne Bay, is nothing if not exotic and luxurious. Designed by famed Miami architectural and interior design firm Arquitectonica, it also features designs by Philippe Starck, including a multi-level entrance area with 100 columns modeled after Easter Island.

Icon’s two-acre pool deck sits 140 feet above Biscayne Bay and features a series of three infinity-edge pools totaling 300 feet in length (the longest pool in Florida) including a reflection pool and an over-sized thermal hot tub that seats 80. Rows of trees line chaise lounges and beds along the pool and enclose the outdoor living area that holds an over-sized fireplace and life-size chess set.

But if Icon’s designs are unusual, “There is nothing unusual about the Related deal,” says Jack Winston, principal with Goodkin Real Estate Consulting, based in Miami. “When we are in an economic situation such as we are in now, it is not (unexpected) that the developer is unable to pay back the loan. Jorge Perez is still involved, because the banks think he is a talented developer,” he says. “They’d have to hire someone else to sell the remaining units, if they didn’t have Perez, so why not stay with the person you know?”

“Icon didn’t fail because of Related,” says Winston. “Jorge thought, as everybody else did, that there was no end in sight (to the boom). I fault the banks because they didn’t do due diligence on the market,” he says.“This deal is a classic example of what is happening in the market. This will not be the last of this kind of thing," says Winston.