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New York-Based Multifamily Investors Flock To South Florida

There is a wave of investors who are currently selling their New York-based properties to invest in the South Florida area. Why?

Mainly because of the recent rent control law and its negative impact on returns on investments. It has been estimated, for example, apartment property values dropped 20%-30% as soon as the laws went into effect. Some investors are now mainly focused on getting their money out of New York and are looking to invest in properties that will produce better yields—specifically in non-regulated rent control markets, such as South Florida.

Why South Florida?

“There is zero incentive for New York multifamily investors to purchase a building and spend money on renovations if they can’t raise rents in these rent-controlled environments. Florida has always been a market with attractive yields. This is why most NY investors are choosing South Florida,” says Rafael Fermoselle, managing partner of Eleventrust Real Estate. “They either have their New York properties under contract to be sold, have already sold them, are in 1031 exchanges, or in some cases looking for diversification.”

Investors are selling their assets in New York and reinvesting in deals that yield more and ideally, are located under one roof. However, since Miami’s inventory is compressed with a lot of smaller multifamily properties and it’s difficult to find buildings with high unit counts under one roof, investors are turning to multifamily portfolios that are comprised of 4 – 8 buildings totaling 50-120 units. Although not all under one roof, investors are finding the 100+ units they are seeking with room to add value.

“Investors are working closely with Eleventrust because we have the inventory other brokerages don’t, plus, many of the deals they are transacting are happening off market, which many investors prefer,” explains Fermoselle.

Opportunity Zones

Opportunity Zones are another big reason why this new wave of investors are looking to South Florida. Miami, Fort Lauderdale and West Palm Beach are among the best places to invest in Opportunity Zones. There are about 123 Opportunity Zones in South Florida, including 67 in Miami-Dade, 30 in Broward and 26 in Palm Beach counties.

“Almost 16% of South Florida’s commercial assets are located in Opportunity Zones, one of the highest rates in the nation,” Fermoselle tells GlobeSt.com.

Tax Savings

New York investors looking to move to Florida also benefits from the state not having an income tax for Florida residents. New York state tax rates range from 4% to 8.82%. Additionally, the effective real estate property tax rate for Florida residents is approximately 0.98%, compared to 1.68% in New York.

New York investors will also save on capital gains tax in Florida where the top marginal tax rate on capital gains in Florida is 25% and top marginal tax rates on capital gains in New York is 33.82%.

“We currently have 4 successful deals with New York investors including multifamily properties with 9-18 units,” says Fermoselle. “We also have properties located in emerging neighborhoods that are garnering interest from east coast investors.”

 

Source: GlobeSt.

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Opportunities Ahead: Three Developers Pick The Hot Spots

Panelists spoke at the RealInsight’s Florida Commercial Real Estate Summit at the Hyatt Regency Miami on Wednesday, October 16, highlighting the potential for distribution centers, hotels, shopping malls, technology hub and sports stadiums in Florida’s major cities.

Despite years of continuous activity, Florida’s industrial and multifamily sectors still have room for growth,  said Crocker Partners Managing Partner Angelo Bianco, Mitchell Property Realty President Ed Mitchell and Merrimac Ventures President and CEO Dev Motwani.

“Industrial is where we get our stuff,” said Mitchell.

His company recently bought industrial warehouses in Fort Lauderdale and Tampa, and is soon closing on one in Miami.

“Capital lenders are all over you. It’s nice. Everybody wants to do industrial now,” Mitchell said when asked how capital partners influence his acquisition strategies. “But land costs present a challenge. It costs more to get land in Miami than to build.”

The average land acquisition price per square foot costs $60 to $70 a square foot.

In Boca Raton, Crocker is creating a campus with a food court and STEAM lab maker space, hoping to draw a tech company.

“The idea is to make the workplace like a hotel.” Bianco credited WeWork for the concept. “Their loss is our gain,” referring to the company’s recent woes.

The retail category drew little enthusiasm from panelists, especially at this time when national chains are flailing.

“The spaces are of interest only when there is a big box that you can tear down and add multifamily,” said Motwani. “Multifamily developments continue to generate strong returns, especially in the luxury market.”

As for why affordable projects don’t draw greater interests, Motwani pointed to the financial realities.

“Concrete costs what it costs. Land costs what it costs,” said Motwani. “From a financing perspective, it makes sense to get luxury condos done, not affordable housing.”

But municipalities can encourage affordable housing development through incentives, including fee relief, parking ratios and adding density bonuses, agreed Motwani and Bianco.

 

Source: Miami Herald

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Hollywood Attracts New Opportunity Zone Investments With 3 Major Projects In The Planning Stages

With two well-situated Opportunity Zones, zoning changes and a robust street improvement program, the City of Hollywood is attracting major commercial real estate developers and investors.

“Our strategic location and public investments – coupled with the tax benefits of the federal Opportunity Zone program – have set the stage for new developments that benefit our community,” said Herb Conde-Parlato, economic development manager, City of Hollywood. “We are now reviewing three new projects that could add vitality to our local economy by creating new jobs, while offering a wider array of housing, dining and shopping options to our residents.”

Those Opportunity Zone projects include:

  • Parc Place, the former “Bread Building” at 1745 Van Buren Street just south of Young Circle Park. Redevelopment stalled about a decade ago, but has been revived by developer BTI, said Conde-Parlato. Plans call for a 25-story tower mixed-use luxury apartment complex development in one phase. The project consists of 433 new apartments, 560 parking spaces and 17,000 square feet of commercial retail space. “This development would bring residential and retail vitality to our city and contribute to the walkability of our downtown core.”
  • Soleste, a residential-retail project at 2001 Hollywood Boulevard in the downtown area. Miami-based Estate Investment Group is planning the development, which would include 350 apartments, 30,000 square feet of retail space and 497 parking spaces.
  • A new hotel and restaurant at 2801 Greene Street in the South Florida Design and Commerce Center, a 150-acre mixed-use business park along Interstate 95. This $35 million investment would include 242 rooms and 162 parking spaces.

“We have many other new retail, office, multifamily and industrial real estate projects in the pipeline, but not all are seeking tax benefits under the Opportunity Zone program,” said Conde-Parlato.

Established by the U.S. Tax Cuts and Jobs Act of 2017, Opportunity Zones are designed to spur economic growth by reducing capital gains taxes on qualifying investments in designated geographic areas. The City of Hollywood moved quickly to capitalize on two large-scale Opportunity Zone designations, one in the downtown that includes all of Young Circle and the area between two major corridors, Federal Highway and Dixie Highway, and another on both sides of I-95 between Sheridan Street and Stirling Road.

By creating Opportunity Zone funds, investors can acquire and improve properties in these areas, while deferring any taxes on capital gains until Dec. 31, 2026. If the investment is held for five years, the original capital gains taxes are reduced by 10 percent; after seven years that deduction increases to 15 percent.

“Those opportunity fund investments must be entitled before year-end 2019 in order to take advantage of the 15 percent deduction,” said Raelin Storey, director of communications, marketing and economic development for the City of Hollywood. “That’s one reason why our city is seeing an upswing in development activity in the past few months. The City of Hollywood was ahead of the curve in marketing its Opportunity Zones, drawing a wave of interest among property owners, developers and investors. The tax advantages have helped make new projects more feasible, since the funds can be included in the development team’s capital structure. It’s an innovative approach to creating new business and real estate opportunities. Now, the city is working with the real estate investment community to bring forward well-designed projects that meet the standards of the city’s commercial and mixed-use zoning codes.”

Looking ahead, the city’s Opportunity Zones hold a potentially even bigger benefit for long-term investors – a permanent tax break.

“If you sell your investment after holding it for 10 years or longer, you would not have to pay any capital gains on the increased value of the property,” said Storey. “That’s really the ultimate advantage to investing in our Opportunity Zones.”

 

Source: SFBJ

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Boca Brightline Station Looks To Be A Certainty

brightline train

Brightline station is coming to Boca Raton. It’s not official. But it’s obvious.

On Tuesday, September 24th, the city council members heard details from Virgin Trains USA executives about the company’s revised offer.

“Brightline has moved a lot,” said Jeremy Rodger.

And he’s correct. Gone is the company’s demand that the city donate two pieces of land in addition to the parcels for the station and a parking garage next to the downtown library. Virgin Trains now wants only first dibs on an option from the city for those properties. Gone is the demand that the city build a pedestrian walkover. Virgin Trains now will help the city seek federal or state money for the project. Gone is the demand that the city pay for a shuttle.

Most notably, gone is the demand that the city pay the entire cost of the parking garage. Company officials said that Virgin Trains USA would pay for the 58 spaces for library patrons that construction would displace.  The city would pay based on the 342 spaces for train passengers. There is no estimate for the cost of the 400-space garage, but current industry figures cite a price of about $20,000 per space.

Mayor Scott Singer noted that the council only was telling City Manager Leif Ahnell to proceed further with negotiations. But the council members’ comments revealed what the outcome will be.

— Andy Thomson: Virgin Trains has “heard us loud and clear on our concerns.” The company has acted in “good faith” and been “responsive and forthcoming.”

— Andrea O’Rourke: “We have to move forward.”

— Rodgers: “A lot of good can come from this.”

— Mayor Scott Singer: The new offer “feels more like a partnership.”

— Monica Mayotte: “This will be a very good addition to our city.”

Virgin Trains felt confident enough to prepare a statement before the meeting and hand it out afterward: “This marks another significant step in expanding Virgin Trains to Boca Raton.”

Not that everyone’s happy. Residents of Library Commons, which is north of the library, packed the chambers Tuesday to complain about the size of the garage and how near it will be to their community. Company officials say they will work Library Commons residents on lighting and setbacks.

Though the library still would have 181 overall parking spaces, members of the Friends of the Library expressed concern about patrons getting from the garage to the library. Virgin Trains said passengers and patrons would use separate entrances and that the company would provide security in the garage.

One major question, however, remains: What might Virgin Trains—or a developer partner—do with that city land if the company acquires it?

Boca Raton had designated land east of the library for a train station. That decision envisioned commuter service—station and parking only.

Optioning the land, however, could put added development next to the library and Library Commons. Jose Gonzalez is executive vice president for real estate development of Virgin Trains’ parent company. He told council members that the possibilities include residential, office or a hotel. Those possibilities worry the Friends of the Library, who already weren’t too keen on the garage.

 “The station isn’t the end of the story.” one speaker said,

Gonzalez said the idea of building on that city land “might go nowhere.” But officials in West Palm Beach and Fort Lauderdale tout the stations’ role in spurring development. Gonzalez wants Virgin to have an “exclusive conversation” about the properties and “preserve our optionality.” Delaying that decision delays the potentially more controversial aspect of the station.

Virgin Trains wants a vote from the council next month. The company would like to open the station by the end of next year. At this point, there’s no reason to think that won’t happen.

 

Source: Boca Magazine

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Expansion, Investment Fuel Big Money In Old But Well-Located West Palm Beach Buildings

West Palm Beach

Cash me out now?

Some West Palm Beach investors and business owners are selling real estate holdings to buyers hot on the downtown, including to businesses and investors coming to the city or expanding their presence here.

“Exterior of Glidden Spina building in West Palm Beach. (PHOTO CREDIT: Rob Woodham of Glidden Spina)

A prime example is Glidden Spina + Partners Architecture Interior Design Inc. In 2014, the firm paid $1.4 million for an old, empty building, the former Hopkins Marine Hardware store at 207 6th St.

After rehabbing the space, the firm sold the building for a whopping $6.8 million two months ago. The unnamed buyer is a company that plans a family office there, a part of town branded the Flagler Financial District.

Meanwhile, longtime West Palm Beach investor Jonathan Gladstone in recent months quietly sold two properties on Clematis Street for more than $6 million. A longtime local real estate investor, Gladstone said he’s starting to see the economy flash warning signs — even as outside investors continue to clamor for a piece of Florida real estate. In addition to his belief that the real estate market may be at its peak, Gladstone also is concerned about the stock market’s recent volatility and uncertainty over tariffs.

“I’ve been here for 35 years. It’s time for me to change things up,” Gladstone said of his Clematis Street divestments.

However, Gladstone said he still owns 114 Clematis Street in West Palm Beach, where Pizza Girls just signed another five-year lease.

With the continued influx of wealthy residents and investors fleeing high-tax states, not everyone is bearish on West Palm Beach. In fact, other property owners think there’s still plenty of room for new deals.

Up for sale is the longtime home of Pioneer Linens, the upscale home furnishings store at 210 Clematis Street. The family that runs the store also owns the building has the property listed for sale for $7 million. The price includes a prime, store-owned parking lot across the street at 209 Clematis Street.

In addition to the vast downstairs retail space, the 15,383-square-foot Pioneer Linens building, constructed in 1925, has upstairs storage space, too. Pioneer Linens building is a family-owned retailer from the prior century still doing business downtown, a rarity nowadays.

In a recent telephone interview, owner Penny Murphy didn’t want to talk much about the listing, but she said the store isn’t shutting down. The listing more is a testing of the market’s appetite for the property, at a time when Murphy is fairly fed up with the constant construction and disruption along Clematis Street.

Lately, the city has been working to turn the eastern end of Clematis Street into the same curb-less look done with the 300 block, in a bid to make the street more pedestrian friendly.

If the building sells for the price Murphy wants, she indicated a Pioneer Linens store would stay in business downtown, but she wasn’t specific. Given the sales activity in downtown lately, it’s possible Murphy could get her price.

Take the Glidden Spina building, which wasn’t even listed for sale. After buying the rundown building, Keith Spina spent $700,000 to design a cool, funky space that features a coffee bar and pool table. The property’s location is just steps from Flagler Drive and the waterfront.

Kelly Smallridge, president of the Business Development Board of Palm Beach County, said she was contacted by a broker representing the owner of a family office from the Northeast. The family office was looking around for space downtown but was keen for any other buildings that were available. Spina was open to a visit, Smallridge said.

Smallridge recalled that when Spina first bought the 6th Street marine supply store, he was ribbed about building out the firm in a 1950s-era building on a side street that no one even knows about. But who’s laughing now? The family office officials took one look at the Glidden Spina space, and that was that.

“They sent someone over who said, ’We’d love to have your building — and everything in it, ” Spina said.

As for Gladstone, the sale of the 537 and 539 Clematis building, now home to MedMen marijuana dispensary, caps years of frustration with the street. He tried for years to find a suitable retail tenant for the space, first bringing in Habatat Galleries and later Footwear & More shoe store.

Recently, the city changed zoning rules downtown to allow for non-retail uses on Clematis. That allowed him to lease the property to MedMen. Last month, a California-based real entity linked to a real estate investment trust bought the building.

The changed zoning rules also are giving a new use for the former Mac Fabrics building, which Gladstone recently sold an investment group. The 426 and 428 Clematis Street building will be the new West Palm Beach headquarters of Suffolk Construction,which built The Bristol luxury condominium on Flagler Drive.

Jeffrey Attanasio, Suffolk vice president of operations, said the company is looking forward to having a visible presence downtown and being part of the urban core.

“We’re very excited about it,”Attanasio said. “The 9,000 square foot space, which features tall ceilings, is being designed to allow for collaboration among the office’s 40 employees.”

He expects the offices to be completed by year-end. Suffolk’s new Clematis Street office will be convenient to the Virgin Trains/Brightline station, which employees already use to go to and from the Miami office.

“In addition, employees now working in the company’s Phillips Point office space are excited about being closer to lunch, art and entertainment options,” Attanasio said.

Suffolk isn’t the only company seeking to expand its presence downtown. Big Time Restaurant Group just bought another office next to its existing suite of offices at 400 Clematis Street.

“The restaurant company, which owns Rocco’s Tacos, City Cellar, Grease, Louie Bossi’s and Elisabetta’s, among other eateries, needs more space as it continues to expand operations,” said Big Time partner Todd Herbst.

Big Time’s second-floor offices are above the CVS on the southwest corner of Clematis Street and Dixie Highway. In October, Big Time will close on the purchase of a $1.1 million office that features 3,000 square space, substantially adding to its existing 5,000 square foot operation.

“With 17 restaurants, we need more space to put more people in human resources and accounts payable,” Herbst said.

Once the deal closes, Big Time plans to punch through the wall to create the bigger office complex.

As for Spina, he’s busy designing his new office space. He just leased 8,000 square feet in a ground-floor space part of Flagler Banyan Square, the mixed-use project being along Flagler Drive. The space is in ground-floor retail in the Oversea apartment complex on Olive Avenue. In addition to the apartments, Flagler Banyan Square will feature a hotel dubbed The Ben, plus a separate building that will house another Big Time-branded Italian restaurant.

Spina said he’s under the gun to get the space built out by a Dec. 1 move-in date. But he’s philosophical about the move.

“The city always is seeking to bring new business to the downtown,” Spina said. “And the story of his architecture building is one example of how it can be done.”

As a result, he’s bullish on the downtown’s prospects.

“I bought an old building, invested in it and brought 30 people to work there everyday,” Spina said. “Now we’ve got a company bringing 20 people and we’re going to expand into a new building. ”

 

Source: Palm Beach Post

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Dania Beach Moving Forward With $634M City Center Redevelopment

Development is catching up with Dania Beach, a once-sleepy city between Fort Lauderdale to the north and Miami to the south.

Antique shops and mom-and-pop restaurants have been joined in recent years by a new casino and the under-construction $800M mixed-use project Dania Pointe. Coming soon: a total redevelopment of the city center.

The Dania Beach City Commission just voted to move forward with a proposal from Virginia-based REIT Armada Hoffler Properties and Boca Raton-based Capital Group to build a modern municipal building, plus five apartment buildings, two office buildings and a hotel.

The milestone came after an eight-month bid process that started when the commission entered into an agreement in December with the Dania Beach Community Redevelopment Agency and Colliers International South Florida for real estate services. They sought bids for a public-private partnership for a mixed-use development on 6.42 acres of city-owned land valued at $12.3M at 100 West Dania Beach Blvd., currently home to City Hall, a fire station, two historic buildings and a 440-space parking garage.

Three bidders submitted proposals. An evaluation committee gave the highest rank to the partnership between Armada Hoffler Properties and Capital Group. Dania Beach’s five commissioners voted unanimously to begin negotiations with the pair of developers.

According to Armada Hoffler‘s proposal, they would develop The First at Dania Beach — “a Catalyst for Entrepreneurs, Artists and for a Cultural Renaissance.” The project is estimated to cost $634.2M.

Armada Hoffler would redevelop the property in three phases, building five 14-story apartment buildings, two nine-story office buildings and a 150-room hotel. City Hall would be demolished and rebuilt, housing new city offices, a library, a women’s club and the chamber of commerce all in one building. A parking garage would be expanded by two stories, and two historic buildings would be relocated.

Armada Hoffler would lease the government buildings back to the city for 20 to 30 years and ultimately turn them back over to the city. The city would give the developers a lease for $1 a year. The REIT would also purchase some land needed for private development.

Armada Hoffler proposed that the yearly lease rate for the municipal building and parking garage improvements “be between $1.03M and $1.33M depending on the final terms and conditions … The annual lease rates for the Fire Station is expected to be $151K and $180K.”

At last night’s city commission meeting, Kevin Greiner, a development planner with the FIU Metropolitan Center who sat on the evaluation committee, called it “a potentially transformative project for Dania Beach” and said that “the financial deal proposed to the city is excellent for the city … the economics are extremely exceptional from the city’s perspective.”

Planners had spent months getting input from a community charrette and developer focus group, he said. Housing would be 100% for middle income earners, and the project would include performance space and an option to eventually connect to Tri-Rail Rail’s Coastal Link, he said.

One resident complained that citizens hadn’t been well-informed about the proposal. “It smells fishy to me. I’m not sure who on the board is colluding,” the man said, insisting that current residents didn’t want an influx of thousands of new residents and cars. Commissioner Chickie Brandemarte worried about impacts on water resources, traffic and schools. Already, Dania Beach‘s population has grown 8.1% since 2010.

Various speakers stressed that the site was just a first step and that the particulars could be tweaked and decided upon in the coming months and years. Ultimately, the commission approved a resolution allowing the city manager to establish a negotiating team to move forward and negotiate with Armada Hoffler and Capital Group.

 

Source: Bisnow

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Economy Remains In Great Shape In Florida

While there are increased worries about a recession at the national level, the economy remains in excellent shape in Florida.

There are some signs of concern of course–including recent estimates that the state government will bring in around $867 million less in revenue than expected over the next two years–but mostly things are looking up in the Sunshine State.

Last month, unemployment in Florida slipped from 3.4 percent to 3.3 percent, well below the national average of 3.7 percent. Jobs continue to grow at a 2.8 percent rate in Florida, above the national average of 1.8 percent.

Tourism also continues to boom in Florida with Gov. Ron DeSantis announcing last week that a record-high 68.9 million tourists visited the state in the first half of the year.

The Florida Realtors just announced that single-family home sales were up 10.4 percent last month when compared to July 2018.

Now, this could all head south of course. Florida’s economy continues to rely heavily on tourism and real estate, two industries that often take major hits in an economic downturn–as the Sunshine State can attest from the damage it took during the Great Recession.  Continued trade tensions with China could impact logistics and agriculture.

Thanks in large part to efforts from former Governor and now U.S. Sen. Rick Scott and current Governor Ron DeSantis, Florida continues to have a strong business and tax climate which continues to attract new residents and businesses. Even as the nation experiences increased worries about a downturn, for the moment at least, the economy remains in good shape in Florida.

 

Source: Florida Daily

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All Of The Stocks Are Tumbling — Except Real Estate

While the U.S. markets are in fear of a recession, investors seem to know one place they want to park their money: real estate stocks.

Of the 28 real estate stocks tracked by The Real Deal — a sample of real estate investment trusts, mortgage companies, brokerages and other real estate services firms — 15 saw an uptick. That’s despite the S&P 500, Dow 30 and Nasdaq showing slight losses as of 1:45 p.m. Thursday, August 15.

The Dow plunged 800 points on Wednesday, August 14, after the yield on the two-year Treasury note pushed higher than the yield on 10-year Treasuries on early Wednesday — a sign investors think it’s riskier to make shorter-term investments than longer-term ones. Markets have been on edge since last week, after President Donald Trump escalated the trade war.

Of the 15 real estate stocks that were up, Realogy saw the biggest gains. The brokerage conglomerate’s stocks were trading at $6.03, up 2.29 percent. But not all stocks were up. Mortgage loan company Ocwen Financial Corporation recording the largest drop of 4.5 percent, trading at $1.40 per share.

The Real Estate Select Sector SPDR Fund, an index that follows real estate investment trusts and real estate management and development companies, was trading at $38.19, up less than 1 percent from the market’s close Wednesday, August 14.

As for only REIT stocks, their returns were up 0.91 percent as of 1:25 p.m. Thursday, August 15, according to the FTSE Nareit All REITs Index. But compared to last week, REITs overall may be losing: Last week the index’s domestic returns were up 1.67 percent, but so far this week they’re down 1.72 percent.

While a yield curve inversion may not always signal a recession, investors will be watching what the Federal Reserve does. Real estate stocks ticked up earlier this month when Fed chief Jerome Powell said there may be a possible cut in interest rates.

Last week, signs of an escalating trade war between the U.S. and China caused real estate stocks to dip but then largely performed well compared to the overall market.

 

Source: The Real Deal

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Report: South Florida Investors Are Still Wary Of Investing In Opportunity Zones

opportunity zones

Months after the Treasury and the Internal Revenue Service released the latest round of regulations for Opportunity Zones, South Florida investors and developers are still wary enough about the rules to prevent them from investing.

A report by Bilzin Sumberg and the Urban Land Institute found that only 28 percent of respondents surveyed said that they intend to invest Opportunity Zones and only 7 percent have already done so.

The reason: investors still do not understand basic questions about the program. Nearly one third of the respondents cited uncertainty as their top reason for not investing in Opportunity Zones. The report surveyed 72 developers, investors and other professionals in June who specialize in real estate and finance in Florida.

One of the biggest questions that participants still have is around refinancings. Although the most recent regulations clarified how developers in an Opportunity Zone can refinance a property and qualify for the tax benefits, the report shows that the rules around refinancings are not understood by some members of the real estate industry.

“A lot of people still hadn’t fully digested the second set of regulations,” said Josh Kaplan, a corporate and tax attorney at Bilzin Sumberg, a Miami-based law firm.

Another reason that investors are avoiding Opportunity Zones is due to the rapid price appreciation of land in designated zones in South Florida, according to Kaplan.

Kaplan said he’s seen reports that land prices in South Florida Opportunity Zones have increased by as much as 30 or 40 percent, making it much more difficult for deals to pencil out for investors.

The Opportunity Zones program allows developers and property owners to defer and possibly forgo paying some of their capital gains taxes, or taxes resulting from the sale of certain assets. To reap the full tax benefit, those who invest in the more than 8,700 Opportunity Zones around the nation must hold the asset for at least a decade.

In Miami-Dade County, Opportunity Zones span distressed areas such as Opa-locka, parts of Overtown, North Miami Beach and Carol City, along with areas where major development is already taking place, like parts of Aventura, Edgewater and the Design District.

From April through September 2018, property sales in those areas tallied $942 million, a 25 percent increase from the same period a year earlier. Several of the Opportunity Zone tracts encompass some of the wealthiest enclaves and megaprojects in Miami, such as Turnberry Associates’ Aventura Mall and the Magic City Innovation District, a planned $1 billion development in Little Haiti.

The report shows that multifamily, however, is the favorite asset class for Opportunity Zones investors. About 82 percent of respondents view mixed-use and multifamily as the asset class most ripe for redevelopment.

Kaplan said he also expects to see more Opportunity Zones deals to close by the end of the year, as investors look to take advantage of the biggest tax benefits, which expire at the end of 2019.

 

Source: The Real Deal

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Blackstone Is Already Selling Pieces Of The $18B GLP Industrial Portfolio

The ink isn’t dry on Blackstone Group’s $18 billion buy of a U.S. warehouse portfolio, and it’s already negotiating to sell part of it.

The company, which finished its transition into a corporation this month, is drumming up interest from potential buyers for pieces of the GLP Pte portfolio, Bloomberg reported. Prologis is in private discussions to buy one such portfolio, valued at $1 billion.

Blackstone’s $18.7 billion deal for the Singaporean company’s 179 million-square-foot warehouse portfolio is one of the largest industrial real estate deals ever.

Selling non-core or non-strategic pieces of a recently required purchase isn’t uncommon. Blackstone applied the same strategy in 2007 when it sold off parts of its $40 billion acquisition of Equity Office Properties Trust.

On the whole, the warehouse sector has seen little supply, high demand and high prices, with available industrial and logistics real estate rising slightly for the first time in 34 quarters, according to a CBRE report. Demand for warehouse and distribution reached an 18-year high in 2018.

Large owners are optimistic that there will continue to be institutional investment in industrial real estate. As Prologis negotiates for a piece of Blackstone’s new holdings, it’s also in advanced talks to buy another $4 billion portfolio from Black Creek Group which spans 37.6 million square feet.

Colony Capital is weighing the sale of its $5 billion industrial in holdings on the heels of selling another warehouse portfolio for $104.6 million.

 

Source: The Real Deal

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‘It’s Like The Tulip Craze:’ South Florida Developers Expect Opportunity Zone Land Values To Wilt

Developers are finally putting shovels in the ground and deploying capital in Opportunity Zones in South Florida and across the country.

But with 124 qualified Opportunity Zones in South Florida, developers, brokers and investors at a recent Bisnow panel said they are largely focusing their attention on projects near Fort Lauderdale and Delray Beach’s urban core.

Jaime Sturgis of the Fort Lauderdale-based brokerage Native Realty said his company is involved in about 10 Opportunity Zone projects. Most of the projects are around 13th Street and Flagler Village in Fort Lauderdale, where interest in the area was already promising and density is high.

“There is a finite amount of land in Flagler Village,” Sturgis said during the Opportunity Zones event held at Sistrunk Market & Brewery in Fort Lauderdale. “That is another reason Opportunity Zone investors are flocking to the area.”

The Opportunity Zones program was part of President Trump’s tax plan, and was designed to encourage investment into low-income and distressed areas. Real estate developers quickly became enamored with the program, and large real estate investment funds such as EJF Capital and RXR Realty sought to raise substantial Opportunity Zone funds.

The benefit for developers and investors in an Opportunity Zone is the ability to defer and potentially forgo paying capital-gains taxes. Yet some owners of property in Opportunity Zones are listing them at prices that are much higher than investors want to pay, panelists said.

“Some folks think that the Opportunity Zone supercharges the value of your land,” said Dale Reed, an executive at Merrimac Ventures. “They are unrealistic on what their land deals are worth.”

Daniel Lebensohn, co-founder of Aventura-based BH3, is planning to build a $100 million mixed-use project in an Opportunity Zone on West Atlantic Avenue in Delray Beach. He said that high land prices across South Florida will come down in the future once property owners realize that smart investors won’t pay the prices property owners are demanding.

“It’s like the tulip craze” said Lebensohn, referring to tulip mania in the 17th century, when tulips reached ridiculously high prices and then fell sharply.

Panelists also agreed that Opportunity Zone incentives alone would not lead them to invest in a project. Most already had secured the land and had the projects penciled out before the legislation came out in 2017.

“Merrimac Ventures invested in two projects before the regulations were in released,” Reed said. “The two projects we did were because they were in the Community Redevelopment Agency area — that’s really the driving force with those projects initially.”

Nick Rojo with Affiliated Development, who is building SIX13, a 142-unit workforce apartment complex at 13 Northwest Third Avenue near Fort Lauderdale’s Flagler Village, pointed out that Affiliated’s project is getting $7 million in gap financing from the Fort Lauderdale Community Redevelopment Agency to complete the project.

“Still,  the program helps make deals more feasible, especially since rents have gone up in Flagler Village and other areas,” Sturgis said. “The Opportunity Zone is the icing on the cake, its makes the pot that much sweeter.”

 

Source: The Real Deal

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Florida Governor Signs Business Rent Tax Rollback, The Third In Recent Years

Business Rent Tax

Gov. Ron DeSantis signed a law that will reduce the tax on commercial leases in Florida.

House Bill 7123, known as the business rent tax, lowers the commercial lease tax by 0.2 percent to 5.5 percent. Although the reduction is small, it marks the third such cut since 2018.

Florida is the only state in the U.S. that collects sales tax on commercial leases, according to NAIOP, the national commercial real estate development association. The state is otherwise considered a tax haven due to its lack of a state income tax.

“In Florida, the commercial tax is imposed on the base rent, plus any additional rent or consideration the tenant is required to pay,” said Darcie Lunsford, who has spearheaded reductions in the tax on behalf of the South Florida chapter of Herndon, Virginia-based NAIOP.

It’s also applied to the tenant’s share of common-area maintenance fees and property taxes. Some Florida counties also tack on a local surtax, including Miami-Dade, Broward and Palm Beach counties.

The tax reduction becomes effective on Jan. 1, 2020 and is expected to generate annual savings of $64.5 million, according to the governor’s office. DeSantis, who won the endorsement of the Florida Realtors in his race for governor, was elected in November. The tax applies to retail, office and industrial leases and does not include hotel or apartment leases.

“Reducing the tax helps to level the playing field when Florida competes for headquarters or major companies,” Lunsford, a senior vice president at Butters Realty & Management said. “It also releases investment capital that companies can now use to grow our businesses, hire people, and invest in equipment.”

“The reduction is minor,” said Marvin Kirsner, a shareholder at Greenberg Traurig. “A previous bill, which did not pass, called for reducing the tax to 3.5 percent, which would have had a much bigger impact, in addition to taxing e-commerce.”

Still, Steven Hurwitz of Colliers International South Florida said that “Over time, additional rollbacks would have an impact on tenants reinvesting in their businesses and the local economy. Any future movement definitely supports that sort of investment in our economy.”

NAIOP’s Florida chapter has been lobbying the state to ratchet back the commercial lease tax for years and is hoping to wipe it out completely.

“Former Gov. Rick Scott attempted to eliminate the rent tax altogether,” Kirsner said.

“It’s definitely a senseless tax that we need to work on eradicating over time, which is what NAIOP’s been doing,” Lunsford said.

Other real estate-related bills are awaiting the governor’s signature. The Florida Legislature recently passed a bill that would make remote online notarizations legal, a move that could speed up foreign and out-of-state real estate investment in the Sunshine State.

 

Source: The Real Deal