More than 400 people attended a recent Miami-Dade Beacon Council‘s annual meeting at the InterContinental Miami, where business and civic leaders touted the agency’s recent wins and toasted its new chair.

For the first time, the county’s economic development group combined its annual meeting with its key ceremony, providing insights into the companies it helped expand or move to Miami-Dade.

The Beacon Council reported that 46 companies relocated or expanded in Miami-Dade County in the 2016-2017 fiscal year, bringing in more than 2,100 new jobs to the region and generating $209.7 million in new capital investment.

The event marked the first annual meeting attended by the organization’s new CEO and President Michael Finney, who previously served as the president and CEO of the Michigan Economic Development Corporation.

“I’ve been impressed with… the warm Miami welcome,” Finney said. “There is really commonality here and a desire to work with one another that’s in full display.”

One of the key accomplishments highlighted at the event was Amazon breaking ground on an 855,000-square-foot fulfillment center in Opa-Locka in June. The project is expected to open by the end of 2018, and Amazon said the warehouse will bring at least 1,000 jobs to the local economy.

While Amazon was not in attendance at the event, other companies present included online boat marketplace Boats Group, which brought in 80 new jobs to the county and a capital commitment of $1.05 million; and Dunham Bush, a Malaysian manufacturer, which added 51 new jobs and $12.5 million in capital.

The economic development agency also touted its new programs and task forces. Specifically, it mentioned its “Connect and Grow” program, which works to connect entrepreneurs and innovators and their new products and technologies to established businesses.

The Beacon Council‘s new Chair Nelson Lazo, CEO of Doctors Hospital, addressed the audience. Lazo takes over for Jaret Davis, co-managing shareholder of Greenberg Traurig’s Miami office, as the agency marks the start of its new fiscal year.

“It is time we told the new story of Miami instead of letting old narratives define who we are to the world,” said Lazo, after thanking Davis for his service.

Davis received video tributes from the economic development group and the University of Miami, which will honor him for contributions to his alma mater on Nov. 4 during its homecoming game at Hard Rock Stadium. Miami-Dade County Mayor Carlos A. Gimenez was one of many to laud Davis‘ contributions to the county’s economic landscape.

“You’re outstanding and a great treasure…. for everything you have done for this community,” said Gimenez, who then handed Davis a a plaque commemorating Thursday, Oct. 26 as Jaret Davis Day.

Since 1985, the Miami-Dade Beacon Council has assisted more than 1,000 businesses that have created nearly 70,000 direct jobs and generated more than $4.6 billion in capital investments, it said.

 

Source: SFBJ

Insurance coverage is top of mind for Florida’s commercial property owners following the damage left from Hurricane Irma.

Building owners had rushed to review their policies to determine whether they had adequate insurance coverage in place in preparation for the storm.

GlobeSt.com caught up with Tom Kersting, president of the insurance services division of Franklin Street, and Nancy Sheinberg, vice president of insurance services, to discuss how insurance providers are helping property owners navigate their Irma policy claims.

GlobeSt.com: What pre-hurricane steps did your team take to help expedite the claims process?

Kersting: We spent several days on the front end of Irma communicating with our clients, pushing out proactive risk management tips, encouraging them to review coverages and make sure they had their policies readily available post-storm. This information is provided when our clients bind policies, but it becomes important to “refresh” as a major storm approaches. This year we also developed a variety of digital tools so clients can easily get in touch with us and report claims if they have one.

Sheinberg: What we did before the storm really made a big difference. An emergency claims phone system was set up so clients were getting a call back within minutes of submitting a claim. Franklin Street has also developed a proprietary master policy layered program that can save property owners thousands of dollars both regionally and nationally, while meeting all lender requirements. Hurricane Irma is showing that our insurance coverages are solid, so it gives credence to the program.

GlobeSt.com: What type of insurance claims are you getting most frequently?

Sheinberg: What we’re seeing most are trees down and roof damage from fallen trees or water leakage. But we still have many clients in South Florida who haven’t been able to get to their properties to inspect the damage.

Kersting: Much of the damage that has been reported to us has been to our multifamily properties.  Often multifamily assets are wood-framed buildings that are generally not as protected as office buildings.

The majority of our claims are coming from the east side of the state. We still expect more claims to come in, at this point some owners haven’t been able to visit their properties yet.

This is especially the case with out-of-town owners who may have difficulty getting access for a few more days. In other cases, it’s common for owners to be aware of damage but they haven’t decided yet if they want to report a claim or go about funding repairs themselves.

GlobeSt.com: What are some important lessons learned from Hurricane Irma?

Kersting: From an insurance stand point, there haven’t been major insurance claims incidents in Florida for over 10 years. An event like Hurricane Irma makes policy holders reevaluate their insurance coverage and take a hard look at their deductible levels.

These are conversations that need to be had, we don’t want our clients to be surprised in a time that they turn to their insurance carrier for help.  We continuously push to educate our clients about their coverage options and show them how their insurance policy will be a valuable tool to protect their balance sheet, not simply an expense burden that appeases a lender.

(There are legal issues involved in filing insurance claims of which you may not be aware. Find out what you must know now to avoid felonies.)

 

Source: GlobeSt.

Wake up and smell the dirty money.

That’s the message federal regulators are sending to the real estate industry in Miami and other high-priced housing markets,

The U.S. Treasury Department announced it would extend and expand a temporary initiative designed to uncover criminals laundering money through real estate. The decree targets secretive shell companies — corporations that don’t have to reveal their true owners — buying luxury homes. The feds have already renewed the rules twice since announcing them in January 2016,

But this time, there’s a big difference — and it’s putting Miami’s struggling condo market under even more scrutiny.

The rules, previously so limited in scope that they applied only to a few hundred deals, will now cover every big-ticket cash transaction by shell companies in seven major markets. They are the South Florida counties of Miami-Dade, Broward, and Palm Beach; all five boroughs of New York City; San Antonio, Texas; Honolulu (included in the order for the first time); and Los Angeles, San Diego and San Francisco.

“This is going to gather much more information,” said Andrew Ittleman, a South Florida attorney who specializes in anti-money-laundering laws.

There’s been speculation about whether the administration of President Donald Trump, a former real estate developer, would double down on an initiative pushed by Obama-era officials. But the new policy shows Trump’s Treasury digging even deeper into the murky world of luxury real estate.

The end result: It’s going to get a lot harder for everyone from drug dealers to Latin American politicians to foreign royalty to shield purchases of U.S. condos and mansions from law enforcement.

The federal decree comes at a bad time for Miami real estate. Overbuilding and a slump in foreign buyers are hurting sales. The average sales price for luxury condo units in Miami Beach fell 21 percent year-over-year in the second quarter of 2017, according to a report from brokerage Douglas Elliman. Two-thirds of those sales were cash.

The rules kick in at different price points depending on the market. In South Florida, they apply to shell companies buying homes for $1 million or more with cash.

“This will help a market that has long neglected the amount of criminal activity taking place in the condo sector,” said Jack McCabe, a South Florida real estate analyst.

But Peter Zalewski, founder of the real estate advisory company Cranespotters, thinks the government is moving too slowly — and not going far enough.

“If you’re closing a $10 million sale and you stand to make $1 million on the deal, that’s a pretty big carrot,” Zalewski said. “And there’s no fear of a government stick, because there isn’t one in place.”

Bark Or Bite?

Critics dismissed Treasury’s original anti-money laundering rules — first deployed in Miami-Dade and Manhattan last year — as so narrow that they were practically toothless.

That’s because only less common methods of cash payments such as money orders, personal checks and hard currency had to be reported. But the latest order includes wire transfers, which are electronic exchanges of money between banks. In most home sales that don’t involve bank loans, money is sent from buyers to sellers through wire transfers. Regulators were missing out on a huge swath of transactions.

“It exempted most people from disclosure,” said Alan Lips, a partner at Miami accounting firm Gerson Preston. “In today’s world, people wire money.”

Until an act of Congress earlier this summer, the Treasury agency behind the initiative, the Financial Crimes Enforcement Network (FinCEN), did not have the authority to monitor wire transfers.

John Tobon, who leads a team of Department of Homeland Security investigators in South Florida, said the move is a crucial first step in allowing law enforcement to monitor funds moving electronically. After the first order, his agents observed home buyers immediately come up with “countermeasures” to avoid the disclosure requirements, including the use of wire transfers, Tobon said.

“Wire transfers were wide open” for abuse by criminals, “and no one was looking at them,” Toban said. “Now, we’re going to be able to identify companies and individuals that we had no idea about in the past.”

FinCEN is targeting cash home deals because it says they are most susceptible to money laundering. Cash transactions generally don’t involve heavy bank vetting. When banks give out mortgages, they are required to background their customers; professionals in the real estate industry are exempt from those responsibilities, although that could be changing.

Naughty Or Nice

As part of FinCEN’s latest push, the agency has told real estate industry professionals they should be on the lookout for suspicious activity from their clients.

“The misuse of shell companies to launder money is a systemic concern for law enforcement and regulatory agencies,” the agency wrote in an advisory to real estate agents, brokers, lawyers and other industry players.

It also encouraged them to report suspicious activity involving clients. Warning signs of bad behavior include clients willing to blindly overpay or lose money on a deal; the purchase of properties with “no regard” for their condition or location; funding that far exceeds a client’s known wealth; and clients asking for unwarranted secrecy or for records to be altered.

David Weinstein, a former federal prosecutor in South Florida who now practices white collar criminal defense, called the advisory “heavy-handed.”

“FinCEN is asking people who are not financial institutions and have no outright obligations to become an arm of the government, to become informants for them,” Weinsten said, “They’re sending a not-so-subtle message: We want you to tell us what’s going on. The implication is that if you don’t do this, we’re going to come after you and start squeezing you and say in our eyes you should have known what was going on. You should have vetted this money.”

Although real estate professionals aren’t required to set up compliance programs, no one is allowed to “willfully” turn a blind eye to money laundering, according to federal law. Weinstein recommended that realty firms consider implementing basic compliance programs.

Ron Shuffield, CEO of EWM Realty International, says the new requirement means closing agents must confirm the name and address of beneficial owners with a 25 percent stake in a corporation or limited liability company via a legal form of ID, such as a passport or driver’s license.

“There’s no legitimate buyer who’s going to feel uncomfortable with this,” Shuffield said.

The degree to which suspect money fuels Miami’s luxe real estate market is debated. But real estate crops up in case after case involving illicit funds. The release of the massive trove of offshore files known as the Panama Papers showed how easily offshore money moves into Miami real estate. The flood of cash has helped raise home prices far beyond what most locals can afford.

In FinCEN’s advisory, the agency highlighted several cases showing the threat posed by money laundering. One example cited was Venezuela’s vice president, Tareck El Aissami, and his associate, Samark López Bello. Both were sanctioned by U.S. authorities for their alleged involvement in narco-trafficking. López Bello owns three Brickell condos valued at nearly $7 million.

Tobon, of Homeland Security, said roughly 50 percent of his investigations involve money laundering through real estate.

The new order takes effect on Sept. 22 and expires on March 20, 2018. It could eventually be made permanent and expanded nationwide. The Washington, D.C., bureau of the Herald’s parent company, McClatchy, broke the news that the order would be extended Tuesday.

Achilles’ Heel

The FinCEN initiative — called a geographic targeting order — was designed to target the Achilles’ heel of American anti-money-laundering laws: weak transparency rules for limited liability corporations.

In many states, including Florida, it’s possible to set up an anonymous company and use it to buy a pricey mansion or condo. Offshore companies can be used for the same purpose. That’s catnip to criminals who don’t want anyone asking where they got the cash.

FinCEN changed the game by requiring title insurers — which are involved in almost all real estate transactions — to pierce the veil of shell companies and determine who really owns them. The information is not made public.

Because of the limitations of the original rules, roughly 240 transactions in the target markets were reported to regulators over 12 months, according to FinCEN data. But 30 percent of those sales were linked to people who’d been separately reported for suspicious activity by financial institutions.

In Miami-Dade, 16 of 32 reported deals were linked to suspicious buyers.

“They’re going to capture a lot more activity now,” said Jason Chorlins, a risk advisor at Miami accounting firm Kaufman Rossin. “The majority of this activity is done via wire transfer.”

 

Source: Bradenton Herald

A federal program that has help fund dozens of big new South Florida business projects over the past decade by swapping U.S. visas and green cards for foreign investment dollars is teetering on the brink of political extinction, according to its supporters.

The EB-5 visa program, which by the estimate of the investment community has funneled more than $18 billion in overseas cash into U.S. business development since 2008 — including hundreds of millions of dollars in Florida — will expire on Sept. 30 unless Congress renews it.

Some of the ongoing high-profile projects that are using EB-5 funds include Florida East Coast Industries’ eagerly awaited Brightline MiamiCentral, the mixed-use downtown Miami station for the upcoming All Aboard Florida passenger rail service. A deal for $130 million in EB-5 funds will go toward the plaza’s 180,000 square feet of retail space.

SkyRise Miami, the ambitious 1,000-foot skyscraper/tourist attraction planned by developer Jeff Berkowitz to launch in 2020, would also include EB-5 funds as part of its $430 million budget.

But the EB-5 faces congressional critics who want to amend the program into oblivion or even it kill it outright. And even to get a fair hearing, it must compete for attention with the always-contentious federal budget, President Trump’s tax-reform proposal and a score of other high-priority items with upcoming deadlines.

“I think Sept. 30 is the drop-dead for renewal,” said Miami immigration attorney Tammy Fox-Issicoff, who frequently works with EB-5 investors. “And I mean that’s the drop-dead date for a full renewal. We’ve had a number of short extensions. That’s killing the program’s credibility with foreign investors who might like to join. Nobody wants to put half a million bucks into something that might be gone in three months.”

What is EB-5?

EB-5 visas were first created in 1990 as part of a larger congressional reform of immigration policy. They allow a foreigner who invests $1 million in a project that will generate at least 10 long-term jobs to get a visa and a green card if the project is completed. The required investment drops to $500,000 if it’s directed at a high-unemployment area.

But EB-5s didn’t really take off until 2009, when the Great Recession dried up commercial lending around the United States. As banks and other traditional credit sources retrenched, businesses started using EB-5 investment to patch the holes they left.

“As a result of those absences, you had to look for alternative sources of financing,” said Michael Conaghan, chief operating officer at Fort Partners, the developer of the Four Seasons Hotel and Private Residences at the Surf Club in Surfside. Conaghan is raising up to $200 million in EB-5 money to build a Four Seasons hotel-residence in Fort Lauderdale. “Since then, EB-5 has proven to be a good source of financing for projects. It also brings new people and new capital and new jobs to the country. A lot of other visa programs focus on people who are already here.”

EB-5 critics say it’s an inefficient investment tool, a needless subsidy to wealthy developers, and an easy target for manipulation and corruption.

“What it mostly does is it saves money for a lot of folks who are already rich and are just getting richer,” said David North, a senior fellow at the Center for Immigration Studies, a Washington think-tank that’s harshly critical of immigration.

But what nobody disputes is that from beer joints to giant train lines, EB-5 funds are fueling economic development and local businesses in South Florida at an increasing rate. According to the latest figures available from the industry trade organization Invest in the USA, EB-5 investment throughout the state shot up from $10,500,000 in 2011 to $150,500,000 in the fiscal year 2013.

The precise impact of the EB-5 is nearly impossible to measure because the government keeps few statistics on the program. No one knows exactly how many EB-5 projects have succeeded, how many failed, or how many jobs have been created.

But the money definitely ripples through other economic measures. Invest in the USA estimates that the total gross domestic product contributed to Florida by EB-5 projects grew from $15 million to $179 million. State and local tax revenue went from $858,822 to $10,918,299.

Mezzanine Funding

Usually, EB-5 money serves as what developers call “mezzanine funding,” which fills the gap between what banks will finance and a project’s total cost.

“In a typical project, the developer is going to have some of his own money involved, maybe 20 to 25 percent of the total cost,” said Ron Klasko, a Philadelphia lawyer who has worked on 10 EB-5 projects in South Florida and hundreds across the country. Another 40 percent or so will come from a construction loan — what’s called the senior loan. And the other 35 percent is the mezzanine loan.”

Mezzanine loans obtained from a bank or other traditional lender might charge 14 to 18 percent. But because EB-5 investors are interested in getting their green cards, they are willing to accept a tiny fraction of that, often between 1 and 3 percent interest.

Funding for these projects is usually put together by federally designated business enterprises known as EB-5 centers that act as conduits for the program’s investment money. As recently as 2010, there were less than 100 EB-5 centers around the United States; now there are more than 850. Although they finance everything from farms to body shops, most of their money goes into real estate projects. In Florida, that has included everything from small businesses to mammoth developments.

Doug Rudolph, the CEO of Tapco Restaurant Group, says its first two Tap 42 Craft Beer Bar & Kitchen restaurants — the Boca Raton location, which opened in 2015, and the Coral Gables spot, which opened in 2016 — each used $2.25 million in EB-5 money, or 80 percent of their total construction costs.

The group’s other two locations — one in Midtown, which opened in June, and an upcoming spot at the Aventura Mall expansion — used $2.5 million each. Rudolph said the three existing restaurants have created “three to four times” the number of jobs required under EB-5 rules. That number varies depending on the size of the investment.

“People who want to invest in businesses that are creating jobs can touch and feel and meet us,” Rudolph said. “They can come into one of our restaurants and eat there, so they know exactly what they’re investing in. Most EB-5 investors intend to live in the same city as their investment, and they like the idea of being part of a local business. They feel closer to their communities.”

The $200 million mixed-use Hollywood Circle development, currently under construction on a 3.2 acre lot on U.S. 1 and Hollywood Blvd., will be composed of a trio of residential towers that will include a boutique hotel, gourmet restaurant, parking garage and a Publix supermarket. The budget includes $109 million in EB-5 funds.

The project is being developed by the Gold Coast Florida Regional Center, which was created in 2010 as a way to fill the void left by the departure of Lehman Brothers, Morgan Stanley and other big financial players from the real estate scene after the 2008 recession.

“We buy money just like plywood for development,” said Charles Abele, a founding partner of Gold Coast. “It’s one of the commodities needed to do what we do, so we decided to raise our own equity. EB-5 serves as a sweetener for every deal.”

Unexpected Benefit

Developers of the 60-story Paramount condo tower at the Miami Worldcenter mixed-use project under construction in downtown Miami say that EB-5 visas have been not a key element in their financing more than $50 million of it — but they say they have become an unexpected marketing tool for the project.

“Four of the 10 units we sold in June went to someone who came to the sales center intending to buy an EB-5 and bought a condo instead,” said Peggy Fucci, president and CEO of the real estate firm OneWorld Properties, the exclusive broker on the Paramount tower. Potential EB-5 investors have pockets deep enough to buy a condo at the tower, where prices start at $700,000.

Curiously, despite the tumultuous state of the U.S. debate over immigration, very little of the criticism of the EB-5 concerns the visas themselves or the 10,000 foreign investors and their family members (the annual cap on EB-5 immigration set by law) who use them to get into the United States each year.

“Most people don’t realize that a million immigrants come into the country each year,” said North, a strong critic of the EB-5. “In the context of a number like that, 10,000 is nothing, a drop in the bucket.”

A much bigger sticking point is what nearly everybody, including the most enthusiastic backers of the EB-5, admits is the program’s inefficient administration by a lumbering immigration bureaucracy that knows lots about visas but very little about cash flow, capitalization or anything else that goes into real estate development.

“The immigration component of the EB-5 program is trivial,” said Philadelphia attorney Klasko. “The EB-5 program doesn’t belong with the immigration service. Immigration officials don’t normally deal with reviewing securities offerings or economic reports or business plans. It creates problems at several levels. When you’re talking about the pace of business — especially in real estate development — it just doesn’t make any sense for immigration officials to say, ‘File your plan with us today and we’ll review it in a year and half.’ That’s not very realistic. But that’s the reality.”

An Uneasy Mix

The EB-5s uneasy mix of politics, business and immigration can lead to practices that are dubious in all three areas. One of the things most frequently denounced is what EB-5 players call “gerrymandering,” after the legislative practice of creating grotesque-looking districts to give one party or another an election advantage.

In the EB-5 version of gerrymandering, developers use tortuous geographic logic to link luxury developments in upscale metropolitan areas with blighted, poverty-stricken districts miles away. That allows them to get access to EB-5 money that’s intended for high-unemployment areas. Because the high-unemployment EB-5 investments can be smaller ($500,000 instead of $1 million), they are more plentiful.

The linkage is possible because the EB-5 law permits the developers to create so-called targeted employment areas, without regard to how large or misshapen they are, as long as the territory consists of adjacent U.S. Census tracts (small areas that are home from 1,200 to 8,000 people).

“We need more regulation on this,” said Rodrigo Azpurua, head of the Riviera Point Development Group, a Broward firm that has raised more than $53 million in EB-5 funds since 2012 to partially fund projects such as the Riviera Point Business Center Doral and the Radisson Red Miami Airport. “Right now, you can pretty easily build a line of Census tracts from Liberty City, where the unemployment rate is 20 percent or so, to Brickell, where it’s zero, and use the Liberty City unemployment to justify a luxury hotel in Brickell.”

Azpurua’s Brickell-to-Liberty City example is, if anything, understated. A 2015 lawsuit in Texas brought to light a targeted employment area that stretched through 190 Census tracts and five counties to link the battered, unemployment-plagued city of Brownsville with a planned upscale hotel in the city of Laredo, 200 miles away.

Not everyone agrees that the Where’s-Waldo? games with Census tracts are a problem. Immigration attorney Fox-Isicoff argues that the location of a project has little connection with where it will create jobs.

“I work on Brickell, but I live in North Miami,” Fox-Isicoff said. “I must drive through 12 or 15 or 20 Census tracts on my way to work each day. Same thing for most of the people in my office.”

And geography becomes even more irrelevant, she says, when the subject is so-called induced jobs — say, the people working in distant factories who manufacture the brick and steel and window glass that go into the construction projects.

“Those are all allowed to count toward the 10 jobs that must be generated by an EB-5 investment,” Fox-Isicoff said. “Does that mean every EB-5 project has to be built next door to a brick factory?”

The Gerrymandering Situation

Others, however, believe that EB-5 gerrymandering is part of a larger problem — that the allure of a potential visa makes investors look past red flags that something is awry. In recent years, EB-5 investors have been victimized in staggering corruption cases in Vermont and South Dakota in which the middlemen packaging their loans ran off well over $100 million of their funds or lost it in unauthorized investments.

The investors not only lost their money (a total of well over $100 million) but their visas, which aren’t awarded unless an investment program is successfully completed.

“It’s true that you can have a Bernie Madoff situation in any investment, with crooks taking your money,” said North. “But the likelihood in an EB-5 investment is greater because the intent of the investment is greater. A bank making a loan is looking for a good investment with solid security. EB-5 investors would like to have their money back eventually, but what they really want is the visas. And they don’t pay much attention to anything else.”

Fox-Isicoff agreed: “Inherent in the EB-5 program is the element of risk. The element of, ‘This may not work. You may not be paid back.’ People lose sight of that fact.”

The bureaucratic delays in the EB-5 program only make matters worse.

“Developers can’t wait two years before they start getting their money from investors, so a lot of times people are making their investment before the government has even reviewed the project,” noted Klasko.

The clumsiness of the EB-5 as an economic tool has led some to suggest that it be replaced with a program that simply sells a certain number of U.S. green cards, just as some two dozen other countries around the world offer citizenship for cash.

The government could use the receipts to create jobs programs wherever they were needed, not just in the high-profile urban areas that developers favor. (A pair of 2016 studies by New York University scholars of the 52 largest EB-5 projects in America since 2009 showed that nearly 40 percent of their money went to a single borough of New York City: Manhattan.)

“If we’re going to prostitute our visa process, let’s get a lot more money for it,” said North. “I’d run an auction. Charge whatever the market would bear. Let the government keep the money instead of giving it to big developers.”

EB-5 Opponents

That’s not one of the proposals on the table in Congress. Those range from killing the EB-5 visa outright to drastically raising its price — which might kill it anyway, many EB-5 supporters say. And although President Trump’s aversion to immigration is well known, the proposals to curtail the EB-5 originated well before his election.

Before President Obama left office, the Department of Homeland Security, which oversees the EB-5 program through its United States Citizenship and Immigration Services office, proposed a series of changes that would raise the minimum EB-5 investment from $500,000 to $1.35 million.

“If the cost goes above $1 million, that’s going to seriously impact the program,” said attorney Randy Sidlosca, a partner in the EB-5 Immigration Investor Program Practice at Cozen O’Connor in Miami. “People just don’t want to part with a million dollars for five or six years, which is how long it usually takes to get your money back from an EB-5.” Sidlosca favors a compromise increase to $850,000, which is gaining support in the EB-5 community. “We can live with that,” he said. “Change is going to come, it’s inevitable, and we need to accept that.”

Compromise is possible, said Ronald Fieldstone, one of the most active EB-5 attorneys in Miami, because the fight about EB-5s is about money rather than ideology, a subject Congress knows how to negotiate.

“This isn’t about Trump and people who don’t like Trump, or Republicans and Democrats, or pro-immigration and anti-immigration,” Fieldstone said. “It’s about rural versus urban. The most combative opponents of EB-5 are people like Iowa’s Republican U.S. Senator Charles Grassley, whose state gets almost none of the EB-5 money because of the way the program has been administered. … I think this can get worked out.”

 

Source: Miami Herald

Miami was ranked by Schroders Global Cities Index for being a prime global location for real estate investment.

Coming in at no. 27, Miami is one of 18 American cities listed in the top 30 by Schroders.

The index utilized a number of factors to identify the most “economically vibrant cities” including the population age 15 and over as a way to gauge demand for goods and services, median household income, retail sales and gross domestic product. The index also factors potential future growth into its calculations and local university rankings.

“We see universities as being critical in powering city economies,” Tom Walker, the co-head of global real estate securities at Schroders, said. “Knowledge-based hubs are growing in economic strength with a positive knock-on to real estate markets in those locations.”

According to Forbes, the index is used by “wealthy, global real estate investors and by institutional firms looking for the best long term value for fixed asset investments.” Shroders is a top international asset management firm.

Out of those categories, Miami ranked highest in retail sales, with a rank of 12. Miami ranked 19th in population, 19th in median household income, 27th in university ranking and 22nd in gross domestic product output.

Miami is already known as a top spot for international property investors, and it’s inclusion on this list won’t hurt that distinction. And while Miami draws inordinately from South American buyers, perhaps inclusion on this list will help draw interest from European investors.

See the rankings of the top 30 cities below.

 

Source: Miami Agent Magazine

RealConnex, a platform that connects real estate professionals to both access to capital as well as investments, has announced a strategic partnership with the Miami Association of Realtors.

According to RealConnex, the agreement will see the Miami Association of Realtors, and their 46,000 plus members, leverage the RealConnex platform to manage their properties and transactions. The platform wants to provide a wide variety of services for property investing – not just access to capital.

The Association is said to be working with RealConnex to add new features and improve design. RealConnex plans to roll out the program to other real estate associations accross the US.

RealConnex was founded to solve a problem faced by many real estate developers: funding mid-market projects and connecting to the right capital sources and service providers. RealConnex says it currently has a community of 72,000 developers, sponsors, capital sources, service providers and owners. It expects to reach the 100,000 member mark by the end of 2017. RealConnex claims it is on track to facilitate up to $1 billion dollars in transacted deals on its platform within the same time frame.

“RealConnex will provide our members with a powerful competitive advantage,” said Teresa Kinney, CEO of Miami Association of Realtors. “The platform will make it significantly easier for our members to collaborate, share, network and distribute listings locally, nationally and internationally.”

RealConnex founder and CEO Roy Abrams said he looked forward to extending their collaboration as they build out the network.

“As a New York- and Miami-based real estate technology startup, we are excited about working with MIAMI to offer better service to its member realtors and promote South Florida’s booming economy,” said Abrams.

 

Source: Crowdfund Insider

Speaking to a Greater Miami Chamber of Commerce crowd, an American Dream Miami consultant said construction on the massive theme-park-oriented mall may not begin until 2025, three years after all roads and expressway interchanges into the development have been completed.

In the meantime, fostering more development around public transit hubs is the key ingredient in creating the kind of critical mass that will transform Miami into a true urban center, according to a panel of downtown and Brickell developers.

“Bringing in the Brightline commuter train into downtown is going to be transformative for the city,” said Greg West, president and chief development officer at ZOM. “It not only elevates Miami, but all of South Florida on the global stage. It should bring more population.”

West joined Swire President Kieran Bowers and Henry Pino, managing member Strategic Properties Group and Alta Developers, in a discussion about builders capitalizing on Miami’s continuing evolution. It was the second of two panels during the Greater Miami Chamber of Commerce 2017 Real Estate Summit held at Jungle Island on Friday.

Pino said his companies have plans to develop two mixed-use sites near Miami-Dade Metrorail stations south of Miami.

“We are trying to expand our projects to be closer to the train stations,” he said. “We just closed on a property that will be 900 feet from the Dadeland South Station,” Pino said. “We have another one in South Miami that is across from city hall and within walking distance to another Metrorail station.”

Earlier this week, Alta paid $11 million for a 1.45-acre industrial site at 9600 South Dixie Highway to complete an assemblage that also includes a 6,250-square-foot site with a retail building at 9514 South Dixie Highway and a 3,125-square-foot site with an office building at 9516 South Dixie Highway. Alta plans to seek county approval to redevelop the sites into a mixed-use project that includes 420 apartments, roughly 20,000 square feet of ground-floor retail, a pool, a fountain and a fitness center.

Bowers said Brickell is a good example of how residential development close to a Metrorail station creates critical mass and encourages people to use public transit

“My experience with Metrorail is that it is fine once you get on it,” Bowers said. “But getting to the stations is the real problem.”

During the earlier panel, three developers building massive projects in the northwest area of Miami-Dade discussed the challenges they face breaking ground, noting it can take years to cut through the regulatory red tape. The panelists were Jose Gonzalez, vice president of corporate development for Florida East Coast Industries, Stuart Wyllie, CEO of the Graham Companies, and Edgar Jones, president of Edgar Jones & Co., which is part of the development team building American Dream Miami.

Gonzalez talked about the hoops Florida East Coast jumped through simply to prepare a former landfill for development into an industrial park.

“We bought the land in 2004,” Gonzalez said. “We literally just broke ground last year. And it will take 10 years to build out that park.”

Jones said that construction of American Dream cannot begin until the state and county finish building all the roads and expressway interchanges that provide access to the gargantuan entertainment and shopping destination.

“That will be completed in 2022,” Jones said. “Construction of the mall won’t start until three years after that.”

Jones also groused about amount of time the developers have been required to spend on traffic studies to convince county officials that American Dream will create more gridlock in an area already plagued by traffic congestion.

“The development team has widened the scope of the areas that may be impacted by more traffic so much that we now know the traffic impact in Santa Monica, California,” Jones said in jest.

He also claimed that if American Dream opponents succeed in killing the project, the massive assemblage of land would be developed into industrial parks.

“You will have trucks on the road at significant levels,” Jones said. “Those trucks will be out during rush hour.”

 

Source: The Real Deal

Year-end surges in the office, industrial and retail sectors foreshadow robust economic growth across South Florida for 2017, commercial real estate experts say.

A lack of new supply pushed office rents higher, particularly in the downtown corridors, and the optimism displayed by businesses looking to expand is prompting developers to strongly consider shovels in the ground after a decade of inactivity.

West City Partners has proposed a 500,000-square-foot office building in downtown Fort Lauderdale, although the project isn’t expected to break ground until an anchor tenant commits.

The Stiles real estate firm is in talks with Broward College for a ground lease at the two-building site on Las Olas Boulevard. Stiles would tear down the buildings and replace them with a 350,000-square-foot office tower, said Doug Eagon, the developer’s vice chairman.

“It is time to introduce the next generation of office space into the downtown market,” Eagon said.

Last year, Stiles paid $13.1 million for the Bank of America building next to Broward College.

“The firm is considering its options, with retail and residential likely,” Eagon said.

Meanwhile, demand is soaring for warehouse and distribution space as e-commerce suppliers struggle to keep up with online retail sales, according to a report from the Colliers  International real estate firm.

In the fourth quarter of 2016, Broward’s industrial vacancy rate plummetted to 4.4 percent from 6.6 percent in the fourth quarter of 2015, the Colliers data show. Palm Beach County’s vacancy dropped to a nine-year low of 4.2 percent.

Boca Raton and Jupiter had the county’s two lowest industrial vacancy rates, at 1.2 percent and 1.5 percent, respectively. Those two markets also had the two highest rents — $14.53 a square foot in Boca Raton and $11.43 a square foot in Jupiter.

“Palm Beach County has more than 422,000 square feet of industrial space under construction, the majority of it at McCraney Property Co.’s Turpike Business Park adjacent to Florida’s Turnpike at Belvedere Road,” Colliers said.

In Broward, Butters Construction and Development and Bristol Group Inc. are planning a 925,000-square-foot business park at the site of the former Deerfield Country Club off Interstate 95 and Hillsboro Boulevard.

Tom Capocefalo, senior managing director for the Savills Studley commercial real estate brokerage in Miami, said the tri-county region is geographically positioned to easily ship goods domestically or internationally to the end users.

“We’re finding that the South Florida marketplace is one of the top-tier distribution markets in the country,” Capocefalo said. “It’s incredible, the pace of it.”

“Industial developers are moving north into Palm Beach County because the county has more available property than either Broward or Miami-Dade,” said Ken Krasnow, executive managing director for Colliers in South Florida, said

“Land is a scarcity,” Krasnow said. “We’re not making any more of it.”

“Palm Beach County also had a banner year in retail, with more than 1 million square feet of space leased – the highest level since 2006 and nearly double the 515,050 of 2015,” Colliers said.

Broward totaled 1.4 million square feet in new retail leases, its best showing in a decade. The first phase of Dania Pointe, an $800 million shopping and entertainment center, is expected to open this year just east of Interstate 95 at Stirling and Bryan roads in Dania Beach.

Colliers said small blocks of space in the 2,000-square-foot range are most in demand as Broward tenants seek to control costs in an era of rising rents and the growth of e-commerce. With smaller spaces more in vogue, the challenge for retail landlords this year will be to find tenants for the available “big box” spaces across the region, market observers say.

Sports Authority filed for bankruptcy and went out of business, closing 13 stores across South Florida and auctioning 10 others. In January, Macy’s said it would close stores nationwide, including one at CityPlace in West Palm Beach.

“Landlords will first try to find a tenant to take the space in its current configuration,” said Peter Reed, managing principal at Commercial Florida Realty Services in Boca Raton. “When those efforts are exhausted, they’ll have to ask themselves, ‘How do I repurpose this?’ In some cases, they’ll be able to multi-tenant it, but in other cases the best thing may be to scrape it and do something different.”

 

Source: SunSentinel

Miami’s Wynwood neighborhood, already a hub for artists, technologists and other creatives, will soon be the home of the new Miami College of Design.

It’s the vision of Walter Bender and Franco Lodato, experts in industrial design. The co-founders broke ground last month on the-state-of-the-art educational facility, which will be Florida’s first accredited college focused solely on industrial design, they said. The state-licensed associate and bachelor of science curricula will focus on a mentorship model and nature-inspired design methodologies. Selected students will be able to attend on generous scholarships provided by Bender and Lodato’s  IAM (Industrial Arts and Method) Foundation via donors and corporations. Lodato and Bender are aiming to open the college next fall.

“Ideas are cheap but knowing how to take an idea and make it into a product is rare,” said Bender, a longtime senior research scientist at the Massachusetts Institute of Technology who also co-founded the nonprofit One Laptop Per Child. “Miami has become a hotbed of ideas. It’s young, it’s vibrant, what we want to do is add to that.”

The new college will be officially announced Wednesday by Miami Mayor Tomás Regalado, along with Bender and Lodato, to kick off the Masters of Tomorrow Summit, a conference bringing together design thinkers from around the world. The conference line-up, curated in partnership with the IAM Foundation, includes talks on virtual reality in film, using big data in climate change research, wearable fashion, smart luggage, incorporating “mindfulness” in design and other topics and ends with a free concert behind The LAB Miami.

The Miami College of Design will seek to advance the integration of design, science and engineering by taking students through a design process, exploring new approaches and solutions.

“The aim is human-centered and nature-inspired design that enhances the human experience, and our approach will be unconventional,” said Lodato, who previously headed design at Motorola and was a director at VSN Mobil Technologies in South Florida, among other roles, and has been collaborating with Bender on various projects for two decades.

Lodato pioneered “bionics,” the theory and practice of nature-inspired design. He has served as Master Innovator of wearable technologies for Google-Motorola and he led design for Herman Miller and Pininfarina. He holds 71 patents including one for the precursor of Gillette’s Mach3, and he has also consulted for Dupont, Coca-Cola, Ferrari-Maserati, Boeing and others.

Bender, president of the IAM Foundation, is also founder of the nonprofit Sugar Labs, a collaborative learning platform, and co-founder of One Laptop Per Child, which innovated distribution of laptops in third-world countries. He headed the MIT Media Lab and founded the MIT News in the Future Consortium, which helped launch the era of digital news.

Rendering shows the front of the Miami College of Design under construction in Wynwood

Rendering shows the front of the Miami College of Design under construction in Wynwood

About 18 months ago Lodato and Bender embarked on this college, acquiring the property and applying for a state license. The new building, designed by architect Fred Nagler of Pompano Beach, is under construction at 26 NE 25th St. They took off the front and rear of the two-story warehouse and expanded it, and are adding a third floor and rooftop garden as a social space, Lodato said. While the school is being constructed, the IAM Foundation will be doing workshops and seminars at The LAB Miami and other venues.

The curricula will be based on Bender and Lodato’s apprenticeship-driven education model that has close ties to industry. It will be project-based, and each student will work on a few projects hand in hand with professionals from the field who become their mentors.

“One of our goals in our model is that the students will be on 90 percent scholarships funded by industry. We already have raised funding for the first cohort of students. We really want students to focus on learning 100 percent, not on how they will pay for it. The work they do will be valuable for the industry,” Lodato said.

Miami is a natural location for the new school, they said.

“There is clearly an energy here but there is not a lot of history in the space in Miami. That means there is not a lot of rigid thinking – there is a lot more openness to ideas and new approaches,” said Bender. “It is a great opportunity for a vibrant, young community and at the same time the world has really opened up to this idea of entrepreneurship, of making, of doing. It’s the time. It’s the right time to be doing this.”

 

Source: Miami Herald

The king of real estate is set to rule the country, but what will a Donald Trump presidency mean for local real estate, one of South Florida’s biggest industries?

The Miami Herald wanted to gauge response from Realtors, developers, economists, bankers and lawyers about possible impacts of the election, both in the short and long term.

The Miami Herald asked: Will a new president — especially a political unknown like Trump — mean uncertainty for Miami real estate? What will the election’s impact be on sales and developer activity? They also wanted to know their views on whether Latin American investors would hesitate to invest in President Trump’s America after his strong anti-immigration stance. Will his election depress demand from Latin American buyers?

Overall, those who responded are mostly bullish, as you might expect from business people who depend on optimism and consumer confidence for sales. The Miami Herald selected a representative sampling of the views expressed and excerpted comments they made, mostly via email. (Thanks to the team at Bendixen & Amandi, the Miami Herald partners on their annual Real Estate survey, which helped put out the word.)

 

Mekael Teshome, economist at PNC Financial Services Group

Trump’s policies on immigration and trade could have the greatest effect on the South Florida real estate market, Teshome said.

“The president in a sense is using a blunt instrument where you’re dealing with the whole country. Real estate is an industry where it’s very localized. It would be hard for a President Trump to craft a policy that affects the real estate market in South Florida.”

Since the early 2000s, the local real estate industry has relied heavily on foreign investors. But their numbers have thinned because of a strong dollar and weak foreign economies. If Trump’s proposed policies result in higher tariffs, friction over trade and lower confidence in the United States as a stable haven for flight capital, that could scare away foreign investors, Teshome said. “Fewer foreign buyers would weaken demand.”

 

Jeff Morr, broker with Douglas Elliman, chair of Miami Master Brokers Forum

“I think people are just happy that the drawn out, vitriolic election process is over. Interest rates are low, the economy is solid and many prices have adjusted. The timing couldn’t be better for buying in Miami.” Longer term, he said: “I expect continued improvement barring any major catastrophes.”

Morr’s business is about half foreign, half domestic; his domestic business has grown because of the U.S. housing market recovery and a strong dollar.

Will Latin Americans continue to invest in Miami real estate? “The U.S. is still the U.S. — a safe haven for people from around the globe. Miami is the unofficial capital of Latin America and will continue to be the beneficiary of Latin American money.”

 

Jorge Pérez, CEO, Related Group

Pérez recently returned from a sales trip to Mexico and said the biggest fear of potential buyers for real estate is the possible visa status changes that could take place with Trump as president.

“We had to reassure our clients that in our opinion there will be no increased restrictions on visas or ownership requirements for foreign buyers. Trump is a businessman and understands the importance of foreign buyers. We have done four condominium towers with him in Florida, and he was part of the presentations to Latin Americans. … I believe that, if anything, he will try to promote this investment to help our economy grow.

“A very large percentage of our buyers are from South America and also from Europe. They invest not only because they love Miami’s lifestyle but also because it is the most secure country in which to invest. Uncertainty is a big deterrent to investment, and I hope that no policies are developed which in any way affect our standing as the most secure country in which to invest. I am also hoping that, after clear and unbiased reflection, Mr. Trump realizes that trade will lead to greater growth and employment in America, which is the cornerstone of his campaign.”

 

Avra Jain, real estate developer and investor

“Overall, Trump will have a positive effect on the real estate industry. People may pause for a week or two while they digest, but I expect the market to resume its positive course.”

Over the next 12 months, “given he is heavily invested in the real estate space, I would expect him to protect favorable real estate tax laws currently in place and will probably try to create more incentives to encourage investment/development. “Favorable policies will be good for everyone, but the personal tax incentives from the income and capital gains would benefit U.S./resident buyers more.”

Her personal concern: Supreme Court justice appointments and how that will affect her daughter’s generation.

 

Masoud Shojaee, president and chairman of Shoma Group

“We have seen so much unpredictability in the course of this election; we are dealing with a very unpredictable person. That will destabilize our dollar in the short term, which will create opportunities for foreign investors. …The message we are hearing from the new administration is that more jobs will be created, more infrastructures and growing of the economy. If this is truly the case, it will have a positive impact to our market. No matter what the rhetoric was prior to the election, the new administration will focus on reality and hopefully on the positive path this country needed badly.”

 

Marcelo Tenenbaum, co-principal of Blue Road, a Miami developer of residential, hospitality and commercial projects

As to the short-term impact of a Trump presidency on Miami real estate, as well as the impact one year out: “We don’t see any change in that trend. Miami has been a magnet for investors for more than 30 years, regardless of different presidents, political moods and parties — they look at the long term. … As the electoral campaign defuses, people will go back to business as usual. Trump talked about a tax cut, which might help to increase profit for investors. That is music to their ears.”

On Latin American investors in particular, he said, “Investors are pragmatic. They look at numbers and returns; they don’t look at political correctness, values, etc. If Trump reduces capital gains, income-tax rates and eliminates the estate tax (which is huge for foreign investors), they will keep investing in South Florida.”

 

Jack McCabe, a South Florida real estate analyst

The country was likely heading into a recession in 2017 no matter who was elected, but the uncertainty of a Trump presidency will accelerate it, McCabe said.

In South Florida, the implications of a Trump presidency will likely be most hard-felt among foreign buyers, who make up about 60 percent of South Florida real estate sales, he said, because of Trump’s disparaging remarks against Hispanics, Muslims and other minority groups.

“Without a doubt, Mexican buyers that have been a growing segment; I think many will find it difficult to invest.” The threat is particularly badly timed now, when foreign investment has eased due to recessions in other countries and a strong U.S. dollar.

Issues have arisen closer to home, too. Luxury real estate, which is largely bolstered by foreign investors, has been suffering from drops in resales and increasing supply. The uncertainty of Trump’s presidency will likely raise more questions for investors. In the past several months, several developers have put plans on hold due to the slowdown in the market, McCabe said.

“There is a tremendous amount of concern from different countries about how his presidency is going to affect global economics. We are headed for a very volatile period in the future, especially in the luxury real estate section.”

 

Marc Shuster, partner at Berger Singerman

“Generally speaking, I don’t see a connection to any president and his/her election on the one hand, and Miami real estate functionality, on the other. I think if anything we might see some pullback by U.S. investors in the short term who are concerned about yield over the next year or so.

“Conversely, the long-term tailwinds that the U.S. is positioned to inherit or even seize makes for a very rosy picture for Miami real estate in the long run. It is a premier destination, and a low-interest-rate environment creates a long-term play for prosperity.

“It seems dubious to me that his campaign speeches will be easily put into government, [with] the executive branch being checked by the Legislature and judicial. And I think, given the rest of the world has such strong economic dislocations, Miami will continue to be one bright spot on the world stage, almost out of necessity when looking at the entire world and desirous of achieving yield in cash-flowing assets. The weather, lack of state income tax, population growth, low-interest-rate environment will help.”

 

Jay Parker, CEO, Florida Brokerage, Douglas Elliman

Parker doesn’t expect a major impact this year.

“That said, I do believe the world in general has faced uncertainty by pausing on most major decisions, especially as we faced the end of a long and complicated election process. As has been seen in the stock market on the first day since the election, I expect that the world will find confidence in the fact that the U.S. is a strong and safe country to invest in. And as we see the country reunite, I think our real estate market will see a strong boost. I also expect that issues like Zika will subside, which will directly benefit Florida.

“Ultimately, I believe and expect Trump’s tax plan, banking regulations and overall effort to lower taxes will create more income, more spending power, which will lead to a housing industry boom. I expect we will see more impact as we move into the first and second quarters of 2017.”

In Florida, Douglas Elliman has seen slower velocity from foreign markets, but Parker believes that many such markets will resume their focus on the U.S., as he expects the security of investment and overall opportunity will increase under the Trump presidency. “I also believe that states like Florida will remain uniquely appealing due to our tax benefits and the continued maturity of our culture, educational institutions, hospitals and quality of life.”

 

Daniel de la Vega, president, One Sotheby’s International Realty

On a national macroeconomic level, most people will take a wait-and-see approach, de la Vega said. “From a local real estate level, I believe people just wanted to know the definite outcome. Now that they do, they feel more confident making their purchase. Donald started off on a good foot in his acceptance speech by saying he wants to bring America together, thanking everyone around him for his success and verbalizing his admiration for Hillary in a long hard-fought battle.

“Some of his fiscal policies and less regulation could lead to economic growth. Jobs created in states that are most competitive will lead to a healthy more stable U.S. Most foreign investors look for stability and a democratic place to put their money. Overall, this country always finds a way.

“2016 definitely shifted to a more domestic buyer. Financing has eased, and job and wage growth were on the rise. I believe this will continue if we make for a better America. This will not be about who our leader is, this will be about who we are as Americans. Like Deepak Chopra said: ‘Perhaps the future no longer depends on a single leader but on each of us who can quietly dedicate our life to light, love and healing.’”

 

Gil Dezer, Dezer Developments and Trump’s former business partner on several South Florida developments

“I think the overall economy will get a boost as consumer confidence grows due to the results of this election. Unfortunately, I’m sold out of Trump units in my six buildings, but I’m sure my clients will enjoy a nice bump in value. … I presume that a year from now is when we will really start to see the positive economic impacts of Mr. Trump’s presidency.”

Will Latin American investors in particular continue to choose to buy in Miami because the U.S. is a stable political and economic environment? “I think you answered your own question here. Latin American INVESTORS are doing just that. They are investing. There is a small fraction of them that actually leave their businesses and families behind to move here. I don’t believe there will be any changes to tourism policies or tourist visas. Latin Americans looking to emigrate to the U.S.A. will most likely go the EB-5 route. That is a completely separate transaction from a real estate purchase.”

 

Peggy Fucci, CEO, One World Properties

“I think our buyers will continue to see Miami as a safe haven — the U.S. continues to provide that image regardless of who the president is. The situation in all the markets that continue to buy Miami, especially Brazil and Argentina, hasn’t changed. Miami is a great bet. We are talking about a city that is poised to be the Hong Kong of the West with all the characteristics necessary — diversity, financial institutions — and it’s centrally located to South America and Europe.

“Trump has real estate in his blood. He has already said he is interested in boosting home ownership. If he shows that during the upcoming year by continuing to keep interest rates low, our housing market will continue to grow. There is too much international turmoil not to continue to keep our rates down. We will also see the rise of the U.S. buyer.”

She said international markets represent about 60 percent of her companies’ sales among all its projects. “Latin America has always invested in Miami … In addition, Trump’s immigration policy has changed since he started campaigning; immigration reform would be a tough bill to push through, so it’s difficult to determine whether this will have any influence in the real estate market.”

 

Armando Codina, developer and executive chairman, Codina Partners

“We do not believe that a new president equates to an uncertain real estate environment here in Miami. The Miami real estate market will probably react much like the stock market reacted [after the election results were announced] — a pre-market drop and then a quick rebound.

“If Trump is successful at getting his proposed tax plan into effect, we believe it will have a positive impact on the economy in general. Real estate will benefit from lower capital gains, and businesses should benefit from lower corporate rates. “Elections in Latin America have a much greater impact on us. America will continue to be seen as a great safe haven.”

 

Craig Studnicky, broker and principal of ISG World

Trump’s lack of experience in public affairs has international buyers and real estate developers concerned, Studnicky said, but Trump is a real estate developer — it’s in his blood.

“There are many people in Miami and abroad that are hoping Donald Trump will use his power as president to influence policies that are favorable for the real estate industry and build a healthy real estate economy. Time will tell. The real question is, in a year from now, will Donald Trump be perceived as a strong leader for the country and will his presidency be perceived as a benefit by the world? Domestically, he/it may be. It’s very unpredictable at the moment.”

 

Art Falcone, co-founder and managing principal of Encore Capital Management

Like traders in the stock market, real estate buyers may react to gyrations in the market and become skittish, Falcone said. “But as to developers, if you are not thinking long term, you should not be in this business. You can’t invest hundreds of millions of dollars into projects and overreact to short-term market changes.

“We were on the phone with some partners from China [Nov. 9], and there was certainly no overreaction about changing their long-term thinking about Miami. If Trump does half of the economic stimulus policies he has mentioned, versus things the media has hyperbolized as being hurtful to the economy, we would be in good shape. He’s certainly not going to eliminate trade altogether.

“With EB-5 projects, you could see a big push to file new applications because of the uncertainty of what the new administration might do with that program. There could be some very positive long-term benefits here if Trump and the policymakers are successful with the infrastructure investments they hope to facilitate. “In general, consumers don’t cause recessions — policymakers do. We have to keep a careful eye on what policymakers will do in the first year of the administration.”

 

Chris Zoller, broker at EWM Realty International

After an election year of uncertainty, Trump’s presidency ushers in an era of certainty, Zoller said. “Now we know what we have, but don’t forget one important thing: What we have is a system that works so well, that is still the strongest democracy on the planet, is still creating the safest place to be investing in real estate.”

Zoller expects the next few years to be prosperous, largely driven by economics, not politics. “In my experience, the president in the White House has much less to do with economics than the business community or the Treasury or the Federal Reserve System or Wall Street.”

Experts have worried that Latin American investors, who are major players in South Florida’s real estate industry, would be scared away by Trump’s anti-immigration stance. Zoller disagrees. “I don’t think every foreigner is looking to come here to live,” he said. “And I don’t think there is a more attractive place for them to make an investment [than Miami].”

 

Andrés Asion, master broker, founder/broker of Miami Real Estate Group

Asion was in Mexico for a poorly attended real estate expo that started the day after the U.S. election. While the peso was tumbling and the country seemed to be in shock about the news, Asion believes that will be temporary.

“Many Mexicans I spoke to feel that Trump is looking out for the best interest of the American people first and they understand that. [They] also feel that after the initial state of shock, Mexicans will continue to invest in the United States because other areas like Europe are too far and South America does not offer the security of the United States. … They feel people will always want to invest in a country that is doing well, so if Trump’s policies will make the U.S. economy strong, it will in turn make everyone else want to invest into it, regardless… The people I spoke to also understand that Trump wants to have a hard stance on immigration.

“In the short term, the hold from many Latin Americans in ‘wait-and-see mode’ will cause sellers in Miami to possibly lower prices in order to move units quicker as the South Americans slow their buying power for approximately the next six months.”

 

James Shindell, attorney and chair of Bilzin Sumberg’s real estate group

“On the commercial side, Miami will continue to be an attractive destination for Latin American capital. It is still an exciting gateway market on an upward trajectory. It is still Spanish-speaking. It is still safe. The rule of law still applies. Alternative investment choices haven’t suddenly lost their flaws. If that’s not enough, the president-elect is a real estate developer.”

 

Dan Kodsi, developer and CEO of Paramount Ventures

Kodsi said a Trump presidency may create some short-term uncertainty in the Miami real estate market, which may weaken the dollar over the next 60 days and send a buy signal to Miami’s largest market, South America, as a good time to buy.

As Trump begins to build his cabinet with fiscally conservative Republicans combined with private sector ex-CEOs who wouldn’t ordinarily get involved in the public sector, it will create a new confidence in our economy, Kodsi said. “While our largest market the Latin Americans may be offended by Mr. Trump’s rhetoric, they will make investment decisions based on the strength of our economy, not his personality. Continuing the reckless spending of past administrations will continue to weaken us over time and would have created an unforeseen long-term issue.”

About 90 percent of Kodsi’s business is from foreigners — about the same as a year ago, he said. “Most of the Latin Americans that invest in Miami do not come to the country illegally. His anti-immigration stance is against illegal immigration, not overall immigration to the U.S. The type of buyers that invest in Miami real estate are the immigrants that a Trump administration will most likely incentivize to come live and invest in the U.S.”

 

Mike Pappas, Realtor, CEO and president of the Keyes Company

The market likes clarity and consistency. There may be a slight pause until the market understands his economic and immigration plan. Longer term, “If Trump implements a pro-business strategy, then that will lift sales and prices.”

Thirty percent of Keyes’ Miami-Dade market is from foreign buyers. “With the dollar strengthening and turmoil in Venezuela, along with political and economic issues in Brazil, we have seen a slight decrease this past year. We are seeing a rising interest now from Asia, as well as a strengthening of the northeast domestic market toward South Florida. For the long term, there’s no effect. In fact, it may actually be positive. As for the short term, they may sit on the sideline until they are comfortable with the new policies.”

 

Ezra Katz, real estate investor, CEO of Aztec Group

“Donald Trump is a businessman and developer by trade, so I believe his presidency will positively impact our economy — and by extension, real estate development, finance and sales. I think his administration will create jobs, which will stimulate consumer spending, and I believe he will be pro-business. By eliminating many of the bureaucratic regulations that are hurting U.S. companies, we will encourage entrepreneurship and entice companies to relocate to gateway markets like South Florida. The real wild card is whether President-elect Trump will reach across the aisle to work with members of both parties in Congress. If he makes bipartisanship a priority, then the U.S. economy is destined for significant growth.

“The U.S. will be a significantly better-managed country under President Trump, particularly when compared with nations in Latin America and Europe. As people overseas begin to see the U.S. economy thriving, it’s only natural that they will want to join in on the growth and profit themselves by opening businesses here and investing here — as they should. The vast majority of inbound investors in South Florida are migrating and doing business here legally, so President-elect Trump’s stance on immigration is unlikely to have a measurable effect on our regional real estate economy.”

 

Karen Elmir, broker, CEO of the Elmir Group

Elmir believes short-term impact will be minimal. “The long-term projections relative to Miami real estate are positive due to the economic policies of President-elect Donald Trump — lowering of tax rates for individuals and corporations, and the reduction of governmental regulations. These should result in an increase in the GDP from the current lethargic figure of 1 to 1 1/2 percent to a robust projected increase of 2 1/2 to 4 percent GDP projected for mid-2017 through mid-2018. A commensurate increase in property values in part due to the increase in GDP and in part due to these policies will result in a slight increase in the inflation rate, which should create upward pressure on residential prices.”

Foreign nationals find investment in Miami real estate attractive because of proximity to South and Central America and the stability of the United States’ political and economic environment, she said. “The immigration policy should have minimal impact on buyers of luxury real estate in Miami.”

 

Calixto Garcia-Velez, executive vice president of FirstBank Florida

“Sales and developer activity are affected by economic drivers, not necessarily political changes. For example, the Federal Reserve has the potential to have a more effective impact on real estate, as any increase or decrease in interest rates can materially affect someone’s ability to pay a mortgage/loan. Although the new president cannot directly influence the Fed, the movement we’ve seen across America and the new administration’s platform could influence the Fed’s decision-making process moving forward.

“It is premature to predict long-term activity as a result of the election. In any event, it is important to note that change in political arena does not necessarily mean change in the real estate market. More significant drivers are what occurs in the world markets and the countries that directly contribute to our real estate activity. For example, Latin America’s economics and political landscape may have more of an effect than short- or long-term election results.

“Regardless of who is president of the United States, Miami has been, and will continue to be, a safe investment and beacon of strength and stability for Latin American investors.”

 

Ron Shuffield, Realtor, president and CEO of EWM Realty International

Shuffield does not think it means uncertainty for the market because Trump is such a highly recognized entity within Miami’s real estate community. “A president-elect who has frequently stated that one of his main goals in office is to address overregulation by the government would have an immediate positive impact on the market.

“I see it as all the more positive in the long run. While much of the luxury market is driven by cash or mostly cash sales, securing a mortgage, especially at the entry level, has become incredibly cumbersome. The overly stringent credit limits that came to pass as a reaction to the financial issues from the recession have had a very negative influence on specifically, the entry level market. His working to eliminate unnecessary barriers will certainly help keep the market moving forward at a viable growth pace.”

Shuffield also doesn’t see negative fallout in the Latin American market. “The person who is purchasing in South Florida is in the U.S. legally, and they certainly have means. Trump has always said that he has no issue with people who are in the U.S. legally. Will the Latin American buyer be psychologically affected and hence not purchase? For the most part, I really do not think so because we are already seeing a softening of that stance from even 60 days ago. I believe Trump’s pro-business, pro-real estate stance will compensate for any negative feelings they may have.”

 

Alex Zylberglait, broker and senior vice president of investments with Marcus & Millichap

In the short term, uncertainty created by a new administration will most likely mean a pause among some investors until emotions settle down. But Zylberglait doesn’t project a slowdown in deals. “Miami real estate deals in South Florida and especially Miami are, in big part, fueled by foreign capital. Except for Mexico, the impact of the Trump elections hasn’t reflected negatively on the value of their currency against the dollar. On the contrary, from the yen to the euro, currencies around the world gained strength, making U.S. real estate more affordable. Also, many real estate investors feel comfortable having a real estate person calling the shots in the White House.

“Having said that, every new administration brings uncertainty to the market so we may see a rush to close deals before Jan. 20 to take advantage of current rules on the books to play it safe. I would not be surprised if the uncertainty in the stock market will re-direct capital to the real estate market in search for a better return.”

Longer term, it will all depend on how the credit markets respond to the new administration, Zylberglait said. “If banks trust Trump’s ability to govern and support its agenda in terms of lending regulations, lenders will feel comfortable refinancing deals and making acquisition and construction loans. Otherwise, it will negatively impact the future of deals because most domestic investors need financing to close on a deal and developers to finance new construction. Since many foreign investors buy cash, they will have the flexibility to buy assets even when the U.S. credit markets put more restrictions on lending. Miami benefits from cash-buyers from across the globe so a tighter lending environment will have less of an impact in Miami than in other cities.”

Zylberglait doesn’t see a slowdown in foreign investment on commercial real estate in the $1 million to $20 million range. “Having said that, if the Trump administration develops an anti-immigration stance, it will hurt deals. Investors are people and they go where they feel welcome. … It is important to see how governments across LatAm will react to Trump’s unexpected victory.”

 

Edward W. Easton, chairman and CEO of the Easton Group based in Doral

“In my opinion, President Donald Trump will not be harmful to Miami real estate. Because he understands real estate, I’m of the belief that he’ll be pro-growth between South and Central America, and North America — and that will be to our benefit, if in fact it happens. Same for long-term activity: It will take time, but in my opinion, it will be neutral or positive.”

Easton believes there will be a waiting period where people watch and see what kind of people Trump surrounds himself with. “I’m hopeful he will be a pro-business president and will cut back on the regulations that I believe are harming our economy.”

Foreign sales are down, but mainly because of currency, not because who the president is, he said. “What will be helpful is if the Trump presidency will be less regulatory than the Obama presidency. Regulations, especially around the Dodd Frank Act, have caused some worry for potential investors from South and Central America. That basically puts the burden on the investor to supply a lot of the documentation to the government about what they’re doing. And that’s not something investors want to have happen. So, maybe by Trump eliminating a lot of the regulations, that will be very positive for investment in the United States by foreigners.”

Regarding Latin American investment, “I believe it will be a net positive. Their fears of investing are coming from what’s going on in their own countries, more than the fears of what’s going on politically in our country. Real estate is a protective asset for them, and I don’t think that reality changes. They feel safe putting money in America and that will continue. Regulatory behavior will be helpful for that.”

 

Aaron Drucker, managing broker in Miami for national real estate brokerage Redfin

Inventory levels and economics will drive consumer decision-making, not election results. Any uncertainty will be short term as Trump lays out more concrete plans for how he’ll help the housing market, Drucker said.

Some wealthy sellers may delay listing their homes this year, hoping to get a more favorable death tax rate, he said. Trump’s proposed tax plan does include repealing the “Death Tax.” “I don’t believe developers will make any rash decisions or change any current promotions they are advertising. For projects currently on hold, it’s likely some developers will revisit coming to market if they believe GDP growth will improve under a Trump presidency and a Republican-led congress.”

Long term, if Trump can execute his tax plan, business and personal taxes will be cut from current levels, Drucker said. Finance regulations implemented under Dodd-Frank and the CFPB could be repealed or replaced with guidelines that are more business-friendly.

“One of the biggest impacts Trump can have to the housing market long term is a refocus on FHA loans. Those are the federal government’s strongest tools for increasing home ownership and expanding access to housing for low-to-middle income and minority Americans, but the mortgage insurance premium for the life of the home loan under FHA can be a deterrent for some borrowers. If Trump can remove that premium, we could see increased access to home ownership and sales volume in the market.”

Trump can also relax some of the scrutiny appraisers must give to the “condition” of the home required when a veteran obtains a VA loan, Drucker said. “When veterans are trying to buy a home with a VA loan and get into multiple-offer situations, it can be hard to compete with other buyers bringing conventional loans or cash to the table. Trump has talked a lot in the campaign about the importance of taking care of our veterans, so we’ll see if he incorporates their housing needs into his plan.”

 

Jill Hertzberg and Jill Eber, “The Jills” at Coldwell Banker, master brokers

Uncertainty can rattle the stock market, which impacts the high-end luxury market, The Jills said. Election night was difficult for the market, but it rebounded the next day.

Longer term, “It’s hard to have a crystal ball, but the Miami market will really depend on the growth of the economy in the next year, both here in the U.S. and economies around the globe. The world is so interconnected, and we are very dependent on what happens in our feeder markets. We are a primary as well as a second- and third-home market, and we are very attractive [for] our favorable taxation [and] reasonable pricing compared to the Northeast U.S., California, Europe and Brazil, and [the U.S. is] a safe country for capital flight.”

South Americans will continue to invest in Miami, the Jills believe. “They have been coming for years and years, they have relatives and friends here, and they are very comfortable here.”

 

Mark Meland, a partner at Meland, Russin and Budwick

While markets don’t like uncertainty, the transactions scheduled to close before the end of the year likely took political risks into consideration, Meland said. “So, in the short term, we do not see much impact [on] the markets. Certainly, interest rate volatility is more impactful in the short run. In the long term, a Republican president with a Republican House and Senate should provide for similar, or favorable, tax treatment for real estate transactions.”

The maturity and stability of the market and the U.S. dollar are more important factors than immigration policy, he said. “While some foreign buyers may be investing for immigration purposes, i.e. EB-5 investments, most are investing in the U.S. market for the stability of the market, as a hedge against currency fluctuations/devaluations and inflation in native countries. The devaluation of Latin American currencies to the dollar (i.e. Mexico) could have potentially negative effects on the real estate market as U.S. real estate assets will be more expensive for these foreigners.”

 

Paul Shelowitz and Ira Teicher, real estate attorneys at Stroock, Stroock & Lavan

These attorneys think that in the short term, Trump’s victory will temporarily chill sales activity, given how overheated the real estate market is right now. As to developer activity, there will be little or no discernible impact given the long lead time associated with project development, they said.

“Our clients tell us that uncertainty relative to a Trump presidency is expected to create buying opportunities. Of course, with that comes additional risk. Our clients are already acting on the news and putting out feelers for jittery institutions and the like. Our clients have also noted that a positive/negative start to Trump’s administration might bring added/reduced value to properties located in the vicinity of Trump branded assets. The latter point of course remains to be seen.”

They believe Latin American investors will perceive the same opportunities that their domestic clients have noted. “Our experience dictates that shrewd investors — here or abroad — are able to divorce their own political views from their investment decisions. We don’t believe that Trump’s anti-immigration stance will materially impact that analysis.”

 

Ken Krasnow, executive managing director for the South Florida region, Colliers International

The lack of certainty and unpredictable nature of any election affects investor confidence, Krasnow said, but market volatility was short-lived, and, ultimately investors found opportunity.

“While uncertainty levels remain high, we expect the Fed to delay raising interest rates this year, and investors may push investment decisions into Q1 until they understand what a Trump presidency means for them. … Miami is already recognized as a safe haven for investors, and Trump’s promise to lower taxes and reduce capital-gains rates could spur additional investment here. An area to watch would be the industrial market: Trump’s plans to renegotiate trade agreements may pose a level of uncertainty for Miami. Global trade and job growth have been a catalyst for the growth of Miami’s industrial market.”

 

Liza Mendez, Realtor

“Some portions of the market have been at a standstill, waiting the results. Now that we know the direction, the marketplace will start to make decisions on what is best.” But Mendez is most optimistic about “getting our government to actually work on the issues and provide solutions rather than gridlock.”

Source: Miami Herald