Developers Score $101M HUD Loan For Biscayne Landing Mixed-Use Project

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Turnberry Associates and LeFrak are making moves at SoLēMia.

The developers’ SM Multifamily LLC just closed on a $101 million construction and permanent loan from Wells Fargo, according to a press release. The Housing and Urban Development-insured financing will be used for the development of two 17-story, luxury rental towers totaling 400 units.

The apartment buildings are part of the first phase of SoLēMia, $4 billion mixed-use, master-planned community in North Miami. The developers broke ground on both buildings in July and plan to complete them by the summer of 2019, a spokesperson told The Real Deal. Crews will pour the first elevated deck for the east building in November.

Turnberry, led by Jeffrey and Jackie Soffer, and LeFrak announced plans for the 183-acre development site at 15045 Biscayne Boulevard about two years ago and refinanced the North Miami land in October with a $66.5 million loan. The developers have said they’re footing the bill for the majority of the project’s $150 million worth of infrastructure, including roads and sewers, which is nearly completed.

The apartment towers will feature views of Oleta State Park and the bay, amenities that include a swimming pool and roof deck/sky lounge, a fitness center, community rooms and a business center, according to the release. In all, SoLēMia will have a 10-acre lagoon with beaches, 12 residential buildings with 4,300 units; a town center with shops, restaurant, a hotel and entertainment tenants; and a Warren Henry car dealership.

The former Biscayne Landing site has had a long and troubled history, including Superfund designation in the early 1980s and multiple failed bids for commercial development since 2003. Richard LeFrak bought out former partners Michael Swerdlow and Ezra Katz in 2015. 

Investors and developers in North Miami and nearby North Miami Beach have been picking up properties in the area, including CK Prive Group and Prestige Imports owner Brett David.

 

Source: The Real Deal

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Miami Real Estate Mostly Spared From Irma’s Fury, Industry Players Say

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Just days after Hurricane Irma lashed downtown Miami and the neighboring Brickell financial district with vicious winds and surging water that took out two construction cranes and flooded major streets, industry players told The Real Deal that the deadly storm largely spared the city’s urban core and coastal communities from catastrophic damage.

Suzanne Amaducci, who leads the real estate group at commercial law firm Bilzin Sumberg, said 1450 Brickell Avenue, the office building where her firm is headquartered, reopened Tuesday morning,

“The power is on and we have air conditioning,” Amaducci said. “If you look at new construction, it withstood the storm very well.”

Carlos Melo, co-founder and principal of the Melo Group — which has developed 12 condo and apartment towers in Miami’s Edgewater, Little Havana and Allapattah neighborhoods — said he weathered Irma at his corporate office, which is on the second floor of his company’s rental building at 425 Northeast 22nd Street.

“We had about one foot of water at ground level,” Melo said. “It only affected the parking area, but it never reached the building. And about an hour-and-a-half after the hurricane passed, the water had receded.”

Melo said none of his buildings sustained extensive damage and that the only major problem is a lack of electricity.

“Nine of our rental buildings are without power and using generators,” Melo said. “The biggest problem is that there are too many downed trees and power lines to pick up.”

The Melo Group currently has two new projects under construction. Aria on the Bay, a 53-story, 648-unit luxury condo tower at 1770 North Bayshore Drive, topped off in May and is scheduled for completion later this year. The firm is also building Square Station, twin 34-story towers at 1424 Northeast Miami Place.

“Both sites are intact and did not sustain damage,” Melo said. “Aria is all glass windows. And none were damaged. The building is intact. The same goes for our neighbors. Square Station, where three construction cranes are currently in operation, was also unscathed. After inspecting the Aria construction site yesterday, we are fully operational again. But work has not begun again at Square Station because we don’t have power there.”

But a pair of projects will have to contend with damage caused by falling cranes. Irma took out the boom from a crane tower at Property Markets Group’s 300 Biscayne Avenue development in downtown Miami and another crane collapsed at the Related Group’s GranParaiso condo tower at 480 Northeast 31st Street.

Ryan Shear, a principal of New York-based PMG, declined comment. Carlos Rosso, president of Related’s condo division, said he couldn’t comment because he was not in Miami to assess the situation at GranParaiso.

A third crane in South Florida also fell at Related’s Auberge Beach Residences and Spa in Fort Lauderdale.  A spokesperson for the project said the crane is “fully contained within the job site,” adding that there was no damage to the tower structure and that power has been restored. The developer and contractor, Moss Construction, are working on a plan to remove the damaged jib, the representative said.

On Wednesday, Moody’s Analytics released a report estimating between $64 billion and $92 billion in property damage and immediate economic lost output caused by Irma, though specific assessments for much of South Florida have not yet emerged. The Florida Keys were battered, with the federal government estimating 90 percent of buildings sustaining damage, but the storm mostly drifted west of Miami.

Chad Warhaft, director of construction and operations for brokerage CREC, said the company’s portfolio of 13 million square feet of commercial space across Florida held up well during Irma.

“Mainly, we are dealing with landscape damage and minor roof leaks,” Warhaft said. “There was a little bit of facade damage at two properties. Other than that, we have been in really good shape.”

Residential developers who spoke to TRD said their projects in Miami were relatively unscathed, and don’t believe the aftermath will have a profound negative impact on their bottom line or construction schedules.

“The 10-story, 81-unit apartment tower at 1657 North Miami Avenue had some stucco fly off and some water intrusion but nothing too severe,” said Nir Shoshani, co-founder and principal of NR Investments, which is developing the Filling Station Lofts in Miami’s Arts & Entertainment District.

His company is also developing Canvas, a 513-unit condo building at 1630 Northeast First Avenue, that has two cranes on site hovering at 425 feet in the air.

“When we started preparing for Irma, we were supposed to be right smack in the middle of its path,” Shoshani said. “There is nothing you can really do to secure those things. On the contrary, you have to let them spin.”

He said crews assessed the site on Monday and he hopes construction on the tower, which has a projected $221 million sellout, will renew before the end of the week. Shoshani said he doesn’t think Irma will cause a major downturn in Miami’s real estate market.

“Miami remains a very attractive place,” Shoshani said. “I also think people forget quickly and it won’t have long term effects on real estate here.”

 

Source: The Real Deal

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Coral Gables Looks To Grow Southward Beyond Merrick Park & University of Miami

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An 11.4 square mile area of Coral Gables that includes the Shops at Merrick Park, the University of Miami and the city’s upscale Riviera neighborhood is poised for a new wave of development that will completely alter the southern landscape of the City Beautiful.

The neighborhood has long been defined by extravagant single-family homes, one-story shopping plazas, mid-rise office buildings and industrial warehouses. But in recent years, the city’s planning and zoning department and the city commission have relaxed zoning requirements that will allow builders to add a slew of condo towers, hotels, office buildings and retail centers to the neighborhood.

Astor Companies President Henry Torres is among the developers expecting to cash in. His company recently broke ground on Merrick Manor, a 10-story Mediterranean-style building at 301 Altara Avenue. The 227-unit tower is the first major condo development in Coral Gables since the last cycle.

Torres said the neighborhood around Merrick Park is a perfect draw for University of Miami professors and employees, parents who want their children attending the college to live in a nice and safe apartment and empty nesters looking to downsize from their palatial homes in Coral Gables.

“There is a need for what we are offering,” Torres said. “That is what prompted me to build in this part of Coral Gables.”

Signs of Change

Despite vehement opposition from wealthy homeowners in the Riviera section of Coral Gables, the city earlier this year hired architecture and design firm Perkins + Will to develop a master plan for the South Dixie Highway corridor that falls within the city’s boundaries. The master plan will provide developers planning major projects along U.S.1 to incorporate an environment that is welcoming to motorists, transit-users, pedestrians and cyclists.

Transportation

In addition to the Douglas Road and University of Miami Metrorail stations, residents can also catch a ride on one of two free trolleys operated by the city of Coral Gables. Various Miami-Dade County bus routes also service the area. The neighborhood’s main access roads are Ponce de Leon Boulevard, Bird Road and South Dixie Highway.

Commercial Broker’s Take

“The whole retail and dining experience in Merrick Park is wonderfully successful, leading to a new wave of residential development in that area of Coral Gables,” Allen Morris, founder, chairman and CEO of the Allen Morris Companies.

Demographics

Population: 14,995
Median Age: 23
Median Income: $111,838

Priciest Residential Sale

A two-story, 5,029-square-foot contemporary estate with five bedrooms and five bathrooms at 1415 Robbia Avenue sold for $2.3 million in June.

Most Expensive On The Market

$2.7 million for a two-story, 5,129-square-foot mansion with six bedrooms and six bathrooms at 1200 Blue Road with its backyard facing Riviera Golf Course.

Least Expensive On The Market

$470,000 for a 970-square-foot condo with two bedrooms and two bathrooms at the Villages of Merrick Park, 4100 Salzedo Street.

Price Trends

Median Sales Price Per Square Foot:
$355 or 19 percent higher than the rest of Miami-Dade County

Average Rent Over The Last Year:
1.5 percent decrease to $1,905 a month for a one-bedroom apartment

New Development

Clockwise from top left: renderings of Gables Station, Link at Douglas, Merrick Manor, Paseo de la Riviera

South Dixie Highway has become the focus of several major mixed-use projects that will add close to 2,000 residential units and more than 250,000 square feet of commercial space over the next two to three years in South Coral Gables.

NP International plans to convert the former Holiday Inn site at 1350 South Dixie Highway into Paseo de la Riviera, a $172 million development consisting of a 10-story hotel with 252 rooms, an eight-story residential tower with 224 apartments, 20,000 square feet of commercial space and 838 parking spaces. Located across the street from Metrorail and the proposed Underline linear park, Paseo de la Riviera will also have a pedestrian bridge crossing South Dixie Highway and a half-acre green space incorporating public art installations, restaurants, and retail. It will also connect the project’s buildings with nearby Jaycee Park.

Just a few blocks north, near the Shops of Merrick Park, NP has plans for another massive project on a 4.3 acre site called Gables Station. The developer is proposing three towers with a maximum height of 155 feet with about 168 hotel units, 554 luxury condominium residences and 87,900 square feet of retail space.

On a 7-acre site adjacent to the Douglas Road Metrorail Station, a partnership between the Adler Group and 13th Floor Investments won a 30-year lease from Miami-Dade County to develop Link at Douglas, with 970 residences, a 150-key hotel, 70,000 square feet of retail space and a public plaza. The deal includes setting aside 12.5 percent of the units for workforce housing, $14 million in improvements to the Metrorail station and $600,000 contribution to the Underline.

Across the street from the Shops of Merrick Park, BF Group is planning a 10-story mixed-use office building at 4311 Ponce de Leon Boulevard. The developers paid $ 7 million for the site and plan to spend another $40 million building the tower, which will have 30,000 square feet of ground floor retail space and 50,000 square feet of office space.

Meanwhile, Roger Development Group recently broke ground on Laguna House, a condominium tower at the Shops of Merrick Park. The 10-story boutique project at 4220 Laguna Street features only 12 condo units that range from 3,000 square feet to 6,250 square feet.

 

Source: The Real Deal

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Feds Widen Their Hunt For ‘Dirty Money’ In Miami Real Estate

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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

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Miami Wages And Salaries Are Increasing Faster Than Anywhere In America

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Wages, salaries, and total compensation are rising faster in Miami than any other major city.

In the 12 month period ending June 2017, wages and salaries in the Miami-Fort Lauderdale-Pompano Beach, FL MSA increased 3.9%, while total compensation was up 3.7%, according to the Bureau of Labor Statistics.

Seattle ranked second in wages and salaries gains at 3.6%, while New York placed second for total compensation increase at 3.3%. Washington D.C. and Philadelphia ranked lowest.

Wage gains are also accelerating. In 2015-2016, the increase in Miami was 2.5% for total compensation and 2.9% for wages and salaries.

Miami Today first reported the data.

 

Source: The Next Miami

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They’ve Paid For Lots Of Miami Buildings But These Visas May Vanish

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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

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First Office Building At MiamiCentral Will Open By The End Of Summer

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The parent company of All Aboard Florida (AAF) this summer will open the first of two office buildings at MiamiCentral, an 11-acre mixed-use development that will include a train station for AAF’s Brightline rail service.

Florida East Coast Industries is developing a standalone office building called Three MiamiCentral and another office building called Two MiamiCentral that will be connected to the train station.

Three MiamiCentral, expected to open by the end of summer, will have 100,000 square feet of office space, including 18,000 square feet that the Brightline rail service will occupy.

Two MiamiCentral, expected to open in fall, will have 190,000 square feet of office space and a group of tenants including Ernst & Young and Regus, a provider of shared office space.

The Cisneros media company will occupy the two top floors of the 10-story Two MiamiCentral office building, and general contractor Moss & Associates will lease space on the seventh floor. Venevision International Enterprises, Fortress Investment Group and Florida East Coast Industries will occupy offices in the building, too.

Rental rates are $33 to $35 per square foot, triple net, at Two MiamiCentral and $29 per square foot at Three MiamiCentral.

 

Source: The Real Deal

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Report Finds Miami One Of The Best Cities For International Investment

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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

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New York-Based RE Company To Develop 200,000 SF Office Building In Miami’s Wynwood District

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Rose & Berg Realty, a New-York-based private real estate company, has unveiled plans to develop The Gateway at Wynwood, a 12-story, 200,000-square-foot office building located at 2916 N. Miami Ave. in Miami’s Wynwood neighborhood.

The building will have eight floors of office space above four floors of covered parking. In addition, The Gateway at Wynwood will include approximately 25,000 square feet of retail space being marketed by RKF.

Kobi Karp Architecture and Interior Design is the architect of the project, and Jack Lowell, Adriana Rosillo and Noa Figari of Colliers International will handle the leasing of the building’s office space.

 

Source: REBusiness

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Billboard Blight And Mural Ads Are Infecting Downtown Miami

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Somewhere behind all the advertisements, there are actual buildings in Miami’s downtown core.

Apple’s Watch billboard on ME Miami building on NE 11th Terrace photographed on Saturday, June 17, 2017.
(PHOTO CREDIT: Sebastián Ballestas)

If you live or work in one of the towers wrapped like packages, you could pinpoint your location by saying you’re in the Heineken building or the Verizon building or the Apple Watch building or the “47 Meters Down” building that warns shark-phobes to “just stay out of the water.”

If you’re trying to find the bold new Zaha Hadid-designed exoskeleton high-rise on Biscayne Boulevard, it’s next to Ten Museum Park — more easily identifiable as the Sparkling Smart Water building.

In addition to residing in a multistory billboard, there are the blots on your bay view — the 1-800-411-PAIN sign erected by an accident-chasing law firm or the 3,375-square-foot video screen that adorns AmericanAirlines Arena.

“Visual pollution ruins what makes Miami beautiful — palm trees, blue skies, interesting architecture,” said Peter Ehrlich, co-founder of Scenic Miami, which has advocated for tighter regulation of signs. “Tourists don’t come here to see giant ads. Residents are not asking for them. Yet they are in-your-face inescapable.”

The city limits the number of mural ads on the sides of buildings to 45. They can be as big as 10,000 square feet. They have not proliferated, but a few have moved to larger or more visible buildings.

“The outdoor advertisers are constantly jockeying to get on a bigger wall closer to a highway in order to reach more eyeballs,” said Ehrlich, who calls them “monster murals.”

Developer Craig Robins wants to prevent the infiltration of mural signs into the Design District. The last thing he wants to see are tacky ads clashing with glamorous boutiques, modern art and new urban plazas.

“He’s got a vision, a sophisticated vision,” Ehrlich said. “He doesn’t want any chance of hemorrhoid cream or Estrella Insurance ads next to Tiffany and Cartier shops or a sculpture installation.”

SmartWater billboard on Ten Museum Park on Biscayne Boulevard photographed on Saturday, June 17, 2017. (PHOTO CREDIT: Sebastián Ballestas)

Robins is seeking to protect the Design District from billboard blight. He has proposed shrinking the zone in which mural ads are permitted by moving the north border six blocks south to Northeast 36th Street.

On July 8, Miami’s city commissioners are scheduled to hear from Robins, who is the major property owner in the district. Robins was also instrumental in the redevelopment of South Beach in the 1990s.

“I’m not saying they’re inappropriate for all neighborhoods but we’re aspiring to a high level of art, design and architecture in the Design District,” Robins said. “Rather than commercialize it, we want to make it a special place that is a source of pride for Miami.”

One existing ad space would be allowed to remain but new ads would be banned under the proposal. Like other property owners, Robins could rent out his prime wall space, much of which is visible from Interstate 95, to outdoor advertisers for tens of thousands of dollars a month. But Robins has commissioned artists to turn the sides of his buildings and a parking garage into “beautiful installations.”

“If we took all our frontage and rented it out, it would be worth millions of dollars per year, but we’re not interested in marketing opportunities,” Robins said. “The commission is usually sensitive when an idea is definitely for the betterment of the community.”

The city makes almost $4 million a year from fees charged to outdoor advertising companies such as Clear Channel, Outfront Media and Wagner that earn billions from businesses seeking to get their messages and products in front of consumers.

“It’s another in a line of serial acts of municipal prostitution,” said Dusty Melton, a Miami-Dade lobbyist and political consultant who co-authored the county’s sign code in 1985. “The city regularly flouts the code with its interpretation of it and allows programmable LED billboards that are prohibited, No one has the political will to unplug these illegal billboards that are basically giant TVs on top of poles. There are probably 30 out there. The three on the Miami Children’s Museum are illegal.”

The city is discussing whether to raise its sign fees. One prime space that it rents out is on its own Miami River Center administrative building on Southwest Second Avenue and Fourth Street — a building that happens to house the code enforcement department.

“For a while that building had an ad promoting tourism to the Dominican Republic,” Ehrlich said.

Volkswagen Atlas billboard on Marquis Condos in Miami on Saturday, June 17, 2017. (PHOTO CREDIT: Sebastián Ballestas)

The new Melody residential tower at 245 NE 14th St. adjacent to the Adrienne Arsht Center for the Performing Arts has a huge Verizon ad facing Biscayne Boulevard.

The drive to or from downtown along State Road 836 is a gauntlet of signs, including a Volkswagen Atlas ad on the side of the University of Miami Miller School of Medicine 15th Street Parking Garage; Peroni beer and JetBlue Airways ads on the back of the Civica Center on Northwest 11th Avenue; a Haagen-Dazs ad on the side of the Springhill Suites hotel; and Guess and Shell ads on the sides of the Atlantis University building.

“Nothing is too massive,” Ehrlich said. “Property owners are now asking architects to design buildings with large wall spaces available for advertising.”

 

Source: Miami Herald

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