South Florida Opportunity Zone Investments Strong Even Before Latest GuidelinesApril 27, 2019
The appetite for opportunity zone projects was already active in South Florida before the federal government released the second round of regulations. In most real estate circles, developers and investors were seen as waiting for the latest guidelines before embarking on projects.
The relatively robust market had emerging areas like the Miami River District and Delray Beach, and preliminary regulations were enough for some developers to embark on projects before the Trump administration released another 169 pages of guidelines recently.
“Initially, just the law itself was really attractive and powerful for real estate developers who want to build and hold for a long period like we do,” said Scott Meyer, who is part of the joint venture developing Soleste Grand Central in a designated zone near the Virgin MiamiCentral passenger train station.
The Tax Cuts and Jobs Act in 2017 created the opportunity zone law to encourage investment in real estate and businesses in economically distressed areas. Investors can take capital gains from any venture and put them into a qualified opportunity zone fund that seeks eligible projects.
In return, investors can get a break on the federal capital gains tax and get an appreciation of their OZ investments.
The Internal Revenue Service and Treasury Department last October issued the first round of regulations, which were enough for the Soleste Grand Central developers.
“We had started putting a business plan in motion but needed that first wave of guidance,” said Meyer, chief investment officer at PTM Partners LLC. “I think that round of guidance really gave us enough to embark on these investments that we ended up closing.”
PTM Partners, a development company founded to focus entirely on OZ projects, is working with South Miami-based Estate Investments Group to build the 18-story, a 360-unit apartment complex at 218 NW Eighth St. Construction is due to finish in summer 2021.
PTM, which has offices in Miami and New York, and Estate Investments bought the 1.3-acre site for $9.7 million this year. And they aren’t the only early birds to get their OZ site before the second round of regulations.
In Miami, Sean McCormick said the OZ tax law and the creation of an OZ encompassing his parking lot at 205 SW Third St. prompted him to opt for redevelopment.
McCormick, whose family has owned the lot since 1974, is looking for joint venture partners and qualified opportunity zone funds to help him develop The Basel Miami (rendering), a 36-story, 234,000-square-foot tower planned with a hotel and office.
The site is about two blocks northeast of the Miami River in a district experiencing vigorous redevelopment.
“It’s obviously been a big combination of everything with market timing, the Miami River becoming that next hot area and the downtown core becoming that next hot area of Miami,” he said. “So really this opportunity zone is just the cherry on top.”
McCormick said he will pull construction permits by year’s end.