Tag Archive for: tulip craze

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

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

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

ā€œThere is a finite amount of land in Flagler Village,ā€ Sturgis said during the Opportunity Zones event held at Sistrunk Market & Brewery in Fort Lauderdale. ā€œThat is another reason Opportunity Zone investors are flocking to the area.ā€

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

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

ā€œSome folks think that the Opportunity Zone supercharges the value of your land,ā€ said Dale Reed, an executive at Merrimac Ventures. ā€œThey are unrealistic on what their land deals are worth.ā€

Daniel Lebensohn, co-founder of Aventura-based BH3, is planning to build a $100 millionĀ mixed-use projectĀ in an Opportunity Zone on West Atlantic Avenue in Delray Beach. He said that high land prices across South Florida will come down in the future once property owners realize that smart investors wonā€™t pay the prices property owners are demanding.

ā€œItā€™s like the tulip crazeā€ said Lebensohn, referring to tulip mania in the 17th century, when tulips reached ridiculously high prices and then fell sharply.

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

ā€œMerrimac Ventures invested in two projects before the regulations were in released,ā€ Reed said. ā€œThe two projects we did were because they were in the Community Redevelopment Agency area ā€” thatā€™s really the driving force with those projects initially.ā€

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

ā€œStill,Ā  the program helps make deals more feasible, especially since rents have gone up in Flagler Village and other areas,ā€ Sturgis said. ā€œThe Opportunity Zone is the icing on the cake, its makes the pot that much sweeter.ā€

 

Source: The Real Deal