Kushner Cos. Updates Miami OZ Project As Jared And Ivanka Eye City
The first Kushner Cos. projects in Miami, one of which is in an opportunity zone near the waterfront, will break ground next year after the coronavirus pandemic put the projects on hold, according to Kushner President Laurent Morali.
The company plans to start work first, probably in Q1 2021, on 127 Northwest 27th St./129 Northwest 26th St., a development with 150 market-rate apartments and a small amount of commercial space in the Wynwood district. After that, Kushner Cos. will break ground on the first of three planned market-rate apartment towers at 1900/2000 Biscayne Blvd., though the exact date hasn't been set yet.
The latter project is in a triangular-shaped opportunity zone (12086002702) extending north to south not far from the waterfront, but not including the waterfront. One of 89 opportunity zones in metro Miami-Fort Lauderdale, the zone's median household income is about $51,700 per year, with 28% of its residents below the poverty line.
Former Kushner Cos. CEO Jared Kushner, whose stint as an adviser to his father-in-law, President Donald Trump, will soon end, has reportedly acquired a $30M lot on Miami's Indian Creek Island, a haunt of billionaires, with plans to build a residence there. The company had no comment about whether Kushner will return to his former position.
The fact that 1900/2000 Biscayne Blvd. is in an opportunity zone hasn't been particularly important to the forward motion of the project, Morali said, though it has made it more attractive to some investors.
"The key is to make sure the project works, regardless of the status of the area," he said.
For investors, it could take a decade to know whether the benefits of a particular OZ deal will pan out, Michael Weiner, land use attorney with Sachs Sax Caplan, said during a Bisnow South Florida opportunity zone webinar in September.
"To really get the benefits, you've got to stick around 10 years," Weiner said. "And honestly, that's the minimum amount of time you need to know whether or not you really made the crazy great bet."
Complicating those bets is that the OZ program might change under the incoming Biden administration. The president-elect's reform plan includes more robust reporting requirements on the impact of OZs, new restrictions on what projects can receive tax benefits, and incentives to involve local community organizations in OZ-based projects.
In the meantime, the question for any multifamily developer in metro Miami is how much demand there will be for new product. Until the pandemic hit, demand seemed fairly robust: over 8,500 units were delivered to the market in 2019, while a net of more than 9,300 units were absorbed that same year, according to CBRE data.
“Comparing year-over-year metrics is difficult during a recession, but I do believe Miami will continue to see strong multifamily demand," CBRE Florida Leader of Market Research and Insights Brandon Isner told Bisnow.
During the four quarters ending in the third quarter of 2020, however, metro Miami net apartment absorption was only 1,600 units.
"What's happening right this minute in Miami is a short-term phenomenon which is happening in a lot of other urban places," Morali said. "We're well aware of what's happening now, and it's a temporary problem with a fix. We won't be renting the apartments for another two years."
Where many major U.S. markets have experienced significant rent drops, Miami’s multifamily rents have remained fairly stable, Isner said, adding that CBRE’s Econometrics Advisors predicts that apartment rents and vacancy rates in Miami will outperform the U.S. average over the next couple of years.
"What’s more, despite overall employment losses, certain job sectors in Miami have actually gained jobs year-over-year, financial activities being one of them," Isner said. "Miami has also become a sneaky tech talent market, ranking sixth in the U.S. from 2015 to 2019 in tech talent growth.”