6 People Died In Miami's Bridge Collapse. Here's What Happened To The Property Next Door.
Florida International University is the fourth-largest university in the U.S. with more than 55,000 students. But it only has the capacity to house about 8% of them on its Miami campus.
That's why a large student housing building at the foot of a planned pedestrian bridge to campus seemed like a can't-lose proposition.
Seven months ago, the bridge collapsed, killing six people and making international headlines. Nothing seemed can't-miss after that.
Two years earlier, Global City Development principal Brian Pearl and his partner, Diego Procel, scouted the area for months before buying out 33 different owners of two-story condominiums on a site across the street from FIU's campus, for a total of $16.6M. Here, they planned to build a 20-story project with 886 units. They hired Arquitectonica for design and secured zoning changes and entitlements.
But the street in question is a busy eight-lane road, Tamiami Trail. The university was in the midst of plans to build a cutting-edge pedestrian bridge over the road for the 4,000 students who cross daily to get to school. The bridge entrance would be just feet from Global City’s property.
The developers initially planned to offer half the building's units as condos, priced from $190K to $700K. The project would be called University Bridge Residences. The developers pre-sold about 200 units. Then, in a story that ran in the Miami Herald March 8, developers said that because the apartment market was so hot and because tax reform would make it beneficial to hold the project long-term, they would return buyers’ deposits and make the buildings 100% rentals instead.
A week after the paper hit newsstands, everything changed.
Pearl remembered being at his office when he got a call from an employee who had just driven under the bridge before it collapsed.
While the collapse was a major tragedy for Miami, the project “wasn’t dependent on the bridge happening,” Pearl said.
His company was not entangled in any insurance holdups or lawsuits, he said, and construction started as planned this June. The deal structure did change again, though.
Pearl said that had his team kept pre-selling condos, “we would have had to wait an entire year at the pace we were selling” to qualify for a construction loan. Another way to finance construction would be with tax-exempt private activity bonds, available to certain projects that have some public benefit.
To qualify, they sold the project to Atlantic Housing Foundation, a South Carolina-based nonprofit, for $48.6M. That helped Pearl and partners raise $227.6M through a bond offering at the end of September — the largest financing of its kind for an off-campus student housing building in the U.S.
“That got us full funding for construction,” Pearl said.
Pearl’s team will stay on to help develop and manage the property for the lifetime of the bond, 39 years. In that period, the rent paid by students will be used to repay bondholders, and the nonprofit will give students $50M in housing scholarships, amounting to the largest charitable gift the university has ever received. When the bond is paid off in 2058, the nonprofit will give the property to FIU.
Pearl said that for his company, the deal actually worked out better than holding the property long-term.
“We want to make normal amounts of money. We’re capitalists,” he said. His team benefited by buying the land at a good price and taking its profit early. “There’s no [required] exit. At the end, we don’t have to put on market. It’s pre-sold, essentially sold to the school. We make less absolute dollars, but there’s also less risk — it’s more than fair. Otherwise we wouldn’t have done it.”
Pearl said that with this model, essentially $1B in total investment and payments will have flowed to charity and the school when the building turns over to FIU.
“Everybody can win," he said. "Instead of it ending up in a pension fund at the end, all the benefits are really flowing to community."
Construction should be done in time for students to move in for fall of 2020. Although FIU and construction companies are currently tangled up in lawsuits and a National Transportation Safety Board investigation over the bridge collapse, Pearl is confident in the ultimate result.
“We believe at some point in future, there will be a bridge.”