The Miami Developers Hoping for OZ Renewal — and Expansion

Developer Neil Fairman says he and his team planning the Magic City Innovation District, an 8.5-million-square-foot mixed-use complex in Miami’s Little Haiti, are late to the Opportunity Zone game.

Render of Magic City Innovation District – Little Haiti

After scoring approval in 2019, the construction start was delayed by litigation and infrastructure work, a heavy lift that included platting, undergrounding utilities, and moving a street to accommodate a future passenger train station.

The developers—a partnership among Miami-based Plaza Equity, of which Fairman is chairman, Cirque du Soleil co-founder Guy Laliberté’s Montreal-based Lune Rouge, and Bob Zangrillo’s Miami-based Dragon Global—are in talks for financing for the first tower, 25-story Sixty Uptown Magic City with 349 apartments.

Since late January, they have been searching for about $40 million in equity.

“If you started in 2018, it would have been very beneficial.”
— Neil Fairman, Plaza Equity

“There is probably a 30 percent chance that it would come from Opportunity Zone funds and 70 percent chance that it would be private equity or private office,” Fairman said. “That’s because a lot of these groups don’t have capital gains to invest, and other investors don’t want to keep the investment for a full 10 years.”

Because investors who put their capital gains in Qualified Opportunity Zone Funds now will only get a tax deferral until next year, the appetite has dried up.

“Previously, if you started in 2018, it would have been very beneficial. You would have had five or six years to defer your taxes,” Fairman said.

He is part of a crop of developers who hope the Trump administration extends the program and loosens it to allow investors with any funds, not just capital gains, to put them toward Opportunity Zone projects. Under this structure, investors won’t get to defer capital gains taxes but will get a total tax exemption.

“If you could use tax-paid funds and that would not be taxed if you kept the investment over 10 years, that would really help the program a great deal,” Fairman said. “I think the program would just go very, very well if it wasn’t restricted to just investing money that’s capital gains. It would be very easy to deploy the capital.”

— Lidia Dinkova, The Real Deal

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