HomeMy WebLinkAboutCRA-R-21-0044 NR 14th Street ProposalR R
RATIONALE FOR CRA SUPPORT
Housing Affordability
14t' Street Apartments Project
Miami's Downtown and Greater Downtown skylines are pictures of construction, as new condos and
apartments are built throughout our burgeoning City. But the expansion experienced in the last and current real
estate cycles is misleading as the City faces one of the nation's most severe crisis of housing unaffordability
stemming from the dual problem of high housing costs and comparably low wages.
Today, Greater Miami's housing stock suffers from a significant supply mismatch. The local market has
a glut of expensive housing and not nearly enough affordable housing. While we have seen the construction of
expensive condos to the point of over -supply, not nearly enough affordable and workforce housing has been
built to meet market's demand. While thousands of new housing units have been developed within the City,
including thousands within the CRA alone, most of the units built are market -rate or high -end luxury units.
The COVED-19 pandemic as well as the expected economic recovery that will follow successful
vaccination campaigns, combined with current trends towards increased remote work, threatens to exacerbate the
City's housing unaffordability issues, as growing numbers of high -income workers and wealthy out-of-state
residents relocate to Miami in search of its unique urban amenities and "destination city" status. The prospect of
companies moving to Miami or opening offices in the City, in an effort to lure skilled workers and/or take
advantage of state and local tax and regulatory advantages, while a very welcoming development, could certainly
compound existing problems around scarcity and unaffordability in housing.
Today, the Miami -Fort Lauderdale metro is already one of the least affordable large metro areas in
the country, measured in terms of median -wage work hours needed to pay average monthly rent: at 87.1
hours, it ranks higher than San Francisco -Oakland (73.4 hours), Austin -Round Rock (70.4), New York -
Newark (69.4 hours) and Boston -Cambridge (67.0 hours), among others. The combination of relatively high
average rents with relatively low median wages is, in a nutshell, the central dynamic of the City's unaffordability
crisis.
According to the Affordable Housing Blueprint: Needs Assessment crafted by the Jorge M. Perez
Metropolitan Center at Florida International University (FlU), "the most serious problem in Miami -Dade County is
the estimated 251,732 renter households who are cost -burdened and the 140,062 renter households who are
`severely' cost -burdened. The significant growth of severely cost -burdened renters is the most pressing
problem due to three market conditions: 1) the increasing demand for renter housing throughout the County
resulting in low vacancy rates and spiraling increases in rent prices, 2) the lack of affordable rental housing
production, and 3) rent prices are increasing much faster than wages."
Furthermore, "[... ] the vast preponderance of County workers earn wages in service sector occupations,
including retail trade, leisure and hospitality, and educational and health services. The household incomes of these
service sector workers limit housing choices to affordable rental housing opportunities, where available." The
problem is compounded, moreover, by the fact that, historically, the City's economy "[... ] has shown it can shed
higher wage jobs very quickly but has shown resistance to adding new high -skill, higher -paying jobs."
Currently, already six in 10 employed adult residents of Greater Miami are housing cost -burdened,
meaning they spend more than 30 percent of their incomes on housing — the highest rate of any large metropolitan
area in the nation. Racial and ethnic minorities, as well as our community's low-income service workers, shoulder a
disproportionate share of the burden of today's housing crisis. The following facts provide chilling insight into the
scope and impact of the current crisis:
N R .
14th Street Apartments Project
■ About 49% of Miami -Dade County's households are renters. Between 2012 and 2017, the County has
seen its proportion of renter households grow by 11.4%, or nearly 2"/o annually. Miami, in particular,
has become a city of renters: the City's homeownership rate, at 30%, is the lowest among large cities in the
U.S.
■ Miami's renter population is disproportionately African American and Hispanic with 55% of black
households and 48% of Hispanic households renting, compared with just over 25% of white households.
■ Greater Miami's median rents are increasingly unaffordable. As of October 2018, the median rent for
Greater Miami was $2,095 — the eighth highest in the nation behind communities like Denver, Portland,
Dallas and Austin. Said median rent requires an annual household income of not less than $83,800 for such
rent to be "affordable" or for the household not to be "cost -burdened."
■ Miami's low-income service class — workers in low -skill jobs like retail, hospitality, food service and
home care which make-up more than 50 percent of the region's workforce — is severely cost -burdened.
Miami's service class faces the greatest rental cost burdens among all classes with just under $11,000 in
annual income left -over after paying rent — the 5" worst rate among large metropolitan areas in the nation.
■ At the same time, an estimated 45% of the jobs created in the City from now through 2024 will be in
occupations with a median annual income less than $35,000 per year: meanwhile, more than 9 out of 10
90.9% of renters in Greater Miami earning less $35,000 annually are cost -burdened.
■ Miami, in particular, has the highest proportion of cost -burdened renters in the nation by a significant
margin. More than half of renters 6( 2.4%1 spend 35 percent or more of their household income on
rent. Moreover, 32% of all renter households are "severely" cost -burdened — paying an excess of 50
percent of their incomes on housing costs. Greater Miami's renters have the least amount of money left
over after paying for housing of any large metro: Miami's renters have, on average, less than $16,000 left
over after paying their rent, far less than the $30,000 or so in take-home income that renters in Washington,
D.C. and Boston have left over after paying for their housing.
Crucially, though, despite the bleak picture, Miami has a lot of gains to reap by increasing the stock
of affordable housing, gains that are broader than strictly dealing with housing scarcity and unaffordability.
As stated in FlU's Miami Affordable Housing Master Plan, "affordable housing has broad -based
economic growth impacts. As families keep more of their income, they drive greater local spending which in turn
stimulates high -wage job creation, increased tax revenue, and lower public costs for health, human services and
policing." Conversely, "keeping housing costs as a reasonable percentage of family income promotes higher
educational attainment and improves family health outcomes, as families have more money to spend on education
and health costs." It is clear that "improved affordability promotes inclusive economic growth".
■ "Housing affordability can be a potent tool for improving economic performance, driving employment
growth, productivity, wages, business development, and retaining and attracting high -skilled, educated
workers to the region."
■ "The cumulative economic impacts of greater, more widespread housing affordability would be a major
boost to developing a more diversified, higher income City economy. "
0 "Affordable housing is [...j critical to Miami -Dade County's economic resilience [...j"
Na
14th Street Apartments Project
CONSISTENCY WITH CRA REDEVELOPMENT PLAN
Chapter 4 of the CRA proposed amendment to the Redevelopment Plan (2019) reaffirms the importance of
the development of affordable housing to the economic vitality of the CRA. With regard to projects assisted by the
CRA (from which it accepts projects it seeks to support to provide workforce, low, or very -low income housing), it
identifies among its community benefits priorities the "inclusion of an appropriate amount of below -market rate
units," specifically workforce housing units (at less than 140% AMI) and units for low-income residents (less than
80% AMl). Among the policy reasons articulated for such community benefits requirement are: (i) preservation of
the affordability of the neighborhood; (ii) prevention of existing resident displacement; and (iii) provide area
workers an opportunity to live near work.
On page 4-32 of the amended Redevelopment Plan, the CRA has noted that housing affordability is one of
the key programs for the CRA to undertake. A thriving community is one where residents in all phases of life with
varying types of employment can live in one area. To that end, the CRA outlined the following programmatic
methods it can employ to increase the supply of affordable housing:
To Assist For -Profit Housing Providers in the CRA could:
2) Pay some portion of development costs such as impact or permit fees
3) Provide a direct cash subsidy in the form of a rebate equal to a percentage of the
increases in taxes paid over a defined period of time after completion if affordable units
are provided.
In addition to the above programmatic methods to expand the supply of affordable housing, the CRA has identified
the following goal on page 5-56 of the Redevelopment Plan:
6) Housing Affordability — The CRA should fund established and creative new ways to increase
the stock of workforce and lower income affordable housing within the district.
GOALS:
a) Create project -specific developer incentives to ensure that new or significantly
redeveloped residential projects in the CRA contain a sufficient number of units that are
affordable to the targetpopulations.
The Project and accompanying request seek financial support from the CRA to underwrite the development of
residential units, specifically for low-income and workforce households, and asks the CRA to provide the Applicant
with a project -specific incentive.
NRINVESTMENTS. COM
N R
10 Street Apartments Project
PROJECT DESCRIPTION
The Developer proposes to enter into a public -private partnership with the CRA to advance the CRA's
goal of developing much needed affordable and workforce housing units within the redevelopment area.
Applicant proposes to construct a 35-story tower on land it purchased over the course of the last four years
which will consist of a mixed -use project comprised of the following elements: (i) 398 multi -family residential
units; and (ii) approximately 9,000 sq. ft. of ground floor commercial use (the "Project').
Applicant proposes to assist the CRA in advancing its Redevelopment Plan goal by restricting rents for
ALL of the 398 residential units within the Project through the life of the CRA as outlined herein below. The rent
restrictions proposed will ensure that the Developer make residential units available to low-income households and
households who can afford "workforce" rents, more specifically teachers, police officers, firefighters, nurses, first
responders, and recent college graduates, among other professions.
The Project represents the Developer's latest investment in the Omni "Arts + Entertainment District" — a
dynamic urban residential neighborhood connecting the CRA & Downtown Miami with the Wynwood Arts District
and the Design District. With the surrounding expansion, the Arts + Entertainment District has seen growth in its
residential, culinary, entertainment and nightlife offerings, but substantial land remains undeveloped and a number
of buildings remain dilapidated within the district evidencing the continued "slum & blight conditions" within the
CRA. Applicant's CANVAS project, an art -inspired condominium offering a "bohemian luxe" lifestyle immersed
in the local art, culinary & cultural scene, has served to anchor the district's ascendant trajectory.
Beyond its project investments within the redevelopment area, NR Investments, Inc., has invested
approximately $2 million in efforts to beautify the Arts & Entertainment District, attract new businesses and retailers
to the area, and deliver high -quality arts, music and community programming, including "The Miami Flea," a pop-
up market, and a "Moonlight Grooves," a music series held on CANVAS's backyard, among others.
Given the Project's location just north of Downtown Miami, it is conveniently accessible via multiple
modes of transit, including: (i) the MetroMover via the "School Board Station" on N.E. 151 Street; (ii) the City's
free trolley system; and (iii) Virgin Trains' service at Grand Central Station. The inclusion of the proposed
affordable and workforce dwelling units in the Project will provide residents convenient access to employment
opportunities via mass transit servicing greater Downtown Miami area and portions of the South Florida region via
inter -city passenger rail service.
Illustrative Project rendering enclosed as Exhibit "A"
NRINVESTMENTS.COM
4
14th Street Apartments Project
REQUESTED PROJECT SUPPORT
Applicant's request assumes the approval of an extension of the term of the CRA through 2047 and
obligations of the Applicant and CRA pursuant to an Incentive Agreement would be conditioned upon the passage
of such an extension. With the clarification, Applicant proposes the following development restrictions and makes
the following request of the CRA to assist the Project:
Proposed Residential Restrictions: Applicant proposes to rent -restrict 398 residential dwelling units — 27
studio dwelling units, 300 one -bedroom dwelling units and 71 two -bedroom dwelling units — as set forth in
the "Project Information Sheet" attached hereto as Exhibit "R." Said rent -restrictions will be remain in
place from the date the Residential portion of the Project is placed in-service (as evidenced by the issuance
of a temporary certificate of occupancy or certificate of occupancy for a residential dwelling unit) through
the date of the CRA's expiration (2047). The Applicant will be permitted to adjust the maximum rent per
unit for each unit type consistent with the rate schedule adopted by the Corporation for "Multifamily Rental
Programs" for Miami -Dade County. The Developer will impose a Covenant setting forth the rent
restrictions and the minimum number of rent -restricted units by type. The Covenant shall grant the
enforcement rights to the CRA through the term of its existence.
Requested Financial Support: Applicant requests partial loss reimbursement of $15.0 million, along
with a rebate of 95% of the TIF collected by the Omni CRA from the Project. Developer anticipates that
the rebated tax increment generated by the Project will amount to approximately $13.6 million in gross
receipts, or approximately $8_7 million in present value. The partial loss reimbursement and TIF receipts
will be used to offset the estimated $38.0 million in gross economic loss (in the 2047 scenario).
Moreover, the project foresees around $4_3 million in estimated permit fees, water & sewer connection
charges, and impact fees to be assessed at the initiation of the Project. See Exhibit "C" attached hereto.
Construction costs have increased significantly in the last year, reflecting higher costs of materials
and labor alike. The sharp post COVID-19 economic rebound, coupled with unprecedented public
sector relief and stimulus outlays, are expected to create supply-side and labor bottlenecks, which
threaten to exacerbate and prolong upward price pressures. The requested financial support will
significantly help to offset these factors.
ii. The value of the requested financial support —partial loss reimbursement of $15.0 million and
TIF rebate in the amount of $8_7 million in present value— is still substantially lower than the
value of the losses generated by the rent and use restrictions detailed above: $38.0 million. This is
without including the project's approximately $4_3 million in estimated permit and impact fees.
iii. The calculation of rent and use losses assumes that market rent prices will grow at a conservative
rate of 3.00% per year. That being said, the specific area where the project is located is
undergoing —and has, in fact, been experiencing for years— rapid growth and redevelopment, in
the larger context of a City which expects to continue expanding its population and urban core.
Therefore, it is not at all unreasonable to anticipate that market rates will increase at a much higher
pace, which would, in turn, cause an even greater loss in rents due to the restrictions in place. In
other words, the project's financial projections may very well be underestimating the losses
generated by the rent restrictions.
iv. The future resale/refinance value of the building, which is calculated on a cash flow basis, is also
substantially diminished by the rent restrictions, by as much as $46,314.638, based on a standard
market cap of 5.00%.
NRINVESTMENTS.COM
14th Street Apartments Project
In sum, applicant deems that the project's present value losses and increased construction costs easily
exceed the support sought, with even conservative estimates of market rents growth during the period.
NRINVESTMENTS.COM
6
10' Street Apartments Project
APPLICANT EXPERIENCE & QUALIFICATIONS
14'h Street Development LLC, is a subsidiary of NR Investments, Inc. ("NR" ), a privately held real estate
investment company. Each of the company's principals and senior executives has extensive experience in real estate
capital markets, acquisition, asset management, development, construction and risk management. NR believes in
fostering cultural movements and communities in undiscovered areas, and in making their buildings the beacons of
their renaissance.
NR specializes in acquiring developing, repositioning, and managing real estate assets in major markets
throughout the world. The company has acquired more than 10 million square feet of office and residential space
across the globe. Over the past 18 years, NR has purchased, developed, repositioned and sold over $700 million of
multifamily and commercial real estate assets.
Recent Development Experience
■ Filling Station Lofts: In January 2013, NR stepped into Miami's Omni / Arts & Entertainment District
with the acquisition and subsequent completion of Filling Station Lofts, an 81-unit loft -style apartment
building.
■ CANVAS Condominiums: In November 2013, NRI closed on the 1.07-acre CANVAS condominium site.
NR constructed a 37-story, 513-unit residential condominium tower that received its final certificate of
occupancy (C.O.) at the end of 2018, and was delivered in 2019.
Qualifications ofPrincinals
■ Nir Shoshani — Principal. Prior to forming NR in 2001, Mr. Shoshani held the title of President at TiS
America, Inc., a subsidiary of Top Image Systems Ltd. (NASDAQ: TiSA), a publicly traded, high-tech
firm headquartered in Israel with operations around the globe. Mr. Shoshani is a graduate of the Belgrano
School of Business in Buenos Aires.
Ron Gottesmann — Principal. Prior to forming NR in 2001, Mr. Gottesmann worked as a mortgage broker
overseeing the operation of GFI Mortgage Bankers Inc. of New York. With Mr. Shoshani, Mr. Gottesmann
leads NR which today is a fully integrated development firm which owns and manages a wide variety of
real estate, including large scale office buildings, commercial shopping centers, and multi -family housing.
Under Mr. Gottesmann's leadership, the firm has maintained a consistent focus on property repositioning
via the acquisition of underperforming buildings in high visibility locations rehabilitating them to their full
potential through extensive renovation and management restructuring.
Terry Wellons — C.O.O. Mr. Wellons serves as the Chief Operating Officer at NR. He leads the United
States team directing a group of highly experienced attorneys, accountants and portfolio and property
managers. He has a background in finance and as a real estate attorney, serves as lender's counsel and
representing buyers and sellers of real estate, aids NR in each aspect of NR's business, effectively
negotiating and gauging the legal and financial risks involved with each transaction. Mr. Wellons holds a
degree in finance from Florida International University and a law degree from Nova Southeastern
University,
NRINVESTMENTS.COM
M R
ExHiBiT "All
PROJECT RENDERING
NRINVESTNENTS.COM
14th Street Apartments Project
14th Street Apartments Project
EXHIBIT "B"
Omni CRA
Tax Increment Recapture Agreement
Project Information Sheet
Developer/Applicant: 141 Street Development LLC
Contact Person: Terry Wellons, C.O.O.
Telephone: (305) 625-0949
E-mail: terry(F4nrinvestments.com
Project Address: 1441, 1445 & 1455 N. Miami Avenue, 25 & 31 N.E. 1411 Street, and
1412, 1418, 1428 & 1432 N.E. Miami Court, Miami, Florida
Property Information
Prior Year Taxable Values
Folio Numbers
Existing Building
Size
Lot Size
2019
2018
2017
01-3136-005-1110
0 sq. ft.
7,600 sq. ft.
$1,333,420
$1,212,200
$1,102,000
01-3136-005-1070
0 sq. ft.
11,400 sq. ft.
$1,875,630
$1,705,119
$1,550,109
01-3136-005-1060
929 sq. ft.
5,700 sq. ft.
$874,463
$794,967
$722,698
01-3136-005-1180
0 sq. ft.
3,355 sq. ft.
$551,489
$501,354
$486,475
01-3136-005-1151
0 sq. ft.
5,000 sq. ft.
$821,892
$750,000
$679,250
01-3136-005-1150
0 sq. ft.
2,200 sq. ft.
$361,632
$328,757
$298,870
01-3136-005-1140
0 sq. ft.
4,200 sq. ft.
$690,389
$627,627
$570,570
01-3136-005-1130
0 sq. ft.
4,200 sq. ft.
$690,389
$627,627
$570,570
01-3136-005-1090
0 sq. ft.
6,300 s . ft.
$1,035,584
$941,440
$855,855
Total:
929 sq. ft.
49,955 sq. ft.
$8,234,888
$7,489,091
$6,836,397
Type of Project:
Construction Commencement:
Project Construction Completion Date:
Project Construction Cost:
Estimated Adj. Taxable Value (TIF Basis):
Residential Square Footage:
Retail Square Footage:
Property Acquisition Date:
Total Acquisition Cost:
Projected Residential Rent (Per Unit Type):
Mixed Use (Retail, Multi -Family Residential)
June 15t, 2022
October 11, 2024
$141,414,310
$65,088,738
297,625 sq. ft. +/-
8,706 sq. ft.+/-
May 2014 and February 2015
$7,842,000
Studio - $1,747 / 1BD - $2,224/ 2BD- $2,750
NRINVESTMENTS.COM
9
"R
14`h Street Apartments Project
Proposed Affordability Restrictions:
2047
Unit Type
Total
Units
Maximum Rent
Studio- 60% AMI
2
$960
Studio- 80% AMI
3
$1,280
Studio- 100% AMI
4
$1,600
Studio- 120% AMI
5
$1,920
Studio- 140% AMI
13
$2,240
1BD- 60% AMI
15
$1,029
1BD- 80% AMI
30
$1,372
1BD- 100% AMI
45
$1,715
1BD- 120% AMI
60
$2,058
1BD- 140% AMI
150
$2,469
2BD- 60% AMI
3
$1,234
2BD- 80% AMI
7
$1,646
2BD- 100% AMI
11
$2,058
2BD- 120% AMI
14
$2,469
2BD- 140% AMI
36
$2,880
Total:
398
-
NRINVESTMENTS.COM
10
FM
EXHIBIT "C"
FINANCIAL ANALYSIS
RESIDENTIAL ECONOMIC LOSS
14'h Street Apartments Project
4
5
6
1
Taa Years
8
9
l0
11
2026
2027
2028
20n
2030
2031
2032
2033
Total
Annual Rent loss:
($L241,830)
($1,282,165)
($1,320,630)
($1,360,248)
($1A01A56)
($L443A88)
($11486,m)
(%,530,9]2)
011,069,3581
Valua0an lass
($24,895,400)
($25,643,292)
($26,41LS91)
($27,204,968)
4$2&02L1181
1$2g,8fiL)51)
($29,12],fi )
($30,619,432)
12
13
14
15
16
17
18
19
Taa Yan
2034
2035
%
2031
20 38
2039
2040
2
Total
annual Bent lass:
($1,5]6,901)
($1,621,208)
($L6T1,934)
15L]23,1221
($L]]4,8161
1$L82RA6D1
(SL8B2,902)
151539,3B9)
($14A22,331)
W.A. lav
($31,538,015)
I$32.W.155)
($33,458,680)
($34A6L440)
($35,496,313)
1$36,561,203)
(S37,fi58,039)
20
21
22
23
24
25
26
27
28
2042
2.3
2(141
Taa Years
2
2046
204]
2046
204]
Total
Annual Rent lass:
($1,99].5)1)
($2A5),4981
($2,119,123)
($L18L]991
($L2a8,289)
($;315,732)
$0
SD
(
ValuaDon lass
($39,-,413)
($41,149,956)
($42,M454)
(5431655,988)
($M,%$,fifi8j
($46,319,638)
50
$0
Weighted AMI Restdtsbn9F B-
50%0l Units
-0%
Total Rent lass:
TIF TO DEVELOPER CALCULATION
CM/ceveloper Retains
91%
GrovrtM1 Pate:
1.03
Oispaunt Rate
3%
MIIla4e Rate
Taaable Value (2020�
Taaable Value(@ O.D.I
AdJ.Talvble Value
Taa Recelub lNe4
CRATIF:95%1
CM Retainetl TlF (fi5%) Caunry
Clawhad (35%)
nidpal Operating
7.4365
$8,700,000
$T3,]88,138
$65,098,]38
1484,032
$459,831
$298%)
$160,941
Mlamh0 d, Caunry- Opentlng
4.6fi69
$8,]s10,000
$]3,I88,I38
$65,088,]38
$303.]63
$288,5]5
$197,573
$101,001
Tatal R-prs:
$787,]95
$748,405
$486,463
$261,942
Taz Years
2033
TOdI
L126
202]
2028
2029
Z030
2031
M32
W CM:
5486,43
$5]061,05]
$S0
2
$5547,529
$53653,94
$086
$568,314
$4,31205,196
TIF to Develo:
$46210
4
$20,6
]4)
SL20pe
TF
$430,606
$40,6006
$410,06
$410,0
$410,606
$410,0
$41D.606
$410,%
$43,2849405]
2034
az Years
T203]
20a1
Total
2035
3036
2038
2039
2040
TIF b CM:
4
2,98
fi83
$69,710
685
$618,611
$69,09
$1 9.,999999
0
TIF to OeVel0
$54
556,1
9
4
$6529L0,028
$60],]25
4,]35
64,0]]
$$45,,924055.,58010r.
TIF Deeor
$390,075
$390,07
390,075
$%,075
$390,0
$30,075
$to 390,075
$3,120,fiO3
az Years
T20a5
Tatal
2042
2043
20J4
204fi
202]
2046
204]
0
TIF b CM:
1711,59:
$]63,84]
$786,763
$310,366
$834,6]]
$859,717
$D
$0
$0
$4,796,969
TIF to Developer.
$7.,sl
$]25,655
$]4],425
$]69,84]
$]92,943
$816,]31
::so
$0
$0
$0
$4,557,121
llF to Devel4perlpV�:
5390,075
$390,011
$390,0]5
$390,075
$390,075
5
$0
$0
$0
$2,340,452
T4taI nF t4 CRA: $14,328,565
TIF to Developer: $13,612,137
TIF to Developer("): $8,745,900
rL RIVIZ WN-4893 fumweliT
11