It was a tumultuous year for South Florida real estate, which began on an upbeat note when Miami was shortlisted in January in the competition for Amazon’s second headquarters.
While Amazon went another direction — north to New York and Virginia — local voters did approve the David Beckham-led bid to build an Major League Soccer stadium and complex at Melreese Country Club.
The collapse of the Florida International University bridge in March, which killed six people, was a low-point, and prompted a federal investigation that is ongoing.
Meanwhile, former broker Kevin Tomlinson went on trial, accused of extorting Coldwell Banker star brokers “The Jills.” The case, which gained national attention, exposed an industry-wide secret: rampant manipulation of the Multiple Listing Service.
In perhaps the biggest scandal of the year, federal prosecutors in July filed charges against eight defendants tied to a $1 billion Venezuelan money laundering scheme allegedly using South Florida residential real estate. More charges and guilty pleas have followed.
All the while, demand for luxury homes skyrocketed from tax refugees — ultra-wealthy residents of states with income taxes.
And in national news that touched South Florida, the federal Opportunity Zones program that provides tax incentives to developers who pour money into underserved neighborhoods sent investors scrambling to take advantage.
Read on for a look at some of the biggest stories to drop in 2018.
Miami and South Florida made it to the shortlist of 20 sites Amazon announced in January for its second headquarters, dangling the possibility of constructing 500,000 square feet of office space by 2019, and about 8 million square feet of space by its planned completion in 2027, while creating 50,000 new jobs.
South Florida’s bid offered eight sites: five in Miami-Dade, two in Broward County and one in Palm Beach County. The list included three locations in and around Overtown, including the Miami Worldcenter site, as well as Downtown Doral in Doral.
As the months dragged on, South Florida eventually lost the race, as Amazon announced in November that it would split its two new headquarters between Long Island City and Crystal City. And in a last-minute surprise, the company also revealed it will be opening a “regional hub” in downtown Nashville.
FIU bridge collapse:
March 15 was a tragic day in Miami, when the Florida International University pedestrian bridge under construction on Southwest Eighth Street collapsed, crushing cars and leading to the deaths of six people.
Munilla Construction Management, a prominent, Cuban-American, family owned construction business built the 289-foot-long bridge, and FIGG Bridge Engineers designed the pedestrian bridge.
In November, federal highway investigators said that designers miscalculated the load-bearing strength of the north end of the pedestrian bridge. The design errors were consistent with cracks in the FIU bridge before it collapsed, investigators said. However, the National Transportation Safety Board has not cited those design errors as the cause of the bridge collapse, and its investigation of the catastrophe is expected to continue into next year.
Kevin Tomlinson’s trial:
Former real estate agent Kevin Tomlinson was sentenced at the end of August to an extended period of probation and was banned from the industry for extorting Coldwell Banker’s the Jills and threatening to expose them for manipulation of home sales data.
Tomlinson, who faced up to 30 years in prison, was convicted by a jury in June on two counts of extortion for his demand that Jill Eber and Jill Hertzberg pay $800,000 in exchange for his silence.
It all began in 2015, when, after four months of digging through the Jills team’s listings, Tomlinson filed a complaint with the Miami Association of Realtors. He detailed 51 listings the Jills manipulated a total of 552 times between 2011 and 2015. Tomlinson said the combined value of those properties totaled more than $372 million, and that the Jills erased nearly 23,740 days on market from those listings in an effort to make the real estate more attractive to potential buyers.
When Tomlinson confronted the Jills, they went to the police and eventually recorded conversations in which he demanded hundreds of thousands of dollars to keep quiet.
In March 2016, the Miami Association of Realtors implemented a new fine structure for agents manipulating the MLS. For every violation, members are now required to pay $5,000.
Venezuelan money laundering:
Alejandro Andrade, a former national treasurer of Venezuela, was sentenced to 10 years in prison in November for his role in a $1 billion money laundering scheme in which much of the money allegedly went into South Florida real estate.
Andrade had admitted in a guilty plea that he received over $1 billion worth of bribes from his co-conspirator, Venezuelan TV mogul Raul Gorrín, and other co-conspirators. In exchange, he allowed them to tap into Venezuela’s special fixed currency exchange rate, according to the U.S. Department of Justice. The fixed rate is much more favorable than the market rate.
Federal prosecutors said Andrade received cash as well as private jets, yachts, cars, homes, champion horses, and high-end watches from his co-conspirators. As part of his guilty plea, he agreed to forfeit his assets, which included five real estate properties in Wellington, Delray Beach and Palm Beach.
Authorities are also seeking to seize about two-dozen properties allegedly tied to Gorrín. Those residences include luxury homes in Miami’s Cocoplum neighborhood and six in Manhattan.
In a separate billion-dollar money laundering scheme, federal prosecutors in July charged eight people in an alleged scheme in which top Venezuelan officials siphoned funds out of the state oil company, and into assets throughout the world.
In both cases, some of the money is alleged to have been poured into two units at Dezer Development’s luxury Porsche Design Tower in Sunny Isles Beach.
South Florida as a tax haven:
All year, ultra-wealthy out-of-state buyers have been flocking to South Florida, scooping up multimillion-dollar homes and condos with plans to establish residency in order to avoid shelling out money to the government as a result of last year’s tax reform.
The out-of-staters are largely top-earning hedge funders, real estate bigwigs, big-time entrepreneurs and CEOs from states such as New York, New Jersey, Connecticut, California and Illinois — places with state income taxes as high as 13.3 percent, and even city taxes in the case of New York City. Florida, on the other hand, has no state income tax.
The Tax Cuts and Jobs Act, passed in December 2017, limited the ability of taxpayers to deduct state and local taxes (SALT) from their federal taxable income in 2018, leading to the surge of interest in Florida.
David Beckham’s group’s MLS soccer stadium complex:
In November, city of Miami voters gave David Beckham and his partners the green light to move forward with their plans to bring a Major League Soccer stadium and an ambitious mixed-use project to Miami.
Called Freedom Park, the complex could include a 25,000-square-foot soccer stadium as well as more than 1 million square feet of retail and office space and about 750 hotel rooms on a site that is now home to Melreese County Club, a public golf course. In total, the development is valued at $1 billion and will be built on 73 acres out of the 131-acre country club.
The city still has to negotiate a 99-year lease with the group, led by the soccer superstar, along with Jorge and Jose Mas, Sprint’s Marcelo Claure and Softbank’s Masayoshi Son. Once negotiations are complete, four out of five Miami commissioners will have to give final approval to the lease.
Still to be determined is exactly what the owners will pay for the development site. The Beckham group previously said it would pay an annual rent of at least $3.6 million — or fair market value as determined by two independent appraisals — plus $20 million to fund the park’s construction, paid in annual installments of $666,667 for 30 years. The city ordered appraisals for the 131-acre site by CBRE and Joseph J. Blake.
Also key are the costs associated with the environmental remediation of the site, which includes dealing with coal ash buried underneath the golf course. The Beckham group has previously said it would be responsible for paying up to $35 million for these costs.
In October, the federal government issued expanded guidelines for the Opportunity Zones program, which was part of the Trump administration’s December 2017 tax overhaul. It provides tax deferments and breaks for developers who invest in projects in designated low-income neighborhoods across the country.
There are 8,700 communities that have been designated as Opportunity Zones nationwide, including 67 in Miami-Dade County. Many large investors have already started setting up funds to invest in Opportunity Zones.