Here’s the lowdown on South Florida Community Development Districts

Through special assessments, builders finance public infrastructure for massive projects

Nitin Motwani with Miami Worldcenter
Nitin Motwani with Miami Worldcenter (Miami Worldcenter, Getty)

In the mid-2010s, Miami Worldcenter master developers Art Falcone and Nitin Motwani faced a dilemma planning the $4 billion mixed-use community in downtown Miami’s Park West section.

How would they pay for the sewer pipes, roads and sidewalks needed to support new high-rise buildings on more than 25 acres of primarily industrial properties and vacant parking lots?

“The area had long been neglected,” Motwani recalled. “No one had improved the infrastructure in the neighborhood. We wanted to create the necessary infrastructure before we went vertical.”

Falcone and Motwani convinced city of Miami officials to create the Miami Worldcenter Community Development District, or CDD. It acts as a quasi-governmental agency in charge of funding infrastructure projects tied to the massive development, as well as maintaining them. Overseen by a five-member board, the Miami Worldcenter CDD sold $74.1 million in tax exempt bonds in a private placement in 2017.

Those funds have financed and continue to pay for new streets and sidewalks that crisscross the two apartment buildings and Paramount Miami Worldcenter condominium that are already completed, as well as half a dozen other development sites at Miami Worldcenter, Motwani said.

“The good thing about CDDs is that they also pay for above-grade improvements like pavers, landscaping, lighting and public spaces,” Motwani said. “It’s a valuable asset for big projects like Miami Worldcenter.”

Since the early 2000s, developers across Florida have formed hundreds of CDDS, primarily for large tract housing developments on the western side of the Sunshine State where public infrastructure didn’t exist.

National developers like Lennar and D.R. Horton regularly create CDDs for their master-planned communities, said Jon Kessler with FMS Bonds, a North Miami Beach-based firm that underwrote Miami Worldcenter’s CDD bonds. It also has underwritten bonds for dozens of other CDDS in Florida.

The bonds are backed by the brick-and-mortar buildings and completed homes, and are repaid through special assessments that are passed down to the home buyer in most cases, Kessler explained.

Sign Up for the undefined Newsletter

By signing up, you agree to TheRealDeal Terms of Use and acknowledge the data practices in our Privacy Policy.

“CDDS provide developers with a form of public financing,” Kessler said. “It is widely used. In Florida, our firm has underwritten more than $1 billion in CDD bonds.”

FMS Bonds underwrites an average of 80 CDD bond deals a year, with each averaging about $7 million to $8 million, Kessler said. One of the most recently formed CDDs in South Florida is for Avenir, a 2,430-acre development in Palm Beach Gardens developed by Miami-based Landstar Development Group, Kessler noted.

In 2016, the developer won city approval for 3,000 single-family homes, 250 multifamily units, 400,000 square feet of commercial space, 200,000 square feet of medical office space, 1.94 million square feet of office space, a 300-key hotel, green space and more. Home buyers and businesses who move in will have to pay an annual fee of about $1,800 a year to cover the construction and management of infrastructure within the development, according to Avenir’s CDD website.

Miami Worldcenter was a rare urban infill project that was able to create a CDD, Kessler said. “Most urban infill projects already have infrastructure in place,” he said. “With Miami Worldcenter, there was a lot to do. The developers are basically building a mini-city.”

In 2007, Midtown Miami was a master-planned urban infill development in the city that created a CDD in order to tap bond financing to build new roads and two parking garages, Kessler said. “Midtown Miami was 57 acres of a former rail yard,” he said. “When you don’t have any real earth work and the roads are already there, there is not much for a CDD to do.”

Other South Florida infill projects that formed CDDs include The Village at Gulfstream Park in Hallandale Beach, and the retail and parking components of CityPlace — now called Rosemary Square — in West Palm Beach.

In the case of Miami Worldcenter, the CDD bonds are being paid through special assessments levied on the various project developers, Motwani explained. “Each parcel is on the hook for its share of the bond obligation,” he said. “It’s based on a complicated formula that is allocated proportionately by project type and density.”

A large portion of the infrastructure is already in place as the next wave of development at Miami Worldcenter ramps up, Motwani noted.

Among the new projects planned are Jorge Pérez’s Related Group and the Motwani family’s Merrimac Ventures’ 33-story condominium tower called The Crosby, with 450 units that will include micro-units; and Lalezarian Properties’ Miami World Tower, a 53-story condominium with 565 condos.