Florida Commercial News - Land, Development, Building, Business

Currency devaluations in other nations are a big factor, but not the only factor, in growing international interest in South Florida real estate development.  Consider these recent monetary events:

Venezuelan Bolivar 6.3:1

In Venezuela, for example, the Venezuela bolivar has been devalued 5 times since 2004 and in February 2013, the bolivar fell to 6.3 bolivars to 1 U.S. dollar.  What happens now, after the recent death of Hugo Chavez, remains an issue: Chavez ordered the February devaluation to combat a growing budget deficit in his country.

Argentina's Corralito

In 2001, Argentina devalued its currency as part of an overall economic plan to avoid bank runs and other big, bad things from happening in an economic situation that many are currently comparing to what Greece is experiencing today.  The Argentine plan, called the Corralito, devalued the peso and by 2002, it had fallen from the fixed rate of 1 peso to 1 U.S. dollar to an exchange of 4 pesos to 1 dollar. 

Brazilian Real 2:1

Meanwhile, in Brazil, economists are looking at the Brazilian Real as being akin to the Australian dollar as being overvalued and at least one leading analyst is concerned that this means big trouble for Brazil in 2014 unless something is done quickly in Brazilian currency policy.  Right now, the Brazilian real has fallen from a high in 2011 to a present exchange of 2 reals to 1 U.S. dollar.  

Latin American Economies Fluctuations Provide Incentive for Florida Builders

Currency exchange rates, and their correlated inflation cycles, are just a few examples of how the national economies in Central America and South America are fluctuating in ways that are influencing land developers in those countries to look elsewhere to build.

Like South Florida.  

As we've discussed in the past, there has been growing interest over the past few years of international investors in Florida real estate developments.  Consider our past posts for details:

• Mexican Investors Doing Real Estate Deals in Florida is Not a Surprising Trend
• Foreign Investors Making More and More Real Estate Deals in Florida: A Trend That Should Continue into 2011

However, as covered by Reuters this week, more and more foreign development is happening in Miami and the rest of South Florida.  From their coverage, the following examples:

• Argentine developer Jose Luis Melo and the Melo Group real estate company are building a 17-story, 98 unit condo tower on a $1.4 million parcel of land here in Miami;
• Latin American developers are tied to around 30% of newly announced South Florida residential projects; and   
• Consultatio, one of Argentina's biggest real estate developers, is developing two sites in Miami. One has already begun: a 154 unit condo tower in Key Biscayne.  They had purchased the land for another big project in a huge deal (one of the biggest last year) for Miami Beach, but the company has yet to break ground on that Bal Harbour tract. 

Last fall, when Hugo Chavez won re-election as President of Venezuela, more and more Venezuelans were expected to move here to South Florida.  And they have.

In fact, Venezuelans have been leaving their homeland for new lives in Florida for many years now: for over a decade, South Florida - and particularly the Miami area - has been a welcoming community for people wanting to escape from Chavez's Venezuelan government. 

Why Miami?  

Venezuelans have long felt Miami to be welcoming - its widespread Latin American influence and the large number of people who speak Spanish fluently, together with a growing Venezuelan population have made our area one of the main relocation targets of Venezuelans for many years now.  

This week, the Sun Sentinel reported on how many Venezuelans have indeed come to the Sunshine State to build new lives in an article entitled, "Venezuelans increasing their presence in South Florida's real estate market."  

As referenced in the article, the United States Census reports that within Broward County and Palm Beach County (together with Miami-Dade, the three counties that form the South Florida Metropolitan Area), between 2000 and 2011, the number of Venezuelan-born residents more than doubled.  

What happened?  

Hugo Chavez was first elected in 1999, and Venezuelan's educated population began looking for alternatives, particularly after Chavez rewrote the constitution. Other factors also played a part:  skyrocketing crime, economic crises (including a devalued currency), and other issues of instability have contributed to the influx of Venezuelans into the Florida area.  

Last fall, Caracas had become known as the "city of departures" among Venezuelans as citizens were fleeing the capital due to growing dangers there.  Kidnapping is a profitable business there.  Murder rates in Caracas are said to be higher than some areas of open war.  

Venezuelans in Miami are Buying Lots of Real Estate

Venezuelans are making more foreign real estate purchases in Miami today than any other country according to the Miami Association of Realtors.  According to their records, Venezuelans are buying 16% of all international real estate purchases in our area.

Which is good news for Miami not only for the influx of revenue into the local economy.  The folk that are relocating to Miami from Venezuela are highly educated, professionals and entrepreneurs and their families.  Not only are they bringing their cash to real estate closing tables, they are also bringing their ability to contribute to our culture and our communities in many other ways.  

What's next?

In February, Venezuela gutted its authorized system for foreign exchange of the nation's currency, the bolivar, as well as devaluing the bolivar by 32%.  This has serious repercussions for Venezuelans and their ability to move their funds out of Venezuela and into more stable financial institutions in other countries as well as their ability to purchase real estate here. 

Meanwhile, the Venezuelean government issued an official report this morning that President Hugo Chavez was facing serious health issues and his condition was characterized as "delicate."  

Which means that the instability of Venezuela is expected to continue, if not escalate, and those wishing to expatriate from their homeland to Florida and elsewhere may be doing so sooner rather than later.  Which is good news for Florida.

Goldman Sachs is an international investment banking legend, having been around since 1869 and when Goldman Sachs issues its opinion on the economic future of an industry or economic segment, many respect and value what the Research Division at Goldman Sachs is predicting.

This week, Goldman Sachs' analysts Hui Shan and Jari Stein are forecasting home sales in the United States will continue to rise over the next several years.  They are giving numbers here:  

• 5.2 million in 2013;
• 5.7 million in 2016.

Goldman Sachs is also predicting unemployment to drop (prediction: 6.2% by 2016) and home prices to rise (17% by 2017).  

The National Association of Realtors Shows Rising Home Sales

Meanwhile, the National Association of Realtors reports that in January 2013, home sales rose and the NAR's chief economist, Lawrence Yun, is explaining this as being the result of a growing number of sellers and a steady rise in home prices:

"Buyer traffic is continuing to pick up, while seller traffic is holding steady," he said. "In fact, buyer traffic is 40 percent above a year ago, so there is plenty of demand but insufficient inventory to improve sales more strongly. We've transitioned into a seller's market in much of the country."

According to the NAR, the total existing home sales (seasonally adjusted annual rates) are:

• January 2013 4.92 million 
• December 2012 4.90 million 
• January 2012 4.51 million 

Skeptics Don't Agree with Goldman Sachs

Of course, not everyone agrees with these nice, juicy housing forecasts.  Yale economist Robert Shiller is one voice of skeptism here, telling CNBC interviewers that things are not that clear on the housing horizon.  Maybe housing will rise, but Shiller is of the opinion that it's not that certain (yet).

And as we all balance these opinions and evaluate things, there is that about-face that Goldman Sachs did last March, when Hui Shan announced that the December 2011 predictions were not panning out and that the predicted housing recovery wasn't happening then, after all.  

How to value Goldman Sachs' latest report?  Well, maybe the investment banking research hasn't always been accurate - but Goldman Sachs has been around for many, many years - withstanding many economic valleys.  There's merit in considering what their research team is reporting this week.

Image:  Marcus Goldman (1821 - 1904) one of the founders of Goldman Sachs.

MERS has been sued again, and it's probably not going to be the last time.  The state of Kentucky (actually, it's a commonwealth) has followed the lead of states like New York, Texas, Alabama, and Delaware, and is going after Mortgage Electronic Registration Systems, Inc. (MERS) for lots of money in a lawsuit based on county record filing fees. 

In this latest suit, filed around a week ago in Kentucky state courts, Kentucky is alleging that MERS and its parent company, MERSCORP Holdings, Inc. violated Kentucky law - allegations that have come about after a lengthy Kentucky Attorney General investigation.  There's an intent prong to the claims being brought by Kentucky, too: the lawsuit alleges MERS acted intentionally to avoid paying these fees so as to unjustly enrich MERS at the expense of consumers' pocketbooks and Kentucky's coffers.

In essence, the Kentucky argument is that MERS did not record mortgage assignments with Kentucky County Clerks as mortgages were sold (transferred) between banks.  Kentucky charges a twelve dollar ($12) fee for each of these recordings in the county real estate records.  The fees are owned by the Commonwealth of Kentucky.

Those $12 fees for each of these assignments adds up to lots of damages being alleged by Kentucky Attorney General Jack Conway. 

"Kentucky's statute is clear. It requires assignments be recorded with County Clerks, and MERS directly violated that law by creating this system that provides no public record of sales or transactions and deliberately circumvents paying recording fees to states," General Conway said. "The process makes it difficult for consumers to access data to find out who owns their loans, and the Commonwealth is ripped off when it comes to recording fees."

You can read the entire complaint filed by Kentucky against MERS and MERSCORP here.  

MERS Comes Back Swinging

MERS isn't new to the ballgame here, and the company was quick to issue a news release slamming the Kentucky claims.  

Here is the MERS' released response to the Kentucky lawsuit:

“There is no merit to the allegations leveled at MERS by Kentucky Attorney General Jack Conway in today's news conference. All MERS mortgages are registered in the local land records and all recording fees are properly paid. The MERS® System's role in the mortgage industry has reduced chain of title issues, provided efficiencies through e-commerce, and resulted in lower mortgage borrowing costs. Our business model is straightforward and transparent, and MERS role is clearly spelled out in the contract between borrower and lender. MERS® System data is not used by servicers to make loan modification, refinance or foreclosure decisions. 

In Kentucky, all foreclosures are judicial foreclosures and as such are processed by the court system. MERS’ standing as mortgagee has been upheld in –In re Jessup, No. 09-5229 (Bankr. E.D. KY 2010). MERS and CitiMortgage’s Motion for Summary Judgment was granted and the court held that “the language in the Lender’s own instrument is sufficient to identify MERS as [the mortgagee].”

Last month, the international non-profit land use thinktank, the Urban Land Institute, held a meeting of minds to ponder the future of coastal land development and how climate change (global warming) is influencing land use and real estate development around the world -- something that is very important to Florida development, of course, and thus, this is our News Release of the Week:

Urban Land Institute Convenes Investors, Insurers and Public Officials to Explore Emerging Business Risks for Property in Coastal Regions 

For more information, contact Trish Riggs at 202-624-7086 

WASHINGTON (January 24, 2013) – The impact of climate change will play a greater role in shaping coastal development in the years ahead, influencing decisions on what is built and rebuilt, where and how it is built, and how it is insured and financed, according to insurance and real estate professionals speaking at a global policy and practice forum hosted by the Urban Land Institute (ULI). 

The increased frequency of property casualties associated extreme weather events, including severe hurricanes, tornadoes, floods, storm surges, and drought-fueled fires, as well as significant sea level increases are changing how property risk is valued, noted the panelists. The changes in both extreme weather events and risks are compelling the real estate industry to explore new development practices that implement adaptive measures that better protect both the built and natural environment. Increased climate risks are also raising awareness of the need for more investments to make existing buildings more energy efficient and reduce the carbon emissions associated with buildings. 

“For the real estate industry, the risk posed to urbanized coastal areas by climate change has become a global issue with dramatic local ramifications. It’s one of several drivers – along with economic, demographic and societal changes – that are necessitating a different approach to coastal development in the twenty-first century,” said ULI Chief Executive Officer Patrick L. Phillips. “Whether necessitated by reasons related to market demand or environmental concerns, rebuilding presents an opportunity to reduce risk in the future, enhance livability, restore natural resources, and increase community resilience.” 

The forum, “Resilience and Risk in Coastal Regions,” held January 16-17 in Washington, D.C., included representatives of the federal government, local governments, investors, property owners and leading members of the insurance and reinsurance industries.Among the panelists’ observations and predictions: 

• Mark-to-market pricing could be replaced by “mark-to-future” pricing that reflects external factors such as a community’s sea wall height and internal factors such as whether the building mechanical systems are elevated in a building. “This century will be about high volatility and huge uncertainty…Planning will be stepped up for events related to climate change, and buildings will be assessed for what will break.”
• Population growth and the rise of the global middle class is accelerating the urbanization of coastal cities worldwide, increasing their vulnerability to high losses of life and property damage from catastrophic storms.
• In the U.S., compromised infrastructure systems are adding to the risks faced by these rapidly growing areas. “Reinsurers and insurers are facing increasing losses around the globe, and what it boils down to is how to deal with uncertainty going forward.”
• Risk assessments are being adjusted to account for the fact that storms originating off the coast are increasingly having a major effect on geographic areas far beyond the initial landfall point, reaching places where buildings are not constructed to the same standards as those on the coast.
• Several lessons resulted from Hurricane Sandy that can be applied to urban planning for the future: 1) Critical infrastructure (such as electricity grids) should be restructured to provide more individualized service on a block-by-block basis, so whole communities do not lose power at once; 2) Land uses need to be reevaluated, in terms of which areas should not be rebuilt or rebuilt differently; 3) Consideration should be given to elevating water and sewer systems to factor in sea level increases; and 4) a new system of infrastructure financing, such as an infrastructure bank, is needed to generate funds to upgrade and build more weather-resilient systems.
• The carbon footprint of buildings will increasingly affect property values and the availability of financing. Tenants seeking to lower their own carbon emissions will choose to lease space in high performing buildings, even if the rent is more expensive. “Carbon is the new asbestos for real estate; and it’s on everyone’s balance sheet.”
• Property insurance underwriting is being driven by the desire for market share, which is causing many companies to be heavily exposed in areas inadequately prepared to withstand natural and manmade disasters. More programs are needed to incentivize cities to implement adaptation measures.
• The costs of business interruption are often far higher than those for replacing properties and repairing damage, but business interruption is seldom reflected in policy coverage. In addition to the vulnerability of their own locations, companies need to gauge the risks posed by the locations of partners such as parts suppliers. As storms become more frequent and intense, long-term economic losses will eclipse property destruction as the major threat to urban prosperity.
• More and more coastal areas are being affected not just by major storms, but by “non-event” weather that is flooding heavily built-up shorelines. A more balanced approach is needed that reflects the likelihood of future damage (and thus avoids rebuilding in the most disaster-prone areas), but which also recognizes that coastal real estate is a key economic driver. One likely outcome: greater use of the waterfront as open space, which creates value for the entire community but can also act as a protective barrier to storm surges.

Observed forum keynote speaker Fred Krupp, president of the Environmental Defense Fund: “Finding solutions to climate change is not an easy path, but a necessary path. We must keep talking about these issues, because we have paid a heavy price for our silence.” 

About the Urban Land Institute

The Urban Land Institute (www.uli.org) is a nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has nearly 30,000 members representing all aspects of land use and development disciplines.

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For those involved in the Florida commercial real estate market, what's happening in Florida business and what's predicted to happen in Florida business is important.  It's more than monitoring development deals or land use: the future success of Florida's commercial real estate development is intertwined with the health of Florida's business development.  

Florida Venture Capital Investment in 2012: the Money Tree Report is Out

Which brings to what has been happening with investors around the country and their decisions regarding investing - specifically, investing venture capital here in Florida.  What's venture capital really?  Venture capital, according to Investopedia, involves:

Money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.

And according to year-end money analysts' take on things, Florida didn't fare too well on enticing venture capital to the Sunshine State last year.  The National Venture Capital Association reports, in an analysis published as the "MoneyTree Report," together with Pricewaterhouse Coopers and using information and numbers from Thomson Reuters, that Florida had 34 venture deals last year.

Those 34 venture capital deals in Florida during 2012 brought $202.9 million to Florida business. The MoneyTree Report compares this to the previous year's total of $346.3 million from 55 venture capital deals.

Florida Venture Capital Funding Fell in 2012 (As Did the Nation as a Whole)

Florida took a hit in venture capital investment last year.  In fact, Florida ranked at one of its lowest points on the national venture capital investment scale, in comparison to other states, in 2012, according to the MoneyTree Report.  Florida was ranked no. 20 in 2012, down from a rank of no. 18 in 2011 - and having been in the top 10 venture capital states in past years - after venture investment dollars tumbled 35% for Florida in the past year.  

That's the news from this report.  (Click on the image of a Blue Florida to read the report online.)  Of course, the entire country faced a similar situation.  The United States as a whole saw a drop of 10% in venture capital investment dollars in 2012.  

Where does Florida go from here?  And what part of Florida fared best in 2012 Venture Capital? 

The bigger news here:  this is the first time that venture capital investment has dropped in the United States in three years.  What is happening to Florida is happening to the country as a whole.  Already, many pundits are warning for no one to listen to any voices crying out that the "sky in falling," as various reasons for the dip in venture capital investment is explained.  Some are pointing to Facebook's limp debut in the stock market last year; others are pointing to things like the ongoing budget fights in Congress.  

Meanwhile, within the State of Florida, it is interesting to note that Central Florida appears to have been the focus of much of the venture capital interest last year, a region that includes the Orlando / Lake Nona metroplex. 

Which states are most popular with venture capitalists, based upon 2012 numbers?  California is a strong number one ($15 billion in 2012); followed by Massachusetts; New York; Washington State; and Texas.  

This week, AOL Real Estate reported on foreign investors becoming so infatuated with U.S. real estate, particularly Florida residential real estate, that they are buying property here without even bothering to visit the home before closing on the deal.  In an article entitled, "Foreign Investors Buy Florida Homes Sight Unseen," the power of the World Wide Web really makes itself known as buyers from Canada, China, and other countries, are shopping real estate sites to find homes to buy.  

Florida, according to the article, is the current hot spot for these foreign buyers:  Canadians, Chinese, and other foreign investors are surfing Florida realty web sites to find condos and homes and town-homes to purchase.  And they are buying these homes sight unseen (except for photos, maybe a video tour). 

Looking to other media sources, it appears that foreign media coverage is concurring with AOL on this new trend in foreign investment.  A cursory review of international media coverage of foreign investment in Florida real estate found the following: 

• The Toronto Star reporting on Canadians facing off with Chinese investors in purchasing Florida real estate.  Both foreign real estate investment group, those in Canada and those in China, are finding Florida (particularly South Florida) a market where they can find great deals on properties in a place they consider to be safe as a long term investment location.   
• The Winnepeg Free Press writes on Canadians buying property in Florida, giving details on how Canadians who are foreign investors in Florida real estate need to be aware of things like property taxes here, how a power of attorney works, as Canadians are finding the "depressed" Florida real estate market a tempting place to buy a home far away from the cold Canadian winters.
• Great Britain's The Independent puts Florida right alongside Spain, various Caribbean islands, Italy, and France as popular places for Brits to put their real estate investment funds these days. Miami is cited as being a particularly "strong" market for foreign real estate investors.  The British article discusses "dirt cheap" properties being available now in Florida due to recent economic conditions.
• Finally, here in Miami, the Miami Herald reported earlier this month on foreign real estate investors coming to Florida and particularly South Florida to buy up local residential real estate. Using individual stories, including an English couple who own a London hotel who have discovered the opportunities here for real estate investment, local coverage is dovetailing with coverage around the globe.

In 2013, we should expect and welcome foreign investors of all shapes and sizes and nationalities here in South Florida where our current real estate market beacons them to buy here and invest their money into our economy - both now and in the future.

Image:  Bayfront Park in Miami, Florida, with condo towers lining the horizon.  Public domain image courtesy of Wikimedia Commons.

This week, the Association of Foreign Investors in Real Estate (AFIRE) released its yearly review of international investment trends: for several years now, AFIRE has compiled a year-end survey of foreign investors to learn what spots around the world they are considering as top investment opportunities.

1. International Investor Survey by Official Voice of Foreign Real Estate Industry in U.S. 

Why should we bother with AFIRE's survey?  Well, for one thing AFIRE, to quote from its web site, is:

the official voice of the foreign real estate industry in the United States and the pre-eminent global real estate organization, the Association of Foreign Investors in Real Estate (AFIRE) represents the interests of nearly 200 investing organizations from 21 different countries. AFIRE is a not-for-profit association of international real estate investors with headquarters in Washington, DC. The organization was founded in 1988 with strong support from Dutch pension funds and German investment firms now constitute the largest nationality of investors. While inbound investment into the US remains our members’ common bond, their portfolios have become increasingly global in scope. 

Representing the “who’s who” in the global real estate investment industry, AFIRE membership is exclusive to principals and senior executives. AFIRE provides a platform for top investors to communicate through global meetings in the US, Europe, and key cities around the world. From legislation and tax regulations to informative publications and resources, AFIRE covers the hottest topics to ensure that the foreign investor is as informed as the domestic investor.

2.  AFIRE Survey Finds Most International Investors Believe U.S. is Hot Spot for Internatonal Investment

Here in January 2013, the good news for U.S. real estate markets is that this year, for the first time (and AFIRE has been doing this for 11 years now), the AFIRE survey finds 4 out of 5 of the top investment cities, according to international investors, were located in the United States.  For foreign investors, apparently, the United States looks to offer lots of real estate bargains in the coming year.  

In fact, 81% of those surveyed reported that they are looking to buy or expand their American real estate holdings in 2013.  That's huge, but the bigger question for those here in the United States, is where are these foreign investors planning on spending their money?  

According to the AFIRE survey, the top five cities garnering international interest are New York City, London, San Francisco, Washington D.C., and Houston.  

That's right: four of the top five cities on their Target List are in the United States.  (One does wonder why Miami isn't here, right?) 

The United States was also found to be number one in "Countries Providing the Most Stable and Secure Real Estate Investments," and "Countries Providing the Best Opportunity for Capital Appreciation."  

What Kinds of Real Estate Investment are International Investors Most Interested in Finding?

As for what kinds of investment these foreign investors are considering in 2013, the AFIRE survey found the following as the five most popular foreign real estate investments:

1. Multi-family
2. Industrial
3. Retail
4. Office
5. Hotel. 

The floodgates for unprecedented foreign interest in Florida real estate, especially commercial development, may be opening for Miami and South Florida as many miles to the south of us, the Panama Canal expansion comes closer to completion.  Why?  Global trade is expected to explode here on the Eastern Seaboard of the United States, but particularly here in Miami where anticipation of the impact of a bigger (and wider) Panama Canal meant that Port Miami needed to be ready for change. 

The Panama Canal Expansion

What is happening in Panama?  Construction began in 2007 to expand the canal so it could serve the newer, bigger ships that move along modern sea routes.  Called the "Third Set of Locks Project," this will DOUBLE the Panama Canal's ability to move ships to and from the Pacific and Atlantic oceans, and it will offer a new traffic lane for today's monster ships -- vessels of a size not envisoned when the Panama Canal was initially designed. This new lane of traffic is a third set of locks, hence the project's name.  

It is projected that this expansion of the Panama Canal will build much more trade traffic to ports along the Eastern coastline of the United States.  In fact, ports from Baltimore on south have been preparing for the impact of the Panama Canal's Third Set of Locks Project for several years now.  

Port Miami Prepares for Over-Panamax and Post-Panamax Ships 

Many ships, including all U.S. aircraft carriers, most supertankers that carry oil, and most container ships, are too big to fit through the Panama Canal as it was originally built.  In shipping circles, these big vessels are called "Over-Panamax" or "Post-Panamax" and they cannot take advantage of the convenience that the Canal offers in traveling from one ocean to the other, or for trade between Asia and Europe and the Americas and the West African Coast.  

These Over-Panamax ships have been around and unable to use the Panama Canal since the mid-1960s, when these big ships and tankers first started being introduced to the seas. 

Now, the Port of Miami is in the process of deepening the port by 50 feet and doing other things to accommodate these Post-Panamax vessels.  

Right now, the Panama Canal project is behind schedule: it's expected to be completed in 2015. This may be good news for Miami, however, since it gives Port Miami more time to get ready for the dance: the only ports prepared to host the Post-Panamax ships at this point are Norfolk, Virginia, and Baltimore, Maryland: Miami can use the time to get its deep water port finished.

Fingers crossed, Port Miami will be ready for Post-Panamax vessels when the Panama Canal Expansion debuts -- and assuming so, Miami is hopeful that given Miami's location as well as its reputation as an international trade mecca will make Port Miami the first stop and preferred U.S. destination for many of those huge trade vessels coming through the Panama Canal in the future.  

The growing popularity of EB-5 Visas with foreign investors is exciting to see for those of us watching the Florida economy, particularly Miami.  Our past couple of posts have discussed aspects of this new "buy a home, get a visa" incentive to foreigners to bring their investments here to our shores, and the EB-5 Visa seems to be catching on with people with money to invest that live in any number of countries around the world.

But we're not the only country that is offering this type of incentive.  Nope, the United States is only one of several nations that are promoting a type of residency visa to foreigners who will buy real estate in their country.  

According to a recent article originally published in The Atlantic Cities, and now popping up on several sites (such as Quartz), "Buy a House, Get a Visa: Coming Soon Everywhere?" more and more countries are putting together these sorts of packages.  From the article, we learn of EB-5 type visas (residency visas for real estate buyers) in:

• Spain
• Ireland and
• Portugal.

 From their research, these countries appear to be offering residency visas as part of larger campaigns to get their national economies out of crisis situations.  Spain, for example, has approximately $200,000,000,000 euros in bad mortgages (today's currency exchange rate is 1 Euro = 1.30 U.S. Dollars, so you do the math).  

Which means Spain is offering residency to those who buy a home in Spain for a price that exceeds the mean home price of 160,000 Euros.  Similarly, Portugal offers residency to foreign buyers of Portugese property valued at 400,000 Euros or higher and Ireland, the same but the minimum is 500,000 Euros.   

That's just Europe.

From The Address magazine, we've got another list of countries (other than the United States) that are offering residency for real estate:

• Malaysia
• United Arab Emirates
• St. Kitts and Nevis
• Bahamas
• Seychelles
• Mauritius.

In these countries, buying real estate automatically brings with it residency status.  For example, you buy land in Malaysia, and Malaysian residency is like a freebie:  you have to do nothing more: no forms, nothing.  

However, the country may have some laws in place on what real estate purchases apply here.  In Malaysia, for example, to get the automatic residency all foreigners must spend the legal minimum on the purchase price of the property, currently set at 124,500 Euros.  Foreigners are not allowed to purchase real estate at any price lower than this minimum amount.  

Which means all these economies are competing with Florida, right?

Perhaps in some way, these residency for real estate (buy a house, get a visa) campaigns are all competing with each other for the same investors.  However, Florida need not worry too much about buyers opting for land in the United Arab Emirates over a Miami offering, for example, because some places are more appreciated than others in the international investor community. 

Numbers aren't clear on which "buy a house, get a visa" campaign is the most successful, world-wide.  However, Florida is beloved by many and should be ranking high in the global competition.

Consider, after all, how Florida ranks within the United States.  According to Inman News, within the United States, Florida is overwhelmingly the most popular location for foreign investment, the following list in order of popularity in 2011: 

• Lakeland-Winter Haven, Florida
• Cape Coral-Fort Myers, Florida
• Orlando-Kissimmee-Sanford, Florida
• North Point-Bradenton-Sarasota, Florida
• Miami-Fort Lauderdale-Pompano Beach, Florida
• Phoenix-Mesa-Glendale, Arizona
• New York County, N.Y. (Manhattan)
• Honolulu, Hawaii.
• Tampa-St. Petersburg-Clearwater, Florida
• Las Vegas-Paradise, Nevada

And, according to the National Association of Realtors, foreign investors were putting their money in the following investments:

Promoting Florida to international investors and foreign business is a big deal for Florida's executive branch these days and Florida Governor Rick Scott will be in Columbia this week, on a trade mission to boost Columbian interest (and investment) in the State of Florida.  Here, in our news release of the week, are details of this latest promotional tour by Governor Scott and his office's summary of past trade missions and their resulting successes:  

Governor Scott to Embark on Trade Mission to Colombia

Florida’s overseas trade missions position Florida as a global hub for business and creates jobs for Florida’s families

November 29, 2012 -- On December 2, Governor Scott will lead a trade mission to Bogotá, Colombia with more than 190 participants representing 116 Florida companies, statewide organizations and higher educational institutions to promote economic development opportunities in the Sunshine State. Colombia is Florida’s second largest trading partner, with more than $9 billion in bilateral trade. Florida also accounts for one-fourth of the total U.S. trade with Colombia, and 37 percent of U.S. exports to Colombia move through Florida. 

Enterprise Florida (EFI) has organized this trade mission and six other international business development missions Governor Scott has led since taking office. Previously, Governor Scott has led missions to Panama, Canada, Brazil, Israel, Spain and the United Kingdom. 

The goal of these international missions is twofold. First, they introduce Florida’s businesses, elected officials and community leaders firsthand to global business opportunities through introductions to prospective clients and markets that provide exporting potential for their local companies. Second, the missions aim to attract job-creating foreign direct investment into the state. These have been core activities for EFI since the late 1990s, soon after the public-private partnership was created to serve as the state’s lead economic development organization. 

EFI, along with Governor Scott, promotes Florida as a global business destination through its Florida Export Sales Missions. These “matchmaking missions,” organized with support from the U.S. Commercial Service, allow Florida businesses to meet one-to-one with foreign companies to discuss economic development and business opportunities. The nations targeted tend to be those that are major trade partners with Florida. Enterprise Florida facilitates affordable travel packages to enable businesses to meet prospective international clients. In addition, Governor Scott has led business development missions with EFI to promote economic development activities in targeted industries that are important to Florida’s economy. 

Governor Scott said, “Florida is perfectly positioned to be a global hub for business. We are committed to growing our relationship across the world in order to create jobs for Florida’s families, and that is why the missions we embark on with EFI are vital to Florida’s economic success. These missions help us attract new industries and businesses to Florida and further cement our standing as one of the nation’s top trading states. I look forward to visiting Colombia and with the recent ratification of the Free Trade Agreements, I am convinced that Florida and Colombia’s growing relationship will expand even more.”

Manny Mencía, senior vice president of Enterprise Florida’s International Trade Division, said, “A major goal of these missions is to help increase our state’s exports, which leads to more jobs, by paving the way to greater sales opportunities for Florida companies. Companies that export, grow faster and are more profitable than companies that do not – and it is clear that we must make this a top priority in Florida.” 

Florida Secretary of Commerce and Enterprise Florida President & CEO Gray Swoope notes that “international trade and foreign investment combined are responsible for more than 1.4 million Florida jobs, or about 17.3 percent of the state’s employment. Florida benefits greatly from a Governor who understands global trade’s effect on job creation and economic prosperity. When Governor Scott leads these missions, they not only generate a higher level of participation and results, but also attract a higher level of attention and enhance Florida’s business image in the host country. We applaud him for being a champion of our efforts to expand Florida’s international trade and business development.”

A Record of Success: International missions have been very successful for Florida, providing a notable return on the state’s investment into these business development activities and long-range jobs-producing opportunities.

Governor’s Business Development Mission to Panama 

Panama City 

March 17-18, 2011 

The objective of this mission was to assess the opportunities from the Panama Canal Expansion.

The delegation — six Florida port directors, business leaders and executives from the Florida Chamber of Commerce, Florida Association of Manufacturers and Associated Industries of Florida – enhanced Florida’s economic relationship with Panama through strengthened ties between state leaders and the Republic of Panama and Florida seaports with the Panama Canal Authority.

Governor’s Business Development Mission to Canada 

Montreal and Toronto 

June 6-10, 2011 

The objective of this mission was to promote investment into Florida.

Governor Scott and Florida economic development organizations participated in 155 FDI (foreign direct investment) recruitment meetings.

Governor Scott announced the Canadian security company Garda will relocate its U.S. headquarters to Boca Raton Florida, creating 100 professional jobs, which has been exceeded.

Team Florida Trade and Business Development Mission to Brazil 

São Paulo and São Jose dos Campos, Brazil

 October 22-27, 2011 

The objective of this mission was to provide Florida companies with an opportunity to increase sales of their products and services.

51 Florida companies participated in a two-day Florida expo and matchmaking event with Brazilian businesses. The Florida companies reported more than $96,684,500 in actual and expected future sales.

Governor Scott announced that Brazilian aircraft manufacturer Embraer will invest $50 million to establish new manufacturing facilities at Melbourne Airport. The project is slated to produce more than 200 jobs over five years.

Governor’s Business Development Mission to Israel 

Tel Aviv, Beersheva and Jerusalem

December 8-15, 2011

The objective of this mission was to promote investment into Florida and promote Florida as a platform for Israeli companies into the U.S., Latin American and Caribbean market. The Governor met with potential Israeli investors, delivered presentations on Florida business climate to Israeli business organizations and was a speaker in the GLOBES Conference. (GLOBES is the leading financial newspaper in Israel.)

Governor Scott met with six Israeli companies that are investment or expansion prospects for Florida and spoke at the seminar “Florida: Platform for Israeli Companies Doing Business in Latin America and the Caribbean,” the audience for which included 45 Israeli business executives representing SMEs with an interest in penetrating the Latin American market.

Governor’s Business Development Mission to Spain 

May 21-24, 2012 

The objective of this mission was to promote Spanish investment into Florida.

Included nine events and 13 meetings with potential investment projects. Governor Scott met Spanish companies interested in investing in Florida and delivered presentations on Florida business climate to several Spanish business organizations.

The following companies based in Spain will add 465 jobs within three years in Miami-Dade County:

Obrascon Huarte Lain (OHL USA), one of the world’s largest global construction companies is expanding its presence in the U.S. market by adding a new U.S. South Region headquarters in Northwest Miami-Dade County. Specializing in civil engineering, healthcare and university projects, OHL’s new location will add 255 direct jobs within three years and $22 million in capital investment.

Miami City Tour (formerly El Grupo Julià), a travel and tourism transportation company will open its first U.S. location in Miami Beach, adding 150 new direct jobs within three years and $4 million in capital investment.

TotalBank, a leading integrated retail-commercial bank in South Florida and a member of Grupo Banco Popular Español will further expand in Miami-Dade County, adding 10 new branches with 60 direct jobs within three years and $4 million in capital investment. TotalBank is already a leading integrated retail commercial bank in South Florida with more than $2.3 billion in assets and 19 convenient locations throughout Miami-Dade County.

BBVA, a Spain-based retail bank that entered the Florida marketplace through acquiring Compass bank, has 45 full-service branches in the Jacksonville area along with loan production offices in Orlando and Miami. This bank is expanding in the Miami market by offering domestic private banking and wealth management services. BBVA will add 45 jobs at an average wage of $60,000 annually

Team Florida Business Development Mission to United Kingdom 

London and Farnborough, England 

July 7-12, 2012 

The goal of this mission was to promote worldwide investment into Florida and further develop the state’s aviation cluster through access to the aviation and aerospace companies attending the biannual Farnborough Airshow.

Governor Scott and EFI recruitment staff met with more than 40 major aviation and seven Aerospace companies with investment potential in Florida.

Tradeshow participants reported $41 million in combined actual and expected export sales for the next 24 months and 250 sales leads.

Following this mission, Governor Scott announced that Pratt & Whitney will create 230 new jobs at an average wage of $81,000 as part of its efforts to establish jet engine manufacturing and test operations in Palm Beach County.

Many businesses also participate in multiple international missions because they provide incredible value and return for Florida’s companies. Below are recent success stories for Florida:

Magna-Bon International LLC 

Okeechobee-based Magna-Bon International LLC participated in the October, 2011 Brazil Trade Mission and will embark to Colombia next week. Magna – Bon produces and distributes agricultural products for algae and bacteria control. Magna-Bon owner Joel Agler says being affiliated with the missions Governor Scott leads brings credibility to his company when promoting and selling in overseas markets. For example, Magna-Bon is EPA-approved in the United States, which benefits the company domestically. Other nations may recognize that standard but also place higher value on a business prospect when it has alliances or support from its government. 

“It’s helpful to have government on your side,” Agler said. “It’s important to say we’re with Team Florida.” Agler’s 14 preset appointments in Brazil with “high quality people,” he describes, bore fruit in several ways, one of which being an import permit that now allows his products to be shipped into Brazil. 

“I learned a lot in Brazil, but Colombia will be better because of the Free Trade Agreement,” Agler said. He mentioned that he became interested in participating after hearing Governor Scott speak about the benefits of participating in these missions. “And the fact that the Governor is going is a win situation for us,” Agler said. 

Sunshine Industries 

Mita Burke, CEO of the family-owned, multinational Sunshine Industries in Coral Gables, said “The introductions, exposure and results we’ve gotten have been over the top. Since our participation in the mission to Brazil last year, we are exporting there consistently and successfully. It has really been very fruitful for us,” Burke said. “The introductions we were able to make during the mission have us very excited about the possibilities and the future is looking good. The companies we met with were all very receptive to our products. It’s a shame more people don’t pay attention to these types of services provided by Enterprise Florida.”

 yNs Med Spa, Inc 

The Brazil mission made a difference for the Naples company yNs Med Spa, Inc., which specializes in skin care products. CEO Ann Breusch said her company was able to collaborate with a large firm that will distribute its skincare products to dermatologists. 

“This is a game changer for our company. Just the partnership with Brazil will result in hiring five more employees. I cannot emphasize enough the importance of the Gold Key service for small businesses to help sell USA made products globally,” Breusch said. 

Businesses may qualify for these grants, which reduce the cost of participating in a trade mission. For the Florida mission, a trade expo and gold key package cost $1,200, but SMEs could qualify to pay only $500. “Without the Gold Key grant given to small businesses, we would not have been able to expand our international business especially during the current economic situation.” 

Embry-Riddle Aeronautical University 

Chancellor John R. Watret, Ph.D. acknowledges the university’s longstanding partnership with Enterprise Florida, which he says has opened doors to business opportunities worldwide. Embry-Riddle’s Worldwide Campus provides educational opportunities for aspiring professionals in the aviation and aerospace industry through an expanding global network of campuses and technology enhanced learning. 

“Of particular importance to Embry-Riddle has been expansion in emerging aviation economies,” Watret emphasizes. “Enterprise Florida’s support and mentorship was integral in the successful opening of a new subsidiary, Embry-Riddle Asia, headquartered in Singapore. EFI events and missions have created valuable connections with foreign governments, industry and individual customers in Europe, Asia, South America and the Middle East that will continue to enhance the university’s international brand and serve its mission of teaching the science, practice and business of aviation and aerospace around the world.”

City of Tampa 

Representatives from Florida’s communities are regular mission-goers in their quest to scope new opportunities for helping their city, county or region grow and prosper. 

“The trip to Colombia is an opportunity to tell our story and make the case to businesses abroad that Tampa is the best place to live, work, and play. I will market what we have to offer – Florida’s largest port, a world-class airport, and incredible economic potential,” said Tampa Mayor Bob Buckhorn.

###

Traditionally, international investment in Florida meant that foreign investors were putting their investment money into commercial real estate -- things like office buildings, luxury hotels and resorts, maybe shopping centers or malls.  Some global investment came into the Florida economy through residential investment as well: foreigners buying condos and townhouses here, and other residential real estate either for second homes or for rental properties.

Now, commercial real estate and residential markets have a growing competitor for those foreign dollars: the charter school.

That's right: charter schools, those primary or secondary school alternatives that are offered all over the state have become very interesting to foreign investors seeking a place to invest in Florida.  It's a big deal in 2012.

Why the interest?  For one reason, the EB5 Visa program.  (Details about that in another post.)  For another, the tax credit currently provided for charter school construction projects.

Federal Tax Credit for Financing Charter School Construction: Education Profiteering

Right now, there is a sweet thirty-nine percent (39%) federal tax credit available for financing the construction of charter schools.  That's nice, especially when one considers that the charter schools are privately funded projects which means that the charter schools can be capitalized.  They can be profitable investments.

Of course, this has become controversial, as some consider "education profiteering" to be bad news.  There's talk that the charters schools are going to get closer governmental scrutiny.   Organizations have formed to advocate against charter schools as profit-making ventures.

Connecting Foreign Investors With Charter Schools: EB5 and ROI

Other organizations have been formed with the specific goal of assisting foreign investment in American charter schools, like the Education Fund of America. 

Investment advisors Greg Wing and Mike Morley formed the Education Fund of America specifically to network international investors with charter school projects here in the United States.  Part of the EFA's task: to help coordinate EB-5 Visa funding for foreigners with charter school projects in various states. 

EFA has been created specifically to help investors from other countries who are interested in obtaining EB5 Visas (where visas are available to foreigners who invest a certain amount in the United States) through investment in charter school projects.  From their site:

Our founders are dedicated to creating the best public charter schools in the United States while providing EB-5 investors with a fast and secure path to U.S. citizenship. In addition the collaboration has resulted in outstanding investor results, averaging less than 2-1/2 years return on investment for education projects.

International Investment in Florida Charter Schools Is a Big Deal Now

Given the opportunity to make a nice return on their investment while simultaneously nailing down a U.S. Visa, many foreign investors are excited about the charter school as an investment vehicle.  Here's one example for you: Enterprise Florida has just announced that a group of investors from China have committed to investing $30 million into the Florida charter school program and these Chinese investors are not done: they are planning to invest $90 million into Florida charter schools next year.

That's great for Florida's economy.  The big question, though: are charter schools taking investment dollars away from other commercial real estate projects that might otherwise get this funding? 

This week, Hugo Chavez was re-elected as President of Venezuela, taking 54% of the Venezuelan vote to the 45% of challenger Henrique Capriles, grandson of Holocaust survivors.

This means that Hugo Chavez will be the President of Venezuela until 2019 (when this new presidential term ends).   For many Venezuleans (and others), this is not good news and reports are that many of these people are looking to leave the country, relocating families and moving investments.  ASAP.

Venezuelans Looking to Invest or Relocate to Miami and South Florida

Word on the street here, and as reported by the El Nuevo Herald in Spanish and the Miami Herald in English, is that Venezuelans are investigating moving themselves as well as moving their investment money to South Florida, and particularly, Miami. 

Immigration attorneys are getting calls and emails.  Real estate brokers, ditto.

Why the growing interest?  Because Hugo Chavez will remain in power for many years in Venezuela, and that is worrisome to many who live in that country because of Chavez's attitudes and policies.  They are afraid.  Here in South Florida, Venezuelans here, watching the election results on television, were upset and even in tears according to CBS-Miami coverage of a Doral restaurant gathering.

EB5 Visas Help Venezuelans Interested in Investing in Florida and Moving to Miami

One big benefit to these people in Venezuela pondering moving their money, their family, and themselves, to Florida is the United State's Immigrant Investor Visa, the EB5.  (For details about this program, read our earlier discussion on the EB5 visa - and how to get one.)

Over half of the Venezuelans who have moved to the United States have expatriated to South Florida (57%).  That's according to official federal agency statistics; however, the actual number of Venezuelans living in this area of the Sunshine State may be much higher. 

According to the U.S. 2010 Census, the number of Venezuelans living in South Florida increased by 150 percent in the first decade of the new century, most in the past 24 months, according to research by the Sun Sentinel.  

Who are these people? 

As explained by Guillermo I. Martinez of the Sun Sentinel, these are Venezuelans who have much to offer Florida and Miami and it's a wonderful benefit to our community as well as our economic future that they are choosing South Florida as a haven against the growing violence and Iran-favoring policies of Venezuelan President Chavez. 

The Venezuelans who are coming here with their families and their money and their skills are professionals; middle class and upper class families; industry leaders, and entrepreneurs who can only help Florida's residential and commercial real estate industries to flourish as well as other facets of the Florida economy. 

Florida knows all too well of the Cuban elite who left Cuba after Castro and how they have contributed to our state since then.  Venezuela's story may well be much like Cuba: our Cuba of the 21st Century.

Florida has a new economic indicator as well as real estate industry analysis tool, heralded as the first of its kind in the nation and the brainchild of Dr. John Tuccillo, chief economist for Florida Realtors, and its debut accordingly becomes our news release of the week:

Florida Realtors®: Residential Price Index Tracks Trends

ORLANDO, Fla., Sept. 12, 2012 /PRNewswire/ -- Florida Realtors® has launched its new Residential Price Index reports, which give Realtors, their clients and others interested in the state's housing market a better understanding of home price trends.

"Realtors will be able to use the index, now and in the future, to give consumers an accurate picture as to what is actually happening in their markets," said Dr. John Tuccillo, chief economist for Florida Realtors.

When Tuccillo took up the post as chief economist for the state Realtor association last year, high on his to-do list was to develop a "comprehensive and accurate" price index for residential properties in the state of Florida. Essentially, a price index tracks and summarizes the individual price movements of specified goods or services over time into a single measure, he explained.

Florida Realtors' statewide Residential Price Index measures the course of individual residential property prices from 1995 through August 2011. It is derived from parcel data maintained by the Florida Department of Revenue, and covers all sales of real property that occurred during those 17 years. Since the index follows the consecutive sales of specific properties, it tracks price trends in Florida's residential real estate market over time, according to Tuccillo.

"There is no other resource available like Florida Realtors' new Residential Price Index – it's really the first of its kind in the nation," said Florida Realtors® President Summer Greene, regional manager of Better Homes and Gardens Real Estate Florida 1st in Fort Lauderdale. "Florida Realtors is taking the lead in providing this comprehensive index to our members to help homebuyers and sellers, and also to the public as valuable insight into home price trends throughout Florida."

Tuccillo said the index also uses data methods to account for the characteristics of homes that are selling, and can provide a clearer picture of what's happening to the value of housing stock.

The statewide Residential Price Index report is available to download on Florida Realtors Media Center at http://media.floridarealtors.org/market-data under Florida Residential Price Index. It can also be found on the Research page of floridarealtors.org at: https://www.floridarealtors.org/Research/index.cfm under "Price Index Reports."

Florida Realtors®, formerly known as the Florida Association of Realtors®, serves as the voice for real estate in Florida. It provides programs, services, continuing education, research and legislative representation to its more than 115,000 members in 63 boards/associations. Florida Realtors® Media Center website is available at http://media.floridarealtors.org.

 SOURCE Florida Realtors

Foreign investment in Florida real estate has been a significant factor in Florida's fight against a hard, harsh economy - however, truth be told, much of the media coverage on the international money coming into Florida has been through residential real estate purchases.  Lots of global interest in condos, particularly, as second homes or vacation spots. 

However, commercial real estate in South Florida is benefiting from foreign investors as well, and an interesting article was published in this week's Sun Sentinel that spotlights one program that is helping draw those international funds into the Sunshine State:  the federal foreign investment program commonly known as the Employment Based Immigration: Fifth Preference, the Immigrant Investor or the "EB-5."

Residential Real Estate vs. Commercial Real Estate Foreign Investment Incentives

As you may recall if you follow this blog, there's movement up in Congress to grant foreigners to the United States visas if they spend at least $500,000 on residential housing in this country: in sum, if the VISIT USA Act ever becomes federal law, then any foreign citizen who  buys $500,000 or more in residential real estate in the United States, will automatically get a U.S. Visa (for details see our earlier post).

For commercial real estate, the EB-5 program is already on the books - and has been for awhile now, since it was initially introduced as part of the Immigration Act of 1990.   Under the EB-5 Program, a foreign investor can not only get a visa but establish PERMANENT US RESIDENCY if he or she has the funds to invest $500,000 or more in commercial real estate project that will create at least ten (10) jobs that last at least two (2) years.

The EB-5 Program Is Extremely Popular: But Is It Shady?

It's a national program, of course, and one which does have its critics.  In December 2011, the New York Times ran a story about the popularity of the EB-5 Program: from 2009 to 2011, the number of foreign investors seeking to take advantage of the EB-5 invitation not only doubled, it quadrupled. 

And with that upsurge, according to the NYT, came an outcry from some circles that the EB-5 was really a "cash for visas" scheme - with the newspaper's own investigation hinting that some officials as well as some commercial developers were pushing the edge of the envelope in their areas to get their projects to fit into the EB-5 Program requirements, so that they could interest international investors to their plans. 

For instance, in Florida there are designated "targeted employment areas" that are the geographic locations required to meet EB-5 standards in any international investment in commercial real estate.  The foreign investor with $500,000 anxious to take advantage of the EB-5 offer of residency needs to make sure that his Florida investment will be built in one of these TEAs.  This means that commercial developers wanting foreign investment funding will need to look into these locations as potential sites for their projects. 

Florida and Foreign Investors: Will the EB-5 Federal Legislation Continue to Thrive?  You Betcha.

Recently, Congress approved the extension of the EB-5 Program through 2015 and President Obama is expected to sign the legislation into law.  It was a welcomed decision and pretty much a slam dunk up in Washington, especially since there were several pending EB-5 hot spots anxious to keep the ball rolling on international interest in their locales.

Florida has been one of the states suffering the most in these recessionary times and the influx of foreign investment monies into our economy, for either residential or commercial purposes, has been welcomed.  And needed.

A couple of weeks ago, it was announced that Miami City Hall will be the location of a regional EB-5 Immigrant Investor Center, assuming that its application to the US Citizenship and Immigration Services Administration is approved.  (This may take anywhere from 6 to 8 months.)  It's the brainchild of not only the City of Miami but also other potentially benefiting interests, such as Enterprise Florida, Port Miami, the Greater Miami Chamber of Commerce and the Greater Miami Convention & Visitors Bureau.

For more details, see the EB-5 Program Site Portal maintained online by the U.S. Citizen and Immigration Services. 

Looks like South Florida will be seeing lots of EB-5 promotion to get international interest in our local commercial real estate projects for the long term future. 

There's a lot of news coverage this week regarding foreign real estate investment in Florida: consider today's article in the Sun-Sentinel as an example:  "Foreign buyers boosting home sales."  

Why?  The new report by Florida Realtors has been released, its 2012 Profile of International Home Buyers in Florida, which provides good news for Florida's economy, such as: 

• almost one-fifth of all Florida home sales in the past year (19%) have been to foreign buyers.
• over ten billion dollars ($10.7 billion) came into the Florida economy from June 2011 to June 2012 from foreign buyers in Florida real estate property - most in deals where the foreign buyer put cash on the barrel head.
• most of that cash influx from foreign sources entered Florida via the Miami-Dade real estate market.
• Canadians spent the most here, making up around a third of the international investors.

However, another report out of Florida Realtors brings with it more good economic news, the August 27, 2012 John Tuccillo Market Report (Florida Realtors' chief economist), and doesn't seem to be getting as much of a media spotlight, even though it finds:

• In July 2012, Florida's single-family inventory was at a 5.3-months supply and townhouse-condo inventory was 5.4-months.
• Investors are buying real estate in Florida in a big way.
• Low interest rates are bringing buyers to Florida residential real estate.
• Distressed properties are being sold.
• Builders are building new homes. 
• In July 2012, closed sales rose for the 3rd month in a row, up 9.8% for single-family homes and 2.8% for townhouse-condos.
• Single Family sales prices are going up: July 2011 - July 2012, the SFD median jumped from $137,300 to $148,000; townhouse-condo median, $92,000 to $102,000.

Two things to consider: foreign investment in Florida is big, and most welcome, but it's not the majority of investment here.  Another thing to consider:  what about commercial investment? These stats are all about residential real estate - and that's not the whole picture.  

We've already discussed how Beazer Homes and American Residential Properties (ARP) are pioneers in buying up blocks of homes - usually in short sales - and then holding them, not reselling them, to get their profits out by being landlords to tenants who will pay a high enough rent to cover management costs, rehab expenses, and the like. For more on Beazer read our May 2012 post; for more on ARP, read our post from earlier this week. 

Apparently, we're not alone in monitoring a new form of real estate investment trust (REIT). 

Bloomberg is reporting that Colony Capital LLC, Och-Ziff Capital Management Group LLC (OZM) and Two Harbors Investment Group have also joined the parade.  These three are also buying up residential, single family homes facing foreclosure and then renting them out ... or they are in the business of finding investment money that is interested in doing this.

According to Bloomberg, Fitch Ratings is pondering this new kind of Rental REIT, and Bloomberg is reporting that Fitch Ratings isn't too comfortable with them: Fitch seems to have concerns about performance data - things like market rents; vacancy rates; other landlord-tenant type of problems, etc.  There's no track record yet, so Fitch is skittish.

Meanwhile, over at the Motley Fool, there is more discussion about these new Rental REITS.  Motley Fool looks at historically low rental vacancy rates across the county together with their view that growth in American home ownership will remain slow if not stagnant for several years to come.  They're happy with rental REITs overall as investment vehicles.

And Ben Steverman at BusinessWeek is offering his take on Single Family Rental REITS, too.  Given bargain prices across the country for single family homes, he asked four market wizards for their forecast: 

What did these four find? 

Real Estate Investment Trusts (REITs) overall are a wise investment decision these days; the choice comes down to risk analysis on the type of REIT vehicle to select.   John Burns sees single family rental REITs as the "biggest opportunity" since housing has been in such a bad place for awhile now.  However, the bottom line in the BusinessWeek story appears to be a big interest in investing in debt - where the investor isn't depending so much on the speed and strength of a recovery in order to make a profit.

Is it really a question of how risk averse you are?  Perhaps. 

Consider this:  last month, bounty-hunting firm Bureau of Fugitive Recovery, Inc. - that's no play on words, this was a company that made its money as bounty hunters - changed ownership.  Chad Carpenter bought 6 million shares of the Bureau to make himself the majority shareholder.

Of interest, Mr. Carpenter is also the head of a California real estate investment company that is known for its risk-loving investment strategies (Reven Capital LLC).

A few weeks ago, and shortly after the take-over, it was announced that the Bureau of Fugitive Recovery was having a make-over. 

No longer will it make money bounty hunting.  No.  In the future, BFR will be in the business of buying up portfolios of single family home rentals from investors who have already compiled the portfolio after finding the homes, fixing them up, and renting them out.

So, could it be that Mr. Carpenter is onto something? 

Florida's real estate industry - residential and commercial - is tied to Brazil in a big way:  according to the Miami Realtors Association, as of last November, Brazilians were second only to Venezuela in foreign purchases of Florida real estate, with Brazil buying fifteen percent (15%) of the total real estate sales in 2011. 

The Brazilian-American Chamber of Commerce (Miami) reports that there are 15 Brazilian multinational companies headquartered in South Florida, including Banco do Brasil, Odebrecht Contractors of South Florida, Embraer Aircraft Holding, and TAM Airlines.  

In fact, Brazil's ties with Florida are becoming so strong that Brazil, currently ranked as the 6th largest economy on the planet, is impacting everyday life here in Florida -- for example, right now there is a push to have Portuguese taught in the Broward County Public Schools, since Brazilians speak Portuguese - not Spanish - and Brazilians businesses and investors (as well as Brazil's many tourists visiting here) need more Portuguese-speaking Floridians.

Which is why Florida real estate investors and Florida land developers are carefully watching what's happening right now with Brazil's economy.

This month, there are news reports and studies being released that do not bode well for the economy of Brazil. Consider these items:

• In June 2012, the confidence of Brazil's consumers fell. According to Reuters, this was for the second month in a row with reports that Brazilians are not optimistic for how their country will fare for the remainder of the year.
• Brazil's Central Bank released its survey where economic forecasts for the rest of 2012 were cut for the 7th week in a row.  The economist are forecasting the weakest year for Brazil's economy since 2009.
• Brazil is facing less demand from international trade at the same time that Brazil's labor costs are rising. 
• The Central Bank of Brazil is predicted to continue its pattern of cutting interest rates through the rest of the year, with talks that the rate may go as low as 7.5% - all in a strategy to fight against inflation. 

What This May Mean to South Florida - Brazil's Economy Influences Florida's Economy

Florida and Brazil have built - and continue to build - an economic relationship and when Brazil falters, then Florida feels the effects.

The Brookings Institute ranks South Florida as one of the country's most hurting economic areas (rank: 81 out of 100)  and one of the factors here may well be Brazil's influence according to local economic experts (read their opinions here). 

It's a great thing that Brazil and Florida - particularly South Florida, and especially Miami - have built a relationship that benefits both regions and it's hopeful that this camaraderie will continue to florish.  However, as with any relationship, there are ebbs and flows, and now Florida must consider not only what happens here but what happens elsewhere: for example, when Brazil's sales in the global marketplace fall - as has happened recently - then Florida will feel this, too. 

Florida sure seems to be popular among investors these days. We've posted in the past about foreign investors from faraway places like Great Britain, Brazil, Israel, and other parts of the world finding the current Florida real estate market a place of great bargains but now it seems there is a new ribbon running through the investor chatter.  It's an idea that things are looking a bit brighter for the Sunshine State's economy - at least for the vacation/second home real estate market and those that benefit from it. 

Consider these news items appearing in the past week:

1. There's an article out of Seattle this week, inviting individual investors to invest their money in Florida real estate. A Florida investment company is educating clients on how to build wealth by taking its services to the Pacific Northwest to sell them on the advantages of Florida real estate investment.
2. Some analysts are warning that demand is exceeding supply for some Florida vacation investment properties. In one story, the CEO of Coldwell Banker Feltrim discussed his review of the first three months of 2012.  There was a rise in sales of vacation homes and  second homes in the Orlando area.  So much interest, in fact, that he didn't have all that many top quality properties to show investors interested in vacation-type residential properties in his area.  That's something new to see in Florida after our track record of the past few years, isn't it?
3. Real estate realities are that Florida investment upswing into second homes and vacation properties is part of a new national trend.  According to several real estate pros, Southwest Florida has seen a jump in second homes along with other parts of the state.  Prices are not rising, but there are more investment dollars coming in to buy up the vacation/second home inventories.

Here's good news for Florida - a new research study finds that the Florida economy as a whole is getting better, news carried by media outlets like the New York Times.  More here in our "news release of the week." 

To get the actual study, you will need to email Comerica at www.comerica.com/econsubscribe and subscribe.

Here from the Comerica Bank out of Dallas:

Florida Economy Rises In March, Reports Comerica Bank's Florida Economic Activity Index

DALLAS, May 23, 2012 /PRNewswire/ -- Comerica Bank's Florida Economic Activity Index increased in March, rising four points to a level of 109.5. The March index reading is 29 points, or 36 percent, above the index cyclical low of 80.6. The index averaged 107 in the first quarter of 2012, eight points above the index average for all of 2011.

"Florida is gaining economic momentum, as shown by the uptick in our Florida Economic Activity Index for March. Real estate conditions are gradually firming, as buyers take advantage of the very high affordability in residential markets," said Robert Dye, Chief Economist at Comerica Bank. "Tourism activity is picking up and that is helping to stabilize the state economy. However, cuts in federal spending are dragging on the Florida economy as the space shuttle program fades into the history books. A weaker global macroeconomic environment may limit international interest in Florida real estate this year."

The Florida Economic Activity Index consists of seven variables, as follows: nonfarm payrolls, exports, sales tax revenues, hotel occupancy rates, continuing claims for unemployment insurance, building permits, and airline passenger deplanements. All data are seasonally adjusted, as necessary, and indexed to a base year of 2008. Nominal values have been converted to constant dollar values. Index levels are expressed in terms of three-month moving averages.

In addition to Boca Raton, East Boca Raton, Fort Lauderdale, Naples, Orlando, Palm Beach Gardens, Singer Island, Sarasota, Stuart, Wellington and Weston, Fla., Comerica (NYSE: CMA) locations can be found in its headquarters state of Texas, as well as in Arizona, California and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico.

SOURCE Comerica Bank

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http://www.comerica.com

Source: PR Newswire (http://s.tt/1czTx)

Here at Florida Commercial News, we post major news announcements and press releases that impact Florida real estate investment and Florida land development as the "release of the week."

This week's big news item is the series of announcements from Orlando International Airport that have been released recently, describing not only the increase in traffic at Orlando International Airport, but the international traffic that is coming into Orlando now:

4/11/2012 - Special Events Lead to February Increase in Passengers at Orlando International Airport

ORLANDO, FL. - It was an eventful February at Orlando International Airport (MCO). Ten separate airlines boosted the number of flights coming into Orlando International for the month. In total, an additional 113 flights per week helped push traffic up by nearly five and half percent for the month. The new flights represent both national and international destinations including Halifax, Nova Scotia; Montego Bay, Jamaica; London, England; Dallas, Texas; and Los Angeles, California just to name a few.

"The combination of the National Basketball Association (NBA) All-Star game, Speedweek events, The National Association for Stock Car Auto Racing (NASCAR) Daytona 500, The Disney Princess Half-Marathon and strong spring break travel this February spurred both international and domestic traffic increases," says Phil Brown, Executive Director of the Greater Orlando Aviation Authority.

Another event 825 miles away also helped to boost traffic. The city with the largest increase in service for the month, with 18 new weekly flights, was Indianapolis, which just so happened to host Super Bowl 46 in February.

February 2012 Statistical Data:

• Overall traffic improved 5.46 percent for the month
• International traffic climbed 11.4 7 percent to 284,616
• Domestic traffic saw an increase of 4.83 percent to 2,570,637
• In all 2.8 million travelers, 2,855,253 moved through Orlando International Airport

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 3/19/2012 - "The Orlando Experience" A Hit With International Travelers

Orlando International Airport's (MCO) commitment to passenger convenience and customer service continues to impress global travelers. In a recent survey by one of Europe's largest online travel agencies, Orlando International ranked 5th worldwide in the category of Waiting Lounges.

eDreams.com reported it received thousands of responses from fliers throughout its 19-country operating area, who actually traveled through the airports they reviewed, and MCO finished with an average score of 4.31 out of a possible 5 points. A total of only .23 points separated the top five airports in Seoul, Singapore, Munich, Thailand and Orlando. Customers were asked to rate various aspects of airports including their services, shopping, restaurants, bars and waiting areas.

"We have facilities that capture the unique character of Central Florida known as "The Orlando Experience". In addition, with visitor-friendly amenities, including 70 retail and 57 restaurant locations, MCO offers customers multiple opportunities to relax comfortably before continuing their travel experience," said Greater Orlando Aviation Authority Executive Director, Phil Brown.

To see the full survey, go to: http://www.edreams.com/flights/airports/best-airports/

In addition to pleasing customers while they visit, Orlando International also excelled in keeping them on schedule. According to FlightStats, MCO's on-time arrival percentage ranked fifth best among the world's busiest airports.

In February of 2012, 86.35 percent of flights into Orlando International Airport arrived on time. Tokyo International Airport had the best performance for the month with an on-time percentage of 94.34 percent.

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 4/18/2012 - GOAA Board Selects New Chairman

ORLANDO, FL - At its April meeting, the Greater Orlando Aviation Authority (GOAA) selected Orlando attorney Frank Kruppenbacher as the new Chairman of the board that manages operations and policy for Orlando International and Orlando Executive Airports. The seven-member board is comprised of five appointees by the Governor of the state of Florida and one elected official each from the Orange County Commission and the Orlando City Council. Kruppenbacher succeeds banker Cesar E. Calvet, who served as Chairman since April of 2010.

Mr. Kruppenbacher currently serves as a gubernatorial appointee on the Greater Orlando Aviation Authority Board among other high profile positions in the state.

In accepting the election, Mr. Kruppenbacher thanked Cesar Calvet for his service as Chairman and acknowledged that he had set the bar high.

Other GOAA Board Officers elected include Dr. Jason Pirozzolo, Vice Chairman; Cesar Calvet, Treasurer; Phil Brown, Secretary; and Dayci Burnette-Snyder, Assistant Secretary.

In October of 2008, Mr. Kruppenbacher was appointed to the Florida Commission on Ethics by then Florida House Speaker, now U.S. Senator Marco Rubio. He previously served on The Florida Commission on Sales Tax Reform as an appointee of Governor Jeb Bush. Mr. Kruppenbacher served as President of the Greater Orlando Chamber of Commerce; was a member of the Orange County Ethics & Campaign Finance Reform Task Force appointed by the Chief Judge of the Ninth Judicial Circuit of Florida; Orange County Oversight Committee; the first Orange County Charter Commission; Central Florida Zoological Board; Orange County Convention & Visitor Bureau Board and the Oversight Board of the Orange County Sheriff’s Office.

Orlando International Airport comprises nearly 14,000 acres of land and accommodates more than 35 million passengers annually.

Composition of the GOAA Board is as follows:

Frank Kruppenbacher, Dr. Jason Pirozzolo, Cesar Calvet, Orlando Mayor Buddy Dyer, Orange County Mayor Teresa Jacobs, Jose Colon and James Palmer.

The Greater Orlando Aviation Authority was established as an agency of the city in 1957 and later amended under an Operation and Use agreement dated September 27, 1976, which transferred to the Authority the responsibility to oversee all aviation activity for the city’s two airports, Orlando International and Orlando Executive. The five members appointed by the Governor may serve two four-year terms. Each Mayor serves two-year terms as long as they are in office. The Chairman is elected by the Board for a two-year term and may serve up to four consecutive terms.

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For more information, contact Carolyn Fennell or Rod Johnson in the Office of Public Affairs for the Greater Orlando Aviation Authority at 407-825-2055.

Update: As described below, and reported by many industry leaders, it appeared that the Florida Legislature left Tallahassee this March without taking important action.  However, as the dust settles, we find that an amendment to HB517, dealing with licensure of appraisers, etc. has included within it an extension of the "bulk buyer" and "bulk assignee" classifications to July 2015.  Read the Bill Summary here. 

Those foreign interests as well as U.S. buyers interested in purchasing inventories of distressed Florida condominium units got some bad news last week.  Buying up lots of condos here in Florida seems like a smart move for lots of folks these days, and they're right:  we all know that condos (particularly here in South Florida) are a hot ticket right now. 

In fact, for the past few years, Florida's current real estate market has offered real estate investors a great opportunity to buy condos in bulk. Savvy investors have been buying up existing condo units as well as buying up prime real estate at bargain prices to build even more condo projects. 

Earlier this month, Business Week covered the huge international interest in Florida's condominium market in an article entitled, "Foreign Buyers Heat Up Miami's Condo Market."  There, experts opined that foreign buyers are making up 80% of the Florida condo investment and gave details on just how big the Florida condo market really is right now. 

Part of this market rebound has to be credited to the actions of the Florida lawmakers, particularly in the passage of the Florida Distressed Condominum Relief Act.  (Read the full text of the Act here.)

Florida Distressed Condominium Act Is Not Extended

However, on March 9, 2012, despite the Florida condo fever two bills died up in Tallahassee that would have extended the life of the Florida Distressed Condominium Act by three years.  Florida House Bill 319 and Florida Senate Bill 680 each contained language that would keep the law effective through 2015.  Both died in committee last week. 

Which means that the Florida Distressed Condominium Act will cease to be effective law on July 1, 2012.

What does the end of the Florida Distressed Condominium Act mean for condo investors? 

Without this law being extended, the legal classification of "bulk buyer" or "bulk assignee" as it pertains to Florida condos will no longer have legal effect after the July 2012 deadline.  The Florida Distressed Condominium Relief Act (FDCRA) allowed buyers to qualify as "bulk buyers" or "bulk assignees" under Florida law and thereby gain some nice benefits in exchange for their buying up distressed condos in bulk and repositioning the projects.  

Which was part of the plan.  Passed in 2010, the goal of the FDCRA was to promote the sale of the huge glut of condominiums setting empty in Florida and to help condo associations who were hard hit by falling property values and huge numbers of vacant, unoccupied condos that had been abandoned to foreclosure.  

Now, we're close to 90 days of opportunity for real estate investors or foreclosing lenders to qualify as "bulk buyers" or "bulk assignees" which will provide them, among other things, limited liability from any claims that originated with the original condo developer.  After July 2012, those buying condos in bulk acquistions here in Florida will need to be aware that they may have successor liabilities involving things like past due assessments, reserves that have not been funded, the responsibility of honoring warranties on individual condominium units, and more. 

No more limited liability protections under Florida law when you buy up condos in bulk.  At least, after July 1, 2012. 

Lesson here?  If a real estate investor is considering buying an existing, distressed condominium project in Florida then they need to hurry and make the deal and get that FDCRA protection.  The clock is ticking. 

Forbes Magazine published an article on Valentine's Day entitled "For Miami Real Estate, Better To Be A Foreigner," which explores the huge amount of foreign investor interest in Miami real estate development.  It's not a discussion of whether or not international investors are investigating Miami and South Florida real estate: that's a given. 

What Forbes' article focuses upon is the fact that one of the key advantages is the Latin American financial model for buying real estate with cash on the table, no long-term financing strategies like America is used to doing. 

We've posted about buyers like those arriving in Florida from Brazil being ready to buy condos and other real estate in Miami and elsewhere with cash assets, not borrowed money.  Forbes isn't the first national publication to take notice of Florida real estate's growing love affair with foreign investors; however, this article does explain the great advantage of the cash purchasing model.

For new properties, this means significant savings. 

Many foreign buyers, particularly those from Brazil and elsewhere in Latin America, pay cash for their Miami real estate - such as an exclusive, ocean front Miami condo.  In the "pay as you build" model that is growing in popularity here in South Florida, the foreign investor buys the real estate in a series of cash payments that cover the time span of initial agreement to buy through the construction phase to completion and the exchange of keys. 

By doing so, the buyer saves a significant percentage on the price of the purchase when compared to the traditional financing model that U.S. real estate uses.  And the seller gets cash on the barrel head. 

The "pay as you build" model of real estate investment

Here in the United States, buying real estate with cash sounds strange.  After all, there are all those tax incentives (interest deductions, capital gains considerations, etc.) to consider when you've got financing for your real estate purchase.  Buy a condo with cash, you're just turning one asset into another form or asset: no big tax breaks there.

Add to that the fact that the banking industry is hurting in Florida and elsewhere, and loans for real estate purchases aren't what they used to be a few years back, and it's obvious that Miami and South Florida would have a very bleak outlook these days without the foreign investment interest. 

After all, RealtyTrac has just reported that Florida default notices on home loans increased 36% comparing this year to last year.  Florida banking has been damaged by the housing crisis to an unprecedented extent. 

Miami has always been known as a global city, a welcoming metropolis to foreign visitors - especially those with Latin American ties.  As the Forbes article points out, savvy real estate developers in the Miami area are marketing globally to bring in more and more of those foreign investors. 

Not only is this a good thing for Miami and South Florida, it may be an economic lifesaver in today's economy. 

With the State of Florida's deregulation of state agency control on most land development issues throughout the state, the importance of county and municipal regulation on land use has become more and more important.  And sometimes confusing to the outsider, whether they are foreign investors from Mexico, Israel, Canada, Brazil, etc. or from other parts of the United States.

For example, Eckstein Schechter Law provides legal services to real estate investors and developers and other clients regarding real estate matters in the following governmental jurisdictions:

The counties of Broward, Lake, Miami-Dade, Orange, Osceola, Palm Beach, and Seminole.

The cities of Miami, Fort Lauderdale, Orlando, Pompano Beach, West Palm Beach, Miami Beach, Kendall, Boca Raton,  Deerfield Beach,  Boynton Beach, Delray Beach, Homestead.

The Orlando-area municipalities of Altamonte Springs, Apopka, Astatula, Avalon Park, Belle Isle, Bithlo, Bushnell Cape Canaveral, Casselberry, Celebration, Christmas, Chuluota, Clermont, Cocoa Beach, Davenport, Daytona Beach, DeBary, DeLand, Deltona, Eatonville Edgewood, Eustis, Haines City, Harmony, Holopaw, Kenansville, Kissimmee, Lake Buena Vista, Lake Mary, Lakeland, Leesburg, Longwood, Maitland, Melbourne, Mount Dora, New Smyrna Beach, Ocoee, Orange City, Orlando, Ormond Beach, OviedoPalm Bay, Poinciana, Saint Cloud, Sanford, Tavares, The Villages, Titusville, Union Park, Windermere, Winter Garden, Winter Haven, Winter Park, Winter Springs, Yeehaw Junction,

The Miami-area municipalities of Aventura,  Belle Glade, Boca Del Mar, Boca Raton,  Boynton Beach,  Brownsville, Coconut Creek,  Cooper City,  Coral Gables,  Coral Terrace, Country Club, Country Walk,  Cutler Bay, Dania Beach, Davie,    Deerfield Beach,   Delray Beach,  Doral,  Fountainbleau,  Glenvar Heights,  Greenacres,-   Hallandale Beach,    Hamptons at Boca Raton,  Hialeah Gardens,    Homestead,    Ives Estates,    Jupiter,  Kendale Lakes,    Kendall West,  Kendall,  Key Biscayne,    Kings Point,    Lake Worth Corridor,    Lake Worth,    Lauderdale Lakes,    Lauderhill,    Leisure City,    Lighthouse Point,    Margate,    Miami Beach,    Miami Gardens,    Miami Lakes,  Miami Shores,    Miami Springs,  Miramar,    North Lauderdale    North Miami Beach,    North Miami,    North Palm Beach,    Oakland Park,  Ojus, Olympia Heights,  Opa-Locka,    Palm Beach Gardens,    Palm Beach,    Palm Springs,    Palmetto Bay,    Palmetto Estates,  Pinecrest,    Pinewood,    Plantation,    Pompano Beach,    Princeton,    Richmond West,    Riviera Beach,    Royal Palm Beach,  Sandalfoot Cove,  Scott Lake, South Miami Heights,  South Miami,  Sunny Isles Beach,  Sunrise,    Sunset,   Sweetwater,  Tamarac,  Tamiami,  The Crossings,  The Hammocks,  Wellington,   West Little River,  West Palm Beach,  West Park,  Westchester,   Weston,   Westwood Lakes,   Wilton Manors

This week, the California real estate firm Point2Homes released its U.S. International Real Estate Traffic Report for Q4, and it's got some great news for the State of Florida.  According to the 2012 real estate investment report, Florida was no. 1 in the country for foreign real estate investment. 

Point2Homes tallied its site traffic and discovered that 31% of international visitors to its real estate web site were investigating Florida real estate investment possibilities.  And it's not a close call - Florida is clearly overshadowing the other states, as Arizona totalled 19.44% to claim second place.

From the report (which you can read and download online here): 

Orlando and Pompano Beach were the top two cities for traffic coming in to Florida properties, with Orlando at 9.77% and Pompano Beach at 9.32%.

Within Florida, foreign investors were investigating the following cities in descending order of popularity:

1. Orlando (9.77)
2. Pompano Beach (9.32%)
3. Kissimmee (7.54%)
4. Miami (5.56%)
5. Davenport (3.56%)
6. St. Petersburg (2.67%)
7. Hollywood (2.25%)
8. Deerfield-Beach (2.13%)
9. Pembroke-Pines (1.87%)
10. Tampa (1.86%)

Which Foreign Countries Are Most Interested in Investing in Florida?

According to this report, Canada is searching for Florida real estate investments (and US) more than any other foreign country; however there were quite a few British subjects (United Kingdom) surfing the site for information on Florida real estate.  And, surprising to no one here in Florida, Puerto Rico remains very interested in Florida investment coming in third as Mexican investment queries tallied a solid number 3 in the national Fourth Quarter 2011 totals.

This week, a new industry report confirms that international trade is favorably impacting the South Florida commercial real estate market and will do so even more in 2012.  (Assuming that FATCA doesn't change things.)

Presented by the Commercial Industrial Association of South Florida, and written by Thomas Dixon of Dixon Commercial Real Estate, the numbers reveal that South Florida is an established global trade center and that predictions are that international investment should continue in this region throughout 2012.

Some tidbits from the report:

• Miami as the spot for corporate headquarters continues to be popular with companies worldwide, with our airport west region the trendy area for company HQs. Interestingly, according to the report, this area continues to have the highest rental rates in the country.
• In the Hialeah area, there is a big demand for its smaller manufacturing spots but the bigger buildings continue to have big vacancies (and lower rental rates).
• Not everything is good news for Miami, though.  The report points out that not a single building sold in one section of the metroplex: the part of town they label the "south region," on the map from southwest 152nd street to the Miami-Dade / Monroe County line.

The complete report can be read and reviewed online here. It's worth your time.

The beginning of 2012 is bringing lots of different forecasts relating to economic recovery in South Florida, and most of us agree that a sustainable recovery can only come after a turn around in the housing industry.  Now, there are those who are proposing creative ways to boost housing and get things moving forward.

Like Federal Reserve Chairman Ben Bernanke.

This week, Bernanke released his Big Idea for Housing:  let banks move lots of those Real Estate Owned properties sitting on their books after foreclosures have been completed into an income-producing column on their books:  rental properties.

Read Bernanke's white paper here. 

It was sent yesterday to the Senate's Committee on Banking, Housing and Urban Affairs and it's spreading like wildfire among news analysts and industry leaders. Some are calling Bernanke's idea a "game changer." 

Banks are sitting on a tremendous number of homes and paying the expense of their maintenance: why not rent them out and get some money coming in?  Sounds great to a lot of people.  And for many segments of our industry, this may provide an answer, but it is not positive news for everyone.  If banks begin to throw their inventory of homes into the rental market, there may be adverse effects to others in the real estate and construction industries. 

In Florida, Renting is Looking Good - for the Construction Industry

The Fiscal Times reports that real estate developers are already forecasting an increased popularity in renting as opposed to home ownership.  Projects in development in Florida and elsewhere for multi-family dwellings are booming in today's bad economy: they are being built at three times the rate of single family homes.  

Here in South Florida, apartments are especially popular in real estate development circles.  As the Fiscal Times notes, we're already aware of development of around 4000 rentals in Fort Lauderdale, Hollywood, and Plantation alone.

It's not good news for those interested in planning and building these new multi-family homes to hear that banks are about to put "For Rent" signs all across the community in front of single family homes.  With the right rent, many families will opt for those homes instead of renting an apartment. 

Mr.. Bernanke's "Game Changer" may not be great news for everyone in South Florida after all. 

Right now, the Florida Legislature is on holiday break but soon it will be back in session up in Tallahassee working on one of the biggest jobs to be undertaken:  finalizing the casino bill legislation to allow limited and supervised gambling in Miami and other parts of Florida.

To monitor that legislation, Senate Bill 0710, follow SB-710's site page at the Florida Senate.

Media Takes Notice of Encouraging Economy Boost Due to Genting's Arrival in Miami

The New York Times covered what's happening here in the Miami area with a recent article entitled, "South Florida Poised for Birth of Casino Gambling," which delves not only into the status of Genting's Resorts World Miami and the future of casinos in South Florida, but also points out what we've been discussing for awhile now:

Genting's entry into the Miami metroplex commercial real estate economy has had an almost immediate, positive impact.  Included in the NYT coverage are examples like:

1.  Miami World Center

You can view a very sleek website for Miami World Center online already, even though the "city within a city" has yet to break ground.  Technically, this project has been in the works since November 2008 and predates Genting's Resorts World Miami, but as the NYT reports, Genting has reinvigorated the project with its promise of an economic boost.  

2. Miami Beach Convention Center

The Miami Beach Convention Center may be getting a nice renovation - and expansion - as the local Powers that Be paid Arquitectonica for a study of what it will take to makeover the place. Steve Wynn was interested in footing the bill to redo the Center if he could build his own casino nearby (a big hint, hint to Tallahassee).  

Miami Beach has hit a stumbling block for the moment here, since their Board of Supervisors voted down the proposal to allow gambling there.  Is it over?  We'll see.  

Economic Predictions

Right now, the economists are still doing their statistical studies and crunching their numbers before issuing their opinions on gambling casinos impacting South Florida.  

However, a big group of businesspeople in a number of industries have taken the floor to state their take on things and how this will help them and their people.  For more, watch this video where the Associated Industries of Florida held a press conference to make their opinion known:

[This post is the fourth in a series discussing the Foreign Account Tax Compliance Act (FATCA) and its impact upon foreign investment and development in South Florida and the United States as well as efforts both locally and in other countries to stop FATCA.]

As 2011 comes to an end, and time ticks closer to the June 2013 effective date of the Foreign Account Tax Compliance Act (FATCA), more and more reaction across the globe is taking place.  As discussed earlier, to implement the requirements of FATCA will cost banks an enormous amount of money -- and there are many foreign lenders that are not too happy at the prospect.

Eight Billion Reasons Feds Like FATCA

In a November 2011 Reuters piece covering FATCA as a forecasted financial tsumani, one U.S. legal expert opined during an Italian tax conference that FATCA may cost the big multinational banks $100,000,000 EACH.  

Compare this against the predicted $8+ billion in tax revenue that FATCA is expected to bring into the coffers of the U.S. Department of Treasury, and we begin to see where the battleground really lies.  The old adage of "show me the money" is often wise advice.  

It's going to be very hard to get FATCA repealed when it's promising so much revenue to a federal government dealing with a severe economic crisis.  Additionally, Congress passed this law as a means of catching alleged tax evaders (whether or not it will actually hurt or halt tax evasion is another issue), so FATCA brings with it a righteous rationale that also weakens the likelihood of repeal.

Other Countries Are Fighting FATCA

As discussed earlier in this series, other countries are shocked and stymied by FATCA because not only does the new law clash with their privacy laws in some instances, but many see FATCA as the United States trying to turn independent jurisdictions into deputized IRS collection agents, and many nations find this insulting. They see this as the worst kind of US economic imperialism at work.

These nations are not sitting still.  They are taking action now, and not betting on a repeal.  China is reported to be planning on ignoring or avoiding FATCA, flat out.  European banks are turning away Americans as customers rather than deal with FATCA.  Canada, meanwhile, has been negotiating with federal representatives on FATCA's impact.  

Earlier this month, Jim Flaherty (Canada's Finance Minister) spoke to reporters to say that the Treasury Department was working with his office on ways to make FATCA easier on Canada's banks.  Flaherty's explanation?  Canada is not a place where U.S. tax evaders are known to find safe harbor.   Since FATCA is aimed at collected hidden tax dollars overseas, Canada is arguing that its banks shouldn't be forced into spending a lot of money to institute compliance (aka collection) procedures that don't jive with FATCA in the first place.  

IRS Commissioner Discusses FATCA Impact Before International Tax Institute

On December 15, 2011, the Commissioner of the IRS gave a speech at the IRS/George Washington University 24th Annual Institute on Current Issues in International Taxation,  (You can read the full text of his speech online here.) It doesn't sound like the IRS thinks that FATCA's days are numbered - Commissioner Shulman definitely sounds like he's with those that think FATCA is a done deal.  

Here are some highlights from Commissioner Shulman's speech (all are quotes from his 12/15/11 speech):

• Our approach to offshore tax evasion follows a natural course…cleaning up the abuses of the past and then mining and leveraging the data we receive to mount a greater attack on the abuse.
• Indeed, I framed the new disclosure initiative as the best chance for people to get back into the system… back into compliance… so they properly report and pay their taxes for years to come. 
• Today, banks are much less willing to facilitate offshore evasion than they were in the past and advisors are asking more questions of their clients regarding offshore accounts. Indeed, individuals now find it more difficult to find an advisor who would suggest such a risky approach and a bank that would accept the money under secrecy conditions. 
• I think it’s fair to say that we are well on our way to deterring the next generation of taxpayers from using hidden bank accounts to cheat on their taxes. Through our ongoing efforts, we are demonstrating that the world has become a smaller place… that we will eventually find you if you are hiding assets overseas.
• Combating international tax evasion is also a coordinated global effort on multiple fronts, including new international tax information agreements and increased collaboration with other governments and tax authorities.
• Congress wrote and passed FATCA to give us tools to combat offshore tax evasion. Since the law was passed, we have put out three pieces of guidance laying out a practical framework and timeline for implementation, such as phasing in the statute’s requirements.
• I have also directly engaged executives from banks and financial institutions around the globe, as have my colleagues at the Treasury Department and IRS. We have listened to their major concerns that generally fall into two categories. First, is the conflict between FATCA and other countries’ laws. Second, is the difficulty in implementing and administering the withholding requirements for passthru payments and the potential burden they place on foreign financial institutions.
• We have taken these conversations very seriously and you can expect new proposed regulations from us soon after the new year that take into account the implementation concerns we have heard. One goal of these regulations is to address these concerns and provide a way forward to allow responsible corporate citizens to work through these tricky issues in a practical fashion.
• To this end, we are shifting our approach to be more strategic, and to view taxpayers through the prism of their business objectives and tax planning strategies. This is a real change.
• We traditionally viewed and pursued international issues through the lens of individual code sections. But this occluded our view of the larger, more meaningful picture. We were only getting a slice of it… and that needs to change.
• For example, when a U.S. corporation shifts income to a low-tax jurisdiction, we need to look at the entire structure that was created to accomplish this. We need to understand the overall planning paradigm… What’s motivating the company...What are the benefits...What are the most aggressive positions…How are they managing tax exposure…In other words, we have to understand what they are trying to accomplish.
•  So, we are shifting our approach to be more strategic and to view taxpayers through their business objectives and tax planning strategies. The end game is to try to develop a way of organizing our international compliance programs to:
  • Indentify the highest compliance risks among our taxpayer base;
  • Work cases as effectively and efficiently as possible;
  • Not waste our and taxpayers’ time on issues that do not pose compliance risk; and
  • Find appropriate ways to resolve cases as soon as possible.
  • Allocation of resources will also follow more closely the way in which taxpayers plan and adopt tax positions. In other words, the strategy mirrors the tax planning paradigm.

• The world of international tax is very dynamic: from our efforts to combat offshore tax evasion by individuals, to deeper coordination of action by sovereign governments, to our evolving strategy to work with the largest corporate taxpayers. Each strategy will depend on us continuing to innovate … continuing to have dialogue outside of our agency…and continuing to always strive to work smarter. We are very focused on continuing to up our game in administering the tax laws in a global environment, and you can expect to see the same intensity of efforts in the years to come that you have seen in the past several years.

What does this mean for Florida land development and Florida real estate investment?  

Well, particularly here in Miami, we are a cosmopolitan culture with longstanding ties - both busness and personal - to countries all over the world.  Florida's economy is in serious trouble, and lots of people are working hard to build upon our global ties to bring foreign investment into the Sunshine State. 

We need to be building that cross-polination between Florida and Brazil, Mexico, Israel, Canada, and beyond.  Asking that these folk come here to invest and build while at the same time, asking their banks to spend millions in an effort for the United States to collect tax dollars -- well, in its simplest terms, it's not very hospitable, is it?  

Financially, it's much more complex than that, of course.  But that is for another post on another day.  

Florida should become even more alluring to foreign investors and international real estate buyers if the United States Congress passes the proposed “Visa Improvements to Stimulate International Tourism to the United States of America Act” (VISIT USA Act).  

You can follow the legislation's progress online here.  

What is the VISIT USA Act?

In October 2011, Senator Charles Schumer (D-NY) and Mike Lee (R-Utah) worked together to put together a bill that if it becomes law will grant foreigners to the United States visas if they spend at least $500,000 on residential housing in this country.

That's right:  buy $500,000 or more in residential real estate in the United States, and you will automatically get a U.S. Visa - if the VISIT USA Act becomes law.  

The proposed Act, if passed, will obviously be of interest to real estate investors worldwide who are considering purchasing homes or condos here in Florida, particularly here in beautiful Miami. Visas can be cumbersome to deal with, and this helps foreigners who are interested in buying property in our area as rental investments or vacation homes.  

The U.S. Chamber of Commerce is already on-board.  From their news release:

Travel and tourism—a sector dominated by small businesses—accounts for more than $700 billion in revenues and 7.4 million American jobs. When business visitors travel to the United States to buy products or attend conferences, training, and trade shows, they strengthen America’s role as the center of innovation and global commerce. These important reforms could help the United States restore its share of the travel market to its 2000 level of 17 percent and create an additional 1.3 million jobs by 2020. 

For too long, we have created barriers, and too many hoops and hurdles, which act to deter visitors from other countries coming to the United States to spend their money and create jobs. This is a loss we can ill afford in today’s economy. We can address these barriers and still protect the security of the United States. The Schumer-Lee bill meets these twin goals and we look forward to working with the Congress to achieve enactment of this important legislation.

The New Act's Visa Will Have Limitations

As currently drafted, the legislation will offer a new kind of visa, one that can be renewed every 3 years.  It would be specific to foreign owners of American residential real estate (buy an apartment building and you're not a part of the Act).  Finally, this new kind of visa would not be a step toward citizenship.  

Additionally, the buyer would have to be buying real estate without debt attached to it: the Act would only apply to cash purchases.  If the foreign buyer lives in the home for 6 months or more, then they would be subject to U.S. taxes, unless the draft is changed during the legislative process.  

There's been a lot of interest and debate over this proposal.  So much so, that Senator Lee wrote an online article and placed it on his website to give more details into the proposal, entitled, "Clarifying Elements of the VISITUSA Act."  He's calling it a "travel visa," not a work visa or an immigrant visa.  

Call it what you will, there appears to be lots of international interest in this legislation.  For example, ChinaDaily reports that it's interesting to Chinese investors who are interested in American schools for their kids, among other things.  

Florida State Representative Kathleen Passidomo (R-Naples) has not given up on trying to get legislation passed up in Tallahassee that will help resolve that part of the ForeclosureGate mess which has created a backlog of foreclosure filings in Florida courts and an approximate 700 day turnaround time for banks seeking to foreclose on homes where no one is paying on the home loan.  

Translate that:  banks in Florida right now are sitting on loans that are going with NO payment for approximately 23 MONTHS before they can legally hold the collateral that was put up for the event that payments stopped coming into the bank.  

Two years without getting paid and sitting in limbo, it's no wonder that banks are in trouble these days.  Which is one of the reasons for Rep. Passidomo's bill.

What Representative Passidomo's Fair Foreclosure Act Proposes

Introduced in October 2011, the legislation will be considered as part of the 2012 legislative process and is currently proceeding through the committee gates to a full vote.  You can read the full text of Rep. Passidomo's proposed Fair Foreclosure Act online in its entirety here.

In sum, if passed, the new law would not gut the judicial foreclosure process; however, when a foreclosure lawsuit is filed and the homeowner fails to answer the lawsuit or assert any sort of defense to the foreclosure action - something that happens quite often when the Florida homeowner abandons the property - then the current procedure would be changed.

In these situations, under Representative Passidomo's Fair Foreclosure Act, the process is changed and the requirements in what the lender must file with the court in order to foreclose upon the property is lessened. This makes it easier both for the lenders and for the judges to get these foreclosures finalized and the homes into the hands of the banks and back out on the market.  

If one of these foreclosures did manage to hit a bump, the new law would allow interested third parties, like homeowners' associations who are concerned about the abandoned property in their community, to come before the court and ask for a court-ordered case management conference to try and get the case moving forward. 

From HB 213's general description:

Designates act "Florida Fair Foreclosure Act"; revises requirements for acknowledgement of satisfaction of mortgage, lien, or judgment; provides requirements for mortgage foreclosure complaints; requires party foreclosing on specified owner-occupied dwellings to provide specified notice; provides for finality of foreclosure; requires certain actions to set aside foreclosure to be treated as actions for money damages; provides requirements for preparation and recording of instrument acknowledging satisfaction; prohibits certain claims following foreclosure based on enforcement of lost, destroyed, or stolen note; provides requirements for deficiency decrees in foreclosures of certain occupied units; revises procedural provisions relating to foreclosure proceedings; provides for determination of reasonable attorney fees for foreclosing certain owner-occupied properties; provides for election by foreclosing lender to proceed without public sale in certain circumstances; provides for liability of persons wrongly claiming under lost, stolen, or destroyed notes; provides for sanctions for raising unsupported claims or defenses & delay of litigation.

 

Answering Critics of The Fair Foreclosure Act Proposal

Of course, there are those that do not agree with Representative Passidomo's proposed legislation, arguing that all that the bill does is help evildoing banks and their foreclosure-happy attorneys to do bad things to Florida homeowners.

It's true that in these situations, the banks would be allowed to meet a much less stringent standard in their burden of proof before legally foreclosing on a home.  It's also true that much of the "robo-signing" morass has been due to lenders not being able to meet the legal burdens of proof under current real estate law.   

Nevertheless, the new law is not written to help bad actors slide away from doing the right thing.  Instead, it is trying to solve a very real problem here in Florida:  people have been walking away from their mortgages and leaving their homes empty.  Sometimes squatters move in.  Sometimes it's only insects and vermin.  These homes sit there, abandoned, bringing down property values and increasing community dangers for months and months - in some cases now, years and years.

That's not right and it's not good for Florida.  Add to that the reality that Florida needs a solid and strong banking industry and we just don't have that right now.  In what reality is it acceptable to have a company wait for almost two years without being able to take collateral on a promise to pay that has been breached?  

We are in a crisis now due to the huge foreclosure backlog in our judicial system and Representative Passidomo is trying to solve that problem.  It's not the complete answer, but it is a step in the right direction.  

In 2011, shortly after the landmark legislation was signed into law by Governor Rick Scott, a lawsuit was filed by the Town of Yankeetown, Florida, challenging the Florida Community Planning Act as being unconstitutional for among other reasons, allegedly being unconstitutionally vague. The State of Florida moved to dismiss the complaint. From the Leon County Clerk's docket:

Plaintiff seeks declaratory relief, alleging that HB 7207/Chapter Law 2011-139 is unconstitutional because it contains more than one subject and has a misleading title as an act relating to trust funds when the act includes a preemption prohibition on certain referendum and initiatives; and because it contains an unconstitutional delegation of authority to the Florida Department of Community Affairs to determine vague and undefined terms.

On November 9, 2011, a proposed settlement between the State of Florida and the municipality was presented to the court, which would result in an exception to the Act’s application when localities had charter provisions authorizing certain referenda in place on the date that the Act became effective. While the settlement must be approved by both the Governor of Florida and the Florida Legislature, an amendment to the Act itself that would make the settlement provisions part of the Act itself has already been proposed.  

Introduced by Senator Mike Bennett as SB 842, it will amend Florida Statutes Section 163.3167 to read, among other things:

“[A]ny local government charter provision that was in effect as of June 1, 2011, for an initiate or referendum process in regard to development orders or in regard to local comprehensive plan amendments or map amendments, may be retained and implemented.”

Senator Bennett’s proposed amendment to the Community Planning Act does other things, as well as disposing of the Town of Yankeetown’s concerns. From the Florida Senate’s overview, this amendment includes:

Repealing provisions relating to the powers and duties of the Secretary of Community Affairs and functions of the Department of Community Affairs with respect to federal grant-in-aid programs; replacing references to the Department of Community Affairs with state land planning agency; repealing provisions relating to the Urban Infill and Redevelopment Assistance Grant Program; deleting provisions relating to the Coastal Resources Interagency Management Committee; deleting provisions excluding a municipality that is not a signatory to a certain interlocal agreement from participating in a school concurrency system; replacing references to the Department of Community Affairs with the Department of Economic Opportunity; deleting requirements for interlocal agreements relating to public education facilities, etc.

 

This proposed legislation may be tracked online.

[This post is the second in a series discussing the Foreign Account Tax Compliance Act (FATCA) and its impact upon foreign investment and development in South Florida and the United States as well as efforts both locally and in other countries to stop FATCA.]

FATCA (the Foreign Account Tax Compliance Act) will become effective in 2013 unless action is taken, and as discussed earlier in this series, there are a tremendous number of critics of FATCA that believe it is harmful to a wide range of interests, not the least of which is economic stability and recovery in South Florida and elsewhere.

Why Was FATCA Passed in the First Place? Money.

The purported reason for Congress to pass FATCA was to enhance the ability of the federal government to gather taxes due on assets that are sitting in foreign accounts.  Congress passed the legislation as part of the HIRE Act (Hiring Incentives to Restore Employment Act), all for the reason of collecting revenue for the federal coffers.  It's an international tax collection effort aimed at perceived tax evasion through overseas accounts.

What Does FATCA Do?

One basic thing that FATCA does is require that financial institutions, American or foreign, anywhere in the world, provide the Internal Revenue Service with account information for any U.S. clientele with $50,000+ in their account.  Which means that the U.S Government is trying to make its tax collections more effective by having banks file information with the IRS and not just the taxpayer.

However, FATCA isn't a simple tax collection procedure.  FATCA will require major alterations to the way business is done by both foreign and domestic enterprises - and that's the problem. 

FATCA, for example, will force every foreign bank to report all of its U.S. account holders to the Internal Revenue Service (regardless of account balance); afterwards, FATCA mandates that these foreign banks  impose a 30% tax on all payments or transfers to these U.S. account holders who refuse to identify themselves. Any foreign bank that doesn't want to do this will be penalized by the federal government through  withholding of interest and dividends for U.S. sources as well as withholding of gross proceeds from the disposition of U.S. securities, etc.

If FATCA does become effective in 2013 (that's one year, one month, and a few days from now), then a huge number of corporations are going to have to make lots of internal changes in order to comply with this new law. Huge numbers of changes. 

Change is expensive. While this type of imposed change is never welcomed with open arms by companies, FATCA requirements are hitting businesses at an especially bad time: internal changes in frameworks, procedures, operations, etc. are expensive in time and money.  

That's not all.  Accounting firms like Delotte and Ernst and Young are already offering their services to provide "compliance risk assessment" and evaluations of systems and how these internal systems will need to be changed in order to meet FATCA's requirements for withholding and reporting.  Which means not only the expense of the changes themselves, but the additional expense of hiring a firm to evaluate and recommend what those changes need to be. 

Given today's economic climate, forcing additional expenditures in already tight corporate budgets in order for the federal government to collect more tax dollars is not setting well with lots and lots of businesspeople.  Companies in all kinds of industries and in all parts of the world are against FATCA and what it means to their bottom line.

Growing Concern for FATCA's Impact on Investment and Trade

Several months ago, Forbes published an interesting take on FATCA in its June 21, 2011 online edition, written by Forbes contributor Daniel J. Mitchell and entitled "Why Obama's FATCA Law Is A Threat To Business Growth."

There, it's first pointed out that FATCA was passed alongside draconian legislation requiring 1099s to be filed by every U.S. business (from solo proprietorships to the largest corporations) for any vendor with whom they did $600 of business (or more).  That was egregious, and this law was nixed.  No one is going to have to jump through that 1099 for $600+ hoop after all. 

However, FATCA - which Forbes describes as a mere "international version of Obamacare’s 1099 scheme" - remains alive and well and since it's impacting foreign business operations much more than those here at home, Congress hasn't heard the outcry against its unfairness as easily as it heard the 1099 - $600 protests. 

Foreign Companies May Respond By Cutting Off American Investment Rather Than Comply With FATCA

Forbes warns that FATCA is so much trouble that it may mean that foreign financial institutions could decide that the easiest change for them will be to ignore all those offers for help from Ernst and Deloitte and instead, just stop doing business in America.  No U.S. investment, no FATCA worries.

Seems like an option that any sensible foreign business would be pondering, doesn't it? 

Add to this, an article (referenced by Forbes) from Great Britain's Financial Times published in June 2011 entitled "US demains tax tolerance of foreign financial groups," where country after country after country is identified as being at the minimum upset and all the more often outraged at this American legislation.

The outrage against FATCA continues to grow.  For some, it's cost.  For others, it's putting them between a rock and a hard place, since FATCA requirements fly in the face of their own jurisdictions' privacy laws.  There are other bases for foreign criticism, too.  Things like a feeling of being disrespected, as they ask why should other countries be required to act as indirect tax collection agents for America?

Meanwhile, we're starting to see what FATCA will mean if it's not repealed.  This week, Ascentric announced its decision: it's not going to be doing business with Americans because FATCA is not worth the effort.

Next in the series, more details on FATCA and what it means to Americans including businesses in South Florida.

The Florida Supreme Court made national news as well as in Florida land development and real estate investment circles this week as it released its opinion in Koontz IV (read the full text here), ruling that it is not a "taking" by the government, for which payment must be made, when a government agency denies a development permit for private property. 

What the Koontz Fight Was All About: Developing a Small Patch of Land Near a Florida Roadway

Specifically, Florida property owner Coy Koontz asked his local Florida water management district for commercial development permits for 3.7 of acres of his 15 acre patch of land on State Road 50, near the East-West Expressway. The majority of Koontz's land tract has been classified as wetlands.

Negotiations began, and the water management district responded with a request that the property owner reduce his development plan to 1 acre, cutting back 2.7 acres off the development project, as well as turning the rest of his 15 acre tract into a conservation area, restricted by language in the deed, in return for the requested development permit. 

Not surprisingly, the property owner didn't agree with this proposal by the water management district, and litigation began.  This, with many developers wondering how the water management district could have thought any other response to their proposal would be a reasonable reaction. 

Mr.Loontz won at the Florida appeals court (read the Florida Fifth Court of Appeals decision here).  Now, the tide has changed, and the state water management district is the victor after the Fifth Court of Appeals certified the issue to the Supreme Court as a question of great public importance. 

From the Florida Supreme Court opinion (emphasis added):

Based on the above analysis, we conclude that the Fifth District in Koontz IV erroneously applied the Nollan/Dolan exactions test to the offsite mitigation proposed by St. Johns. Since St. Johns did not condition approval of the permits on Mr. Koontz dedicating any portion of his interest in real property in any way to public use, this analysis does not apply. Further, even if we were to conclude that the Nollan/Dolan test applied to non-real property exactions—which we do not— Mr. Koontz would nonetheless fail in his exactions challenge because St. Johns did not issue permits, Mr. Koontz never expended any funds towards the performance of offsite mitigation, and nothing was ever taken from Mr. Koontz. As noted by the United States Supreme Court, Nollan and Dolan were not designed to address the situation where a landowner‟s challenge is based not on excessive exactions but on a denial of development. See Del Monte Dunes, 526 U.S. at 703. Here, all that occurred was that St. Johns did not issue permits for Mr. Koontz to develop his property based on existing regulations and, therefore, an exactions analysis does not apply. See id. (“[T]he rough-proportionality test of Dolan is inapposite to a case such as this one.”).

 

What Does Koontz v. St. John's River Water Management District mean to Florida?

First, it's reversing two existing decisions, already in place as rendered by lower Florida courts, finding that this type of negotiation failure would constitute a taking worthy of compensation. 

The St. Johns River Water Management District had been ordered to compensate a land owner in Orange County for the temporary taking of his land because of permit negotiations to the tune of $376,155.00.  Now, with the Florida Supreme Court ruling, that land owner may be waiting a very long time to see a dime of that money.

According to the Florida Supreme Court, to rule otherwise would be cost-prohibitive to Florida land development:  

"Governmental entities must have the authority and flexibility to independently evaluate permit applications and negotiate a permit award that will benefit a landowner without causing undue harm to the community or the environment." 

However, the argument remains that by demanding that a property owner cut back his proposed development along with turning the rest of his track into conservation lands - or alternatively, get no development permit at all - the water management district has essentially taken that land from the land owner.  

This is how land developers and real estate investors both in Florida and in other parts of the country as well as the world will interpret this case. 

Will the case be taken to the United States Supreme Court for review?  Maybe.  Koontz has been fighting this since 1994, cost-wise it seems like a worthwhile investment at this point.  Assuming that he does so, there's still the big question:  will the United States Supreme Court agree to hear his case?  Who knows -- but it's an open issue before the High Court, so there's the chance that they might do so. 

FYI -- interestingly, Justice Polston agreed with the result, but not the reasoning: Polston believes that failure to exhaust administrative remedies before filing suit was sufficient to reverse the lower court's decision. Chief Justice Charles Canady concurred with this position.  Easy way out for the majority would have been to follow Polston's analysis and kick the case out because Koontz hadn't gone through agency channels before entering the courtroom. 

Miami-Dade County Commissioners learned a lot more about the proposed new Resorts World Miami this week, as Genting's proposed casino resort was discussed in detail at a Commissioners' meeting.  Proponents and critics alike were there to put their two cents' worth into the debate about casinos being built in Miami.  Specifically, the three resort casinos currently being proposed in Tallahassee with Genting's casino the one that has all the details all ready to go.  Genting's got a plan, Genting's already moving ahead.

Genting's Resorts World Miami Will be HUGE

Genting is sharing lots of information about its Miami project, much like a proud new mother shares photos of her baby.  Just check our their video (below).  Amazing stuff.

And, at the Commissioners' meeting this week, Genting shared:

• Resorts World Miami is estimated to cost $3.8 billion to complete
• Resorts World Miami will be bigger than any Vegas hotel or casino
• Resorts World Miami is expected to create "tens of thousands" of construction jobs in the short term and "tens of millions" of tourist dollars in the long run
• Genting will issue casino debit cards to its guests for use at restaurants, shops, etc. in the surrounding area (i.e., non-Genting establishments)
• Resorts World Miami is expected to have 5200 hotel rooms (compare this with the MGM Grand at 5044)
• Resorts World Miami plans include two casinos in two different parts of its project, one almost twice as big as the other.  8500 slot machines are included along with 50 restaurants. 
• It is targeting a higher-stakes gambler (more "whales" for Miami).
• Resorts World Miami will be the biggest casino resort in the world - if the plans are okayed by the Powers That Be. 

Bigger than Vegas?  Bigger than anything else in the world?  That's real estate development in a big way and its impact on our economy will be staggeringly positive. Now and later. 

Genting is good for Miami. 

Watch what Genting is planning here:

Right now, the State of Florida is one of many states requiring lenders seeking to foreclose on a property for nonpayment of a mortgage note to do so via a formal legal process.  A lawsuit must be filed.  An official order signed by a judge must be obtained, approving of the foreclosure itself. 

This is the way that things have been done in Florida for many years.  Now, Governor Rick Scott and several key members of the Florida Legislature want that to change.  And, it looks like their campaign may succeed - meaning that in the near future, Florida will be a non-judicial foreclosure state. 

Why Should Florida Change From a Judicial Foreclosure State?

The Governor's position is simple.  There are so many foreclosure actions that have been filed in Florida courthouses that the system has become overwhelmed.  Lane Wright, press secretary to Governor Scott, has explained to one Florida newspaper that they are finding it's taking over 600 days for a foreclosure to be processed, start to finish, in Florida. 

That's almost 2 years. 

The Governor's position is that when there is this big of a bottleneck, then citizens are hurt because lenders get stuck and aren't able to go about their business, making new loans. Their position is that judicial foreclosures are stalling our economic recovery, so it's time to simplify the process.

Critics Challenge The Wisdom of This Change

This is not an easy sell in Tallahassee.  Last year, a bill to change Florida to a nonjudicial foreclosure state died in the Legislature.  The Governor is returning now, his second time at bat on this controversial issue. 

Many do not believe that moving the foreclosure process outside the courthouse is smart for Florida.  They argue that doing so removes needed oversight, and gives even more power to the lenders at the expense of the homeowners, a situation where there is already an imbalance of negotiating power. 

A bigger concern: money.  Courts profit from foreclosure actions.  In bad economic times, what are the various counties to do if they no longer have incoming revenue from foreclosure fees?

What Will Happen?  There Will Be Some Change in the System - But It's Missing the Bigger Issue

It's taking years, not months, for Florida banks to complete the foreclosure process right now in Florida.  No one can argue that this is a big problem -- both for the lender as well as the homeowner.

Some are already looking for ways to get some change here, to get things moving forward, with one suggestion now on the table being segregating foreclosures into contested and noncontested matters. When the homeowner is not contesting the foreclosure, the lender would be allowed to institute a process outside the courtroom, foreclosing on homes in a manner analogous to the established process used now to repo motor vehicles. 

Still, the elephant in the room is the lenders' crisis situation, not the one down at the courthouse.  Banks are buckling from the tremendous number of mortgages that have defaulted -- left holding the bag not only on unpaid notes but on dealing with real estate when banks never were in the business of being real estate investors, land developers, or landlords. 

Add to that volume of defaults the problems of servicers and lawyers snowballing the crisis with robosigning and fraudulent acts, and lenders go into a whole new level of crisis. 

There's more.  People are still defaulting.  In a recent article in the Sun Sentinel, an elderly couple admits that they are not paying their note and have no intention of doing so.  They're waiting for the foreclosure notice; in fact, they are waiting to be forced out. 

Looking to the courthouse backlog may be needed, but it's not the solution to Florida's foreclosure crisis and it will not solve the banking crisis we are experiencing. Banks are stuck because their customers are breaching their loan agreements in unprecedented numbers. This is the problem that has thrown the Florida economy into the ditch, and we're not rebounding until it's dealt with.

Genting Malaysia has closed many of its land deals and debuted its plan for Resorts World Miami, a new $3 billion mega-resort located in downtown Miami (part of it in the old Miami Herald building, part in the Omni) with news that it's moving fast:  Genting developers see doors opening as soon as next year for the hotels, condos, restaurants and other amenities. 

We're already posted about Resorts World Miami and what it means to Miami.  It offers a unique opportunity for South Florida's renewal, and signals economic recovery - even a new prosperity for our community. 

After all, Genting won't be a development in a vacuum: other symbiotic and even parasitic developments will be popping up around Resorts World Miami.  That's a given.  (To check out the details surrounding Resorts World Miami, check out Genting's new website on the planned development.)

So, it's no surprise that some would be concerned at all this fierce activity.  Lots of things will be happening now, and fast.

Miami Powers that Be are justifiably concerned about how Genting's new economic bombshell - as well as the expected additional developments  - will work with what is already here: particularly, the cultural arts facilities that exist in the area.  So much so that the non-profit entity The Town Square Neighborhood Development Corporation is now focusing its efforts on working out the infrastructure kinks (traffic, parking, etc.) that Genting's bringing to the party.  Adrienne Arsht Center's Michael Eidson and Parker Thomson are involved here, along with developer Armando Codina and architect Cesar Pelli.  

Cautiously, and rightfully so, they're turning a watchful eye on Resorts World Miami. Their hope: another Lincoln Center, but this one in Miami not NYC. 

It's too bad that some in Miami haven't been so gracious to Genting.

Others are not so welcoming.  Luther Campbell in the Miami New Times comes right out and challenges the new development in an opinion piece entitled, "Genting casino will kill Miami and Miami Beach." Campbell argues that Genting will keep its visitors on Genting property - that tourists who come will be lured to stay (and spend) only on Genting property, and that Miami Beach and other nearby restaurants and attractions will not only not benefit, but also suffer by having their tourist base drawn to the Genting project. He also argues that the jobs Genting brings are all low paying service jobs, because the casinos will be operated by experienced employees Genting imports from other states, with experience running gambling tables.

 It just does not make sense. A project like Genting's will bring all kinds of jobs - from construction jobs, to development jobs, to service jobs, to jobs for those who will run the hotels, restaurants, and retail establishments.  There is, by the way, no downside to bringing lots of service jobs to Florida - we need the jobs.  Plus, it is hard to believe that tourists who come to Genting won't also be drawn to our beaches, to the Everglades, and to the many nearby attractions that make Miami a world class city. We are all likely to benefit.

The Miami Herald published a piece on Tuesday by Michael Putney, "Genting deals winning hand for Miami," where, after researching the specifics of the deal and Genting's background, including that of its CEO, Mr.. K.T. Lim,  Putney ultimately supports the project (even though there are some comparisons in the article to con men and Ponzi scammers like Scott Rothstein and David Paul).

What brought trust to Putney?  First, that Genting has already invested so many hundreds of millions of dollars here already, just to buy land.  (The Miami Herald spot for $236 million, for example.) Second, that Genting's been hiring locally, getting Floridians to do their work here - Putney points out that  Arquitectonica is doing sculptural design.

Third, Genting's got a track record of success with this sort of thing.  Resorts World Miami isn't Genting's first rodeo.  They've got successful examples of similar types of developments all over the world. 

Is It Wise to Already Be Biting the Investor's Hand That Is Feeding Our Economic Recovery?

Genting is well aware that it may be single-handedly instituting a local recovery here and still, its plans and behavior have been gracious and considerate of local interests.

Billions of dollars are coming into Miami.  Now.  Infrastructure concerns?  Of course.  Water, electricity, traffic, roads, parking.  Wow - lots of work.  And work means jobs.  Jobs.  Right now, as well as later.

Genting has revealed its big plan for Miami, and it's turning lots of heads. As well it should, because we may have just heard the magic words that will release our local community from being under its current dark economic spell. 

Foreign Developer Announces Details of New, Huge Tourist Mecca In Resorts World Miami

Yesterday, Genting pulled back the curtain on its plans for a mixed-use development named Resorts World Miami, and it includes taking the Omni Center and neighboring land to construct not only restaurants, bars, and such but a real, live casino to open as soon as a year from now.  If Genting can get the okay to operate a casino in downtown Miami, of course.

Many believe that the Genting Group (officially, Genting Malaysia Bhd., operating casinos worldwide from its Southeast Asia headquarters) will succeed in obtaining a gambling license for its shiny new project from the Florida Powers That Be.  That will only increase the pull of this new tourist destination for visitors across the country as well as across the globe. 

This is a very, very big deal.  Genting will be spending $3 billion here in Miami to develop and build its Resort World Miami project.  The waterfront resort, according to the latest Genting release, will have four (4) hotels (5200 rooms) with two (2) condo towers (1000 units) and (wait for it)... a lagoon on the roof that is estimated to span 3.6 acres.  There will be a convention center, and Resorts World Miami will have the largest ballroom in the United States.

All this is happening very fast.  We've just learned that the Genting Group bought one mortgage note on the Omni last week, pulling the property out of foreclosure.  Soon thereafter, Genting purchased the remaining mortgage note, giving it control of the Omni Center.   

Genting had made news earlier this year when it bought the property that housed the Miami Herald for so many years (see our earlier post, "Foreign Investors Announce Big New Miami Land Development: Genting Malaysia Spend $236 Million for 14 Acres in Downtown Miami.") 

It's Redevelopment Like This Which Will Bring South Florida Back to Sunny Economic Days

Genting's projection include the creation of 15,000 construction-related jobs as well as 30,000 permanent jobs from its development.  These, of course, are projections tied only directly to Genting.  There will be many other jobs that are created as the ripples of this economic tidal wave crest in downtown Miami.

Consider this:  the U.S. Department of Commerce tracks and measures local economies and it has recently released its tallies for Florida (see the GDP Tables here).  According to Tuesday's information, in South Florida (including the Miami metroplex), real estate is tops, government is next, and trade/finance comes in third as contributing to our economy. 

However, you have to consider that within those numbers are foreign and domestic visitors -- and when you do, as calculated by the Miami Herald, you've got around 15% of the local economy which brings tourism into second place right behind real estate. 

Genting's project is right in the big middle of those numbers.  Genting will be coattailed by others seeking to profit from overflow from Resorts World Miami or to compliment the resorts' offerings. 

Yes, this is a very big deal.  And through tourism investment and real estate development, South Florida may be back on the road to prosperity. 

It's already happened:  the Federal Housing Finance Agency (FHFA) has filed suit against many of the nation's top banks over alleged bad acts involving mortgage-backed securities, i.e., ForeclosureGate. (Read the agency press release here.) 

The question is -- what are the consequences?

Specifically, here is what's happened:  the following big name financial institutions have been sued by the federal government - as well as individuals that include not only some of the bank's top officers but also some of the defendant lenders'  unaffiliated lead underwriters -- for alleged violations of  (1) the Securities Act of 1933, a federal claim for damages that gets these cases filed in federal court as well as (2) analogous claims under state securities law and (3) assorted tort claims under state law including negligent misrepresentation and/or common law fraud. 

Torts, of course, bring with them the possibility of compensatory (punitive) damages.  These banks and bankers are being sued for intentional bad acts under state and federal law. 

Federal and State Law Claims Asserted Against 17 Lenders (and Various Individuals) by the FHFA

Which state law applies depends upon where the lawsuit against the particular defendant has been filed - the FHFA has filed these suits in New York as well as Virginia, etc. Go here to click on links that will connect you with the particular complaint filed by the feds against each of the following seventeen (17) lenders:

1. Ally Financial Inc. f/k/a GMAC, LLC

2. Bank of America Corporation

3. Barclays Bank PLC

4. Citigroup, Inc.

5. Countrywide Financial Corporation

6. Credit Suisse Holdings (USA), Inc.

7. Deutsche Bank AG

8. First Horizon National Corporation

9. General Electric Company

10. Goldman Sachs & Co.

11. HSBC North America Holdings, Inc.

12. JPMorgan Chase & Co.

13. Merrill Lynch & Co. / First Franklin Financial Corp.

14. Morgan Stanley

15. Nomura Holding America Inc.

16. The Royal Bank of Scotland Group PLC

17. Société Générale

What are the Consequences of the Federal Government Suing Banks and Bankers? 

The ramifications of these lawsuits is still being pondered by many -- both experts here in the United States as well as across the globe.  Of course, there will be serious consequences here and the real question becomes who is going to be hurt by this, and how bad.

Consider the following articles as debate grows on what has happened here:

In the Wall Street Journal, Jeffrey Sica writes, "Empire Of Dirt - "Let them fail: Why Failing Banks Should Fail," opining that the FHFA has lost all respect as a regulator because it was this very agency that has put the U.S. economy in "peril" by its contribution to the failure of both Fannie Mae and Freddie Mac.

At Bloomberg, Paul Miller of FBR Capital Markets & Co. is arguing that the federal government must stop “punishing banks” because it's hurting any possible economic recovery. He's quoted at Housing Wire as opining that these lawsuits will result in less money available for loans.  Period. 

Overseas, the BBC is reporting that lenders (at least defendant The Royal Bank of Scotland Group PLC ) will be aggressively defending against these suits, which are expected to seek billions of dollars in damage claims, "Royal Bank of Scotland to Fight US Mortgage Action."

What Does This Mean to Florida?

Florida could well be the poster child of ForeclosureGate -- the Sunshine State is definitely one of the hardest hit economies in the aftermath of all the unprecedented foreclosure fraud that's been reported.  The economy is hurting and both government and industry are working hard, feverishly even, to find ways to get Florida out of its current economic quagmire.

How to get from recession to recovery is a hot topic here: environmentalists may clash with developers, for example, but it's not debatable that financing (i.e., banks) are vital to any economic recovery.  Money has to be moving here for Florida to rebound, and having the federal government sue these lenders doesn't bode well for Florida's future financial health. 

Banks need to be finding ways to loan money and get Florida moving again, and with these lawsuits, one thing is clear:  the biggest lenders will be busy finding ways to protect themselves from tort damages. 

Last week, we discussed the latest analysis of the South Florida commercial property market and the good news that industry leaders believe that commercial real estate has turned the corner here in the Miami-Dade | South Florida area.  (For details read our post entitled, "Miami Commercial Real Estate Turns the Economic Corner According to New Report by CB Richard Ellis.")

Today, we're seeing corresponding industry analysis being discussed and weighed as it regards the South Florida residential real estate market -- which is a big deal in the Miami marketplace what with the upsurge in foreign interest in our community's beachfront and waterfront condominiums.  However, indicators do not appear to be as clear for residential real estate as commercial property here in South Florida.

Standard & Poor/Case-Shiller vs. Federal Housing  Finance Agency Perspectives

Two new reports have been released regarding the local residential real estate market, and they are not jiving.  First, the Standard & Poor /Case-Shiller release was issued today.  It is good news: according to Case-Shiller, things are looking up. 

Meanwhile, the Federal Housing Finance Agency has also recently released its quarterly housing index, and while the FHFA is said to follow the same steps as Case-Shiller, i.e., creating an index through a comparison of past sales prices to present sales prices in the region, the federal agency numbers are not as optimistic.

What Case-Shiller’s Index Reports About South Florida Residential Real Estate

The well-respected Case-Shiller Index is published each month on the morning of the last Tuesday of the month, with the goal of recording and reporting single-family home prices in selected metropolitan areas across the country.  The home prices are collected and then compared with prior data already on file for each community as well as the nation overall.

Analysis is given for the state of the home real estate market in each of the metro areas.  Case-Shiller then provides an overall, value-weighted average of the selected metropolitan areas' indices for an overall index value (showing appreciation or depreciation in home prices as rated against a base value of 100 set in January 2000). 

What FHFA's Index Reports About South Florida Residential Real Estate

The Federal Housing Finance Agency provides its HPI Index quarterly, not monthly, also providing a record and review of single-family home sales prices across the country.  It takes its data from a similar batch of metropolitan areas ("metropolitan statistical areas") but also includes sales prices from the 9 divisions of the Census Bureau, and from each of the fifty states along with the District of Columbia.  

The FHFA's home price index is also a weighted index, describing itself as a "...weighted, repeat-sales index, meaning that it measures average price changes in repeat sales or refinancings on the same properties."  The FHFA includes in its calculations mortgages have been purchased or securitized by Fannie Mae or Freddie Mac.  From the FHFA site:

"The HPI serves as a timely, accurate indicator of house price trends at various geographic levels. Because of the breadth of the sample, it provides more information than is available in other house price indexes. It also provides housing economists with an improved analytical tool that is useful for estimating changes in the rates of mortgage defaults, prepayments and housing affordability in specific geographic areas."

What Can We Take From These Two Studies?

This morning's Case-Shiller index reports two months of increasing residential real estate values in our local area, while the FHFA index shows falling numbers. Today, the two indices do not paint parallel pictures.

As reported by Douglas Hanks of the Miami Herald in an article today, "Searching for a bottom in housing prices in South Florida," the media focuses upon Case-Shiller much more than the federal home price index and the Case-Shiller report is encouraging. We should expect to read about the Case-Shiller numbers more than the FHFA Index.

Still, neither home price index is painting a rosy picture for residential real estate in South Florida these days.  While industry analysts may be forecasting a brighter future for commercial property in our area, the residential market is still fighting to turn its corner.

On Tuesday, Pultizer-Prize winning journalist Gretchen Morgenson's article "Attorney General of N.Y. Is Said to Face Pressure on Bank Foreclosure Deal," was published in the New York Times and the next day, the New York Times published its editorial,"It's a Flawed Settlement," opining that the New York AG should persevere in his fight against this deal getting done. 

The firestorm this has sparked is still spreading across the country. 

Why? It may end up being the death knell to the national attorneys general ForeclosureGate settlement with the nation's biggest mortgage lenders - which would have a significant impact on Florida.

In her expose, Ms. Morgenson reveals that Obama Administration has been pulling its Executive Branch strings to get the Attorney General for the State of New York, Eric Schneiderman, to stop resisting the finalization of the AG - Big Bank Deal. 

According to Ms. Morgenson's investigations, the NY Attorney General as well as some of the other Attorneys General involved in the negotiations with the lenders, are not too keen on the current deal sitting on the table because it would bar their states from going after the banks under their state laws, including specifically alleged illegalities that occurred during the sales of mortgage-backed securities.  Joining these AGs in their opposition to the proposed deal are various consumer advocate groups and the like. 

Their position:  the deal lets the banks walk with merely a hand slap and it bars the states from instituting their own actions against the lenders. 

The New York Times story reveals that behind the scenes, White House representatives have been contacting the NY Attorney General as well as these consumer  advocates and others who share Mr. Schneiderman's concern - trying to convince them to get Eric Schneiderman to go along with the proposed deal.  And according to Ms. Morgenson, the White House calls began after officials from the Big Banks asked Shaun Donovan, Secretary of Housing and Urban Development, to help get the contrary NY Attorney General in line. 

Mr. Donovan did admit to the NYT that he had discussed the deal with Mr. Schneiderman - but his position was that he was motivated by a need to help troubled homeowners, not banks. 

What Is On The Table?

The top prosecutors from all fifty states and representatives of the federal government have negotiated with the major lenders involved in the ForeclosureGate crisis to find a settlement agreement that would rectify improprieties that have resulted from widespread activities that include robosigning and false filings (including forged real estate documents and the like).   

In March 2011, basic terms of the proposed deal were released by the group, where big national lenders (e.g., Bank of America, Citi, JPMorgan Chase, Wells Fargo) would pay approximately $20 billion into a fund that would be used to help homeowners who had been harmed by the foreclosure crisis.  In exchange for the money, the lenders would receive releases -- and that's the problem: how big should those releases be?

The deal on the table has each state's attorney general agreeing to release the lenders from any other claims based upon the bad acts addressed in the negotiations (robosigning, etc.).  The lenders would be freed from future lawsuits in exchange for putting the billions of dollars into the fund. 

Here's Where It Hits Florida - Banking Business Is Needed Here

It's true that Florida may have substantial claims against these lenders -- claims that former Florida Attorney General Bill McCollum began investigating last fall (see our discussion "Real Estate Transactions: Florida Attorney General Spearheading Foreclosuregate Investigation - All Other State Attorneys General May Follow Bill McCollum's Lead.")  It's also true that counties have lost significant filing fee revenue, etc., from the ForeclosureGate practices that they'd like to get back (see last week's post, "Suing MERS: Calif Case Reaches Supreme Court and States, Counties Pursue Claims for Lost Fees - But Whose Pockets Would Pay Their Damage Claims?")

However, these prosecutions would seek to bring more money from the lender's pockets into the government's pockets for distribution as the state or county entity saw fit.  Meanwhile, as the Federal Reserve's Kathryn Wilde points out, these lenders are the very same banks that Florida citizens (and elsewhere in the country) depend upon not only as depositors but as home buyers and businesspeople who need solid banking business upon which they can depend. 

What the NYT reveals may be accurate, but in the bigger picture, does this help Florida?  How much money is in the lender's pockets and by taking that cash in claims filed by the government(s), how free will those lenders be to participate in the crucial role of getting Florida's economy out of its dire straits?  Banks aren't bottomless pits of cash - and if they are forced to pay federal settlements, state claims, county claims, both as direct defendants and as indirect defendants (i.e., MERS ownership), then how long does that keep South Florida down?

This week David Streitfield's article, "Affluent Buyers Reviving Market for Miami Homes," was published in the New York Times -- which can only mean even more potential investors in Miami real estate will be aware of the inticing deals to be had here in South Florida for beautiful, oceanfront condos in one of the most cosmopolitan of cities. 

Word of Mouth for Miami Real Estate Bargains Is Good for Florida

In his article, Mr. Streitfield points out that the current ForeclosureGate situation -- where lenders are setting on their inventories and moving slow on pending and possible foreclosures because of robo-signing legality concerns -- has actually benefited the Florida real estate market because supply has shrunk ... and investors from other parts of the country and other parts of the world are taking advantage of the properties here, where local buyers are finding it hard to find lending. 

Brazil, Mexico, Latin America, Canada and Israel Are All Buying South Florida Real Estate

Bottom line, while the banks set on that real estate inventory and don't offer many home loans, foreign investors (as we've been discussing - those from Brazil, Mexico, and Israel among other countries) are coming to town and finding great real estate deals to be had - either for second homes, or rental investments. 

It's true that it is a great time to invest in Florida real estate if you have the funds to do so.  Bargains on very beautiful property abound right now.

However, as we've discussed before - the Shadow Inventory looms.  The banks are sitting on a lot of property - condos, homes, lots, etc. - that is not listed in the MLS and isn't for sale now.  Vacant properties that locals recognize because they have popped up everywhere. 

What will happen to that Shadow Inventory?  Rumors are that the federal government wants to find ways to rent those properties. 

What happens to the banks and home loans to Americans?  That's a more difficult question to answer. 

The South Florida Water Management District was quick to put together a buyout package for its employees after the Florida Legislature's big budgetary cutbacks were signed into law by Governor Scott last month.  Facing a big budget cut from the state, the South Florida Water Management district hastily put together a buyout package to reduce payroll.

Water Management District Saves Money on Payroll, Employees Avoid Layoff

It was a nice package, and last Friday, 123 South Florida Water Management District employees who had been on a salary of $100,000+ per year officially started their Fourth of July Weekend by saying goodbye to the South Florida Water Management District as their employer - saving them from layoffs expected to occur next month and saving the SFWMD around $10,000,000 in payroll.

How Will This Impact Florida?  The Doom and Gloom

Out of the 123 employees who took the buyout last Friday, 15% were scientists and 10% were engineers.  Already, there are those who question how the SFWMD can be effective with this loss of expertise, given that the District is responsible for managing the state's water supply.  Who knows how many more of these brainiacs will be let go next month, when it's expected that 100 employees will be laid off, leaving the SFWMD will around 1500 employees.

Meanwhile, conservationists are bemoaning the future of the Everglades with these manpower cutbacks at the South Florida Water Management District.  These critics include attorney Allan Milledge, member of the Florida Audubon Board and formerly the chairman of the board for the South Florida Water Management District. In a recent editorial in the Orlando Sentinel, Mr. Milledge voiced his concern that the cutbacks at the SFWMD will harm the Everglades, especially as drought conditions continue. 

The Hard Realities Florida Faces Means Tightening the Budget - We Must All Work Together for Florida

It is true that last week's buyouts and next week's layoffs at the South Florida Water Management District are motivated by money:  the SFWMD governing board has to find $128,300,000 to cut from its $1+ billion budget because of the new legislation that cut its revenues by 30% as part of a statewide reduction in property taxes. 

However, this does not mean that the District has been gutted and made powerless.  There are those that thought it could use some streamlining - that the District had more people on its books that it really needed in the first place. 

New Executive Director Mellissa Meeker, for example, has announced her desire to reduce the District's overall salary and benefits package so that it looks more like the packages that other State of Florida workers get.

This means the SFWMD folk don't get golf carts to carry them from the office to their car, for example.  And Meeker's already sold ONE of the SFWMD airplanes.  She's also cut her own salary from $202,000 of her predecessor to $165,000, taking 20% off her own payday at the get-go.

It makes sense for conservationists to be afraid of rampant disregard of everything they hold dear if there is no regulation left for protecting the Florida Everglades.  However, the cruel reality is that the State of Florida is broke, Floridians are sharing the tough times of this Great Recession, and we must all tighten our belts in this economic crisis. 

The Everglades are protected by local, state, and federal laws as well as being monitored by private and public groups dedicated to its survival. Perhaps there will be dangers to the Everglades because of these cutbacks, but that suggests a distrust of Ms. Meeker and her remaining, streamlined crew at SFWMD which may be very premature and unwarranted.  Melissa Meeker gave up her job as state water czar to helm the SFWMD, after all. 

We must all be financially responsible as well as ethically vigilant.  We're in tough times and things have to change. 

Brazil has discovered Florida, which is not news to the Latin American community here in South Florida but is a story newsworthy enough to be covered by the national media in a June 21, 2011, Bloomberg article entitled, "Brazilians Buy Condos at Bargain Prices." 

According to this news story, Brazilians are in a fantastic position to take advantage of the low Florida real estate market, because of two main reasons.  First, Brazil's currency (the real) has skyrocketed up 45% against the U.S. dollar in the past three years and second, Brazil's real estate prices are high in comparison to what we offer here in Florida.

Along with Mexicans and Venezuelans, Brazilians are flocking to the Miami metroplex to buy condominiums, in particular.   The story quotes Craig Studnicky, president of International Sales Group, in reporting that around 50% of Miami's downtown condos have been sold to foreign buyers, many for over half a million dollars. 

You will remember Mr. Studnicky from our post last week: his ISG group has just joined forces with the "Condo King" Jorge Perez to build several condominium projects in the Miami area that are being targeted to Latin America, and with Latin American financing, which is very different for the American financing model.  For details, see "Latin American Investors Targeted by Miami's "Condo King" Jorge Perez and His Related Group: 4+ New Condo Projects With Intl Sales Group."

Bloomberg predicts Brazil's interest in South Florida to explode, given how powerful its currency is here - Brazilians can buy a lot more here in the United States than back a home - and the Brazilian economy is growing (4.2% in 2010). 

Brazilial investors and others from Latin America have a shared culture - with similar traditions, religion and outlook.  Though there is a difference in language - the national language of Brazil is Portuguese -  this is unlikely to create an impediment.  Many Brazilians are multi-lingual.  They speak English or Spanish (or both) and are extremely comfortable navigating in Florida's real estate and investment communities.  Savvy, smart Brazilian looking at great investment opportuniites here in South Florida are contributing a great deal to our economy, and benefitting from it.

With ink barely dry on the Community Planning Act, savvy foreign investors are flocking to Florida and its real estate investment opportunities.  In the same month that Resort World Miami was announced by Malaysian investors, Condo King Jorge Perez and his well-known firm, The Related Group, revealed their new partnership with International Sales Group, helmed by Philip Spiegelman and Craig Studnicky. 

Jorge Perez Knows Real Estate, Florida, and Latin America

You may remember Jorge Perez: in 2005, TIME magazine him one of the 25 most influential Hispanics in the United States; in 2007, Forbes magazine named him one of the 400 Richest Americans, and in past years, his Related Group was routinely named as one of the largest Hispanic-owned businesses in the USA, although current economic factors have found Related Group no longer on that list in 2010.

The new partnership between the real estate developer and the international brokerage will operate under the name "Related ISG" and their efforts are targeting the South Florida condo market for interested buyers in Mexico, Central America, and South America.

First, they will be promoting a Hollywood, Florida, condo project at Apogee Beach (ground breaking set for early 2012) where condominium homes in the 22 story oceanfront building will be marketed primarily to Latin American buyers.  

That's right: Florida is getting an influx of cash from foreign sources, as we've been predicting for awhile now.

Condo King's Dedication to Bringing Latin American Clients Into South Florida Real Estate Gets National Attention

The Wall Street Journal considers Related's financial package to be "unconventional" because it will ask buyers to pay over 80% of their condo's building expense during construction - lots more cash that Americans are used to considering, even at a 20% down payment.  

Related's proposal? Buyers must provide 20% down payment; 20% when building commences, and another 40% during the construction process.   That's right: by the time the new owners move into their new home, they've only got 20% left to pay before they own the condo outright.

However, this is "unconventional" only to American ears.  In other countries, this isn't a bizarre request at all.   Most Latin American real estate is sold in this staggered payment system; Related's targeted foreign buyers are not going to find the proposal "unconventional' in the slightest. 

Already, More Future Related Condo Projects Slated for South Florida and Latin American Buyers

Related has already bought the land and released its plans for four condo projects in the Miami area, using the same financial strategy and marketing the same Latin American buyers:

1. A small condo building with around 250 units to be constructed next to Related's 500 Brickell project and called "My Brickell;"

2. A condo project designed by Mexico's renowned architect Enrique Norton in the same area as My Brickell, this with 300+ units;

3. A 400+ unit waterfront condo in Midtown Miami; and

4. The above-described Apogee Beach condominium project in Hollywood, Florida.

Prediction: More and More Foreign Investment Comes to Florida Real Estate Developers

Jorge Perez is just one of many business savvy folk who are seeing opportunity in the crisis Florida faces in this current recession.  With the current Florida lawmakers and their goals of making Florida more business-friendly, as evidenced by the recent Growth Management Reforms, Latin American investors will be finding great opportunities here in South Florida, a beautiful and cosmopolitan locale with a shared heritage, language, art, religion, and culture.

Jorge Perez is one of the pioneers leading the way.