A developer enhanced its position on a $1 billion condo and five-star resort project in Fort Lauderdale after The Euclid Group found a creative solution to a complicated issue.
“The developer had a complex problem with no immediate solution,” said Lee Feldman, principal for The Euclid Group. “We came in and examined the problem. We found a solution and then we executed it.”
Said John K. Shubin, the Group’s founder and Chief Executive Officer: “It’s a problem people have been trying to solve for years.”
The result was a win-win outcome for local developers Tate Enterprises and The Related Group and for the City of Fort Lauderdale, which conveyed air rights to a newly created Community Development District (CDD).
Feldman was familiar with such projects during his 35 years working as a city manager. In his current position with The Euclid Group – an urban administration, planning and land use strategic advisory firm with offices in three Florida cities – Feldman was tasked with finding a solution for the developer (Rahn Bahia Mar LLC).
Bahia Mar had already entered into a traditional 100-year ground lease with the City of Fort Lauderdale to operate a world-class marina and construct 350 high-end condominiums, along with a hotel and retail and commercial spaces.
But Feldman said that, ultimately, under that lease agreement, condo units would likely be sold at a discount (estimated at 17.5 percent), thereby reducing value to the developer and tax revenue to the City.
“The problem is when you sell a condo, just like a house, you want to live in it forever,” Feldman said. “But when the condos sit on leased property and the lease ends in 100 years, in year 99, whoever owns that condo has to worry about leaving because they won’t own it in year 100. So, people don’t want to pay full price for a luxury condo that they’re going to have to give back at the end of 99 years.”
In examining the issue, Feldman discovered that the City’s charter permitted it to convey, without solicitation, property to another governmental entity for a public purpose. As a result, The Euclid Group recommended that Bahia Mar petition the City to a CDD, an independent governmental unit under Florida Law, for a portion of the leased property.
The CDD, in turn, would petition the City for the air rights for the parking garage/podium. After the air rights are conveyed to the CDD, the CDD would convey, for fair market value, the surplus air rights to Bahia Mar.
Bahia Mar adopted The Euclid Group’s recommendation in January, after which the City conveyed the air rights to the CDD.
The solution worked out not just for the developer, but also for the City. “It’s in the city’s best interest not only for the (increase in tax revenue), but under the lease agreement, every time a condo gets sold, the city gets a percentage of the sales price,” Feldman said. “We did a calculation, and it came to more than $900 million more for the City over a 100-year period.”
As for the developer, it plans to start construction of the sales center this summer and start sales in October.