Due to the recent changes to the nation’s tax system, a 20-story tower across from Florida International University (FIU) will be developed as a student rental building instead of a condominium.
University Developments said the strong rental market for student housing combined with recent changes in United States tax legislation made “retaining the unique asset incredibly compelling.” The Miami-based company has been processing its building permits for University Bridge Residences since the fourth quarter of 2017 and expects to be able to break ground this spring and deliver the building on its original schedule in time for the 2020-21 academic year.
“Despite very impressive sales in an overall difficult condominium market, we have made the decision to retain this asset instead of selling it off to individual buyers,” said Brian Pearl, principal of University Developments, in a statement. “Cervera Real Estate, our exclusive broker, has done an amazing job, realizing more than 150 unit sales in the past six months. We were certainly on track on our projections, however, the option of retaining the asset is clearly the better scenario for us in the long-run.”
When asked what specific measures led University Developments to make the decision, Pearl told Multifamily Executive, “The reduction of the corporate income tax from 35% to 21% at the end of 2017 leads to a more than 20% increase in our annual net income after taxes. This extra value over time makes the decision to hold the asset much more compelling.”
In response, Cervera Real Estate says it is actively trying to find alternative options for the potential buyers that were interested in the property.
“We understand that developers have to make the best financial decisions available to them,” said Alicia Cervera Lamadrid, managing partner and principal of Cervera Real Estate, in a statement. “While we are disappointed that the units will not be sold as condominiums, especially with the tremendous response that we saw from both buyers and brokers, we are glad to see the project still going ahead and filling the obvious need in the marketplace for student housing.”
Pearl added “It is a rare opportunity where an asset is viable as both a sale and a rental, but the opportunity to retain the asset was the deciding factor.”
