MIAMI—Rancho Luna just sold as part of a creative 1031 exchange land transaction that’s worth dissecting. The Miami parcel fetched for $1.625 million.
Franklin Street’s Deme Mekras and Elliot Shainberg represented both the buyer and the seller in the transaction. First American Exchange Company, a qualified intermediary for Balogh Family Partnership and Housing Trust Group, acquired the asset. The buyer plans to maintain the land as an income-producing commercial property with an interest in multifamily development. Rabelo Real Estate Enterprises#1 owned the property for decades.
“This transaction was a highly structured 1031 exchange between the buyer and the seller,” says Mekras. “This transaction shows that buyers are willing to get creative and take unique risks in order to make deals work in core areas.”
While the property’s current use is not typical of the buyer’s acquisition targets, Mekras says it is in a prime location for an alternative, redeveloped use of affordable multifamily housing. The property was previously on the market at the end of 2012 and part of 2013 pending a tax credit funding application which was not obtained.
“This local developer believes in the long-term value of the location and was willing to buy the asset with no guarantee that they will obtain tax credits to subsidize the development of affordable housing because they will have sufficient cash flow in the meantime,” Mekras says. The property is operating with two tenants: Rancho Luna, the oldest Cuban restaurant in Miami, and a car wash.
“We did put the property under contract at above our previous asking price, which was well north of a million dollars higher than the price it ultimately sold for the next year,” Mekras says. “The previous high price was only feasible with the rare possibility that a developer was able to secure low income housing tax credits to subsidize construction, which unfortunately never materialized. When the property ultimately sold, it was at a reduced price more in line with the market and a price that was necessary considering the risk and opportunity the site offered the market and the ultimate buyer.”
Located at 45 Northwest 22 Avenue, the land sits in the Little Havana submarket. Little Havana is known for its landmarks including Calle Ocho and its Walk of Fame, the Firestone/Walgreens Building, and most-recently, the new Marlins ballpark. The area has eight elementary schools, three middle schools, three high schools, three libraries, and Miami-Dade College’s InterAmerican campus.