Could a Trump tax break be behind David Beckham’s revived interest in an Overtown stadium site?
MasTec chairman Jorge Mas revealed on Tuesday that his fellow partners in the Miami Beckham United Group wanted to close on a $9 million land deal in Overtown. The news meant the Beckham group planned to buy land once slated for a Major League Soccer stadium until the partners abandoned that plan for a larger sports and commercial complex about eight miles away on real estate currently occupied by Miami’s Melreese golf course.
The Overtown site, under contract with Miami-Dade since 2017, does give Beckham a back-up in case the city talks for Melreese fall through. But real estate experts say the timing of reviving the Overtown deal could present Beckham and partners with a particularly lucrative long-term play, thanks to President Donald Trump’s signature economic-development legislation.
Much of Overtown was declared a federal “Opportunity Zone” in 2018 by the Treasury Department, a designation allowed under the Republican-backed 2017 tax overhaul that brings with it significant tax breaks for deep-pocketed investors who sell property inside a zone for a profit.
Under certain circumstances, sellers can avoid all capital-gains taxes, savings that can mean millions of dollars in windfalls for investors and a loss of the same dollars for the federal government.
The Beckham camp won’t say whether the county-owned property’s location within an Opportunity Zone was a factor in the decision to quickly close the $9 million purchase from Miami-Dade County, rather than make an allowed $900,000 installment payment to keep the land under contract.
Mas has kept mum about the Overtown decision. He’s been in talks with Miami-Dade Mayor Carlos Gimenez, who said Mas told him the purchase of the three-acre county truck depot allows the Beckham group to satisfy an MLS deadline requiring building permits for a 25,000-seat stadium in the Miami area. Major League Soccer representatives did not respond to repeated requests about the deadline.
The group had previously paid $19 million for another six acres of land next to the county site in Overtown in 2015, and still owns that property. Beckham partners haven’t said what they planned to do with the land once the stadium site shifted to Melreese.
Deadlines for payments on the county land were suspended during a court fight over the 2017 no-bid agreement to put the property under contract, but a recent decision by the Florida Supreme Court to dismiss the challenge gave the Beckham group just days to pay more to prevent Miami-Dade from taking the land back.
So why buy the remaining three acres in Overtown instead of keeping them under contract with Miami-Dade for a lower payment of $900,000?
Real estate experts say the decision to buy is a smart move for reasons that have nothing to do with a stadium.
The Overtown stadium site is located inside one of the 68 designated Opportunity Zones in Miami-Dade (click here to see a map of all the zones).
A provision of President Trump’s 2017 Tax Reform Plan, Opportunity Zones are designed to encourage long-term investment in low-income neighborhoods through capital gain tax deferments.
The regulations around Opportunity Zones are byzantine and still being finalized. The Internal Revenue Service is expected to release another set of rules before the end of the year, complementing two sets of regulations released in October 2018 and April 2019.
But Jonathon Yormak, a co-founder and managing principal of the East End Capital real estate development firm, said Opportunity Zones come down to two simple things: tax reductions both now and in the future.
▪ Any property inside an Opportunity Zone acquired on or after January 1, 2018, can be sold after 10 years for a tax-free capital gain.
▪ Any new business inside an Opportunity Zone that uses residents of the zone to make up 50 percent of its workforce can be sold after 10 years for a tax-free capital gain.
▪ Investors can also use capital gain from a previous sale to invest in an Opportunity Zone fund. In this case, the investor pays only 15 percent of the total assessed tax on their gain. If they keep the investment in place for 10 years, the remaining 85 percent of the assessed tax is erased. If they keep the investment in place for seven years, they would be able to defer the pending 85 percent of taxes until December 2026.
Potential profit windfall
In the case of a soccer stadium, the owners could sell the land and the team after 10 years and any profits would be tax-free.
“When these stadiums get sold, they often come with the franchise,” said Peter Mekras, managing director of Aztec Group, a real estate investment firm. “If you make a major capital investment in an Opportunity Zone and the physical part appreciates in value and it’s a good business venture, you’re allowing a smart decision to be even smarter.”
Through a spokesperson, Mas declined to comment for this story. But Miami-Dade Mayor Carlos Gimenez told the Herald that he and Mas had already discussed other options for the property if the stadium went elsewhere, including affordable housing.
“From a pure real estate standpoint, this purchase makes sense,” said Javier Aviño, a partner and land use lawyer at the Bilzin Sumberg law firm. “They are getting the property at a good price and they have support from the district commissioner and the county to do something else with the property, even if it’s not a stadium.”
According to Yormak, the original concept of opportunity zones sprang from Silicon Valley.
“They were tech entrepreneurs, and the idea was for start-ups to be located in areas where there wasn’t a lot of job creation,” he said. “Think if a company like Uber had headquartered in Overtown 10 years ago. When they went public, all their capital gain would be tax-free. But over that whole period of time, they would have been hiring local people, too.”