Miami 2018 An in-depth review of the key issues facing Miami-Dadeâ&#x20AC;&#x2122;s economy featuring the exclusive insights of prominent industry leaders
67 Market voices: Skilled labor
69 City of Miami:
14 Economy in numbers
41 Real Estate:
17 Interview: Rick Scott, Governor, State of Florida
19 Interview: Carlos Gimenez, Mayor, Miami-Dade County
a strong global economy
23 Interview: Maurici Llado,
President & CEO, Miami-Dade
challenge is getting them to scale
34 Tax overhaul: Miami’s businesses are adapting to December’s sweeping tax reform
38 Interview: Michael Custer, Tax Principal, Kaufman Rossin
40 Market voices: Tax & real estate
80 Market voices: Neighborhood spotlight
81 Focus box: Community redevelopment
84 Transportation in numbers
85 Tackling transit: Miami is on the verge of a new era in transit
52 Interview: Jon Cardello, Vice President & U.S. Commercial Sector Leader, Stantec Architecture & Design
86 Interview: Aileen Boucle, Executive Director, MiamiDade Transportation Planning Organization (TPO)
53 Interview: Ken Krasnow, Executive Managing Director & Market Leader, South Florida Region, Colliers
88 Interview: Javier Rodriguez, Executive Director, Miami-Dade Expressway Authority
55 Viewpoint: David Diestel, Regional President, South, FirstService Residential
60 Construction in numbers
62 Crane city: Residential construction has slowed, but office, retail and industrial remain strong
63 Interview: Edgardo Defortuna, President & CEO, Fortune International Group
66 V iewpoint: Jaime Saavedra, Vice President & General Manager, Turner Construction Company
79 Interview: Erika Fleming, President, Miami International University of Art & Design
35 Interview: Bobby Moore, Managing Partner, Baker &
50 Interview: Manuel Crespo, Partner, Greenspoon Marder
31 Market voices: Startup to scale up
75 Interview: Moishe Mana, Founder & CEO, Mana Group
29 Analysis: Startup to scale up Miami is a hotbed of startups; the
48 Interview: Tibor Hollo, President, Florida East Coast Realty
71 Interview: Francis Suarez, Mayor, City of Miami
Sabadell Miami Branch 25 Interview: Michael Finney,
44 Interview: JP Perez, Vice President, Related Group
Managing Director, Banco
70 Global city: The City of Miami is emerging as a true global leader
20 Economic powerhouse: MiamiDade County is riding the wave of
42 High demand: Miami’s housing market is hot, and commercial and industrial are booming
89 Viewpoint: Dionne Polite, Manager of State Operations, AARP Florida
91 Interview: Patrick Goddard, President & COO, Brightline
93 Market voices: Airlines
94 Interview: Kasra Moshkani, General Manager, Southeast U.S., Uber
96 Viewpoint: Samuel Cohen, General Manager, Florida, Lyft
99 T rade & Logistics: 100 Trade & logistics in numbers 102 Keep it moving: Miami’s airport and seaport move some of the largest volumes of cargo in the U.S.
103 Interview: Lester Sola, Director, Miami International Airport
105 Interview: Romaine Seguin, President, UPS International, Inc. Americas Region 106 Interview: Juan Kuryla, Director, PortMiami 108 Roundtable: Cargo carriers Rasheme Richardson, Vice President Airport Operations, Amerijet International Wayne Zimmerman, Director Cargo Operations - MIA, American Airlines Cargo Camilo Gallo, Cargo Manager, Florida and Latin America, Cathay Pacific Cargo
121 Interview: Carolyn Bermudez, Vice President of Operations, Florida City Gas
Andres Bianchi, CEO, LATAM Cargo
123 Interview: Kristin Johnson Karp, President, Hotwire Communications
113 Infrastructure, Utilities & Environment:
114 Foundation for growth: Miami is tackling environmental and infrastructure challenges
116 Interview: Eric Silagy, President & CEO, Florida Power and Light Company (FPL)
118 Viewpoint: Humberto Alonso, Senior Regional Business Development Director, Atkins North America
8 | Invest: Miami 2018 | CONTENTS
125 Health: 126 Investing in health: Miami’s healthcare industry is a pioneer in clinical care and research 128 I nterview: Dr. Narendra Kini, CEO, Nicklaus Children’s Health System 129 Interview: Carlos A. Migoya, President & CEO, Jackson Health System
132 Viewpoint: Dr. Marc Agronin, Vice President for Behavioral Health and Clinical Research, Miami Jewish Health System
133 Interview: Nelson Lazo, CEO, Doctors Hospital Miami Orthopedics & Sports Medicine Institute
134 Interview: Dr. Edward Abraham, CEO, University of Miami Health System
137 City of North Miami: 138 City for the future: North Miami is leading the way in sustainable growth 139 Interview: Dr. Smith Joseph, Mayor, City of North Miami
149 Banking evolution: Miami’s banking instutions continue to innovate and adapt
151 Interview: D. Nicolas Miceli, Regional President, Florida Metro, TD Bank
154 Interview: Guillermo Castillo, Former Managing Director & South Florida Region Manager, JPMorgan Chase 156 Roundtable: Wealth management Carlos Constantini, Head, Itaú USA and International Private Bank Brian P. Mormile, Managing Director, Divisional Executive, SE Region, US Trust, Bank of America Private Wealth Management Jeremy Straub, CEO, Coastal Wealth Jeff Haines, Regional Managing Director Southeast Florida, Wells Fargo Private Bank
158 Interview: Jorge Gonzalez, President & CEO, City National Bank
159 Interview: Jorge Villacampa, Region Bank President South Florida, Wells Fargo 160 Viewpoint: Mario Rivera, CEO, FlexFunds
141 Interview: Larry Spring, Jr., City Manager, City of North Miami, Executive Director, North Miami Community Redevelopment Agency
161 Market voices: Commercial lending
162 Roundtable: Technology
Michael Friedman, Market Lead, Capital One
Driss Temsamani, Head of Channels & Enterprise Banking, TSS Latin America, Citibank Stephen Gonthier, CEO, GardaWorld Cash Services 164 Analysis: Year of Bitcoin 2017 was the year cryptocurrencies joined the global financial system
165 Education: 166 Expanding minds: MiamiDade’s educational instutions are investing in innovation to produce competitive job-seekers 168 Interview: Irma Becerra, Provost & Chief Academic Officer, St. Thomas University
172 Roundtable: One Community One Goal
John Wensveen, Vice Provost, Academic Schools, Miami Dade College Jeffrey Duerk, Executive Vice President and Provost, University of Miami Saif Ishoof, Vice President for Engagement, Florida International University
175 Tourism: 176 Tourism in numbers
142 Viewpoint: Michael Tillman, Managing Director, LeFrak
143 Focus box: SoLē Mia
145 Interview: Major Timothy Belcher, Neighborhood Enhancement, North Miami Police Department
146 Focus box: North Miami Community Redevelopment Agency (NMCRA)
147 Banking & Finance: 148 Banking & finance in numbers
Miami 2018 ISBN 978-0-9988966-1-8
177 Global destination: Miami is emerging as a cultural powerhouse, offering year-round events and festivals
179 Interview: Arnold Donald, President & CEO, Carnival Cruise Corporation & PLC
181 Interview: Gene Prescott, President of Seaway Hotels, Biltmore Hotel
182 Interview: Adam Goldstein, President & COO, Royal Caribbean Cruises Ltd. 184 Viewpoint: William Talbert III, President & CEO, Greater Miami Convention & Visitors Bureau 186 Market voices: Culture corner 187 Focus box: Historic Virginia Key Beach Park
189 Sports: 190 Season of change: Miami sports are undergoing positive change as they welcome a new team and an old star
191 Interview: Derek Jeter, CEO, Miami Marlins
192 Interview: Tom Garfinkel, President & CEO, Miami Dolphins 195 Viewpoint: Kim Stone, Executive Vice President & General Manager, The Heat Group
President: Abby Melone Chief Financial Officer: Albert Lindenberg Managing Editor: Jaime Muehl Executive Director: Erica Knowles Editorial Manager: Robin Miller Art Director: Nuno Caldeira Contributing Writer: Valerie Silva Interns: Taryn Dwyer Michael Gargula Michelle Goldstein
Meagan Harmon James Woo
Cover photo: Azeez Bakare Studios
Invest: Miami is published once a year by Capital Analytics Associates, LLC. For all editorial and advertising questions, please e-mail: firstname.lastname@example.org To order a copy of Invest: Miami 2017, please e-mail: email@example.com All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, without the express written consent of the publisher, Capital Analytics Associates, LLC. Whilst every effort has been made to ensure the accuracy of the information contained in this book, the authors and publisher accept no responsibility for any errors it may contain, or for any loss, financial or otherwise, sustained by any person using this publication. Capital Analytics Associates, LLC accepts no responsibility for the return of unsolicited manuscripts and/or photographs, and assumes no liability for products and services advertised herein. Capital Analytics Associates, LLC reserves the right to edit, rewrite, or refuse material.
Photo Credits: Contents: pg 7 – Top photo: Brightline pg 7 – Bottom photo: City of North Miami pg 8 – Patty Nash Photography pg 9 – Miami International Airport (MIA) Economy: pg 13 – Large photo: Plaza Construction pg 13 – Small photo: Pérez Art Museum Miami pg 20 – City of Miami pg 26 – Historic Virginia Key Beach pg 29 – Capital One pg 30 – Hotwire Communications Real Estate: pg 41 – Small photo: ISG pg 41 – Large photo: Moss & Associates pg 42 – Paramount pg 48 – Florida East Coast Realty Construction: pg 62 – Paramount
City of Miami: pg 69, 70, 72, 76 – City of Miami Transportation: pg 83 – Large photo: MIA pg 83 – Small photo: Miami-Dade Expressway Authority pg 85, 96 – Florida Department of Transportation Trade & Logistics: pg 99 – Large photo: Maersk pg 102 – LATAM Cargo Infrastructure, Utilities & Environment: pg 113 – Large photo: Hotwire Communications pg 113 – Small photo: Florida City Gas pg 114, 120 – Florida Power & Light Health: pg 125 – Both photos: Nicklaus Children’s Hospital pg 126, 130 – Jackson Health System City of North Miami: pg 137, 138, 143, 144 146 – City of North Miami
Banking & Finance: pg 147 – Small photo:TD Bank pg 149 – Capital One pg 152 – Popular Community Bank Education: pg 165 – Large photo: Florida International University (FIU) pg 165 – Small photo: Johnson & Wales University pg 166 – University of Miami pg 171, 172 – FIU Tourism: pg 175 – Small photo: Pérez Art Museum Miami pg 177 – Carnival Cruise Corporation & PLC pg 180 – Patty Nash Photography pg 183 – Pérez Art Museum Miami pg 187 – Historic Virginia Key Beach Sports: pg 189 – Large photo: The HEAT pg 189 – Small photo: Miami Marlins pg 190 – The HEAT pg 192 – Miami Dolphins pg 196 – Miami Marlins
Economy: As a superior trade and logistics hub, diverse arts and culture center and economic powerhouse, thereâ&#x20AC;&#x2122;s no question Miami-Dade is the place to be for business. A favorable tax climate allows the county to continue to prosper in terms of its booming real estate industry, bustling financial center and innovative startup community. Additionally, Miami-Dadeâ&#x20AC;&#x2122;s forward-driven focus on sustainability and infrastructure improvements is attracting international interest.
Economy in numbers: Greater Miami employment, non-farming, in thousands (February 2018):
Trade, transport and utilities
123.8 Other services
443.5 Professional and business services
329.0 Leisure and hospitality
Education and health services
Mining and logging Source: Bureau of Economic Analysis
Greater Miami employment change, non-farming, in thousands (February 2018):
10% 8% 6%
Source: B ureau of Economic Analysis
14 | Invest: Miami 2018 | ECONOMY
Leisure and hospitality
Education and health services
Professional and business
-4% Financial activities
Trade, transportation, and utilities
Miami-Dade, Florida and the U.S. average personal income (2016): 4%
0% Personal Income
Source: U .S. Bureau of Economic Analysis
U.S. and South Florida city unemployment rates (2017-2018): 2017
2% 1% 0% U.S.
Source: U .S. Bureau of Economic Analysis
Top 15 metro areas by GDP (2016; $ million):
New York-Newark-Jersey City, NY-NJ-PA
Los Angeles-Long Beach-Anaheim, CA
Dallas-Fort Worth-Arlington, TX
Houston-The Woodlands-Sugar Land, TX
San Francisco-Oakland-Hayward, CA
Atlanta-Sandy Springs-Roswell, GA
San Jose-Sunnyvale-Santa Clara, CA
Minneapolis-St. Paul-Bloomington, MN-WI
Miami-Fort Lauderdale-West Palm Beach, FL
Source: U .S. Bureau of Economic Analysis
Standing together How Floridians have shown solidarity in the face of environmental and other challenges in order to secure a bright future for the next generation
Rick Scott Governor – State of Florida What are your reflections on your eight years as governor of Florida? I have spent every day since taking office fighting to grow our economy and ensure we have the most prosperous state for generations to come. I am proud of the work we have accomplished together to secure Florida’s future by creating an environment where Floridians of all ages have the tools they need to succeed in our state. Working together, we’ve created an environment where our private sector has added more than 1.5 million jobs, our GDP has grown 26 percent, home values have skyrocketed, state debt has decreased by $9 billion and our unemployment rate has dropped from over 11 percent when I took office to 3.9 percent. Despite all this, our work is not done. We must secure our future by investing record funding in our environment, our education system and our transportation infrastructure and by making sure Florida remains a global destination for jobs. What did Florida learn from the 2017 hurricane season? Floridians came together and faced Hurricane Irma head on. As I traveled around the state, I heard story after story of families helping one another and communities standing together. The response and solidarity that was shown by our state was one of the proudest moments I have had as governor. After the storm, we showed up. From handing out water to working at food banks, many Floridians helped neighbors in need. Florida demonstrated to the world how to prepare and respond to a natural disaster. Just when we thought it was over, Hurricane Maria quickly approached Puerto Rico. While we are so blessed that Florida was spared, sadly our neighbors in Puerto Rico were devastated. We have had hundreds of thousands of Puerto Ricans come to Florida since Maria, and my goal is that Florida continues to be the most welcoming place for people displaced by the storm.
How will you protect your legacy of tax cuts? Florida has experienced an incredible economic revival because we have worked hard to cut taxes nearly 100 times, which has saved Florida families more than $10 billion. Working together, we have taken billions of dollars out of the government’s hands and given it back to Floridians. I want 2018 to be the year that Florida voters pass a constitutional amendment that makes it harder for politicians to raise taxes. My proposal would require two-thirds of the legislature to vote on a tax increase for it to become law. We need to ensure we do all we can to prevent future politicians from undoing the hard work we have done to grow Florida’s economy and create jobs. We need to secure a strong economy for our children and grandchildren. www.capitalanalyticsassociates.com
Thriving county How Miami-Dade County’s investments in infrastructure, public safety and economic development ensure that the region will continue to thrive
Carlos Gimenez Mayor – Miami-Dade County How will Miami-Dade’s transportation continue to improve? Transportation is an important aspect of a thriving metropolitan community, which is why we understand that we can and must do better. We continue to explore the latest technologies that can enhance how we get around. Today, approximately 95 percent of our residents commute via personal vehicles. For the foreseeable future, the majority of our residents will continue to use their cars, so we must continue to improve our roadway network; that is why last year we began installing smart traffic signals along 10 of the county’s major corridors. These signals adapt to real-time conditions to improve the flow of traffic and will communicate with our transit vehicles and provide transit signal priority so that our buses will spend less time stopped at red lights. Last month, we began testing the transit signal priority project along the South Dade TransitWay, and already Metrobus riders are seeing a significant reduction in their travel time from Homestead to Dadeland and back again. This is the first step in a long journey, but it is a positive development. How is Miami-Dade’s safety improving? While we continue to build a better Miami-Dade, we also continue to work towards securing the safety of all Miamians. Every day, our Miami-Dade police officers are on the streets serving our residents. In 2017, Miami-Dade welcomed 144 new officers and is planning to hire an additional 65 officers in 2018. Additionally, the department secured 25 grant agreements, including $6.8 million in funding from the highly competitive 2017 COPS hiring program grant. This will fund an additional 25 community-oriented policing officers to combat gun violence. The partnerships we have entered into and the grants the department has received will assist in our effort to reduce the gun violence we have seen in parts of our community. While our overall crime rate has not risen, we un-
derstand and appreciate that gun violence anywhere in Miami-Dade County is unacceptable. What is helping to drive the county’s economy? Our county departments are partnering with the private sector to create job opportunities and diversify our economy. Thanks to PortMiami’s growth in the last decade, our seaport is recognized as a global gateway and the uncontested cruise capital of the world. We set a world record by welcoming 5.3 million cruise passengers in 2017, about 1 million more than any other port in the world. Miami International Airport welcomed seven new passenger airlines and four new all-cargo carriers. These additions bring the total number of airlines at MIA up to 107, more than any other U.S. airport. Miami-Dade’s tourism industry remained strong in 2017 despite many challenges. We welcomed a record 15.8 million overnight visitors who generated $25.9 billion for our community. www.capitalanalyticsassociates.com
Economic powerhouse: Miami-Dade County is riding the wave of a strong global economy, recovery in Latin America and a booming startup industry If Miami should be known for one thing, it is resilience. Despite a colorful history of hurricanes, crime, immigration, recession and a persisting party-town image, the city has evolved into a highly diversified center for innovation. From a vibrant startup community to world-class arts and cultural offerings, Miami is emerging as an economic powerhouse that packs a global punch. Miami-Dade County’s gross regional product (GRP) grew at a rate of 2.7 percent from 2011 to 2016, reaching $142.6 billion. The county’s unemployment ended Q4 2017 at 4.5 percent, down 50 basis points year-over-year, and 27,100 new jobs were added countywide. With a strong U.S. economy and a continually growing tourism sector bolstering the region’s booming real estate industry, Miami is rebuilding in the wake of Hurricane Irma and heading into the second half of 2018 with vigor. Global gateway Miami-Dade County is the southeasternmost county on the U.S. mainland. According to a 2017 U.S. Census report, it has a population of 2,751,796, making it the most populous county in the state of Florida and 20 | Invest: Miami 2018 | ECONOMY
the seventh most populous in the country. It is also the third-largest county in the U.S. in terms of land area, and that land is positioned only about six feet above sea level. While the county’s 84 miles of ocean coastline, 22 miles of beaches, 67 miles of inland waterways and 5.5 miles of Miami River provide abundant recreational opportunities, they also present a host of environmental challenges. Miami-Dade comprises 34 incorporated cities, the largest of which is the City of Miami, along with many unincorporated areas. The northern region of the county is highly urbanized, while the southern portion is primarily agricultural. On November 13, 1997, residents voted to change the county’s name from Dade to Miami-Dade in order to capitalize on Miami’s international name recognition. Along with Broward and Palm Beach Counties, Miami-Dade makes up the South Florida region, which is home to about 6 million residents, 53 percent of whom are bilingual. South Florida’s GDP is close to $300 billion, ranking it 38th in the world. With no individual state or local income taxes and a wide array of public and private universities, including four research institutions, the region is a hub for both
national and international business. Served by three international airports and seaports and two major rail lines, South Florida is truly a global gateway. Cultural crossroads Miami has long been touted as the gateway to the Americas thanks to its proximity to Latin America and the Caribbean, its large multicultural and multilingual workforce and its abundance of international corporate and financial resources. It also boasts the second-largest foreign trade zone (FTZ) network in the U.S., and its year-round sunshine keeps its vibrant tourism industry thriving. Home to more than 100 foreign consulates, foreign trade offices and bi-national chambers of commerce that promote and facilitate global business, as well as 1,400 multinational companies, Miami continues to rebrand itself as a modern international trade hub. “The international population is our population,” Brian Barakat, principal at Barakat Law, told Invest:. “We have people who speak all different languages working here. They’re excited to invest their money in the U.S. because they feel comfortable and because we are welcoming. We adapt to them; they don’t have to adapt to us.” The city has come a long way from 1982, when $1 million worth of cocaine was seized at Miami Inter-
national Airport (MIA). Today, MIA is recognized as one of the most secure, cargo-friendly airports in the country and is ranked number one in the U.S. and number 10 globally for international cargo. It was also the first U.S. airport to receive certification for handling cold-chain pharmaceutical products. And while PortMiami used to be subject to regular Miami Vice drug busts, today it is one of the top international ports in the country and the reigning “Cruise Capital of the World.” As a cultural crossroads, Miami is poised to continue its robust north-south trade with Latin America as it looks towards opening east-west trade partnerships with Asia and even Africa.
Miami’s airport is ranked number one in the U.S. and number 10 globally for international cargo.
Thinking macro Nationally and globally, there are a number of trends that Miami should be keeping an eye on as it continues to enjoy an era of economic prosperity. These include potential rollbacks to Dodd-Frank, welfare overhaul, immigration policy (particularly when it comes to the fate of the Dreamers), burgeoning economic recovery in Latin America, the threat of a looming trade war with China and the evolution of cyberspace. For Miami’s robust banking industry, a loosening of the tight regulations imposed by lawmakers after the last recession would mean some breathing room for smaller and mid-sized banks, for which regulatory www.capitalanalyticsassociates.com
compliance has been a costly challenge. This would free them up to better serve both clients and shareholders. While in March 2018 the Senate passed a bipartisan plan that would roll back some of the regulations, at the time of print many lawmakers remained skeptical that it would pass the House. Also facing uncertainty in 2018 is the fate of the nation’s welfare system. In April, President Trump privately signed the Reducing Poverty in America by Promoting Opportunity and Economic Mobility executive order, which mandates that all secretaries government-wide review their welfare programs and propose new regulations and that all federal agencies enforce current work requirements, create new requirements and find ways to cut costs. Statewide, 79,040 Florida adults and children receive welfare, and in 2017 Miami-Dade County had about an 18 percent poverty rate. In February 2018, lawmakers were already considering imposing a work requirement for those enrolled in the state’s Medicaid program.
The Obama-era Deferred Action for Childhood Arrivals (DACA) program was set to expire in March 2018, but a Supreme Court ruling deferred that date by possibly as much as a year. However, there is still no plan for granting DACA recipients, called Dreamers, permanent protection. With about 11,000 of the state’s 27,000 Dreamers living in South Florida, an end to DACA could mean a substantial economic hit to the region. According to a study by the Center for American Progress, Florida would suffer a GDP loss of $1.4 billion per year if DACA recipients were deported. On a brighter note, Latin America is entering a phase of economic recovery as recessions in countries like Brazil, Argentina and Ecuador start to ease up. Higher commodity prices are spurring growth, and investment is no longer dragging, particularly among wealthy Brazilians. With Brazil remaining Miami’s top trading partner in 2017, rising 0.48 percent year-overyear to $15.76 billion, this recovery is positive news.
About 11,000 of Florida’s 27,000 Dreamers live in South Florida.
22 | Invest: Miami 2018 | ECONOMY
CONSTRUCTION ECONOMY OVERVIEW
Considering China was Miami’s second-largest trading partner in 2017, with trade rising 10.2 percent to $7.37 billion year-over-year, the tariff threats the U.S. and China have been volleying back and forth could mean trouble for the local industry if they escalate into a full-blown trade war. In April 2018, President Trump called the threats part of the negotiation, and the hope is that the world’s two largest economies will resolve their differences without damaging the global economy. In the wake of a number of devastating cyber attacks launched in 2017 — mostly by Russia, North Korea, Iran and China — more than 30 high-tech companies, including Microsoft and Facebook, announced in April 2018 that they would not aid any government in mounting cyberattacks. In addition, they pledged to come to the aid of any nation on the receiving end of such attacks. While many business leaders, like Microsoft’s president Brad Smith, have been pushing for a sort of “digital Geneva Convention” to create rules for behavior in cyberspace, the movement has not gained momentum. Research company Gartner predicts that by 2020, more than 25 percent of identified cyberattacks on businesses will involve the Internet of Things (IoT) but that IoT will account for less than 10 percent of IT security budgets. This gives businesses — both in Miami and across the globe — something to think about. With so many connected devices and protocols on the market, many from competing manufacturers, finding a way to secure the IoT network is a major and imminent challenge. For Miami, which numbers close to 9,700 high-tech businesses, ranking it ninth among large U.S. metros, cybersecurity is a critical block in supporting this growing industry.
How will the new tax laws affect Sabadell as an international bank? The new tax legislation has made the U.S. more attractive for investors in two different senses. First, for our international clients who are looking at the U.S. as an investment destination, this tax overhaul improves their situation. The impact will not be seen until 2019 as investment decisions are not made quickly. Investors need time to find a project and secure capital, but abroad experts are analyzing and seeing more activity in the U.S. Second, as a bank we pay our taxes in the U.S., which puts us in a good position. Due to the lower tax pressure, we are looking at different ways to do more business in the U.S. There are certain activities that could be moved from Spain to the U.S. Right now, it makes sense to take a look at that. However, we know that this tax scenario will not last forever. It may be four, eight or twelve years —we don’t know — but while the legislation is in effect, investors will take advantage of it. While there are some challenges for us in the new tax legislation, the repatriation of the cash that U.S. companies have offshore will bring a lot of money into the U.S.
Working world With national unemployment at a 17-year low and the stock market riding the wake of a record-setting bull run, during which it generated more than $7 trillion in new wealth in 2017, there has been a surge in U.S. consumer spending. December’s major tax overhaul also means more money in the pocket for many American consumers. The hope is that the tax relief will mean faster economic growth, especially in no-income-tax states like Florida. Inflation remains tame right now, which suggests the current cycle has room for expansion. In 2017, the Miami area added 27,100 new private-sector jobs, the third highest of all Florida metro areas. The area’s unemployment rate dropped to 4.5 percent by the end of the fourth quarter, down almost a full
Why is Miami the perfect location for Sabadell? When this branch was founded 25 years ago, we were focused on serving our Spanish clients who were starting to invest in the Americas. We came to Miami because our clients were coming here, travel was easy and many people were bilingual, which was nice for us as a Spain-based bank. We foresaw that Miami’s role as the gateway of the Americas would help businesses grow. There are many different banks in South Florida, and we have carved out a particular role for ourselves. Our Private Banking clients are coming here and investing in the U.S. with us, but they are not only sending money. They are also acquiring real estate, making investments and opening subsidiary companies in Miami-Dade. They have chosen Miami as the headquarters for their operations.
Maurici Llado Managing Director Banco Sabadell Miami Branch
percentage point from the same time in 2016. Economists project that Florida will reach a $1 trillion economy in 2018, bolstered by a booming market, a steady stream of new residents (about 898 per day) and the state’s high GDP (which is larger than Saudi Arabia’s). While job growth is currently the highest it has been since 2007, it is expected to slow a bit in 2018, with the state projected to add 180,000 new jobs compared to 195,000 in 2017. In Miami, the industries with the highest job growth throughout 2017 were trade, transportation and utilities (7,500 new jobs) and education and health services (6,700 new jobs). The area also offered the third-highest number of high-skill, high-wage STEM jobs (6,603 openings). Across South Florida, housing and construction experienced an annual average rate of growth of 5.2 percent in 2017, and professional and business services grew by 4.5 percent over the year. “In South Florida, real estate drives the business market,” Harvey W. Gurland, Jr., managing partner for the Florida offices at Duane Morris LLP, told Invest:, “and that has been the case for as long as I have been practicing, which is close to 40 years. You look out the window and see all the construction; visitors can’t believe how many projects are going on at this time. That has been something we’ve seen here over the course of decades.” Wages in the Miami metro area grew by 3.7 percent year-over-year in 2017, with construction, wholesale
trade, education and health services experiencing the most growth. Despite a rough September due to Hurricane Irma, leisure and hospitality gains in South Florida ended 2017 on solid footing. Arts and culture have also become an increasingly important pillar of Miami’s economy. In 2017, the arts generated $1.43 billion in local economic activity, according to an Arts & Economic Prosperity study conducted by Americans for the Arts. This is comparable to such artworld powerhouses as Los Angeles, Chicago and Philadelphia. The combined $851.9 million of nonprofit arts and culture spending and $578.6 million in event-related audience spending supports 40,944 full-time jobs. Currently, Miami hosts 16 million cultural tourists annually, compared to 13.5 million just five years ago. The Magic City has truly evolved into a global arts mecca. However, South Florida continues to struggle with the issue of economic mobility. In 2016, Bloomberg News ranked Miami the worst city in the U.S. for income inequality. Additionally, the United Way of Florida’s most recent Asset Limited, Income Constrained, Employed (ALICE) report found that 21 percent of households in Miami-Dade County live in poverty, and an additional 27 percent are only one emergency away from financial instability. Fortunately, area businesses are taking note and working toward closing the income gap and providing support to struggling communities. In 2017, Bank of America Charitable Foundation named Catalyst ( )
Wages in the Miami metro area grew by 3.7 percent yearover-year in 2017.
Jim Murley Chief Resiliency Officer – Miami-Dade County
When I look out the window of my building, I see Brickell Avenue, right near our shoreline. If 100 years ago I looked out my window, none of that would be there. The only reason it is there is that we have learned how to live with, manage and drain water. Looming environmental challenges are nothing new to us. Using our knowledge and building on our experience, we have more than a good chance at being able to handle whatever comes.
24 | Invest: Miami 2018 | ECONOMY
Bridging gaps How The Beacon Council is focusing on growing sectors like technology, attracting skilled talent and filling the gaps in the area’s economic ecosystem
Michael Finney President & CEO – Miami-Dade Beacon Council Which sectors of Miami-Dade’s economy offer the most potential for new growth? Miami is a gateway to Latin America and also has the potential to be a gateway to Europe, Africa and Asia. Tourism is one of the most visible sectors of the economy, with the weather, events and cruises dominating the brand. This means promoting other sectors like technology, distribution and logistics can be difficult. There needs to be the right marketing for these sectors. It is important that The Beacon Council works with organizations such as Enterprise Florida and Select USA to help promote other economic sectors. It is also important that we have international connections. To what extent does Miami have the right attributes needed to attract large companies such as Amazon? When major companies such as Amazon are thinking about locations for headquarters, at the top of their list of priorities is talent. They have to find the key people needed to be successful. In their public request for proposals, Amazon stated that for its new headquarters it wanted a range of technical and professional personnel, from accountants to software engineers. There is a particular need for software engineers, so in Miami we need to ensure that there is an effective pipeline of graduates coming through the education system. We also need to ensure that there are professionals already in the community so that if Amazon were to choose Miami for its new headquarters, it would find that the pool of talent is adequate for meeting its requirements and start hiring immediately. Talent is almost always the number one consideration when companies are looking for places to locate offices.
On which areas of economic development is The Beacon Council focusing? The Beacon Council is filling in the gaps in Miami’s economic development ecosystem. We want to work out the best ways to help existing businesses grow more effectively. We are looking to develop a business-to-business initiative that will leverage the relationships we have with large established companies by encouraging them to do more buying from local companies. We intend to increase the number of companies that we work with on an annual basis about threefold. We are meeting with the local companies to understand what their business challenges and opportunities are. Our staff is being much more proactive in communicating with the local business community than in years past.
( ) Miami a recipient of its Workforce Development and Basic Needs grant. The nonprofit plans to use the funds to further its efforts to help Miami’s low- and middle-income residents lead healthier and more financially stable lives. Mother Nature Until recently, a boat graveyard in Coconut Grove paid homage to the hundreds of vessels that littered South Florida’s coast and waterways after Hurricane Irma barreled through the region in September 2017. As of January 2018, a total of 264 boats had been removed in the City of Miami, while in the Florida Keys — which took a direct hit from the storm — that number was closer to 1,700. Also in January, a government task force was charged with cleaning up the maritime mess, at an estimated cost of $145,000. This is just one small example of the economic blow Irma landed on South Florida. Hurricane Irma caused an estimated $50 billion of damage throughout the state of Florida, and while Miami-Dade was spared a nightmare scenario when the storm veered west at the last minute, residents still suffered damage to boats, homes and businesses; widespread power outages; short-term business interruption; and even loss of life, most notably the 12 Hollywood nursing home victims whose deaths shone a spotlight on the state’s lax oversight of such facilities. The storm may not have brought widespread devastation, but it did highlight the area’s vulnerability to natural disaster. In a January 2018 letter to the Southeast Florida Congressional Delegation, Miami-Dade Mayor Carlos Gimenez wrote, “What Irma revealed (and Sandy, five years earlier) is that we must move from discussion of risk into action. Studies, plans and projects take time. I believe this time has been exhausted and the need for action is now urgent.”
However, despite the impact of September’s storm and the ongoing threat of climate change, Moody’s Investors Service reported in early February that Florida’s bond rating would remain strong due to the state’s “strong economy, growing tax base and the federal government’s ongoing resources through FEMA to help cover the costs of storm damages.” Later that month, Moody’s reported it would be introducing new standards in order to integrate climate risks into its bond ratings. The agency warns that
Lyle Stern President – Koniver Stern Group
Miami is special thanks to its climate and the ease of travel. There are more and more airlines opening routes to Miami. Five years ago, we didn’t have any direct flights from the Middle East, and now there are direct flights on Qatar Airways. Hopefully next year there will be direct Beijing-to-Miami flights. The world comes here, and Miami is a culturally comfortable place for South and Central Americans.
26 | Invest: Miami 2018 | ECONOMY
Historic Virginia Key Beach Park, Miamiâ&#x20AC;&#x2122;s only African-American beach during the Jim Crow era and home to a variety of unique flora and fauna, is particularly vulnerable to hurricanes.
without significant efforts to reduce greenhouse gas pollution and build climate resilience, coastal cities could face such financial risks as default, loss of insurance and credit downgrades. South Florida has $30 billion in vulnerable coastal real estate and $46 billion in annual economic exposure. Hurricane Irma imposed a $7.5 billion economic loss on the region, including losses of $2.6 billion in household income, $4.1 billion in regional GDP and almost $900 million in forgone federal, state and local revenues. In preparation for the inevitable future storms and effects of climate change, the Miami-Dade County Office of Resilience is currently working on updating a Regional Climate Action plan, as part of the Southeast Florida Regional Climate Change Compact, that will help policymakers incorporate resilience into their planning activities. A major focus of this plan will be including social equity and racial justice recommendations, as commu-
nities of color and low-income neighborhoods are particularly vulnerable to extreme weather events. Miami-Dade County has long been on the frontlines of environmental resiliency efforts and remains committed to taking action in order to build safer, healthier and more prosperous communities within its bounds.
South Florida has $30 billion in vulnerable coastal real estate and $46 billion in annual economic exposure.
Building business In July 2017, the Miami-Dade County board of commissioners approved a plan that would provide $100,000 tax rebates to film production companies that spend at least $1 million in the county. The film incentive bill includes provisions that productions must hire a minimum of 50 Miami-Dade residents as cast or crew while filming in the county, at least 80 percent of hired vendors must be registered in the county and at least 70 percent of the entire production must be produced or filmed in Miami-Dade. The Miami-Dade Office of Film and Entertainment began taking applications in August. The Cities of North Miami and Miami www.capitalanalyticsassociates.com
Beach implemented similar approaches to position the area as a top film production destination. Miami-Dade continues to promote itself as an attractive place to do business. The county allocated about $1.8 million in direct financial incentives and $4 million in tax incentives to promote economic development in the 2016-2017 fiscal year. In February 2018, a Fortune 50 company in the aerospace industry announced that it would seek taxpayer incentives to add 90 jobs to its Miami-Dade facilities and make a $10.75 million capital investment. If successful in meeting these goals, the company would be eligible for $450,000 in tax rebates ($90,000 from the county and the rest from the state) over five years through the Qualified Target Industry program. Additionally, in January 2018 Amazon announced that South Florida made the shortlist of its top 20 locations for its new headquarters. While the company is already planning to open an 850,000-square-foot mega warehouse next to the Opa-locka airport in northwest Miami-Dade (the project broke ground in 2018), its 8-million-square-foot headquarters on about 100 acres — which would create 50,000 jobs as part of a $5 billion investment — would be a tremendous boon to the region. Since the announcement, South Florida leaders have
had more discussions with Amazon, and the company is expected to make its final decision by the end of the year. Looking ahead Miami-Dade County is buzzing with innovative energy and economic growth as it enters the second half of 2018. Despite challenges, the global economy is on the rise, and Miami’s world-class port and airport are uniquely poised to capitalize on increased traffic, both passenger and cargo. In February 2018, Miami International Airport (MIA) diversified its cargo business with the state’s first-ever ocean-to-air perishables trans-shipment. This new pilot program will allow the airport to receive perishable freight by sea as well as air — a first for a Florida airport. Miami continues to be a tourism mecca, attracting both national and international visitors to its unique blend of sunshine, sand, culture, food, sports and much, much more. With a booming real estate industry, a bustling financial center, an innovative startup community, a favorable tax climate attracting droves of new residents and businesses and city and county leaders focused on sustainability, the future looks bright, indeed, for this emerging global city.
Startup to scale up: Miami is a hotbed of startups; the challenge now is getting them to scale In 2017, the Kauffman Foundation named Miami the number one city in the U.S. for new startups, ousting Austin, Texas, which held the title for the previous two years. However, the foundation’s Growth Entrepreneurship Index, which measures the growth of companies in the first five years, ranked the Magic City second to last out of the 40 large metro areas studied. “Our government at the state level has done a good job of making Florida a great place to create startups,” Oz Rashid, managing partner at MSH Talent Solutions, told Invest:. “There are favorable small business regulations and no income tax, and it’s an at-will state, so it’s very favorable for employers. I think our startups are at the nascent stages. I think we’ll see the fruit of these seeds in five to 10 years.” It seems that while Miami is a catalyst for new business, a lot of these businesses are finding it difficult to scale up. For that reason, a number of local organizations — like Endeavor Miami, Rokk3r Labs and the Knight Foundation’s Platform initiative, among others — are focusing their attention on accelerating growth. The Kauffman study is industry-agnostic, meaning it looks at startups across all industries, ranging from
high-growth tech to mom-and-pop shops and restaurants. According to the study, about 30 percent of all new entrepreneurs in the U.S. in 2016 were immigrants, and immigrants were more than twice as likely as native-born individuals to start new businesses. With more than half of its population foreign-born, it’s no surprise that Miami ranked among the top five cities with the most immigrant-owned businesses. But what is keeping these startups from scaling? Part of it is money. While database AngelList reports that there are about three angel investors for every startup in Florida, and Miami ranks eighth among large U.S. metros for total amount of venture capital invested ($1.3 billion in 2016), not every new business is able to score that critical early capital. To be successful, many Miami-area startups have had to find innovative methods of fundraising, including extensive networking and looking outside of the region for support. Another issue is finding local talent. According to the 2017 LinkedIn Workforce report, Miami ranks number eight on a list of U.S. cities with the largest skills gap. In other words, Miami struggles to provide a supply of workers with the right skills to meet emwww.capitalanalyticsassociates.com
Fiber optics-based data centers are a boon to startups.
ployer demand. One of the best ways to narrow that gap is to encourage partnerships between the area’s educational institutions and business community. To this end, The Beacon Council’s One Community One Goal (OCOG) has created a Talent Development Network to connect students at any of the seven local academic institutions to the city’s employers, free of charge. The council also launched the Connect & Grow Innovation Initiative in 2016 to facilitate a network between startups and established companies in order to spur job growth. The recently created Miami Innovation Working Group is a key part of this initiative, bringing together over 40 organizations in an “innovation ecosystem” that encourages collaboration and unity. In addition, over the last five years the Knight Foundation has invested more than $25 million to help create and foster a creative startup culture in Miami, focusing on attracting capital, facilitating networking and building the local talent base.
“Everyone loves Miami; it has a very interesting vibe that you can only find here,” Brett Haralson, global community manager for Wix, told Invest:. “There’s the beach coupled with a growing technology and business hub with an engaged community that fosters networking and supports others looking to develop new businesses. This environment certainly feeds the business ecosystem here, and Wix loves being part of the Miami tech community.” Historically, Miami has had far more micro-businesses — those under four employees — than most other large metro areas. Today, the focus is on ways to foster a robust entrepreneurial ecosystem that moves these business from startup to scale-up. Miami-Dade Mayor Carlos Gimenez and other local leaders are committed to promoting Miami as an “Innovation Destination,” a place where companies have all the necessary resources to grow and thrive in a sustainable way.
Mayor Gimenez and other local leaders are committed to promoting Miami as an ‘Innovation Destination.’
30 | Invest: Miami 2018 | ECONOMY
to Market voices: Startup scale up
Co-founder and COO Rokk3r
Here in Miami, we see startups focused on everything from tourism and advertising to real-time analytics, big data and IoT. Miami is coming into its own in the startup community in terms of the infrastructure; Rokk3r Labs, VentureCity and newcomers like 500 Startups are providing that framework. Now the education, company-building and fund components are starting to fall into place to produce a more mature ecosystem, which was not the case a couple years ago. We are now taking this entire ecosystem into the public markets to further develop it and grant access to a traditionally hard-to-access asset class.
Miami’s startup scene is about where Chicago was seven to 10 years ago. It’s exciting because people are getting the bug. Things are popping up all over the place. Everybody keeps coming to Miami, including some large and medium-sized venture firms that are looking for opportunities here. The obvious opportunities are, of course, tourism, logistics and transportation. Also, people frequently want to locate in Miami because it’s the gateway to Latin America. We’re a bit challenged in the technology area because the technology investors tend to be on the coasts, but everybody in the ecosystem here is trying to change that.
Managing Director Endeavor Miami
Director Startup FIU Empower Accelerator
Here in Miami specifically, entrepreneurs were saying that Miami was a great place to live. The advantages of Miami are its geography, access to the world and quality of life. That’s the reason entrepreneurs come here, but they were lacking access to mentors, capital and talent, which are the three things Endeavor has focused on historically. Miami ranks in the Kauffman Index as a top city for entrepreneurial activity but really low in the ability for those companies to scale. Historically, startups in Miami haven’t demonstrated that they can scale, and Endeavor is here to support entrepreneurial growth.
Miami has the highest percentage of co-working space in the nation. It is a growing city, and co-working is moving faster than the development of commercial office buildings. There is less office space available; this dynamic will lead to more commercial office development with flexible office options. While the majority of our customers are seasoned entrepreneurs in the scale-up stage, our community is a blend of startups to enterprise clients. We effectively support and service companies at every level to ensure their success — from complimentary co-working days for those early stage companies to industry-vertical collaboration events.
Laura Kozelouzek CEO Quest Workspaces
Tax: In December 2017, the Trump administration passed one of the largest reductions of corporate tax rates in U.S. history. After 10 years of steady economic growth within the U.S., this legislation was meant to accelerate growth even further by exponentially increasing jobs, wages and GDP. While many U.S. banks are winning due to lowered corporate tax rates, there is overall uncertainty about the long-term effects of the tax bill.
Tax overhaul: Following December 2017’s major tax reform, Miami-Dade’s businesses and residents are adapting to the changes In December 2017, Congress passed the most farreaching tax reform legislation the U.S. has seen in 31 years — and lawmakers did it in record time. The bill affects most taxpayers, but the most pressing question for many Miami-Dade residents is: How? The Tax Cuts and Jobs Act represents one of the largest reductions in corporate tax rates in U.S. history, dropping from 35 percent down to 21 percent. The bill also lowers individual tax rates for most Americans, as well as small business owners, but there’s a lot more than that going on in this major tax overhaul. Stimulating change The Tax Cuts and Jobs Act is a pro-growth plan, intended to spur an additional $1 trillion in federal revenues, $600 billion from its permanent provisions and $400 billion from its temporary provisions (i.e., the majority of individual tax cuts, which will expire at the end of 2025). However, according to the nonpartisan Joint Committee on Taxation, tax reform will also increase federal deficits by $1.46 trillion over the next decade. This number could be even higher if individual tax cuts are extended beyond the current eight-year limit. Over the next 10 years, the GDP is expected to increase by an average of .29 percent per year, and Americans would see a tax increase on a static basis during this time. Average after-tax income for all taxpayers in 2027 is projected to be .3 percent lower than it is today; for the top 1 percent, after-tax income will be .6 per34 | Invest: Miami 2018 | TAX
cent lower. Chained CPI — or the indexing of spending and tax brackets to the rate of inflation, which was introduced by the Reagan administration in its 1981 tax legislation — will be retained. Other major changes include doubling both the child tax credit and the individual standard deduction, as well as the estate tax exclusion; repealing the Affordable Care Act’s individual mandate and the deduction for alimony payments; limiting mortgage deductibility for newly purchased first or second homes to loans of $750,000 or less; and capping state and local deductions (SALT) at $10,000 (which can include a combination of property taxes and sales or income tax). On the corporate side, the tax rate was lowered to 21 percent beginning in 2018, the alternative minimum tax was repealed and pass-through owners (with some exclusions for healthcare, law firms and professional services) will be able to deduct 20 percent from their business incomes, among other changes. The plan also moves the U.S. from a worldwide system of business taxation into a territorial system, which essentially means businesses are taxed only on income earned within U.S. borders. This tax applies to all businesses that operate in the U.S., whether or not the business is headquartered here, but the details of the new system — like much of the legislation — are complex. R&D boost For South Florida businesses, tax strategy will be a top priority in 2018. Companies in the tech, life sciences, ( )
International impact How the new tax legislation will affect foreign investors and businesses
Bobby Moore Managing Partner – Baker & McKenzie, LLP How are international businesses being affected by the new legislation? The world has changed. We have to think of things differently now. Many of the strategies we often used to manage a company’s effective tax rate (ETR) no longer work or are far less effective. As a result, we must reset our thinking, and to do that we have to take a step back and look holistically at a company’s structure. We need to think of things in terms of business lines and local country taxes and identify whether transformational change is necessary to mitigate some of the new tax rules, such as global intangible low taxed income (GILTI) and the base erosion and anti-abuse tax (BEAT). Let’s say you are a U.S.-based multinational company. You have subsidiaries and do business around the world. Today you hear that the statutory corporate rate in the U.S. has gone from a high of 35 percent down to a flat 21 percent, yet your tax department tells you that, overall, your ETR is not going to change much. How is that possible? That’s possible for a number of reason, one of which could be that the company is paying high tax rates in foreign countries that it previously was able to effectively use to lower the U.S. rate but which now aren’t as useful against a much lower U.S. rate. Now companies might need to shift their focus away from the usual foreign tax credit planning to how to lower the foreign taxes they pay. Doing this is not easy, as it might require actual business changes affecting functions and people. Similarly, the adoption of GILTI effectively ends many of the benefits associated with maintaining intellectual property offshore. As a result, many multinationals are considering onshoring their IP. Further, the bill adopted new rules that incentivize domestic ownership of intellectual property and business operations in the U.S. These rules, however, might be susceptible to WTO challenge.
How will the tax bill affect foreign investment? The tax bill has the potential to impact foreign investment in the U.S. in a couple of ways. First, the new limitations on the deductibility of interest make it more difficult to minimize U.S. tax through interest deductions. Certain real estate businesses, however, are exempted from these rules. In South Florida, where the real estate industry drives a lot of investment, this is a major win and could result in increased foreign investment. Secondly, the BEAT has the potential to effectively result in a denial of deductions having the similar effect of increasing the U.S. effective rate. Lastly, the lower corporate rate in the U.S. could drive increased investment here, although lower rates in certain industries, such as real estate, already were available when the investment was not made through a corporation. The bottom line is it’s too early to tell whether we’ll see increased foreign investment in the U.S. and what form such investment will take. www.capitalanalyticsassociates.com
$12,000 $6,000 $0
2018 standard deduction:
2017 standard deduction:
Head of household
Head of household
( ) software and many manufacturing industries should be keeping an eye on the Research and Development (R&D) tax credit. Under the new legislation, this credit could prove to be much more useful than in the past. In Miami, a hotbed for innovative startups, this is great news. Paired with the corporate tax cut, the after-tax cash benefit of the R&D credit will increase. As companies are required to reduce the amount of R&D expenditures they deduct by the amount of the R&D credit, they will end up with a larger net benefit when the 21 percent corporate tax is applied to the disallowed R&D deduction. This benefit applies to pass-through businesses as well. Pass-throughs will be able to elect a reduced R&D credit and indirectly take advantage of the 21 percent corporate rate, flowing a larger credit through to the owners. With the elimination of the corporate minimum tax (AMT), which prevented certain corporations from using the R&D credit, more companies will be able to capitalize on the R&D benefit. Similarly, the
increase of AMT exemptions for individuals will also improve the use of the credit. There is immediate value in the R&D credit for South Florida startups. The new legislation preserves the Qualified Small Business Payroll Credits that were made available by the PATH Act in 2015. This means that startups with less than $5 million in revenue can capture the R&D credit and immediately apply it to offset up to $250,000 in payroll taxes — a huge benefit to those companies just getting started or in the process of growing as this is as close as it comes to a fully refundable credit. The only downside to the tax credit when it comes to R&D is the amortization over five years (by 2022) of all research and development expenditures. But for the moment, Miami’s booming startup scene can look forward to a little boost. Hitting homes In Miami-Dade County, the median home value increased by 6.1 percent between November 2016 ( )
Kirstin Turner Florida Complex Director – RBC Wealth Management
There are a lot of questions about the new tax legislation. Some clients have advisory accounts, for which instead of paying commission per trade, they pay an advisory fee. Those fees used to be written off, and now they aren’t. Many write-offs like this have gone away for our high-net-worth clients. What is yet to be seen is whether the lowering of tax brackets will offset the minimizing of the write-offs. RBC Wealth Management does not provide tax or legal advice. All decisions regarding the tax or legal implications of your investments should be made in connection with your independent tax or legal advisor. RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.
36 | Invest: Miami 2018 | TAX
Local reaction How South Florida businesses and business owners are responding to the new tax legislation
Michael Custer Tax Principal – Kaufman Rossin
Will this legislation affect population growth in Miami and Florida in general? Tax policy is a funny thing. It is designed to change human behavior. For example, the fact that there is no individual income tax in the state of Florida has always been a big draw. However, I don’t think anybody has decided to move solely because of the new tax law. Are individuals going to pick up the pace of moving into Florida? It’s a possibility. In addition to the tax landscape, it comes back to travel times, housing supply and good schools. Most taxpayers won’t fully understand the impact of the new tax law until they run the numbers and see more concrete guidance from the IRS. Then they will be able to make those big decisions related to tax changes going into effect for the 2018 tax year and beyond. 38 | Invest: Miami 2018 | TAX
Are businesses seeing the tax decreases they were expecting from the legislation? Pass-throughs were happy to receive the new 20 percent deduction. However, many were thinking that since they pay 40 percent already, their tax rate would drop to 20 percent, and that’s not the case. If you make $1 million, you get a 20 percent deduction down to $800,000, and then that’s subject to your top rate of 37 percent. The effective rate went from 37 percent to around 30 percent, not from 40 percent down to 20 percent. A lot of people were not interpreting it that way initially. This doesn’t apply to every pass-through equally, either. We need to ask whether the business has the right kind of income, has paid the right amount of wages and has the right amount of depreciable property to qualify. All of those factors have an impact. A lot of our clients are service providers, and they don’t qualify for the deduction. Accountants, attorneys, consultants and management companies aren’t typically eligible, unless they meet some income thresholds. There is a host of provisions in this legislation that we are grappling with and waiting for direction (from the IRS) on. How will this legislation affect high-net-worth individuals here in Florida? Everyone’s situation is different. Take a W-2 individual with a high net-worth who wasn’t able to utilize her charitable deductions because her income was so high and was being phased out of her charitable deductions under the Pease adjustment. Now that adjustment is gone, and she is able to take all of these charitable deductions at the cost of losing a bit of her state tax deduction. But in Florida, she didn’t pay any state taxes except the real estate tax on her house. So it’s a win. That’s totally different from the individual who has a supply company in S-Corp that is selling product in Florida and wants the qualified business income deduction, but he owns 100 percent of the business and needs to deal with wage limitations.
( ) and November 2017. While the $10,000 cap on property tax deductions might not affect the majority of lower-income taxpayers, South Floridians earning $200,000 and above could take a bit of a hit. In 2015, the average property tax deduction for homeowners at this income level was about $13,000. The good news is that mortgages on second homes can still be included toward a household’s mortgage deduction, though the limit is now lower (down to $750,000 from $1 million). This lowered limit applies only to new loans, not to existing loans, which are grandfathered in. While the market for homes priced between $750,000 and $1 million might see some slowdown due to the legislation, Miami’s luxury market is primarily buoyed by second-home buyers. With the loss of SALT, Florida’s lack of a state income tax is a huge incentive for wealthy individuals to keep buying in the Magic City. According to a study by the New York City Partnership, a family of four earning $175,000 in New York City pays 25 percent of their income in taxes. In Florida, that same family would pay 14 percent. A single high-net-worth resident making $110 million a year would receive $227,619 in tax relief in Florida, while in New York that same resident would experience a tax hike of $257,177 due to the loss of SALT. Overall, if corporate tax cuts indeed spur the hopedfor job creation, Miami should expect an influx of higher-paying positions and a greater need for housing, driving its already strong real estate market. Additionally, the pass-through deductions of 20 percent for companies that make less than $315,000 per year are expected to bolster economic growth. On the commercial side, the reduced corporate tax cuts have the potential to boost already strong foreign investment and help drive deals in desirable South Florida. With a 20 percent deduction for real estate investment trust (REIT) dividends, it’s likely there will follow an injection of capital benefiting REITs. Banking win Miami is home to the largest concentration of foreign and domestic banks on the East Coast of the U.S. south of New York City, so the effect of the new tax legislation on financial institutions is an important consideration for the industry. After the tax bill passed, companies like Wells Fargo were praised for promising bonuses and higher wages to their employees in a true show of trickle-down economics. Wells Fargo reaped a $3.35 billion benefit from the legislation, mostly due to deferred tax liabilities it had on its books. The bank reported
that it would be raising its minimum wage to $15 an hour and that about 70,000 of its employees would see some sort of benefit from the reform. After the bill passed, more than 70 financial institutions announced they would increase wages or offer bonuses. Despite taking one-time $2.4 billion and $22 billion hits, respectively, from the tax law — largely due to recalibration of their tax-deferred assets — JP Morgan and Citigroup both expect higher net income and increased returns in the long run. U.S. banks are among the highest-taxed industries, which also makes them some of the biggest winners in the tax bill game. Larger banks will reap the benefits of lowered corporate tax rates, while smaller banks will benefit from pass-through deductions. Wells Fargo and JP Morgan reported that they expected their 2018 effective tax rates to be around 19 percent, nearly onethird lower than what they paid in 2016. PNC Financial expects its effective rate to fall even further, to 17 percent, in 2019. For foreign banks, which make up a large part of Miami’s financial sector, the news isn’t quite as shiny. The new legislation includes a base erosion and anti-abuse tax (BEAT), which taxes payments from American entities to foreign affiliates, but it’s uncertain whether payments are counted on a gross or net basis. The provision is intended to prevent U.S. companies from shifting profits abroad to benefit from lower overseas rates. Some foreign banks are concerned that the BEAT tax will increase their U.S. tax liability and/or reduce the benefit of the corporate tax cuts. Certain uncertainty The only certain takeaway from this massive tax overhaul is that there is a lot of uncertainty about how it will affect different businesses and different sectors moving forward. “When you look at the tax legislation, there are very polarized camps about whether it will be good for business,” Jennifer Olmedo-Rodriguez, shareholder at Buchanan Ingersoll & Rooney PC, told Invest:. “I’m of the opinion that we need to wait to see what will happen. There is anecdotal evidence from CEOs saying they will be investing in capital improvements or giving employees raises, but it’s a little too early to see how it will actually play out in the economy.” For Miami businesses looking to capitalize on U.S. tax reform, it seems that embracing the changes early will position them to reap any potential future rewards. www.capitalanalyticsassociates.com
Tax & real estate
What differentiates us is that we are headquartered in New York City, which is the epicenter of the commercial real estate lending industry. We continually see New York money investing in Miami. With the new tax bill, I think we’ll see even more interest from northeasterners migrating south.
Managing Director Ackman-Ziff
The luxury market in the first quarter this year has seen a pop. We are up 25 to 30 percent in sales over last year, and we are getting anecdotal evidence that this is due to the tax law changes. Now there is a $10,000 real estate tax cap along with a state and local tax cap. For example, in New York, the state charges 13 percent tax on top of your income, so if you have a home and you are paying $10,000 on your real estate tax, that 13 percent applied to a $200,000 income will leave $26,000 that is not taxable. Florida is a tax-free state, which gives you a big benefit: you don’t have to pay the additional 13 percent.
W. Allen Morris
Chairman & CEO Allen Morris Company
CEO The Keyes Company
One of the big things we’ve noticed is that some of the most recent buyers of many of our penthouses in the SLS LUX on Brickell Avenue were from New York, not from Latin America, because they wanted to establish residency in Florida. Miami is really becoming the New York of the South — it has the sophistication, the arts, the convenient transportation, great restaurants and strong business connections. With the new tax law, one of the big changes is the lost deductibility of state income tax. I think that we could see a tidal shift of some of the wealthiest and smartest brain trust of investors and businesspeople who are residents of the highest tax-paying states moving and re-establishing residency in Florida.
With this new tax bill, many people from Northeastern states, where they have state and local taxes as high as 13 percent of their adjusted gross income, are seriously considering moving their permanent residences to Florida. We’re fortunate to live in Florida, where we’re one of only seven states in the nation that has no state income tax. With federal taxes now severely limiting the deductibility of state and local taxes, I think we’ll continue to see a funnel of people coming into our state. With 30 percent of Florida’s permanent population living in South Florida, this area is poised for significant growth.
40 | Invest: Miami 2018 | TAX
Ron Shuffield CEO EWM Realty International
REAL ESTATE OVERVIEW
Real Estate: Despite high rents and affordable housing concerns, the MiamiDade real estate market continues to thrive. Miami-Dade was ranked the fourth most valuable housing market in the U.S. in 2017. With emerging ambitious projects and growing economic development across the county, investors are particularly bullish about the industrial and retail markets.
High demand: Miami’s housing market was the fourth most valuable in the country in 2017, and commercial and industrial are booming Miami-Dade County’s real estate sector has always been a paragon of the South Florida market. According to the U.S. Census Bureau, Miami ranked 14th for the largest population growth from 2015 to 2016. From April 2010 to July 2016, the county population grew 8.6 percent, increasing from 2,496,435 to 2,712,945 people. Though there are a variety of factors that can explain this surge in population, one thing is certain: this is good news for the Miami real estate market. September’s Hurricane Irma had a minimal effect on the market, and while 2017 was slow compared to previous years due to saturated inventories, there have still been great opportunities. In fact, Miami was ranked the country’s fourth most valuable housing market at $864.2 billion at the end of 2017 according to a Zillow report, trailing behind Los Angeles, New York and Washington, D.C. While increases in rents and a lack of affordable housing have become obstacles for those entering the market, people are buying now more than ever. In terms of commercial real estate, office, retail and industrial vacancies have consistently fallen due to a growing population and continuously increasing 42 | Invest: Miami 2018 | REAL ESTATE
demand. Foreign investment in Miami-Dade has also gone up approximately 15 percent from 2016. Latin flavor Despite challenges in 2017, Miami’s real estate market continues to offer a solid value proposition for investors. Many factors contribute to this, including a strong U.S. dollar, continuing unrest in Latin America and governmental elections. Currency exchange is affecting Miami real estate. Foreign buyers, especially those from Latin America, have long been a stabilizing force in the Miami market, and for those countries whose currencies have fallen against the U.S. dollar, investors are facing sharply higher prices. While some Latin American investors are retreating, others think the dollar is only going to continue to strengthen and are poised to act quickly. “In South Florida, a place that attracts a lot of foreign investors, the power of the dollar and the financial/ political problems of foreign countries both have a huge impact on real estate sales,” Giampiero Di Persia, Miami CEO at Poltrona Frau Group, told Invest:. “In Miami, this is reflected most specifically in condo
REAL ESTATE OVERVIEW
sales because about half of condos are purchased by international buyers.” There has been an enormous amount of unrest in Latin America, especially with collapsing oil prices and unsteady political regimes. For the past several years, Venezuelans, Brazilians and Argentinians have taken turns leading the ranks when it comes to immigration to Miami. In 2017, Venezuelans led the pack as the top asylum seekers in the U.S. due to political unrest and food shortages. According to U.S. Citizenship and Immigration Services, 14,525 Venezuelans applied for asylum last year. Despite fluctuating currencies, it’s unlikely that foreign investment in Miami-Dade will stop anytime soon. “Miami has something that few places in the U.S. do,” Inigo Ardid, copresident of Key International, told Invest:, “and that’s Central and South America. That is a huge engine for our economy. Latin Americans are buying condos at big prices and renting them at not-so-big prices. It’s a holding spot for their money, and it’s a huge benefit to our economy.” Additionally, President Trump’s new tax bill is expected to propel the real estate market by allowing homeowners to subtract the interest on their loans for first and second homes. The law caps federal deductions for state and local income and property taxes at $10,000, giving people more incentive to look for homes in places like Florida or Texas, where there is no income tax. Overall, the corporate tax cuts are predicted to increase employment and wages and thus fuel the market.
Miami-Dade real estate sales faced a formidable opponent this year in the form of Hurricane Irma. Single-family home sales fell 35.8 percent in the month after the hurricane. The storm did nothing to erode rising prices, however, as median sales prices for single-family homes increased by 6.5 percent. In true reflection of the city’s resilience, Miami bounced back. It goes without saying that the fundamentals of the Miami market are what make it so valuable. The Magic City’s geography positions it as the ideal gateway for global connectivity to the U.S., especially for Latin America. As an incredibly diverse international and multilingual city, Miami has cultivated a niche for art and culture lovers. Many urban neighborhoods like Wynwood, Brickell and the Design District are gaining momentum as “lifestyle” locations where people can live, work and play. And, of course, there’s the incredible weather.
Overall, MiamiDade County residential sales increased 9 percent year-onyear in 2017.
Residential matters In 2017, the Miami residential market was in the middle-end of the real estate cycle. Nevertheless, the market had a strong year. Overall, Miami-Dade County residential sales increased 9 percent year-on-year. Existing condo sales increased 6.5 percent, while single-family home sales dropped 0.7 percent. The extremely favorable tax environment and softened prices have had the most positive effect on the market. Because of the large supply of properties in 2017, especially luxury properties and condos, sellers have been reducing their prices to more ( )
Arnaud Karsenti Managing Principal – 13th Floor Investments
I see growth in both homeownership and rentals within South Florida. There is a misconception that millennials don’t want to own homes and prefer to rent. This is more from lack of affordability than desire. Conversely, rentals present an excellent alternative to homeownership and provide people with a turn-key, amenitized lifestyle without having to make a large financial commitment. We feel that most people would prefer to own than rent if they can afford to do so. For this reason, we are active in both segments of the market. The trick is finding the right balance between price, value and lifestyle.
REAL ESTATE INTERVIEW
City of change How Miami’s real estate market is transitioning, from a new wave of retail tenants to micro units to emerging neighborhood hotspots
JP Perez Vice President – Related Group What is the advantage of building micro units? We’re working on the first large-scale residential development in Wynwood including micro units. The smallest unit is 417 square feet. The opportunity here is that a lot of people are getting priced out of the urban core or they’re spending too much of their incomes on rent. We’re hoping this is a way to help alleviate that pressure. We are compensating for the smaller units by providing better amenities. We have a 3,000-squarefoot gym, co-working rooms, a game room/social lounge, a roof deck and a pool. To make the space feel bigger and brighter, the ceilings are higher than usual and the windows are bigger. People will be very comfortable living in these smaller units.
What changes do you see coming to Wynwood? In the last five years, there has been a huge transition, with many warehouses being converted and some retail tenants coming in. Now there is development of ground-up construction projects, which will bring in a whole new wave of tenants. With more residents coming to the neighborhood, a different type of retail tenant will come in. There will be more credit tenants and dry goods retail. Right now in Wynwood there are a lot of restaurants and some bars. Once there are more residents, a grocery store will pop up, and then office buildings will follow. Some people are tired of the typical Downtown offices. They are migrating towards the trendy areas; it’s where their employees want to be. There will be more daytime users in Wynwood than there are now. 44 | Invest: Miami 2018 | REAL ESTATE
In the short term, how do you see the condo and rental markets performing? In the next few months to a year, we probably won’t see any new condominiums launched. The ones that are under construction will finish up, but the condominium market will definitely slow down as far as new starts. The rental market has continued to see a lot of new projects because there is a lot of financing still available for rental jobs, but it will slow down in both the condos and rentals until some of the new projects are absorbed. What other areas are trending right now? Another area that you’ll see transform in 2018 is Edgewater. We have four towers going up, and three will be delivered this year. It will be like a city within a city. Up until two years ago, there wasn’t much new residential, so that area has definitely changed and will continue to change. We’re adding about 1,400 units, which will have a big impact on Edgewater. We’re also creating a new public park, which will be great for the city. More people will have access to what Miami is really known for: the beautiful bay and ocean.
REAL ESTATE OVERVIEW
( ) realistic numbers. In fact, average prices per square foot decreased by 3 percent in December 2017. The year saw an overall trend of decreasing prices in both the single-family and luxury property markets. While townhouse and condominium sales have slowed down, luxury and single-family sales have sped up. Lack of access to mortgage loans continues to limit Miami’s condominium market. Only 12 of 9,307 condo buildings in both Miami-Dade and Broward have been approved for Federal Housing Administration loans in 2017, compared to 29 buildings in 2016. Miami’s luxury real estate market ended 2017 on a high note. Sales of properties above $1 million soared in December alone. From 2016 to 2017, luxury condo sales increased 47.6 percent, and luxury single-family sales jumped 16.7 percent. Price reductions on behalf of the sellers, in addition to high luxury demand, are fueling this sales momentum. Due to the oversupply of luxury properties, sellers are being more realistic with their asking prices. In fact, the average discount price of luxury condos in March 2017 was about 20 percent. It’s no wonder 31 percent more condos were sold that month compared to March of
the previous year. These discounted homes were sold in an average of 122 days, compared to more expensive properties, which were sold in an average of 259 days. “This is definitely a buyer’s market heading into 2018,” Craig Studnicky, principal at ISG, told Invest:. “Upward price pressure on single-family homes in Miami-Dade should help shift some interest back into the condo market. The 12- to 24-month supply of condos will put pressure on developers to discount prices next year.” Miami is a diverse city in terms of its people and culture, and this translates to its real estate market. For example, while South Beach and Downtown Miami are experiencing a slowdown in the condo market, Brickell is booming. Brickell has become the epicenter of lifestyle living in Miami-Dade. With the recent delivery of Brickell City Centre, residents and workers enjoy working, shopping, dining and living all within a short walking distance. The median home value in this area is $367,100. Miami Beach is currently the most overvalued neighborhood in town. According to the Miami Herald 2017 real estate study, it is also the hottest area in MiamiDade right now and the top spot for buyers looking for apartments. “When prospective buyers from all over the world are thinking about buying a vacation home, one of
REAL ESTATE OVERVIEW
the top places on their radar is Miami Beach, not inland neighborhoods,” Phil Gutman, president of Brown Harris Stevens, told Invest:. “Part of the reason for that is the Miami Beach government. The mayor is making sure that Miami Beach maintains its integrity.” Coral Gables is vying for the top spot when it comes to single-family homes. Homestead is the most undervalued part of town; it is also the neighborhood where median home prices line up most accurately with median household income. Cash transactions make up a great deal of the Miami market, a direct reflection of the strong foreign investment pouring into the economy. In November 2017, cash transactions accounted for 39.4 percent of total closed sales, which is almost double the national average of 22 percent for home sale cash transactions. There are a few things to look out for in 2018 when it comes to the Miami residential market. An increase in the number of millennials in the marketplace signals a positive future for both the single-family and condo markets. Also, a predicted increase in the number of residential real estate investors from the Northeast has potential to dominate residential in the next year.
favors buyers by giving them higher bargaining power in negotiations with sellers. A 2018 report by ABODO Apartments ranks Miami as the 11th most expensive rental market in the U.S. The median 1-bedroom rental price is $1,825 a month. And when it comes to the biggest percentage of costburdened renters of any major U.S. city, Miami ranks number one. In fact, according to a report released by the Metropolitan Center in early 2018, 61 percent of renters in Miami-Dade are cost burdened, meaning they spend over 30 percent of their incomes on rent. While MiamiDade might not be the most expensive place to rent, it is the county with the biggest gap between what people are spending and what they can afford. Still, it all depends on a potential buyer or renter’s needs. Although the market currently favors buyers, renting remains affordable in many areas of Miami. Because it’s hard to find a home to purchase under $400,000, renting might be a better option for short-term needs. Area real estate developers are working on creating opportunities for everyone.
Miami saw an addition of 380,000 square feet of new retail space in 2017.
High rent Buying is 43 percent cheaper than renting a home in Miami-Dade County. For that reason, it’s no surprise that the majority of local real estate industry experts think owning is a smarter choice than renting. In recent years, there has been a shift in public interest from renting to buying. This increased interest in buying properties stems from an oversupply of inventory. The oversupply
Rethinking retail While retail sales have recently fallen stagnant due to the e-commerce boom, Miami saw an addition of 380,000 square feet of new retail space and 1 million square feet under construction in 2017. Most of these projects are high-end mixed use, with the largest being the proposed Miami Worldcenter. This center will house 450,000 square feet of retail space developed by Miami Worldcenter Associates, the Forbes Company and Taubman Centers, Inc. with an estimated completion date of 1Q 2019.
Greg Matus Senior VP, Investment Sales, Real Estate Services – Franklin Street
From a CRE perspective, it’s about finding and getting into certain areas early. There are formerly depressed areas that have doubled or tripled in value in the last five to 10 years. In Overtown, Little Havana, Wynwood and Edgewood, investors have made a lot of money. It was simply investing in the right place at the right time.
46 | Invest: Miami 2018 | REAL ESTATE
Tibor Hollo President Florida East Coast Realty
How will Panorama Tower impact Brickell? Panorama Tower is going to raise the bar for apartments in Brickell with all of its amenities. There are three movie theaters, several bars and a coffeehouse. There’s even a music studio, or Muse Room, where our residents can meet up for jam sessions in a soundproof environment. There’s a wine-tasting room and a large dining room so our residents have the space to entertain larger parties. These amenities encourage our residents to mingle and create a social environment. Other amenities are geared more toward convenience. There are 50 separate 300-square-foot offices so our residents can live and work in the tower. We have a 15,000-square-foot gym, offer yoga and pilates classes and have a cyber café that can fit 100 people. We also have a pet daycare, grooming and boarding facility so our furry residents are taken care of. How are millennials changing the market? Millennials are the biggest shift in the market I’ve seen in my career. This generation wants mobility. If they get a job in Southern California that pays better, they’ll move. They don’t want the baggage of homeownership, so the majority don’t want to buy. We have to depend on snow birds from the north and foreign buyers to fill that niche. Millennials want nice apartments, good amenities, good transportation and walkability. 30 percent of our new residents don’t have cars. The urban way of life is changing, and millennials want different things than their parents or grandparents had. We need to listen and give them what they want. What is your outlook on the market in 2018-2019? I think that office building rentals will benefit from the new tax legislation. Many New York complexes are dead in the water due to New York City and State taxes, so it doesn’t make sense for them to be residents of or have their offices in New York. Miami is a pleasant place to do business. 2018 will be a decent market for rentals. It will be very good for investment in real estate. 48 | Invest: Miami 2018 | REAL ESTATE
The Panorama Tower is the tallest residential building on the East Coast south of New York City.
Two other significant retail projects are the Panorama Tower and The Plaza at Coral Gables, with 50,000 square feet and 130,000 square feet of retail space, respectively. Both projects are expected to be completed by 2Q 2018. The recent phenomenon of experiential shopping has had a significant effect on Miami retail. “Often, we’d much rather go online to order something rather than fight traffic and possibly not even find what we’re looking for,” Bernard Zyscovich, managing principal of Zyscovich Architects, told Invest:. “But for certain things, like dress shopping or going to the bar, the pleasure comes from the touch and the feel. The moment of the huge department store has mostly passed. A lot of the new, high-end places are not renting a store, they’re renting a rack.” Urban submarkets like Wynwood and Brickell are attracting millennial buyers by offering a “cool” and personalized shopping experience with more than just stores. This includes the addition of new food halls, movie theaters, outdoor spaces, pop-up shops and unique activities. Without these diverse offerings, it would be hard to compete with the speed and convenience of e-commerce. However, Miami retail is adapting, modernizing and continuing to grow. Office space With tightening vacancy numbers, the Miami office market is redeveloping itself to cater to a changing
REAL ESTATE OVERVIEW
and vacancy decreases in industrial and multifamily is lagging a bit in the office market.” It might be lagging, but it’s still happening. In Q4 2017, total vacancy in the office market was at 10.9 percent, showing a decrease of 70 basis points yearover-year since 2012. Miami’s low unemployment rate of 4.6 percent and growth in financial, professional and business services have driven an increase in demand. This is the lowest unemployment rate Miami has seen in years, so it’s no surprise that vacancy rates are so low. This demand is projected to continue to increase, along with a predicted 5.5 percent increase in job growth by 2022. Rents continue to increase as well. The average asking lease rate in Q4 2017 for Class A properties in the Central Business District was $52.20 per square foot, a 1.7 percent increase from the previous year. Miami’s office market was ranked 11th out of the top 78 U.S. markets for investment and development in 2017. In fact, investment sales in Q4 totaled $83.9 million. The largest of these sales were the trades of Lennar Corporate Center and 9350 Financial Centre, for $40 million and $33 million, respectively. millennial workforce as competition accelerates. The co-working space phenomenon is newly dominating the Miami market, encouraging landlords to upgrade old workspaces to include amenities such as gyms, communal space, greenery and modern designs and decorations. “Office suites are getting smaller with companies stacking more workers into their office spaces. There are co-working spaces and executive suites that have caused disruption in the market,” Nick Mau, director at First Pointe Advisors, LLC, told Invest:. “The sort of velocity we’ve seen with rent increases
Low vacancy A strong and healthy industrial real estate market is good news for Miami as a global logistics hub. Demand outpaces new supply as tenants and investors are continuously attracted by Miami’s international reputation. In Q4 2017, sales volume totaled $103 million for 17 transactions of 874,000 square feet. The majority of these sales took place in the North Central Dade (35 percent), Medley (28 percent) and Doral (21 percent) submarkets. “In the past three years, we’ve seen the demand for luxury condos slowing down, and currently many ( )
Arden Karson Senior Managing Director, South Florida – CBRE
Miami is a global gateway, which is positively impacting the industrial market. With the expansion of the Panama Canal, the growth of business at PortMiami and the growth of e-commerce accompanied by retailers wanting to be closer to their consumers, there is strong demand for industrial space. Areas like Doral — which historically catered to the industrial market — are now becoming important neighborhoods where people can live, work, play and stay. We are seeing a lot of the land inventory being used for mixed-use developments.
REAL ESTATE INTERVIEW
Urban redesign How real estate developers are rethinking where and how they develop to cater to Miami’s professional workforce
Manuel Crespo Partner – Greenspoon Marder to live and work in the same area, don’t own a car and don’t need a lot of space. The targeted, underserved population is established professionals who are making very good money and have families but don’t want the white picket fence out in Kendall. They want to stay urban, but they can’t afford to live in Brickell. They have a greater need for the “family car.”
How is the challenge of affordable housing being addressed? I believe builders and developers are rethinking where they develop and what sorts of products they will offer in a quickly growing city. One of our client groups is redeveloping a lot of underutilized real estate in the Jackson Memorial area. The customer base is built in with the nurses, medical techs and patients’ families as far as affordable residential housing is concerned. Looking at the area as a future work-live zone, adjacent to a world class hospital district, one also realizes that developing a variety of hotels ranging from regular stays to longer-term stays for patient families would be a huge leap forward for the district. While micro units are being considered, it isn’t going to be the primary focus. Micro units are a wonderful concept for young professionals who want 50 | Invest: Miami 2018 | REAL ESTATE
What are some active areas for development? The Wynwood area and the Design District are both active right now. There’s so much potential there, but our clients are very conscientious about avoiding the displacement of existing populations. That’s something that appeals to us about some redevelopment concepts that we have for the hospital district. There are many abandoned, boarded-up homes in that district that our client is looking to improve, but at the same time we are making a good effort not to displace people who have been there for a long time but have lower incomes. Overtown is going to be the next place for a lot of change, especially if the MLS stadium works itself out there. If you recall, when they built the Marlins stadium, a lot of change was projected to come to that area, and there’s arguments on both sides as to whether or not it did. There will have to be a generalized effort, not only to drop the stadium into the area, but also to actually work in conjunction with residential real estate developers while maintaining that concern about displacement. What are your predictions for 2018? 2017 is really going to flow into 2018 in terms of the continued stabilization of prices. I don’t think we’re going to see the ballooning of prices in the residential market that we saw for a few years prior to 2017. I think the main driver of that stability is a lot of the inventory that’s coming online. I don’t think we’re going to see much of a dip, except maybe a bit in the condo market.
REAL ESTATE OVERVIEW
( ) experts forecast a four-year inventory,” Matt Rotolante, managing director at SVN South, told Invest:. “Outside of that product type, however, we are seeing solid demand. Industrial is hot and will stay that way even if we fall into a recession due to the e-commerce, last-mile trend taking place right now.” Lease rates have reached an all-time high in the Miami market, with an average asking price of $9 per square foot in Q4 2017. Net absorption for 2017 totaled 2.8 million square feet. The majority of these lease transactions took place in Doral (40 percent), Medley (17 percent) and Miami Lakes (17 percent). The best indicators of the healthy industrial market are the low vacancy rates. Specifically, the Miami industrial market has remained under 4 percent vacancy for 13 consecutive quarters. As long as demand continues to exceed supply and Miami continues to be a global city, the future of this market looks bright.
to invest their money. Many of them are looking for real estate opportunities.” Miami’s foreign investment market had a mix of opportunities and obstacles in 2017. In Canada, economic growth strengthened the Canadian dollar, which is good news for the Miami market. In the face of economic difficulties due to collapsing oil prices, Latin American investors were challenged by weaker currencies in 2017. At the same time, capital controls were more tightly regulated in China. Despite these obstacles, foreign investment in Miami residential property increased in the past year. In 2017, foreign buyers accounted for 21 percent of Florida’s residential volume of sales, compared to 19 percent in 2016. They spent $7.1 billion on South Florida homes in 2017, compared to 2016’s $6.2 billion. A majority of these foreign buyers hail from Brazil, Argentina, Venezuela and Colombia. Venezuela outspent other Latin American countries in MiamiDade for the second year in a row, making up 12 percent of the 51 percent of foreign deals in South Florida. This comes as no surprise, especially with collapsing oil prices and extreme political unrest. Argentinians and Brazilians spent the second most in Miami, at 9 percent each. Colombians represented 5 percent. While Miami’s foreign investors primarily hail from Latin America, investors from Canada are becoming a dominant force in the market. They made up 9 percent of South Florida foreign purchases in 2017. Investors from Turkey have recently been leaving an imprint on the Miami market, as well. The Turkish economy’s instability has led Turks to look for opportunities in Miami, especially since direct
In 2017, foreign buyers accounted for 21 percent of Florida’s residential volume of sales.
Shadow market One of the major driving forces of the Miami real estate market is its “shadow market,” made up of foreign investors from all over the word, from countries ranging from Venezuela to China. According to the Related Group, 70 percent of its projects are being bought by foreigners in cash deals. Attracted by Miami’s stable economy, favorable climate and diverse culture, foreign investors continue to flock to the Magic City. In fact, more than twothirds of Miami real estate owners come from overseas. “Miami is a hub for foreign investment,” Luis Lugo Jr., senior vice president/regional manager Southeast U.S. & Latin America at Hill International, told Invest:. “There are a lot of people coming to Miami and trying
Dan Kodsi Principal – Royal Palm Companies
International presence in Miami is incredible. We have buyers from over 50 countries for the Paramount Tower, including China, Turkey, the Middle East, Colombia, Brazil, Venezuela and some European countries. It’s a testament to how international Miami has become. During the recession, Miami real estate was at a discount and the dollar was weak. It was a great time to invest in Miami, so it attracted a lot of buyers to the city, establishing a larger pool of capital.
Jon Cardello Vice President & U.S. Commercial Sector Leader Stantec Architecture & Design
How do the design demands placed on new developments in Miami differ from other U.S. markets? There are three components of our approach to design: aesthetic, experience and asset consideration. It is important in Miami that these three considerations do not become mutually exclusive. As architects, we should always be looking for better solutions that maximize the value of the underlying asset, which could occur in a building’s constructability, its aesthetic design or its eventual usage in daily operations. In Miami we face many unique challenges from a design point of view. Sea-level rise is the biggest issue that developers face in terms of the wider scope of building for environment resiliency. Sea level is far more than just surface flooding. We also have to take into account the increasing hydrostatic pressure coming up from the ground and its effect on buildings. All of these factors add up to an increased emphasis on where developers put dollar value in their buildings to create functionally robust but also unique architecture and expression. It is forcing designers to look at creating designs that demonstrate projects’ unique features rather than simply applying proven solutions. How can innovation of office design help attract the kind of tenants Miami needs to grow? When we talk about office design, we are largely looking at creative office design. If Miami wants to attract more companies from the tech and innovation industries, designers have to think carefully about what kind of work spaces these creative types are demanding. It is perfectly appropriate that designers are being increasingly called upon to develop new solutions, not just for the repurposing of existing structures, but also new ground-up, creative office buildings. One of Miami’s biggest issues is there are not as many corporate headquarters in the city as we would like. If we take a long-term perspective and consider the salaries that we are setting up future generations to earn in Miami, we have to attract more corporate headquarters. 52 | Invest: Miami 2018 | REAL ESTATE
flights from Istanbul to Miami were established last year. Turkish foreign investment currently accounts for 2 percent of Miami’s total foreign investment and is expected to continue to grow. “International interest in Miami is high,” Jeff Morr, chairman of Master Brokers Forum and broker-associate at Douglas Elliman Real Estate, told Invest:. “We have a whole world of buyers because the U.S. is a stable country. The chances of losing your money due to fraud are very low. It’s a safe country to do business in.” The EB-5 program enables foreign nationals to invest in projects that create jobs locally and satisfy other key requirements in exchange for a green card. While the majority of EB-5 investors nationwide are Chinese (about 80 percent), an overwhelming percentage of the program’s investors in South Florida are from Latin America, Brazil in particular. The planned $40 million renovation of the Miami Marine Stadium is to be partially funded by the EB-5 program. The program has faced troubles for the past several years, particularly regarding the uncertainty of its renewal, and the new tax bill poses another set of challenges. For now, however, EB-5 visas are helping to propel Miami’s foreign investment. Heating up Little Haiti continues to be the neighborhood undergoing the most gentrification in Miami. Between 2012 and 2017, median home prices have gone up by more than $100,000. In the zip code 33137, which includes some parts of Little Haiti, median home prices went up by a whopping $339,450. Rents have also increased up to 50 percent. Many developers are investing in the area due to its high elevation and geographic location. Little Haiti is roughly a mile inland, putting it on higher ground and at less risk of flooding. Nevertheless, its proximity to both the beach and Downtown makes it a prime place to live. The problem with this rapid gentrification is that it is pushing out many Haitian-owned businesses and residents. As a result, many of these businesses are establishing partnerships with incoming developers. In March 2018, developers of the proposed Magic City Innovation District, founded by Metro 1 Cos. Inc. and Dragon Global, added three more properties to their Little Haiti collection. The vision is to create a walkable technology, arts and entertainment center in the neighborhood. Known as the financial capital of the South, Brickell is growing fast and does not seem to be stopping anytime soon. Flocks of young talent come in search
CONSTRUCTION REAL ESTATE OVERVIEW
of work opportunities and career advancement. Not only is Brickell a place to work, but it’s also a place to live and play. Residents and workers can enjoy working, shopping and living all within walking distance, which is rare for Miami. This is especially true following the completion of Brickell City Centre, which has added much-increased consumer demand in the area. The Panorama Tower — the largest building in Miami — is a major development to look out for, expected to deliver 2.6 million square feet of retail, office and residential space by Q2 2018. Unsurprisingly, Downtown is one of the fastestgrowing neighborhoods in Miami. Average price per square foot has gone up to $483 from $347 in the past year, increasing median home sales by $472,000. The area’s charm and opportunity lure young, moneyhungry millennials, especially with its improved public transportation and abundant nightlife. Edgewater continues to be hot as well. This can be attributed mainly to its fantastic location, situated close to Wynwood, Miami Beach and the Design District. The luxury real estate submarket is surging in this area, as is evident in new projects like the Resorts World Miami, Aria on the Bay by Melo Group and Biscayne Beach by Eastview Development and GTIS Partners. “There continues to be significant development activity in Sunny Isles Beach, Surfside, Bay Harbor, Bal Harbor and Miami Beach,” Robert Finvarb, CEO of Robert Finvarb Companies, told Invest:, “but North Beach and North Miami have been somewhat neglected by the development community. We are currently focusing our efforts within these emerging regions of north Miami-Dade as both communities provide multiple opportunities for smart development.” Attainable housing Recent initiatives such as micro-apartments are addressing Miami’s main real estate concern: affordable housing. In Florida, 79 percent of extremely low-income households are considered severely cost burdened. This problem continues to spiral in Miami-Dade as affordable housing units decrease in numbers and legislators diminish housing funds. This not only affects families but businesses as well. The housing crisis negatively impacts businesses in the urban core, where workers must endure a long commute in order to live comfortably on their salaries. Currently, 60 percent of Florida’s 275,000 public and affordable housing units are about to expire their land-use restrictions, which limit their use for low-income families.
Ken Krasnow Executive Managing Director & Market Leader, South Florida Region Colliers
How did the real estate market perform in 2017? It was an interesting year in terms of investment activity. 2017 will go down in history as an adjustment year; there was a lot of resetting in regards to pricing expectations, but we still believed in the market very strongly. Since the beginning of 2018, we’ve seen the market return to almost full confidence, leading to more transactional activity in the first quarter of this year than we saw in the first half of last year. The market regained momentum because some concerns from last year never came to realization. Now there’s a renewed sense of confident urgency. The tax legislation was a big part of this confidence factor, of course, because it reduced rates. Additionally, there were other provisions that, from a real estate perspective, gave people a renewed sense of confidence. What are some trends in commercial real estate? One trend with a large effect on the industrial market is the convergence of e-commerce and retail. The need for quicker speeds to market and more efficient distribution channels within the facilities themselves were big drivers. As a segment, food is hot in the retail sector as specialty grocery stores and niche food markets are gaining popularity. Alongside that, there is an industrial component required to bring those perishables in and store them. We’re keeping an eye on construction and labor costs. Due to the political winds around trade and immigration, skilled labor will be even more difficult to find and could increase material costs. With e-commerce becoming more popular, what do you see as the future of retail? Retail is constantly evolving, and the real estate footprints reflect that. Some big-box retailers are going away, but some of the e-commerce companies that were purely online are adopting brick and mortar strategies and opening up stores. These stores need to be in places where people are living or gravitating towards. The stores, communities and malls that are able to create experiences will do extremely well. www.capitalanalyticsassociates.com
REAL ESTATE OVERVIEW
“Housing affordability is one of the biggest challenges in Miami,” Greg West, president and chief development officer at ZOM Living, told Invest:. “It’s a very complex problem that does not have simple or one-dimensional solutions. Government should be a part of this. We have hundreds of thousands of units that are needed for affordable housing, and something at that scale can only be accomplished if developers are incentivized and encouraged, not taxed and burdened.” Miami currently has various affordable housing projects underway in an attempt to solve this problem. Projects like Modello Homes, Marcia Gardens and Senator Villas will house 100, 134 and 23 family units, respectively. Marcia Gardens is slated to open in late May 2018, Modello Homes is scheduled for completeion in late summer or fall of 2018 and Senator Villas will deliver in 2019. Another trend that Miami is following in an attempt to alleviate the affordable housing crisis is going mini — in the form of micro-apartments. In November 2017, the Miami commission approved smaller micro units of 275 square feet, down from 400 square feet. Developers like Related Group and East End Capital are supporting this trend, especially in Wynwood and Downtown Miami. Millennial madness Miami has one of the largest millennial populations (people between the ages of 18 and 34). In fact, 27 percent of Miamians are millennials. They have an average household income of $60,000 and have a combined total of $1.68 trillion in purchasing power. As digital natives accustomed to smartphone devices and the online world, millenials make 54 percent of their purchases online, and this number keeps growing. When it comes to real estate, an aging millennial population means bad news for the Miami rental market. In the third quarter of 2017, homeownership rates rose to 63.9 percent, according to the U.S. Census Bureau. This is the highest homeownership rate in the country since 2014. While rents in Miami continue to rise rapidly, buying seems like a more plausible option for this working population, especially as they start to plan for families. Many home builders are incentivizing this trend. For example, Miami-based Lennar Corporation promises to help millennial home buyers with their student debt by contributing as much as 3 percent of the purchasing price of a home towards the balance of their loans. These incentives seem like a win-win for home builders and buyers and might set a trend in the Miami market in years to come.
David Diestel Regional President, South FirstService Residential
In 2017, there was lower unemployment with a lot of construction, which put a serious strain on labor and supply. Many of the communities we service were looking to ramp up level of service and projects but were constrained by being unable to find great people in the market. Of course, we also dealt with the hurricane. Irma was a great showcase of what people do in times of stress; it was all about preparedness, and thankfully the damage was less than we anticipated. In terms of other environmental challenges, I was fortunate enough to be on a sea-level rise panel discussion in late 2017. The consensus in the room was quite interesting — all saw that companies and individuals are continuing to invest. People believe in Miami’s ability to cope with environmental challenges, and it’s not slowing down. Miami’s population is still increasing. We would, however, like to see more proactive steps taken by the state to address some of these concerns. When our company makes recommendations based on environmental or energy-saving concerns, sometimes our investors don’t take our advice. For example, when we tell a client that a lobby shouldn’t be air conditioned the way they intended or we recommend dialing down the heat on a year-round pool, which would lower costs, those suggestions are sometimes not well received. Energy management in Miami is all about saving dollars, and it’s an investment decision. I’m not seeing enough of a trend towards sustainability because many residents have chosen to live in Miami for the beautiful and luxurious lifestyle on the water. There’s not a demand for green sustainability that is outside the high returns of prudent cost management. We don’t see a trend towards investment in sustainability as much as we see in other parts of the country. In Miami, people want to enjoy resort-style living — and that can conflict with green living. www.capitalanalyticsassociates.com
REAL ESTATE OVERVIEW
Bright future Despite an array of challenges in 2017, investors are particularly bullish about the real estate market outlook for 2018. Home prices in Miami are steadily increasing, more people are buying and foreign investment is thriving. “There’s going to be tremendous investment opportunity going forward,” Scott Lunine, vice president/regional manager for Marcus & Millichap Real Estate Investment Services, told Invest:. “That’s one of the reasons I came here. When I analyzed the market in Miami, one of the things I noticed is that we can at times get hit really hard here but then we recover exceptionally fast. It’s kind of like the stock market. Every once in a while in a bullish market, you need to have that correction. Real estate is no different.” Northeastern buyers are predicted to drive the Miami real estate market in 2018, particularly New
Yorkers and Canadians. Additionally, as multifamily prices continue to drop due to oversupply, singlefamily pricing is predicted to remain steady. In 2017, the retail market seemed especially promising due to the number of new high-end, mixed-use projects in the works. The office market is being transformed by the co-working phenomenon and is adapting to the new young workforce. The industrial market continues to do well as demand outpaces supply and lease rates reach an all-time high. Miami-Dade continues to be a true U.S. gateway between domestic and international markets. Investment and immigration from all over the world propel its real estate market to be one of the most valuable in the country. With Florida’s favorable tax climate, this growth is expected to continue gaining momentum as Miami becomes an increasingly global city.
Northeastern buyers are predicted to drive the Miami real estate market in 2018.
56 | Invest: Miami 2018 | REAL ESTATE
REAL ESTATE OVERVIEW
58 | Invest: Miami 2018 | REAL ESTATE
Construction: With rising rents, land and labor costs, Miami-Dade has shifted its focus from residential to commercial construction moving into 2018. In fact, residential construction spending decreased by 33 percent while commercial spending increased by 27 percent in 2017. Miami-Dade developers are making strategic use of the limited space in the county. This shift in focus is sure to spur the local economy by attracting more businesses and logistics companies with more office and industrial space.
Construction in numbers: Building permits issued in Miami:
25,000 20,000 15,000
Total YTD Proj 2018
Source: D epartment of Regulatory and Economic Resources
Total YTD 2017
Estimated value of construction for new single and multifamily homes (2018): Jan 2018 # of BLDG New singlefamily home, townhouse
# of units
# of BLDG
Mar 2018 # of units
# of BLDG
# of units
Jan-Mar 2018 YTD cost total
New two-family units
New apartment buildings 3 or 4 units
New apartment buildings 5 or more units
Total per month
Source: D epartment of Regulatory and Economic Resources
Office inventory Q1 2017 - Q1 2018 (in sq ft.): Q1 2017
Q2 2017 Total
Q3 2017 Total
Q4 2017 Total
Q1 2018 Total
12,606,826 10,440,944 23,047,770 12,498,682 10,480,969 22,979,651 12,493,972 10,609,632 23,103,604 12,660,373 12,603,520 25,263,893 12,237,300
22,036,041 15,818,764 37,854,805 21,958,065 15,858,789 37,816,854 21,953,355
37,971,125 21,419,488 18,835,619 40,255,107
Miami (CBD + suburbs)
60 | Invest: Miami 2018 | CONSTRUCTION
Inventory of industrial construction Q1 2018 (in sq ft.): Miami-Dade
Warehouse & distribution
169,309,648 12,118,299 181,427,947
North Central Dade
North Central Dade
North Central Dade
Underdeveloped office inventory Q1 2017 - Q1 2018 (in sq ft.): Q1 2017 Class A CBD
Q2 2017 Total
Q3 2017 Total
Q4 2017 Total
Q1 2018 Total
Coral Gables Kendall/Dadeland Miami Airport Miami Beach
Miami (CBD + suburbs)
Crane city: While Miami’s residential construction has experienced a slight slowdown, office, retail and industrial are all booming Construction firms spent 2017 reacting to a mixture of market conditions. On the one hand, commercial construction has seen tremendous growth in Miami. Office buildings in particular are experiencing increasing absorption rates, upping demand for new construction. Both retail and industrial construction are also booming. On the other hand, Miami’s residential market has experienced a slowdown. Rising labor and land costs, as well as increasing rents, have been turning away developers and renters alike. Oversupply of residential inventories has also played a significant role in this slowdown. The luxury residential market in particular is experiencing a surplus in inventory, forcing developers, brokers and sellers to adjust their prices. Miami-area construction companies have taken note and are shifting gears to focus on the commercial market. While 2016 was perceived to be an adjustment period in which developers began reacting to a change in market demand, 2017 made it clear that commercial construction has become the focus for Miami’s construction industry.
62 | Invest: Miami 2018 | CONSTRUCTION
Shifting tides The numbers underscore a shift in focus from residential to commercial construction in Miami-Dade. The South Florida commercial sector is thriving, with a 27 percent increase in spending from 2016 to 2017. In that same time period, the residential sector saw a 33 percent decrease in spending. One explanation for the decrease in residential construction spending is the oversupply of inventory. As of the third quarter of 2017, there was a 53-month supply of condos on coastal Miami mainland property. Additionally, there was between 12 and 18 months of inventory for condos priced over $1 million in the Miami market. As of the end of 2017, approximately 150 condo buildings were delivered, and about 100 more are currently under construction. Builders also continue to face challenges. Increasing demand for real estate — particularly for commercial buildings — is set against growing costs for labor and land. According to research conducted by the Associated General Contractors of America, 69 percent of construction firms are struggling to fill staffing needs. In Florida, 61 percent of firms face the same issue. South
Florida’s high cost of living and pricey rents make it harder to attract more construction workers. Some construction companies have begun participating in local partnerships in order to provide training and apprenticeships to incoming workers to ease the problem. Nevertheless, this labor shortage will inevitably lead to increasing prices for labor and will not be an easy problem to solve. Growing land costs have also presented issues for builders. Miami-Dade’s dwindling supply of residential lots continues to plague the residential construction market, which has led many builders to develop upwards instead of outwards. On the commercial side, the increase in construction spending can be explained by surging demand. Home to PortMiami and Miami International Airport, two of the busiest logistics hubs in the U.S., the Miami area attracts development for all types of commercial real estate. As a growing major financial center, Miami’s office construction in particular has soared. As the live-work-play dynamic permeates Miami-Dade’s neighborhoods, the retail sector is also being transformed by many new projects. The industrial sector is booming, as well, due to surging e-commerce sales and Miami’s continued growth as a logistics center and gateway to Latin America. Conservative lending The recent plateau in the real estate market has undoubtedly had an effect on financing trends. Due to oversupply and high labor and land costs, the availability of financing for construction diminished in 2017. Particularly for condominium development, the construction of new condos, in addition to existing inventory, has created a saturated market. Subsequently, asking prices have decreased and buying has slowed down, discouraging lenders. Another reason for the tightening of construction lending is the ambiguity surrounding regulations. In the first half of 2017, commercial lenders were anticipating a repeal of the Dodd-Frank Act, which would have improved Miami’s restricted lending atmosphere. As of early 2018, the future of Dodd-Frank remained in limbo. “The biggest financing challenge currently facing developers today in Miami is the limited availability of capital, the cost of capital and the extent to which borrowers can leverage their projects,” Charles Penan, executive vice president at Aztec Group, told Invest:. “Local community banks are the most aggressive capital source in the local market. Some
Edgardo Defortuna President & CEO Fortune International Group
How do presales in Miami today compare to the last few years, and what do you think the future holds for Miami’s luxury market? The market has changed in the last two to three years. The peak was sometime in 2015 when it comes to absorption and rhythm of sales. The strengthening of the U.S. dollar in comparison to many foreign currencies has diminished the influx of buyers in parts of Miami. In many ways, 2016 was the slowest year in terms of volume of sales. It’s starting to feel like the market is coming back again. Even though we went through Hurricane Irma, sales didn’t slow down. There’s still incredible opportunity for new development in the city. Despite its ups and downs, the Miami residential real estate market is one of the most solid international markets worldwide. Miami is still a great value if you compare its prices to those in other major cities around the world. We’re expecting a great season in 2018. Who is investing in Miami right now, and how does this impact the market? We’re seeing a resurgence in the economies of the countries that are feeder markets for us. Argentina has an established policy, both economic and political, so people feel comfortable, and that allows them to invest outside the country. The same thing with Brazil, Peru, Chile and even nontraditional countries like Paraguay or Bolivia. We certainly have to work a lot harder to get those customers, and as a consequence, we make a little less money. If you actively search for that type of customer, with the assurances and comfort level they need, they will pull the trigger and invest in Miami. The financing model might change. The banks in Miami might be more flexible, in a consolidated and more mature market, to finance with the model they use in cities like New York. In other words, banks will allow more financing to developers with fewer presales because they trust the developer and the fact that the market is much more stable and the building’s sales will be absorbed faster during the process of construction. www.capitalanalyticsassociates.com
of the best banks to work with are ones that have emerged from consolidation of smaller banks that have recently been able to increase their construction exposure.” Despite these tightening trends, many construction companies have been successful in securing financing. For example, Florida Community Bank recently issued a $59 million loan for a mixed-use project in Coral Gables. Nevertheless, developers are looking beyond banks in order to attract investment in the absence of traditional financing options. Major alternative lenders include asset managers like Blackstone Group and Texas Pacific Group. Some of the largest construction loans of 2017 included the $285 million loan for the 27-acre Miami Worldcenter and the $225 million loan for Zaha Hadid’s One Thousand Museum. The Worldcenter loan was financed by Inbursa Bank and BC Immigration fund, while the One Thousand Museum was financed by Fortress Investment Group. Buyer’s delight In 2017, residential construction spending decreased to $5 billion, due mostly to saturated inventories and a slowdown in the South Florida condo market. Miami-Dade also reported fewer home sales year-over-year. This lack of new construction, coupled with Miami’s favorable tax environment, is good news for those looking to invest in Miami residential real
64 | Invest: Miami 2018 | CONSTRUCTION
estate. Saturated inventories have led sellers to reduce asking prices up to 20 percent in the past year, signaling that this is the perfect time to buy. These lowered prices will eventually allow the oversupply to be absorbed. Price increases should follow this predicted absorption. A few challenges might help explain the lack of new home construction in 2017. The main obstacle is in meeting the high demand for construction labor in Miami-Dade. Project managers and supervisors are especially hard to find given the immense number of projects on the market. But labor shortages aren’t the only problem. Miami-Dade, along with Broward and Palm Beach counties, is ranked number 12 on a list of the worst metropolitan areas nationwide to build houses and apartments, according to BuildZoom, a website for contractors. Miami’s dwindling supply of residential lots is a growing problem for the residential construction market. Despite these obstacles, major residential projects have broken ground in Miami-Dade in 2017. Miami’s skyline continues to grow as developers build up rather than out in order to accommodate the expanding population and ease transportation woes. Many of these underway developments are geared towards high-end buyers looking for luxury properties. For example, Property Markets Group (PMG) and JDS Development Group partnered on Echo Brickell, a luxury high-rise of 180 residences in Brickell. CMC Group’s Brickell
David Martin President – Terra Group
There are three big issues that I view as opportunities: resiliency, affordability and transit. On the resiliency side, we are using green infrastructure that conserves energy and handles a lot of stormwater runoff. In terms of affordability, we have been working with the city to earmark funding for the incremental tax for creative, innovative ways to create affordable housing. We have also been advocating to replan zoning codes to spread affordable housing through all the districts rather than just Downtown. Finally, in transit, we are advocating for the first speed bus program from the Miami Intermodal Center to our property in Doral so residents don’t have to rely solely on cars.
Flatiron is another ultra-luxury high-rise made up of 64 stories and 548 condo residences. It is expected to be delivered in December 2018. From 2012 to mid-2017, Downtown Miami saw 5,180 new condo units delivered. The Related Group’s Gran Paraiso is a luxury tower located in North Edgewater, Miami. The 53-story, 314-residence building is under construction and expected to be completed in the fall of 2018. Shahab Karmely’s 60-floor One River Point ultra-luxury high-rise will deliver 404 residential units by 2020. According to Downtown Development Authority research, on average, under-construction supply in Miami is 70 percent pre-sold. 1000 Museum in Downtown Miami, developed by Gregg Covin and Louis Birdman, will soon be the most ultra-luxury residential tower in Miami. The 62-story architectural masterpiece will have 83 residences and is expected to be completed in December 2018. In a fiercely competitive luxury residential environment, developers know that amenities often make the difference in attracting the exclusive highend buyer. At its new Echo development, PMG is prototyping a new smartphone app that will allow residents to access building and concierge services. The company has also tapped wellness guru Deepak Chopra to integrate healthy living technology into some of its units at Muse in Sunny Isles Beach. At the Ritz-Carlton Residences in Miami Beach, developer Lionhart Capital is offering its residents a floating helipad and a yacht rental, with butler included.
Developers are also beginning to focus more on affordable housing, especially geared towards the growing millennial population. For example, Miami-based Lennar Corporation promises to help millennial home buyers with their student debt by contributing as much as 3 percent of the purchasing price of a home towards the balance of their loans. Micro-apartments are also becoming increasingly popular among homebuilders in order to promote more affordable housing. The Related Group has three micro-unit towers underway: Wynwood 25, Wynwood 26 and Wynwood 29.
Office construction during 2017 totaled 330,000 square feet, with 68 percent preleased.
Surging CRE On the commercial side, Miami developers put approximately $5.7 billion into new construction in 2017. Accelerated construction has been necessary to keep up with surging demand for office, retail and industrial space. Office construction during 2017 totaled 330,000 square feet, with 68 percent preleased. Another 800,000 square feet under construction in 2018 are 54 percent preleased, indicating a favorable outlook for 2018. Major projects include MiamiCentral and the office components of Panorama Tower and Wynwood 25. These projects will deliver 100,000, 100,000 and 40,000 square feet of office space, respectively. The Optimum office tower in Coconut Grove will also deliver 44,000 square feet of office space. In terms of the general office market, direct vacancy rates have fallen to 11.4 percent over the year 2017, www.capitalanalyticsassociates.com
Jaime Saavedra Vice President & General Manager Turner Construction Company
The main labor shortages we see in South Florida are in the drywall, plumbing, HVAC, electrical and other high-demand specialty trades. As a result of unprecedented growth, trade contractors are nearing capacity. In addition to multiple high-rise condo projects, there are numerous major non-residential construction projects that are taxing the market. Examples include the Seminole Hollywood Hard Rock Casino Expansion Project, Miami-Dade County Public Schools, Jackson Community Hospital Miracle Bond Program and several major projects at Fort Lauderdale-Hollywood International Airport. In other parts of the country, the ability to bring in supplemental labor from surrounding areas to support the boom is a viable option. However, due to the geographic location of South Florida, companies and workers are reluctant to travel all the way down here. As a result, South Florida companies are being more selective in the projects they pursue, demanding higher profits for the work they secure and hiring workers who have not previously worked for (or been trained by) their company. This is resulting in higher costs and lower productivity rates. There is no easy answer for this problem. It takes a combination of training new workers, communicating with clients and utilizing good risk management processes/skills. General contractors must be more selective and take extra precaution prior to making an award to a subcontractor. In Turner’s Miami office, we go to great lengths to manage subcontractor risk by writing thorough bid scopes of work, conducting thorough post-bid scope review meetings, demanding man-loaded schedules, reviewing financial health and safety records and respectfully challenging trade contractors on where their workforce will be coming from. All of these steps are done during the preconstruction phase. During construction, we are utilizing lean techniques, BIM modeling, prefabrication of building components, GPS technology and drones that take photos of construction sites. All of these efforts are proving to increase efficiency and enable us to do more with fewer workers. 66 | Invest: Miami 2018 | CONSTRUCTION
while rental rates have increased 4.9 percent yearon-year. Particularly, Class A office space absorption is on the rise. Class A rental rates have surpassed $46 per square foot, compared to the average Miami office space rental rate of $38.26 per square foot. Companies seem to be opting for smaller Class A workspaces in light of the trending co-working phenomenon. Miami outpaces the rest of the world in terms of brick and mortar retail performance, so retail construction is booming. The recent delivery and success of Brickell City Centre has prompted developers to continue the trend of building experiential shopping locales. 2017 saw approximately 380,000 square feet of completed retail construction, with another 1 million square feet currently under construction. These new endeavors are mostly high-end mixeduse projects in established retail markets like the Design District, Coral Gables and Downtown. Major construction projects that are currently underway are the Miami Worldcenter, The Plaza at Coral Gables and the Panorama Tower, delivering 450,000, 130,000 and 50,000 square feet of retail space, respectively. The surge of e-commerce and the city’s growing population have kept industrial construction strong in Miami. Some of the region’s major general contractors are shifting away from residential construction to focus more on industrial projects such as warehouses and seaport and airport facilities. There has been a noticeable increase especially in warehouse construction. As of the third quarter, 578,075 square feet of warehouse construction was completed in 2017. During the course of the year, 5.3 million square feet of warehouse space was sold, totaling $418.7 million. Vacancy rates fell in 2017 and are expected to continue to fall in 2018; for example, Miami-Dade’s north submarket vacancy rate fell from 7.2 percent to 4 percent between January 2017 and January 2018. Moving forward The construction sector of Miami remains stable going into 2018. With construction softening in the residential sector and condo prices continuing to drop, Miami-Dade is expected to continue to focus on commercial construction. Rising challenges in securing labor, land and financing are causing construction companies to narrow down priorities when it comes to new projects, especially in an urban area like Miami with developable land at a premium. With a growing millennial population, builders are also focusing more on affordable, entry-level housing as they move forward into 2018.
Market voices: Skilled labor
Chairman & CEO Moss & Associates
Anywhere in South Florida a huge challenge is making sure there are enough manpower resources and qualified available specialty contractor resources. There is high demand right now. Another challenge is making sure you have adequate professional leadership on the job. We are fortunate to have a large staff of highly qualified people. We recruit at a lot of colleges, and we have an active co-op program. When candidates are in their second or third year of engineering or accounting school, we employ them during the summer. That gives us a firsthand view into their work ethic, commitment and capabilities. If they do well the first semester, we bring them back the next summer, and then if they do well again, we try very hard to hire them when they graduate.
Every builder’s challenge in Miami is finding the best and most qualified subcontractors. We also operate in a marketplace that has a lot of outof-town developers who expect things to be exactly the same as where they’re from. There’s a big learning curve. Attracting great people to South Florida is what we spend most of our time doing. The more talented people we can find from all over the country, the better we’re going to be as a company. The people who are coming to Miami today are people we didn’t necessarily attract 20 years ago. They’re young, bright people, and they’re the future.
Principal & CFO Cuesta Construction
President Plaza Construction
The shortage of skilled workers is a huge problem for the construction industry, especially for those firms specializing in trades, such as concrete shell and masonry, electrical and plumbing. Not only is there an existing shortage, but also because of the focus on having most children attend college, the gap seems likely to continue widening. New advances in construction technology help somewhat, but there will always be a need for more skilled labor. The U.S. is missing out on a big opportunity to encourage new entrepreneurialism via the skilled trades. Construction is a great example of a rare industry configuration in which individuals very often begin as laborers and later move on to becoming entrepreneurs and creating their own businesses.
City of Miami: The City of Miami is a global leader in terms of multicultural growth and business development. The Magic City is home to the largest concentration of international banks in the world and the thirdtallest skyline in the United States, not to mention its reputation as an international tourist destination.
Global city: Rising from multicultural roots, the City of Miami is emerging as a true global leader in culture, connectivity and sustainability The City of Miami is the heart of South Florida. It is the principal, central and most populous city in the Miami metropolitan area and is part of the second most populous metropolis in the southeastern United States, after Washington, D.C. An emerging global city, the City of Miami was named an alpha-level world city in 2010. It is ranked 9th in the U.S. (and 30th globally) for business activity, human capital, information exchanges, cultural experience and political engagement. Not only is the City of Miami a business hub, but it is also the richest city in the U.S. and the 7th richest in the world in terms of purchasing power. It is a major tourism hub and ranks second in the nation, after New York City, for total international visitors. This multicultural powerhouse has been instrumental in South Florida’s emergence as a global leader. From Tequesta village to Magic City The land on which Miami sits today has been inhabited since as early as 500 or 600 B.C.E. The Tequesta people occupied the area for over 1,000 years before the land was claimed by Spain in 1566. The word Miami is derived from Mayaimi, the historic name for Lake Okeechobee. The land came under U.S. control in 1821, and a fort was 70 | Invest: Miami 2018 | CITY OF MIAMI
built in the area as part of an effort to clear the area of the Seminole tribes, who lived there after the Tequesta were removed by the Spanish, in order to make way for American settlers. During the Great Freeze of 1894 and 1895, Miami’s crops were the only ones to survive, and the settlement’s importance increased in the region. In the wake of the freeze, citrus grower and “Mother of Miami” Julia Tuttle, and her neighbors William and Mary Brickell, convinced railroad tycoon Henry Flagler to expand his rail system into the area. The City of Miami was officially incorporated on July 28, 1896, and is the only major city in the U.S. to have been conceived by a woman. From the beginning, the city had a diverse population. At the start of the 20th century, migrants from the Bahamas and African-Americans constituted about 40 percent of the population and played a crucial role in the development of the city, but they were subjected to racism and discrimination from white residents. In the 1960s, many wealthy Cubans immigrated to Miami in order to escape Fidel Castro’s rise to power. In its history of over 120 years, the city has grown from 1,000 residents to over 400,000; today it is the 44th largest city in the U.S. In fact, Miami experienced such ( )
CITY OF MIAMI INTERVIEW
Open door How Miami's new mayor is keeping the lines of communication open and promoting the City of Miami as a great place to live, work and play
Francis Suarez Mayor – City of Miami How are you opening up communication between your office and the community? I’ve always given out my number since I ran for office in 2009. It’s still the same number: 305-992-3342. I do have a forwarding feature, so if I’m in a meeting or unable to answer, it gets forwarded to a live person. I like text messages as well. If I’m not able to answer in the moment, I can revisit it later and still give somebody the thoughtful response they deserve. Technology allows you to communicate that way, and there are so many platforms like Facebook, Twitter and Instagram where I’m communicating with residents as well. The fact that they can communicate with their mayor is essential, and it allows me to know minute-byminute what they’re thinking and how they’re feeling, which is a big benefit for both sides. I’m a believer in accessibility, but I’m coming to appreciate delegation as well. As time passes, I am finding a better balance between being accessible and also delegating to my team, whose experience and knowledge I can utilize to address a variety of problems. How can we make the City of Miami’s tech sector stronger? Our plan is to forge a series of technological partnerships throughout the year that will weave the narrative that we are a tech-based city. We have opportunities for tech-based companies like Tesla, Lyft, Uber, Spotify and WeWork, to name a few. We want to continue to build that narrative that we are a city that attracts mega brands on the technological side, as well as on the entertainment side. The mayor is the chief marketer of the city, so I’m constantly trying to forge partnerships with these tech-based companies. We are in a new, knowledge-based technological economy. My job is to attract businesses that will supply the jobs of tomorrow for our children.
What makes Miami such a great place to live and work? Due to advancing technology, we live in a world where you can live where you want to live. If you can live wherever you want, Miami wins that competition because of our weather and our favorable tax environment. Miami is also inexpensive compared to other major cities in the U.S. We are a city that is diversifying enormously in terms of our capital and our population. We’re no longer a gateway city but a global city. We are focused on making sure that our progress benefits all citizens. We can’t just have a system that allows the rich to get richer. We have to continue to make sure that we educate all of our children and give them an opportunity to succeed in today and tomorrow’s economy. If we’re not doing that, we're doing a disservice to our city. That’s part of my emphasis as well: it’s not just prosperity for some, it’s prosperity for all. www.capitalanalyticsassociates.com
CITY OF MIAMI OVERVIEW
Known for its many colorful murals, Wynwood is one of the City of Miami's most vibrant districts.
( ) rapid growth that snowbirds from the North who wintered here remarked that the change from year to year was like magic — hence was born the nickname “Magic City.” Seas, safety and “Silicon Beach” Miami’s economy is strengthening. Moody’s Investors Service increased the city’s primary bond rating from A1 to Aa2 in March 2018 due to its strong financial footing. Proactive measures to combat sea-level rise and provide affordable housing were mentioned as reasons for the improvement. Another factor in Moody’s increased rating was the passing of the Miami Forever Bond Program, a $400 million general obligation bond, in November 2017. The money will go towards affordable housing, flood prevention and other public projects. Officials are planning to spend almost half of the amount on pumps, seawalls and storm drains. The move did not increase taxes, but the money will come from keeping taxes at the same level after the city pays off its debt from previous bonds. This project will help Miami stay resilient in the face of increasing environmental challenges. The City of Miami officially launched its Safe City Initiative in March 2018. This program is a collaborative effort with the goal of creating green, safe and clean neighborhoods. As of early 2018, 10 unsafe and abandoned structures have been demolished or cleared, eliminating them as locations for illicit activities and 72 | Invest: Miami 2018 | CITY OF MIAMI
making way for new, fresh housing to reinvigorate neighborhoods like Little Havana. City officials are also committed to reducing gun violence. In September 2017, the commissioners included money in the city’s budget to triple the territory covered by ShotSpotter, a network of sensors that automatically reports gunfire to police. The system, installed initially in 2014, already covers areas of Little Haiti, Park West, Liberty City and Overtown. In 2018 and 2019, the area will expand to include sections of Coconut Grove, Little Havana, Model City, Downtown and Allapattah. Since installing the system in 2014, the homicide rate in the City of Miami has decreased by over 30 percent. Part of Miami’s healthy growth is due to the tech community that has found a home here. Mayor Francis Suarez is particularly passionate about encouraging tech growth and is working with Tesla to bring charging stations to public parking lots. The city is also looking to attract Spotify, the music-streaming giant, to establish its Latin American headquarters here. In March 2018, the city announced a partnership with shared-workspace company WeWork to attract and retain startups and help them scale up. On the private side, between 2013 and 2016, commercial real estate (CRE) leased by tech companies in Florida increased by over 100 percent, and Miami is becoming known as the “Silicon Beach” of the United States. In 2017, Miami became the number one city in the U.S. for tech startups, surpassing the
CITY OF MIAMI OVERVIEW
CITY OF MIAMI OVERVIEW
reigning Austin, Texas, for the honor. With ongoing support from The Beacon Council and city officials, the tech sector will continue to bring innovation, as well as capital and jobs, into the City of Miami. Continued development Miami has the third-tallest skyline in the U.S. and is still growing. One development that will have a profound effect is the Miami Worldcenter, a mixed-use project going up in Park West, just north of Downtown. The project will span about 10 blocks and contain retail, residential and hotel properties. In January 2018 the developers, Nitin Motwani and Art Falcone, closed a $43 million loan from Fifth Third Bank for the retail and parking part of the project. In late March, the Paramount Miami Worldcenter, a building that will house over 500 condos, passed the 45th floor on the 60-floor project and was already 73 percent presold. Another big project is the future home of David Beckham’s MLS team. The ownership team was planning on finding a home in Overtown, having bought property there in 2016, but recently they expanded their search. City officials suggested the city-owned Melreese golf course as an alternative location, offer-
ing a much bigger property for the development to include a feature public park, soccer academy and other amenities in addition to the MLS stadium, as well as connectivity to public transportation. While the stadium’s location has yet to be finalized, the City of Miami is looking forward to welcoming its new MLS team. While many mega projects continue to climb, average apartment rent shows no sign of declining. At $1,750, the City of Miami’s median one-bedroom rent is the most expensive in Miami-Dade County. In order to address this issue, the Miami Forever Bond allocated a quarter of its funds — $100 million — to affordable housing. The Omni CRA wants to double this amount; the board voted in January 2018 to establish a goal of allocating $100 million in tax increment funds to affordable housing. By increasing the amount of affordable and attainable housing, real estate in the City of Miami will reach a balance of satisfying the needs of foreign investors while providing places to live, work and play to all of Miami’s residents and visitors. Connectivity Existing infrastructure in Miami includes PortMiami, which retains its crown as the busiest cruise port in the
CITY OF MIAMI OVERVIEW
world, serving just under 5 million cruise passengers yearly. It also provides 324,000 direct and indirect jobs and has an economic impact of over $41 billion. Two more terminals, one for Royal Caribbean and the other for Norwegian Cruise Line, will make the port even busier. Royal Caribbean’s terminal will open in the fall of 2018, and Norwegian will break ground in May 2018 with the expectation of opening in November of the following year. Upcoming infrastructure projects include the Underline, a 10-mile park that occupies the space underneath the Metrorail. The proposed park, which will begin development in Brickell in the fall of 2018, will provide a walking and biking path, as well as other proposed amenities, including an outdoor gym, a basketball court and gaming tables. The City of Miami has pledged $50 million, half of the proposed budget, for the park, which will benefit residents living both in the City of Miami and its surrounding neighborhoods. Another, similar project in the works is the Ludlam Trail, a proposed 6.2-mile trail on the former Florida East Coast Railway lines. Florida East Coast Industries is a supporter of the project and hosted a carnival in August that attracted over 500 attendees. An issue surfaced in February 2018, however, and the entire area was fenced off after testing revealed arsenic and hydrocarbons in the soil. Although the levels were not high enough to be dangerous, they did exceed government standards. A solution is adding clean soil on top of the contaminated layer, keeping users from encountering the chemicals. Although this could delay the project, it should not keep it from being completed on time. Innovating transit Miami-Dade County’s SMART plan is coming along but hit a snag when it was announced in March 2018 that necessary environmental studies would delay the project for a year, though they would not incur additional costs. While the county and state are working to make all of Miami-Dade more accessible, the City of Miami is also providing solutions for its residents. One of the SMART plan’s target corridors, Baylink, or the crossing from Miami Beach to Downtown, is getting some extra attention. Mayor Suarez hosted a meeting early in 2018 to discuss the possibility of a personal rapid transit (PRT) system for that corridor. Passengers would be able to give their cars a personalized destination, and each stop would be removed from the main track system, keeping the stops from slowing down the rest of the cars. In its favor, a PRT system would cost 1/10 the price of a rail line, but currently the only working PRT system in the U.S. is in Morgantown, West Vir-
Moishe Mana Founder & CEO Mana Group
Why does Miami have so much potential for global trade? The world is becoming more global, and nothing can stop this trend. A lot of headquarters will be coming to the western hemisphere. The question is where do they want to be? New York, Panama or Miami. From Miami, you can access many countries in Central America and much of the U.S. within two to four hours. Logistically, Miami has many of the ingredients to be a global trade hub: a great tax situation, great airports and great seaports. This city is the link between South America and the U.S. We’re starting a movement to encourage other countries to come here and do business. How will your projects in Wynwood and on Flagler change Miami? Wynwood is going to be the cultural hub of Miami. We don’t want high-rise buildings; we want to keep the feeling of Wynwood intact. We’re building the Mana Contemporary and will house fashion designers from all over the world. We’re looking to set a calmer, more cultural tone than other parts of Miami-Dade. The other part of Wynwood is the business side. We want to build a global trade hub to facilitate trade between the Far East, the U.S. and South America. This project is going to impact the whole city. People from all over the world are going to come here to trade. There are only so many coffee shops you can have; you need business to support a community. Mana Common, our project on Flagler, is slightly different. We’re building micro units and are investing in many businesses, including tech, fashion, arts and restaurants. This is the Mana Common idea: to share space and share sense. There is a movement right now of collaboration, so we are designing social communities. We’re not developers in the typical sense. We’re more interested in the content. The value of a building is in its contents, not the rent collected. What is created in that space is what matters. www.capitalanalyticsassociates.com
CITY OF MIAMI OVERVIEW
Maximo Gomez Park, also known as "Dominos Park," is a Little Havana landmark.
ginia, a city of just over 30,000 residents. More studies would have to be done to make sure the system could handle Miami’s large population. The Miami Trolley, a free, award-winning system, has doubled its traffic since 2013. In February 2018, the trolleys moved into the neighborhood of Little Haiti, which has become a tourist destination in its own right. The system has over 450,000 monthly riders and is connecting different neighborhoods within the city to the urban core. In addition to the new Little Haiti route, the trolleys currently serve 11 neighborhoods, including Allapattah, Brickell, Wyn-
wood and Overtown, and the majority of those routes operate seven days a week. Another addition is the Miami Citi Bike bike-sharing program; the bikes can be rented on an hourly, monthly or yearly basis, which provides flexibility for users. Both systems help residents and visitors explore the different areas of the City of Miami without a car. Healthy city The City of Miami’s healthcare facilities are continuing to expand their offerings and their ability to serve residents. Both Jackson Memorial Health System and
Bob Zangrillo Chairman & CEO – Dragon Global
The urban core from Downtown right up between Interstate 95 and the rail line will represent the next area of growth, especially where it has already been zoned for light industrial or industrial. That area is also becoming increasingly attractive from a transportation point of view. Without proper zoning and underlying transportation infrastructure, it is going to become increasingly difficult for an area of Miami to attract attention from corporate tenants and investors.
76 | Invest: Miami 2018 | CITY OF MIAMI
CITY OF MIAMI OVERVIEW
G. Frederick Reinhardt Chairman & CEO – Brickell Bank Foreign families often send their children to Miami to be educated. In the course of that process, the next generation becomes green card holders and then U.S. citizens. Now you have a succession planning matter. You have family assets that are abroad or offshore. There are a whole bunch of issues in terms of how you transfer wealth from one generation to the next and from one jurisdiction to another and how you do it in the most tax-effective way and in a way that the succession is enduring. We get involved with lawyers and do that for our clients. That's Miami-driven because many of our Latin American clients are in that situation.
the University of Miami Health System (UHealth) received good news this year. The Florida Senate, which was considering changing Florida’s Medicaid funding model, confirmed the existing system in March 2018, and Jackson Memorial found this worth celebrating. The group was faced with a possible loss of $58 million, a large number considering the total funds under consideration statewide were $318 million. Also in March, the Senate passed a bill that will restrict the creation of new trauma centers, although it specifically confirmed the status of four such centers in Miami-Dade, including Jackson Memorial’s Ryder Trauma Center. The University of Miami Health System has received several generous donations in 2018 and is expanding accordingly. The institution received a $50 million gift for its cancer center and $12 million for the Bascom
Palmer Eye Institute. Sylvester Comprehensive Cancer Center has bought more property to expand its facilities and is creating a new proton therapy center, while UHealth’s eye institute is establishing a research center for macular degeneration and retinal disease. On the leadership side, Dr. Edward Abraham was confirmed as the CEO of UHealth in December 2017. Arts and culture hub The City of Miami is home to some of Miami-Dade’s finest artistic and cultural experiences. The Pérez Art Museum Miami (PAMM) and the Adrienne Arsht Center are located Downtown, while Wynwood has become a global destination for street artists and street art enthusiasts. In January 2018, the City of Miami Commission reestablished the Art in Public Places Program, which will integrate works of art with the landscape of the city. The
CITY OF MIAMI OVERVIEW
program was originally administered by Miami-Dade County, but the City of Miami has decided to have a more direct hand in beautifying the city. The Coconut Grove Playhouse is getting a second lease on life. The building opened in 1927 and served as a movie theater and venue for stage performances, developing a strong national reputation as a leading theater in the 1980s. The building closed in 2006, but there are plans to reopen its doors. In April 2018, it was announced that the project had secured its goal of $11 million in private donations and pledges; along with support from the City of Miami and the county, the project will move forward. The proposed renovation would preserve the many unique architectural features of the original building. Cultural events are also plentiful in the City of Miami. Ultra, the yearly electronic music festival, takes place Downtown and annually has over 160,000 attendees. The festival features the most popular electronic musicians and vocalists. In 2018, the surprise closing act was Swedish House Mafia, who had not performed together since splitting up in 2013. The Calle Ocho Festival, an annual tradition since 1978, is the largest Hispanic festival in the country and attracts over 1 million attendees yearly. The festival celebrates Hispanic art, music, food and fashion and is sponsored by the Ki-
78 | Invest: Miami 2018 | CITY OF MIAMI
wanis Club of Little Havana. (Read more about Miamiâ&#x20AC;&#x2122;s cultural developments in Arts, Culture and Tourism.) Educational advances The City of Miami is home to excellent schools, including Miami International University of Art and Design (MIU), Miami Dade College and the New World School of the Arts. MIU was founded in Downtown Miami in 1965, and since that time the Design District has grown around the campus. The school has over 2,000 full-time students enrolled in programs, including visual design, marketing, film and fashion. Students earn recognition in their fields while completing their undergraduate degrees. Examples include Alejandro Barzaga, a fashion design student whose wedding dress sketches for Duchess Meghan Markle were featured in El Nuevo Herald, and Jamalat Larach, a fine arts student whose pieces were selected as a part of the Art Espace Gallery and will be exhibited in the Louvre in Paris. Miami Dade College has over 165,000 students between its nine campuses and is the largest college in the Florida College System. The institution, which began as a community college, has a history of providing access to education. This year, it continued that legacy by waiving the out-of-state fees for displaced Puerto
CITY OF MIAMI OVERVIEW
Rican students. Many Puerto Ricans fled the extensive hurricane damage at home and moved to Miami, temporarily or permanently, disrupting many students’ educations. The college also moved to strengthen its business education. It recently partnered with VentureCity to launch a two-year degree program in business entrepreneurship. Students enrolled in this program can expect such professors as the CEO of Cisneros Group and the Florida manager for Lyft. Banking center The City of Miami is home to the largest concentration of international banks in the world, and the majority of those are located in Brickell, the “Wall Street of the South.” The neighborhood was originally platted for mansions by Mary Brickell, one of the founders of Miami, in the early 20th century. In the 1970s and 1980s, Brickell became the home of high-rise office towers and apartment buildings and grew into the financial center we see today. Often called the capital of Latin America, many international banks focused on that region have offices or headquarters in Miami. As Latin America comes out of its period of slow movement, Miami is poised to reap the benefits of the newly energetic market. Private equity deals continue to come through and have increased overall in Florida in three of the past four years. The City of Miami is continuing to grow in population and is getting a boost of high-net-worth individuals fleeing high taxes in the Northeast. That bump is a boon to wealth management providers as well as to the community. (Read more about Miami’s thriving banking industry in Banking & Finance.)
Sustainable city The City of Miami is vulnerable to environmental threats, as it contains much of the central shoreline of Miami, as well as Virginia Key and Dodge Island. Flooding has become an increasingly damaging issue for the city over the last decade. The Miami Forever Bond will provide $192 million for storm drain upgrades, flood pumps and sea walls. The money will also begin a $1 billion fund for other projects to brace the City of Miami against rising seas. In order to make sure that citizens’ voices are heard when it comes to the use of the money, the city is creating a 10-year citizen oversight board to review proposed projects funded by the bond and to make recommendations to the commissioners. This community engagement will help guide the city’s investment. As part of the effort against climate change, the City of Miami Office of Sustainable Initiatives has set ( )
Erika Fleming President Miami International University of Art & Design
Why is the Miami International University of Art & Design positioned perfectly? The City of Miami and the Arts and Entertainment District is the ideal location for our university. We are at the heart of all the action anchored by the Arsht Center, Museum Park and Downtown Miami just to the south of us and Wynwood, Midtown and the Design District to the north of us — all within walking distance or only a short trolley or Metromover ride away. The city has done an impressive job of investing in the growth and development of this area. This depth and breadth in arts, design and culture has been fundamental in helping our students hone and polish their natural creativity. Miami is a multicultural window to the world. It is a young city rich in culture and diversity, providing the artistic and creative backdrop that helps our students evolve their skills and talents. That creativity and ability to think about challenges unconventionally is something that many employers look for. How are your students involved in the community? We believe it is critically important that our students understand that we all have an obligation to the community in which we live. As such, many of our collaborative projects also serve to fulfill that ideal. For example, our students created some of the videos used for the City of Miami Police Department campaign, See Something, Say Something, which encouraged citizens to notify law enforcement whenever they saw anything that was out of the ordinary. We also worked with the American Red Cross; our students produced short videos that captured the smoke detector campaign. Additionally, we were involved in the creation of the first fashion incubator in Miami in partnership with The Beacon Council and Macy’s. Our film students helped film and produce music videos for up-and-coming artists from Sony Music label. We support organizations in the arts such as YoungArts and the Arts & Business Council and student and teacher exhibits for Miami-Dade County Public Schools. We are proud to work on so many collaborative projects that not only highlight our students’ skills and creativity but also enhance our community. www.capitalanalyticsassociates.com
Market voices: Neighborhood spotlight
Alice Robertson Executive Director Miami DDA
Development in Downtown Miami has traditionally depended on the demand for office space. As the movement of Americans away from suburban lifestyles and into the urban core plays out in Miami, there are now new opportunities for residential, retail and entertainment development. Without this migration of residents into the Downtown area, we would not have the critical mass necessary to support new developments of this kind. Downtown Miami is fast evolving as a mecca for arts and culture. During the past 10 years, the urban core has welcomed new museums, chef-driven restaurants and world-recognized annual art fairs.
Our main focuses at the moment are creating attainable housing, improving infrastructure and working toward historic preservation. Our mission is to clean up the streets, fix up the buildings and bring businesses to the area. We are also trying to build as many units of affordable housing as possible. This area is not a depressed neighborhood anymore. It has really accomplished its mission. Many people who lived here for years, myself included, can no longer afford to, so we are working to change that. Many people have a certain interpretation when they hear the term ‘affordable housing.’ Something important to clarify is that our focus is on affordable housing for mixed incomes.
Albert Garcia Vice Chair Wynwood BID
We’re finding that people coming to Wynwood are largely shedding cars and coming to us through rideshare or transit. We are keeping up by being very responsive to consumer preferences. We are using Wynwood as a laboratory to shape future policy for the rest of the city and Miami-Dade County. One thing we are currently working on is called a woonerf, which is a Dutch term for a shared street. It is a street that bicyclists, pedestrians and cars all share simultaneously; there are no defined sidewalks, parking lanes or vehicular lanes. They are landscaped as if they are parks.
The goal of the Southeast Overtown/Park West CRA is to eliminate and prevent the conditions that cause slum and blight. We employ a three-pronged approach in carrying out this mission. The first prong addresses job creation, job readiness and small business opportunities that create good-paying jobs. The second prong is the development of affordable housing. The third prong is to foster safe neighborhoods. Good-paying job opportunities, along with available affordable housing, improves the quality of life of the residents. Moreover, not only must the neighborhood be safe, but it’s also imperative that it looks safe. It’s about changing people’s perception and making them realize Overtown is a good place to be and to live. 80 | Invest: Miami 2018 | CITY OF MIAMI
Executive Director Omni/Midtown CRA
Cornelius Shiver, Esq.
Executive Director Southeast Overtown / Park West CRA
CITY OF MIAMI OVERVIEW
( ) targets to reduce the city’s greenhouse gas creation. The office has planted over 6,000 trees with the goal of 30 percent tree canopy coverage; the trees decrease heating costs for buildings, beautify the city and absorb carbon dioxide. The city has also adopted a single-stream recycling program, which has increased the tonnage of annual recycling. Challenges The City of Miami is a city in the midst of growth, but this brings challenges along with the opportunities. Economic inequality in the U.S. continues to be a problem. In 2017, it was reported that the top 1 percent of U.S. citizens controlled 38.6 percent of American wealth, and the issue is worse in major cities. City of Miami officials are focusing on growing the middle class and providing attainable housing for residents at all income levels. In addition, a focus on adding jobs, especially in the rapidly growing tech field, will help create opportunity. Another challenge for the City of Miami is spreading the word about Miami’s strengths. Many in the U.S. think of Miami only as a vacation or retirement destination, which discourages new businesses from taking the city seriously. The good news is its reputation is not slowing down individuals’ interest in Miami; Miami-Dade is the sixth-fastest-growing region in the U.S. The city is working to better reflect its current status as a player in the global business community. Amazon’s interest in Miami for its second headquarters, as well as the flourishing startup community, is helping to counteract the Magic City’s stereotypical beach and party image. Looking ahead Miami will continue to evolve as a global leader. The City of Miami is today what many cities will look like in a few years in terms of diversity, environmental concerns and business growth. The city will continue to partner with businesses and entrepreneurs to encourage and grow the emerging tech economy and improve housing and transit options to ensure that it remains a welcoming place for all residents. Improving shared spaces and public safety will continue to be a focus of the government, as will making it as easy as possible for citizens and businesses to communicate and work with the city to innovate and continue Miami’s upward trajectory. Capital Analytics would like to thank the City of Miami for its contribution in compiling this chapter. To learn more, visit their website: www.miamigov.com
Community Redevelopment The City of Miami is home to two CRAs focusing on different neighborhoods. The Southeast Overtown/ Park West CRA and the Omni/Midtown CRA are dedicated to getting rid of blighted areas and creating urban renewal by bringing in new businesses, creating affordable housing and making communities safer. Under the leadership of the CRA Board of Commissioners, the new executive director, Cornelius “Neil” Shiver, of the Overtown CRA is focusing on the housing side of the equation. As of February 2018, the CRA had invested more than $148 million in over 1,000 housing units. The investment was allocated among several new developments, as well as the renovation of existing, multifamily units. A main focus for the new director is homeownership. In the spring of 2018, the CRA purchased 19 units in Town Park Plaza North. The development is one of the largest sources of homeownership in Overtown. These units will be the foundation of the Neighborhood Stabilization and Homeownership Program, which is intended to make homeownership a priority for low- and moderate-income residents of Overtown. The CRA is also focusing on bringing Overtown’s cultural history back to life with the opening of a new restaurant built by the Marcus Samuelson Development Group. The restaurant, which is owned by Samuelson, the celebrity chef who runs the popular Red Rooster in Harlem, is expected to open by the end of the year. In March 2018, the CRA Board also approved the construction of the Harlem Square Supper Club and Lounge in the burgeoning Overtown Entertainment District. The building will contain a jazz lounge, cigar bar and rooftop events space and contribute to the revitalization of the area. The Omni/Midtown CRA is continuing to work hard for its residents and stakeholders. One project that will have a big impact is the relocation and expansion of the successful Miami-Dade County Magnet School iPrep Academy. The CRA is working with the school board, the City of Miami and MiamiDade Public Housing and Community Development to expand quality school access to residents, as well as providing workforce and affordable housing opportunities, clearing blighted land and keeping the school board’s offices in the neighborhood, among other community benefits. The culture and history of the region is also a priority for the CRA. The Dade Heritage Trust honored the Omni/Midtown CRA in April 2018 for the preservation of the historic 1925 Citizens Bank building at 1367 North Miami Avenue. www.capitalanalyticsassociates.com
Transportation: In 2017, Miami-Dade made strides when it came to transportation infrastructure investment. Various up-and-coming projects such as Brightline, the Underline, Baylink and Park and Ride transit facilities have demonstrated the countyâ&#x20AC;&#x2122;s dedication to decreasing commute times and promoting ease of traffic flow. Investment in the countyâ&#x20AC;&#x2122;s Metrorail and Metrobus systems have also allowed for a muchneeded makeover of the existing transit system.
Transportation in numbers: Total monthly weekday, Saturday and Sunday boardings by mode (March 2018): Total weekday ridership
Total Saturday ridership
Total Sunday ridership
Total monthly ridership
% change vs. March 2017 total ridership
Miami-Dade transit system operating expenses (2017):
$0 Per-passenger operating expense
Average revenue per trip
Operating income loss per trip
Source: Miami Today
Miami International Airport passenger traffic (2017): Deplaned
% change over last year
84 | Invest: Miami 2018 | TRANSPORTATION
Tackling transit: Miami is on the verge of a new era in transit with ambitious projects, vehicle upgrades and surging airport passenger and cargo numbers Miami’s increasing significance as an international trade hub, coupled with its position as a popular tourist and global arts destination, calls for upgraded infrastructure. Achieving this goal would improve connectivity among the county’s various vibrant neighborhoods, from its southern cities like Kendall, to growing neighborhoods in the City of Miami like Wynwood, to northern municipalities like Aventura. Miami-Dade’s transportation system is complex and has long comprised various highways, a Metrobus system, a Metrorail system and the second-busiest airport in the U.S. for international passengers (behind New York’s JFK). In 2017, strides were made in terms of new methods of public transportation and much-needed upgrades to infrastructure already in place. Improving mobility Various projects undertaken within the last year have demonstrated the county’s commitment to transportation improvement. One of the most notable is the Brightline passenger rail project funded by All Aboard Florida. When completed, the express train service will connect Miami, Fort Lauderdale, West Palm
Beach and Orlando. Service between Fort Lauderdale and West Palm Beach was launched in January 2018 and has so far exceeded ridership expectations. In fact, ridership is three times what the company projected. Service to Miami is expected to begin by May 2018. By 2023, Brightline is expected to generate $6.4 billion in economic impact. Expansion and updates are being made to current transit systems as well. For example, the Miami-Dade Metrorail is getting a major upgrade with the Underline, a project that will transform the corridor below the Metrorail into a 10-mile linear park and urban trail. The corridor will start at the Metro’s Brickell station and end at the Dadeland South station. The total cost is projected to be $120 million. The Underline is expected to create 1,000 new construction jobs and 400 total jobs annually, as well as $170 million in total economic output during construction and $50 million annually after completion. Miami-Dade’s traffic woes are no secret; for that reason, many other projects are currently in the works with the goal of taking cars off the roads. In an effort to reduce congestion, Miami Beach launched a new ( ) www.capitalanalyticsassociates.com
SMART transit How the Miami-Dade Transportation Planning Organization is addressing the area’s critical mobility needs
Aileen Boucle Executive Director – Miami-Dade Transportation Planning Organization (TPO) As background, the SMART plan is a comprehensive program of projects that was unanimously adopted by the TPO Governing Board in 2016 in order to address critical mobility needs, congestion and future economic growth in Miami-Dade County. Once implemented, the SMART plan will introduce new transit options along six critical workforce commute corridors that currently have limited mobility options today. In addition, the SMART plan includes multiple Bus Express Rapid Transit (BERT) routes that are designated for operation in the region’s express lane network.
How did the development of the TPO’s Strategic Miami Area Rapid Transit (SMART) plan progress in 2017? The advancement of transit and transit-supportive projects is our number one priority. In June 2017, the TPO Governing Board allocated just under $1 billion over the next 30 years to advance the SMART plan. This represents a local funding commitment that is part of the overall requirement to seek new federal and state transportation funding grants for Miami-Dade County. During 2017, the SMART plan environmental documents, which are required to develop transit projects, were significantly advanced. In addition, the TPO Governing Board adopted a financial framework necessary to advance the plan. The funding framework includes partnerships with local, state and federal agencies, as well as the potential for public/private partnerships. 86 | Invest: Miami 2018 | TRANSPORTATION
In what ways are the TPO’s efforts helping to develop a cohesive vision for regional transportation? We have a regional MPO structure that includes one board member from the Miami-Dade TPO, as well as the Broward and Palm Beach MPOs. This structure enables regional collaboration, as well as provides a forum to formally endorse and advance our regional transportation planning efforts. Our regional MPO is called Southeast Florida Transportation Council (SFTEC), and we have been recognized as a national model of regional cooperation by USDOT. We also serve on the Florida Metropolitan Planning Organization Advisory Council (MPOAC) with all the MPOs in the state. As far as our regional transportation planning efforts, the Miami-Dade County SMART plan is also called the SMART Region because we are part of a larger interconnected region commonly known as the Miami Urbanized Area. The SMART plan advances regional transit needs by prioritizing cross-county regional transit projects on several of the six SMART corridors, as well as a comprehensive managed lane network that facilitates a seamless and coordinated cross-county transit program.
( ) South Beach trolley in November, as well as new Middle Beach Loop, Collins Link and North Beach Loop routes. In addition, after experiencing weeks of delay, new express lanes along Interstate 75 opened at the end of March 2018. “There’s nothing like the South Florida express lane system in the country,” James Wolfe, District 6 secretery for the Florida Department of Transportation, told Invest:. “There are many linear express lanes nationwide; however, the network aspect and the extent of South Florida’s express lanes are unique.”
ducing four new express bus routes and increasing on-time performance of transit vehicles. The Transportation Improvement Program (TIP) outlines the DTPW’s transportation improvements for the next five years. All projects receiving federal funds are included in this plan. New facilities outlined in the TIP include the new Dolphin Station and the Kendall Park-and-Ride facility, while new service routes include the SR 836 Express Bus. Various infrastructure renewal programs, including $1.85 million worth of rail maintenance, are delineated in the fiveyear plan as well. The DTPW’s Strategic Miami Area Rapid Transit (SMART) plan was officially endorsed and initiated in April 2016. The SMART plan seeks to expand mass transit throughout the county by connecting existing mass transit with six added corridors: Beach corridor, EastWest corridor, Kendall corridor, North corridor, Northeast corridor and South Dade Transitway. Two major activities are underway for each corridor: land-use visioning headed by the Miami-Dade Transportation Planning Organization (TPO) and project environmental studies headed by the DTPW and the Florida Department of Transportation (FDOT).
The SMART plan seeks to expand mass transit throughout the county by connecting existing mass transit with six added corridors.
Staying up-to-date Miami-Dade has made much progress on its long-term transportation goals. The MDT10Ahead 2017 Annual Update serves as the blueprint for the Department of Transportation and Public Works’ (DTPW) strategic guide for public transportation in Miami-Dade over the next 10 years. The 2017 update outlines the county’s performance in terms of meeting the outlined transportation goals for the year. In 2017, a majority of the goals put forth were either met on target or finished ahead of schedule. Goals included improving accessibility, transit service reliability, convenience, customer service, operational safety, coordination, outreach, integration, sustainability and the maximization of funds. Specific things done to achieve these goals include completing the construction of three multimodal transit hubs (Dolphin Station, Northeast Transit Hub Enhancements and Transitway Park-and-Ride), intro-
State of affairs FDOT provides a significant amount of funding for Miami-Dade transportation projects. As of 2016, it had allocated $3.75 billion to Miami-Dade for the next five years for transportation products and improvements.
Alice Bravo Director – Miami-Dade Department of Transportation & Public Works
We are replacing our bus fleet. We’ve entered into a contract to get 300 new buses, and now we are going to take a second step to get an additional 200 buses. That represents more than half of our fleet. This is a huge investment — we’re talking about $250 million. It’s also going to be Compressed Natural Gas, or CNG, so it’s a clean technology and good for the environment.
Javier Rodriguez Executive Director Miami-Dade Expressway Authority
How are you facing the challenge of mounting traffic? In Miami-Dade County, 97 percent of today’s commuters use roadways to travel. Due to Miami-Dade’s continued growth, the issue of congestion will get worse if we don’t provide mobility options. We need to manage the congestion that we have and offer choices to the public. In doing that, we will get people moving faster and prevent them from cutting through city and neighborhood streets. One way we’re looking to reduce and manage congestion is by incorporating express technology lanes on our expressways. We call them XT Lanes. Currently we are incorporating them on the Dolphin Expressway to set the platform to provide express bus services from the Dolphin Station Park-and-Ride, which we are currently building, to hubs such as the airport and Downtown. We will also implement these in our new multimodal corridor, the Kendall Parkway, extending the Dolphin southwest to West Dade and West Kendall to serve 600,000 residents and businesses that today do not have transportation alternatives. What does the future hold for 836, Dolphin Expressway? With the modernization of the Dolphin Expressway being completed later this year we are looking at opening new avenues to the future. The Dolphin Expressway was originally built to serve a population of fewer than 1 million residents. To keep pace with the growth of this community over the past 50 years, MDX is committed to forwarding new, improved and multimodal infrastructure choices that successfully address the needs of a local population of 3 million residents, as well as 16 million visitors. Using technology and offering new choices for travel, such as express transit service, we are confident we can contribute to the betterment of the public and the continued growth of our economy.
88 | Invest: Miami 2018 | TRANSPORTATION
This includes the operation and maintenance of transit services, financial services and budget; information systems; legal, personnel and contract administrative programs; and Miami’s Work Program development. The Work Program is a tentative list of projects that will be funded and carried out over the next five years in District 6 (Miami-Dade and Monroe counties). Of FDOT’s allocated funds, 75.9 percent will fund construction projects, 15.3 percent will fund public transportation programs, 7.5 percent will go to right of way purchasing and 1.3 percent will go to funding other programs. In Miami-Dade, most of the money contributed by the state is being used for improvements and upgrades for Metrobus and Metrorail services. In November 2017, Miami-Dade unveiled its first new modern and high-tech $8 million Metrorail car, which is part of a $380 million plan to fully switch out all 14 of the 33-year-old Metrorail trains. FDOT’s proposed 2017-2018 budget allocated $70,113 to this effort. Approximately $250 million was invested in a new fleet of Metrobuses as well, toward which FDOT planned to allocate $229,425 in 2017-2018. Federal money is being used efficiently in order to improve transportation within the county and enhance the public ridership experience, encouraging residents to take advantage of public transportation options as an alternative to battling traffic. MDX matters The Miami-Dade Expressway Authority, also known as MDX, is a not-for-profit agency dedicated to enhancing mobility and transportation infrastructure in MiamiDade County. The MDX expressway system consists of the five most traveled expressways in Miami-Dade: Dolphin Expressway (SR 836), Airport Expressway (SR 112), Don Shula Expressway (SR 874), Gratigny Parkway (SR 924) and Snapper Creek Expressway (SR 878). The agency was created in order to ensure that toll revenues collected are reinvested to continue to make transportation improvements. MDX currently has a five-year work program in place for 2018 to 2022 to effectively maintain and organize its transportation goals. This current program consists of 43 projects with a total cost of $1.3 billion. These projects are mainly funded by toll revenues collected on the five expressways and through partnerships with entities such as FDOT and DTPW. Some major current projects include MDX partnering with FDOT and Miami-Dade Transit to construct the Dolphin Station Park & Ride transit facility. The $18.9 million facility will support DTPW’s SR 836 Express Bus Service, providing new bus routes to Dolphin Mall,
Sweetwater and Doral. It is expected to be completed in 2018 and will hopefully be the site of a new east-west commuter rail service. Another major project is the $243.2 million SR 836/I-95 Interchange improvement, which will include widening, a new connector and new access to the Hospital District in order to improve mobility and safety. Lastly, the Connect 4 Express is a potential project in the works that would contribute a new expressway to Miami-Dade, connecting SR 836, 112, 924 and 826. The project is anticipated to begin in 2019. Modern rail Major long-term rail projects are poised to change the way Miami-Dade residents travel. In the hopes of easing traffic congestion, rail improvements are anticipated to encourage more people to use public transportation and leave their cars at home. After almost three decades, Miami-Dade County finally debuted the brand-new $300 million Miami Metrorail train cars. The first high-tech custom train was unveiled in November 2017, and all 136 cars should be replaced by 2019. The old train cars are 33 years old and were in desperate need of an upgrade. These new trains will have faster Wifi, bicycle racks and digital signage. “An important milestone this year was the delivery of our first new metro rail train,” Alice Bravo, director of the Miami-Dade Department of Transportation & Public Works, told Invest:, “which went into service on November 30, 2017. The contract represents a huge investment in our community. People love to talk about expansion, but you have to maintain your existing system. Transit is the solution for mobility and reducing congestion, so we want to have a system that’s clean, safe and reliable.” The first leg of Brightline was officially unveiled in January 2018, linking Fort Lauderdale and West Palm Beach. The $3 billion project, which will link Orlando, West Palm Beach, Fort Lauderdale and Miami, is expected to generate $6.4 billion in economic impact for the state by 2023. The first building at Brightline’s Miami station — 3 MiamiCentral — was completed in February 2018. The Miami station is set to begin service between Miami and Fort Lauderdale in 2018. Baylink, the proposed $244 million light rail extension from Miami to Miami Beach, was unfortunately halted in December 2016 until Miami-Dade commissioners commit to building a connection across Biscayne Bay. The two-mile wireless streetcar system would have connected South Beach to mainland Miami. It is unclear when this rail project will start up again, but as of March 2018, a new Personal Rapid Transit (PRT) system is being discussed to connect Miami Beach to Downtown. The
Dionne Polite Manager of State Operations AARP Florida
Transportation is an issue for everyone in Miami-Dade, and especially for our older residents. We try to make things easier for our members by providing them with information on community resources. Many people are looking for in-house support or transportation assistance in getting from home to their doctor’s appointments. With these services, people are more able to age in place and live their best lives. Here in Miami-Dade, cultural experiences and being social are important to quality of life, and transportation and walkability are key factors in that. We are working to develop livable communities by encouraging developers and city planners to make sure there is some thought around building homes for older people or, for that matter, places where all people can live and age. For example, making sure that there is some housing built with no or minimal steps. When you’re young, running up the steps is not a big deal, but as you get older it becomes a challenge. At the beginning of 2016, we had about seven communities in our age-friendly network, and we ended 2017 with 16. We’ve already added two more in 2018, and one of them is right here in South Florida, with the intention of having many more added to our South Florida list. We’re also working to encourage our members to explore their neighborhoods and nearby areas on foot. We’re working with officials in Little Havana, Little Haiti and Wynwood to organize walking tours. We’re not looking to limit opportunities but to expand them. Nobody is saying that once you hit a certain age, you shouldn’t drive after dark. Many seniors are still driving; 78 percent of men and 52 percent of women nationwide who are 80 or older still drive occasionally, but many are choosing to give up their cars for convenience. It costs about $8,500 a year to own a car, and that money can make a big difference, especially for retired people. It’s important for Miami’s leaders to know that there are more people who are 50 and older than those who aren’t, and that number will be increasing rapidly. Walkability and transportation needs aren’t going away, so AARP wants to work with all entities to address these needs with our Age-Friendly Network. www.capitalanalyticsassociates.com
PRT trains are a way of gaining momentum on Miami’s SMART plan and reigniting the Baylink proposal. With Brightline ridership numbers at levels three times higher than expected and upgrades to Metrorail cars, Miami-Dade officials and residents alike are demonstrating their commitment to improved public transportation systems. The advancing of rail projects will improve traffic and commute times. Flying high In a 2017 American City Business Journals study, Miami International Airport (MIA) was ranked the seventh best-run airport out of 89 airports in America for its growth and operational efficiency. It was also recognized in 2017 with the Airport Innovation Award. MIA is the second-busiest airport in the United States for international passengers and the top U.S. airport for international freight. It’s no wonder that it serves as one of the top economic engines of Miami-Dade County, generating $33.7 billion and contributing approximately 280,000 jobs annually. The airport is also recognized both nationally and internationally for its role as the gateway to the Americas. It offers more flights to Latin America and the Caribbean
90 | Invest: Miami 2018 | TRANSPORTATION
than any other airport in the U.S.; has direct connections to Canada, Mexico, Europe and the Middle East, with flights to China on the horizon; and also handles one of the highest cargo volumes among airports worldwide. Florida airports received some of the highest rankings in terms of customer satisfaction, as well, according to J.D. Power’s 2017 North American Airport Satisfaction Study. Of all U.S. mega airports, Miami International was ranked number 12 for customer satisfaction, while Orlando was ranked number one. Tampa was ranked second of all large U.S. airports. International passenger traffic has increased slightly from 2016, by 0.43 percent, while domestic passengers decreased by 2.61 percent. This resulted in a total decrease in passenger traffic of 1.15 percent in 2017. This slight decrease can be explained by a variety of factors, in particular the Zika virus outbreak and the tumultuous hurricane season. Considerable water damage from Hurricane Irma forced MIA to close and cancel operations from Friday, September 8, until Tuesday, September 11. Despite these challenges, MIA continues to grow and expand its network. It attracted 22 new cargo carriers and 32 new flight routes in 2017. The Qatar Airways ( )
Bright commute How Brightline is improving connectivity and opening up the Miami area in ways that have not been possible before
Patrick Goddard President & COO – Brightline How is Brightline going to be partnering with existing transportation to create an easier commute? There are transportation systems, both public, such as Tri-Rail, Metrorail and Metromover, and private, like ride-sharing, taxi and limo companies. We’re partnering with all of those entities to create a seamless trip from door to door. Our station is strategically located in Downtown Miami. MiamiCentral is an intermodal center; those other modalities can connect our passengers easily to their final destinations. Some of them are directly integrated, and some we have arrangements with. A lot of individuals are hesitant to part with their car keys. Cars instill a sense of freedom, but it’s false, particularly at rush hour. We are trying to let people know that they should try Brightline as a quicker, more productive and more reliable option. What is Brightline’s strategy to help prevent any more accidents involving pedestrians? Safety is our number one priority as an organization. We’ve done an excellent job of working with the municipalities, FDOT and FRA in evaluating all of the systems that need to be in place throughout our transportation system. We meet the highest national levels of safety throughout the Florida East Coast Railway and Brightline corridor. The key to preventing incidents is education and enforcement. People should only cross at designated railroad crossings and obey the signals. A passenger train crossing takes about the same amount of time as a red light cycle. We have deployed ambassadors and VMS signs at many of the crossings up and down the corridor. We’ll be launching a big safety campaign right before we start operating in Miami. Individuals should never try to beat a train.
How is Brightline going to change Miami over the next few years? Brightline is going to open up Miami to Fort Lauderdale and West Palm Beach in a way that has not been possible before. It will expand options for residents and tourists in terms of dining, arts and culture. Previously, residents might not even have thought about going from one to the other because they didn’t want to deal with parking or driving back at night. From a commuting perspective, someone could live in Palm Beach or Fort Lauderdale and work in Miami. Being able to reliably get to work in Miami in 30 minutes from Fort Lauderdale makes a big difference in someone’s quality of life. Cost of living in Fort Lauderdale and West Palm Beach is a lot different from the cost of living in Miami. We think it expands the talent pool available to all South Florida businesses.
Market voices: Airlines
Station Manager, Miami EL AL Israel Airlines
We purchased 16 new aircraft in 2017. Out of the 16 we have four already, and the rest we will receive in the next few years. We are gradually changing our fleet from the 747-400s to the Dreamliners. The future is here; they are a state-of-the-art aircraft. Everything about this aircraft is exciting and results in an overall improved customer experience, such as more comfortable new seats and new technology, including Wifi. They are fuel efficient. We can take more cargo and have shorter flight times. We are opening new stations all over the world. Tel Aviv is the hub, of course, but we’re flying to Europe, Africa, Asia and the Far East. Miami is the gateway to South America, and we will launch nonstop service from San Francisco to Israel this November.
For Europeans, Miami used to be solely a tourist destination. They enjoyed the metropolitan, multicultural atmosphere with the perks of South American influences on the music and food. There are still many tourists, but today more Europeans travel to Miami for business. For Lufthansa Group, it’s all about innovation. Every airplane has two wings and an engine, but our product quality — especially for our business class customers — sets us apart. When our customers arrive at their destination, they don’t want to have any catching up to do. They need to be able to make conference calls and conduct normal business during the flight. To accommodate them, we were the first to provide Wifi on a transatlantic route.
Chairman & CEO IBIS Airlines
Station Manager, Miami Lufthansa Group
IBIS will enter the South Florida aviation sector with around 110 employees in the pre-fight stage, eventually reaching closer to 1,000 employees once the airline is operational. Launching our new airline from Miami International Airport provides us immediate access to numerous international destinations that are not far away from South Florida, as well as the local aviation sector’s great training facilities. Many legacy carriers have signaled to airports that they won’t continue servicing certain international routes with direct flights, instead preferring to return to a hub network structure. While this can improve the internal operations for a given carrier, not having affordable options to fly directly to international destinations is unattractive to passengers.
Local focus How Uber is investing in the local community, improving mobilty and quality of life for Miami-Dade residents
Kasra Moshkani General Manager, Southeast U.S. – Uber are shared through technologies like Uber Pool. The idea is still the simple concept that we started with: wherever you are, whatever time it is, you can open up the app, push a button and get a ride. Uber Pool takes this one step further and helps to make mass carpooling a reality. A few years back, Miami was one of the first cities where we rolled out our pool product. People going from similar start points to similar endpoints share a car, so fewer cars are being used, which reduces congestion and pollution in our city. Having grown up in Miami, I know that there is a strong car ownership culture, and the notion of carpooling hasn’t always been popular. I’ve been pleasantly surprised to see the adoption of this technology. Our culture is shifting; more and more families are going from two cars to one, and some are getting rid of their cars altogether.
How is Uber working to build better communities? It’s an exciting time for our company as we are at a turning point. Under new leadership, this new era will be marked by integrity at the core of every decision that we make, whether that decision is global or local. We are excited about the opportunity to use our technology in partnership with the cities that we operate in. We will work hand in hand with them to address both the transportation and the environmental challenges that we know so many cities are facing. Our technology has enabled us to improve the mobility and the quality of life for people who live inside and outside of cities. At the end of the day, it’s about providing people with an attractive alternative to driving their own cars. How are driving habits changing? How people think about private car ownership is shifting from actual car ownership to one where cars 94 | Invest: Miami 2018 | TRANSPORTATION
How is Uber working with Miami’s business community? Uber now has over 100,000 driver partners throughout the state, and visitors from 79 countries took an Uber while here in South Florida last year. One of Uber’s core goals is being as local as possible. Our Miami team has grown over the last few years, and we’re very passionate about answering one question: We have this technology that works really well around the world, but how can we make it uniquely Miami? One answer to that is the partnerships we’ve formed over the last few years, including our relationships with the Miami Heat, the Miami Marlins, the Adrienne Arsht Center and Ultra Music Festival. These are all are such an integral part of what it means to live in Miami, and we want to be a part of that experience. Our services also cut down on drunk driving. That’s something we are looking forward to continuing to do over the coming years as part of our mission to be as local as possible.
( ) Cargo launch in February 2017 was one of the more notable advances. New commercial air service added in 2017 included First Air to Canadian destinations; Aer Lingus to Dublin, Ireland; and EL AL to Tel Aviv, Israel. Miami International Airport was recognized in 2017 by the Airports Council International as the top airport in North America for environmental management for its Sustainability Project, one of the largest energy-saving programs in the U.S. The project was initiated in 2015 with Florida Power and Light as a way to reduce carbon emissions and water consumption. The $32 million investment in ventilation upgrades and other innovative solutions has saved 35 million kilowatts of power per year, not to mention the reduction of carbon emissions and water consumption by the equivalent of 5,110 cars and 28 million gallons of water, respectively. In 2017, cargo went up 9 percent and is expected to continue to grow exponentially. In order to support this recent boom, MIA plans to allocate approximately $1 billion in infrastructure investments to upgrade cargo buildings. The Miami-Dade Aviation Department gained final approval from the U.S. Department of Commerce to designate MIA as a foreign trade zone. This is great news for Miami International Airport in the years to come. By gaining this free trade zone status, companies will be able to receive and process materials and merchandise with reduced or eliminated customs charges upon entry to the U.S. at MIA. This is a huge incentive for many companies and is expected to attract more business opportunities to the airport in years to come.
Partnering up The public and private sectors of Miami-Dade are working in unison to effectively reach the county’s transportation goals and provide mutually beneficial arrangements for all stakeholders. Transit-oriented development — specifically mixed-use developments located at or near transit hubs — is particularly playing a role in providing transit solutions. For instance, MiamiCentral will soon be home to the new inter-city Brightline express trains that connect Miami, Fort Lauderdale, West Palm Beach and Orlando. MiamiCentral, a mixed-use urban space spanning six blocks in Downtown Miami, will house 800 apartments, 180,000 square feet of retail and 190,000 square feet of office space, as well as Central Fare, Miami’s first food hall experience. The project is being developed by the parent company of All Aboard Florida, Florida East Coast Industries. The first mixed-use tower, 3 MiamiCentral, was completed in February 2018. The Underline is a $120 million project planned by the City of Miami that will turn 10 miles of space beneath the Metrorail into a new park. The goal is to transform the underutilized space beneath the Metro into a walkable and bikeable car-free place for Miami residents. This project, which is estimated to be completed by 2020, is expected to result in increased private investment on properties along the Metrorail. In November 2017, the City of Miami called for a proposal to allow developers around the Underline to build bigger if they contributed funds for the park. In fact, it is estimated that projects within a half-mile radius of a
In 2017, cargo went up 9 percent and is expected to continue to grow exponentially.
Art Noriega CEO – Miami Parking Authority
From a parking perspective, we have a huge opportunity due to changing technology. Parking garages could evolve in different directions, but the traditional system — driving to work and parking a car in a garage all day — might not exist in the next decade. We’re zeroing in on the idea that whatever we’re building in the near future needs to be flexible enough to be repurposed.
Samuel Cohen General Manager, Florida Lyft
2017 was a great year for Lyft; we grew more in the first half than in all of 2016. We are the fastest-growing ride-sharing company in the U.S, as well as in Florida and Miami. We expanded coverage statewide across Florida and increased the number of rides we are providing. We’re growing so quickly because we are preferred by passengers and drivers. We were the first rideshare company to allow tips and have always prioritized helping drivers earn more through incentives and partnerships. At the end of 2017, we announced a partnership with Guild Education that helps connect drivers with discounted education so they can better pursue their goals and passions. Lyft passengers recognize that we’re a values-driven company. Our focus is on treating drivers well, and we provide a good experience for passengers and the community. In 2017 we also launched 24/7 phone support in English and Spanish to make it easier for drivers to get their questions answered quickly and comprehensively. We also launched Round Up and Donate, which rounds up a passenger’s fare to the nearest dollar and donates that change to a charity of the rider’s choice. It’s very important for us to be a part of the community and to create positive change. During Hurricane Irma, we established a $100,000 fund for people in need to get to and from hospitals and shelters after the hurricane. We’re also continuing to grow ways to increase car occupancy and provide affordable ride options, such as our shared ride option, Lyft Line, which allows a passenger to share his ride with someone else going in the same direction and pay up to 60 percent less. In Miami alone, more than 6.3 million single-use cars have been taken off the road thanks to Lyft Line. Services like ours allow people to live and work without a car and save money. After paying for insurance, gas, parking and other expenses, a number of people in the city have found it’s more convenient to rideshare. It’s really changing the way people live in Miami. 96 | Invest: Miami 2018 | TRANSPORTATION
Miami continues to become more bike friendly with projects like the proposed Underline.
Metrorail station will enjoy a height increase from 8 to 12 stories and a floor-lot ratio bonus increase from 25 to 35 percent. Going fare-free As studies of the six-corridor rapid transit SMART plan await more state and federal funds, the Miami-Dade TPO Executive Policy Committee has been turning an eye toward fare-free municipal and county circulators. The idea, proposed in March 2018, is to have free public transportation options like trolleys service all municipal areas, linking with one another and with the area’s bus and train systems, in an effort to increase connectivity across the county. Most municipalities in Miami-Dade already use People’s Transportation Plan (PTP) money for fare-free circulators, so the plan would expand and improve on the existing service. In 2002, the county added a half penny to the sales tax, bringing the overall sales tax up from 6.5 percent to 7 percent, with the half penny going toward improving transit around the county. The PTP funds are split among 30 municipalities, distributed on a per-capita basis, with 20 percent of a municipality’s share required to be used on transit. While no formal plan was voted on or put into place, ongoing discussions about filling the gaps in transportation between municipalities using PTP funds will continue into 2018. Sharing rides Ride-sharing applications are transforming the way people travel around the world, especially in a trafficcongested city such as Miami. After a long-running battle over transportation network regulation, on May 9,
2017, Governor Scott officially signed HB 221, also known as the “Uber/Lyft Bill,” which set consistent operating standards for ride-sharing companies throughout Florida. The bill reduces regulations and makes it easier for these ride-sharing companies to thrive. Rapid urbanization and increased growth is continuously putting stress on Miami’s transportation infrastructure. Ride-sharing apps like Lyft and Uber have decreased the burden by saving governments money on drunk-driving accidents and infrastructure expansion. App upgrades like Uber Pool and Uber Express Pool also encourage carpooling, which effectively decreases the number of cars on the road and makes getting around easier. Ride sharing has a positive economic impact as well. In fact, Lyft reported that its riders put an estimated $2 billion into local economies in 2017. Getting technical Technology continues to be important for transportation initiatives in Miami. With a particular emphasis on sustainability, Miami-Dade established an integrated Department of Transportation and Public Works (DTPW) in 2015 in order to enhance the region’s transportation networks and quality of life. The new department embraces mobility management by partnering with both public and private transportation networks in order to facilitate connectivity within the county. Miami-Dade is providing residents with a new fleet of technologically advanced and environmentally friendly buses. Hybrid buses save approximately 25 percent in fuel costs and have lower emissions. In 2017, DTPW invested $250 million in 500 Compressed Natural Gas (CNG) buses, which is estimated to save
$200,000 per bus in the long run. DTPW is also improving mobility by adding transit signal priority; in 2017, it invested $40 million for the implementation of the system throughout major corridors. This is part of a five-year, $160 million plan to improve traffic signalization and reduce congestion. “Electrification is coming,” Greg Barnes, president of Bill Ussery Motor Group, told Invest:. “The questions are how big it is going to come and how fast it is going to come. In the showroom, we don’t have a lot of people coming in for an electric car. While everyone in the industry is preparing for it, we haven’t seen a strong demand from the consumer side yet.” In terms of smartphone app technology, Miami-Dade is the first county in Florida to join the Waze Connected Citizens Program. Waze is a navigation app with the world’s largest community of drivers. The program is essentially peer-to-peer data exchange of publicly available traffic information to provide drivers with travel suggestions through the least congested routes. This leads to more efficient, safer and easier commutes that improve the quality of life for residents. Perhaps an even more technologically ambitious plan is Elon Musk’s proposed Hyperloop between Miami and Orlando. The proposal calls for a 26-minute trip between Miami and Orlando, a route that usually takes an average driver four hours to complete. Hyperloop One and FDOT announced their partnership in April 2017 and are currently running tests and studies on the potential project. New era Miami’s traffic is a secret to no one. The metro area ranks 5th out of 297 U.S. cities and 14th out of 1,360 cities around the world in terms of time residents spend in traffic, as reported by INRIX. In 2017, drivers spent 9 percent of their time in congestion, which adds up to approximately 64 hours out of the year. Nevertheless, Miami-Dade is on the verge of a new transit era. Modern and ambitious upcoming projects like the Brightline, the Underline and Park-and-Ride transit facilities are reshaping the way residents think about commuting. Miami-Dade’s government has shifted how it funds and implements public transportation, as demonstrated by the recent major upgrades to Metrorail trains and Metrobuses. The region’s aviation industry has made strides as well, especially with surging cargo deliveries and increased international passenger traffic at MIA. The future of transit in the Magic City is looking bright. www.capitalanalyticsassociates.com
98 | Invest: Miami 2018 | TRANSPORTATION
Trade & Logistics: Nicknamed the â&#x20AC;&#x153;Gateway to the Americasâ&#x20AC;? because of its convenient location, Miami-Dade County serves as a global hub for international imports and exports. PortMiami and Miami International Airport are the economic powerhouses of Miami and the state of Florida. Both the seaport and airport continued to thrive and set records in 2017 and are keeping the momentum going into 2018.
Trade & Logistics in numbers: Top 10 imports Miami International Airport (2017): Gold
Value added to a returned import
Cellphones, related equipment
Returned exports, with change
Heterocyclic chemical compounds
Fish fillets, chilled or frozen
Aircraft engines, Engine parts
Source: WorldCity Trade Numbers
Top 10 exports Miami International Airport (2017): $6.33 billion
Civilian aircraft, parts $4.64 billion
Cell phones, related equipment Gold
Plasma, vaccines, blood
Medical instruments for surgeons, dentists, vets
Medicines in individual dosages
Value added to a returned import
$522 million 0
Source: WorldCity Trade Numbers
100 | Invest: Miami 2018 | TRADE & LOGISTICS
Top Miami trading partners 2017: $15.76 billion
Brazil $7.37 billion
Colombia Dominican Republic
$5.41 billion 0
Source: WorldCity Trade Numbers
Top 10 exports PortMiami (2017):
Top 10 imports PortMiami (2017):
Motor vehicles for transferring people
Sweaters, pullovers, vests, knit or crocheted
Returned exports, with change
T-shirts, tank tops, knit or crocheted
Insulated wire, cable
Motor vehicle parts
Rum, gin, vodka, other liquors
Printers, all types, parts
Shrimp, other crustaceans
Cellphones, related equipment
Scrap iron, steel
Medical instruments for surgeons, dentists, vets
Synthetic yarn, not retail
Value added to a returned import
Source: WorldCity Trade Numbers
Source: WorldCity Trade Numbers
PortMiami trade (2017): 30 Value Tonnage
20 $14.60 billion
10 6.15 million
2.54 million 0 Total Trade
Source: WorldCity Trade Numbers
Keep it moving: Miami’s airport and seaport move some of the largest volumes of imports and exports in the country, powering the region’s economy Florida handles the most air cargo of any U.S. state, is home to the second-largest foreign trade zone network in the country and has the third-largest cluster of logistics and distribution establishments nationwide. Miami-Dade County houses PortMiami and Miami International Airport (MIA), both of which are top economic engines for the entire state of Florida. PortMiami is one of the busiest ports in the world, and Miami International Airport was officially named the “Best Freighter Hub” in the world in September 2017. Miami is nicknamed the “Gateway to the Americas” for a reason. Both the seaport and airport are responsible for some of the largest volumes of imports and exports of goods. While recent trade policies and global events have limited international trade, Miami continuously sees increases in cargo traffic year-overyear due to market factors such as the boom in e-commerce and significant infrastructure investments. It’s no wonder Amazon ranked Miami among its top 20 finalists for its new headquarters. Global trade In 2017, key events significantly impacted global trade with Miami. The U.S. withdrawal from the Trans-Pacific 102 | Invest: Miami 2018 | TRADE & LOGISTICS
Partnership (TPP) caused the U.S. to forgo approximately $131 billion annually, or 0.5 percent of GDP. Several politico-economic events in countries that are key trade partners for Miami, like China and Colombia, also had an impact on international trade. In a fight against unfair trade practices, the Trump administration launched an investigation into China’s intellectual property trade power, and China and the U.S. have been sparring ever since, threatening to slap increasingly high tariffs on each other’s goods. Trump and his supporters say these tariff threats are the first step in negotiations with China and part of an effort “to protect the technology and intellectual property of American companies and American people.” Meanwhile, global financial markets have been gyrating as the world’s two largest economies skirt the edges of a trade war. In Colombia and Peru, illegal gold mining and selling have had an effect on Miami’s trade and have become a problem for local logistics. Approximately 2 percent of the market value for gold in the U.S. passes through Miami annually, but illegal gold miners in Peru and Colombia are poisoning rainforests with chemicals and working in conditions that violate labor laws.
TRADE & LOGISTICS OVERVIEW
Trade with Cuba has also been significantly affected by President Trump’s new regulations. The rules levied on travel and trade strengthen the embargo and limit American travel to Cuba once again. Specifically, the restrictions ban Americans from any direct financial transactions with 180 entities connected to the Cuban military, intelligence and security services. Industry initiatives Various entities are promoting trade and logistics in Miami at both the state and local levels. At the state level, leaders have invested greatly in seaport and airport infrastructure, including MIA’s $6.4 billion capital improvement program and PortMiami’s Deep Dredge Project. Enterprise-Florida, a partnership between Florida’s business and government leaders, provides assistance to trade and logistics company in South Florida by offering trade grants and providing business counseling, among other things. Additionally, in 2017, the Florida Department of Transportation (FDOT) focused on aligning transportation investments to support development of logistics within the state through its FDOT ILC Grant Program and partnership with the Florida Chamber Trade and Logistics Institute. At the county level, The Beacon Council’s Trade and Logistics Committee set various goals in April 2017 to prepare Miami’s future workforce for careers in the growing trade and logistics field of South Florida. PortMiami and Miami International Airport are the biggest economic engines in the state, so it’s no surprise that trade and logistics and international trade in Miami-Dade County support over 100,000 jobs. Investing in the education of young South Floridians will continue to fuel the growth expected within the industry. The three goals established by The Beacon Council are 1) marketing trade and logistics opportunities worldwide and locally, 2) creating opportunities for low-income communities to engage in Miami-Dade logistics and 3) finding employment opportunities for newly developed logistics talents. The Beacon Council has set out to accomplish these goals by implementing logistics education programs in colleges and high schools throughout Miami-Dade, including Miami Dade College, the University of Miami, Florida International University and Miami-Dade County Public Schools. These initiatives from local educational institutions are intended to promote efficiency, innovation and skill-building in trade and logistics related fields. The Beacon Council also launched the Commercial Drone Initiative in May 2017. Drones are used to increase efficiency and cut costs for businesses, and this is creating rapidly accelerated demand for unmanned aircraft
Lester Sola Director Miami International Airport
Can you talk a little about the role that Miami International Airport plays in Miami? 70 percent of all international visitors to Florida come through MIA, and 96 percent of visitors coming into South Florida come by air. The first impression for most of these visitors is our terminals, which makes them incredibly important. The airport has had significant growth throughout the years and has served this community well, evolving and bringing in new technology as it becomes available. One of those evolutions includes pharmaceutical shipments. MIA is the only airport in North America that is certified by IATA for pharma freight, and that’s something we’re very proud of. All of the components have been certified, from the airport infrastructure to the airlines. We expect it to yield huge dividends for us, especially shipping to Brussels, which is the other IATA-certified airport for pharma. How is Miami International Airport continuing to innovate? We partnered with Customs and Border Protection and installed a new passport screening system that uses facial recognition technology. In two seconds, the system identifies you and determines whether or not you are the passport holder. This removes all opportunities for human error, and we’re able to process a plane of 300 people in about a half hour. It doesn’t matter whether you’ve grown a beard or changed your hair color; it’s able to make that connection. Backed-up customs lines will be a thing of the past, especially once we’re able to leverage this technology throughout the entire airport. We were the first airport to have a passport facility completely dedicated to this technology, and as of the spring of 2018, we’re still the first. Leveraging this type of technology and trying new systems help us make travelers’ experience as pleasant as possible. Coming through an airport — especially a large, international airport — can be frustrating. If someone’s first experience is waiting in a long line, that person might be less likely to come back to spend time and money here in Miami. www.capitalanalyticsassociates.com
TRADE & LOGISTICS OVERVIEW
PortMiami tonnage, January-February 2017:
114,072 Honduras 97,257 Costa Rica
89,916 Dominican Republic
46,088 The Netherlands
Source: WorldCity Trade Numbers
systems. For example, UPS launched a pilot program to test drone deliveries of home packages in Florida in order to cut costs. The Beacon Council initiative is meant to educate local businesses on how they can benefit from drone usage and the ways drones are accelerating the aviation and technology sectors of South Florida. Carrying cargo As the largest passenger port and one of the largest cargo ports in the world, PortMiami is also one of the busiest ports globally. Its ideal location in the center of the Western Hemisphere and as the U.S. container port closest to the Panama Canal makes it critical for international trade and commerce. For this reason, the port has the largest economic impact on both the
county and the state. As of April 2017, PortMiami’s economic impact had passed $41 billion, an increase of $12.8 billion from the previous year. “The most visible aspects of the maritime economy here are the cruise industry, container shipping, fuel deliveries, the recreational boating and yacht industries and fishing,” Rear Admiral Peter Brown, commander of the Seventh Coast Guard District, U.S. Coast Guard, told Invest:. “Smaller freighters on the Miami River go to Haiti and other island nations. All these pieces of the maritime economy in South Florida are an interconnected engine, and part of the Coast Guard’s job is to make sure that those pieces work together safely in a way that’s responsible to the environment and is also secure.”
Charlotte Gallogly President – World Trade Center Miami
We recently launched our trade assistance center to provide direct services to companies looking to go global. We also have a new radio show called Trading After Hours, which serves as an opportunity for us to bring together experts in international trade and business listeners in Miami. We have launched a lot of initiatives like this one to promote the idea that Miami is the trade and logistics capital of the Americas. We target small to mid-sized companies, informing them about the various kinds of assistance that is made available by the State of Florida for growing a business internationally.
104 | Invest: Miami 2018 | TRADE & LOGISTICS
TRADE & LOGISTICS OVERVIEW
Cargo traffic at PortMiami increased by 18.5 percent from August 2016 to August 2017, totaling 99,546 20foot units. This significant increase can be explained by PortMiami’s $1.3 billion in infrastructure investments. These investments include adding four super post-Panamax cranes, dredging the shipping canal and constructing a new on-dock rail link that connects Miami to 70 percent of the U.S. population. All of these investments allow the port to service larger ships, thus increasing cargo traffic. Cargo growth can also be explained by expanded cargo services, such as Seaboard Marine’s two new services between Miami and Latin America and Hapag-Lloyd’s new service to the Mediterranean Gulf Service. PortMiami’s largest trade region is within Latin America and the Caribbean, which makes up approximately 49 percent of the total trading. With the recent completion of the Deep Dredge Project, trade with Asia is expected to continue to increase as bigger ships are now able to dock at the port. As of 2016, trade with Asia made up 34 percent of the port’s total trade. Europe and the Mediterranean made up 13 percent, while the Middle East, India and Africa made up 3 percent. The port suffered some challenges in 2017, including a cyber attack in June that affected some dry cargo delivery. In November, port drivers also boycotted PortMiami for several weeks in order to protest slow turnaround times and delays that were costing them heavy penalties. Nevertheless, 2017 saw growth in cargo shipments and increases in overall economic impact for the state. Flying freight Miami International Airport (MIA) is ranked number one in the U.S. for international freight. As the world’s most prominent gateway to Latin America and the Caribbean, MIA handles 83 percent of all air imports and 79 percent of all exports to and from the region. In 2015, MIA became the first airport in the Western Hemisphere and the second airport in the world to be certified by the International Air Transport Association (IATA) as a pharmaceutical freight hub. The past few years have been significant for the airport, not only because of its official designation as a pharma freight hub, but for other reasons as well. For example, MIA received over $36 million in federal grants in August 2017 to reconstruct and rehabilitate taxi railways to improve the safety and efficiency of operations. The Federal Aviation Administration awarded a total of $162.4 million to 72 airports around the U.S., and MIA received 22 percent of the grant. In November 2017, MIA also unveiled the new Cargo Flight Tracker, the first web-based cargo flight information display system in
Romaine Seguin President UPS International, Inc. Americas Region
Have you seen any impact from the economic slowdown in Latin America? This surprises many people, but no we haven’t. Look at Argentina, for example. They had a change in leadership, which promoted trade, so now business is getting strong there. I have seen nothing but a big boom. Whether it’s e-commerce, business to business, manufacturing or pharmaceuticals in Mexico, we have seen nothing but upticks in demand across the region. How is UPS using technology to improve services? We are very focused on what makes our operations efficient and are testing drones as a part of that process. We’ve even gone a step further to test this kind of drone technology, channeling it towards humanitarian efforts. In October of 2016, we partnered with the minister of health in Rwanda. Due to the poor roads, when it rains, it can take a day to drive 50 kilometers. Women in the area were dying in childbirth from hemorrhaging because rescue crews couldn’t get blood delivered quickly to their location. We used drones to get blood to their villages. We have also tested drones to deliver parcels during the important “last-mile” delivery, launching them from the roof of our trucks to make shipments in rural areas. However, what is important to consider is working within the regulations of the countries where we operate. The challenge with drones and other emerging technologies will be with policy, and that’s why we’re always working with government officials for this technology. What new industries is UPS entering? We are always looking to invest where our customers want us to invest, and one of those areas is healthcare. The middle class is rising and starting to become more influential in South and Central America, causing demand for more options on how they receive their medication. We have healthcare facilities in São Paulo, Mexico City and San Juan. If there’s something out there to invest in, whether it’s an acquisition, or brick and mortar or technology for our customers, we’ll do it. www.capitalanalyticsassociates.com
Juan Kuryla Director, PortMiami How is PortMiami working to retain its title as the cruise capital of the world? Cruise passengers who sail out of Miami start their vacations the moment they arrive at our port. The port’s location is key, surrounded by breathtaking views of Downtown Miami’s skyline, Brickell, South Beach and Key Biscayne. The crystalline waters of Biscayne Bay are like no other in the world and never fail to impress our guests. The PortMiami team strives to come up with new and innovative ways to enhance our welcoming environment and has embraced the new era of smart cruising. Upgrades and renovations are ongoing and centered on the guests’ experience. Some recent improvements include our advanced embarkation/disembarkation processes, more seamless luggage-handling processes and our world-leading K-9 security training. We have two new terminals under construction: Terminal A, set to open this fall, and Terminal B, expected to open in the fall of 2019. How have infrastructure improvements affected PortMiami’s cargo operations? Today PortMiami is recognized as one of the fastestgrowing ports in the U.S. In order to continue to stay on top and grow our economic significance, continued investments in cargo infrastructure are critical. Growth is expected to continue as the world’s leading ocean carriers take advantage of PortMiami’s recent capital infrastructure investments, including channel deepening, new post-Panamax gantry cranes, on-dock intermodal rail and direct interstate connection via the new direct tunnel. To date, the port has welcomed more than 200 post-Panamax vessels that would not have been able to dock here without the deepening project. Without our infrastructure upgrades, we wouldn’t be experiencing the growth in containerized cargo vessels we are seeing today. With a contribution of $41.4 billion annually to Miami-Dade’s economy, PortMiami’s future is brighter than ever. 106 | Invest: Miami 2018 | TRADE & LOGISTICS
the U.S., which allows cargo shippers, freight forwarders, customs brokers and logistics providers to view real-time cargo flight information on their mobile devices. In February 2018, MIA announced that it will be the only U.S. airport sponsor of Air Cargo India 2018, the largest air cargo exhibition and conference in India. The sponsorship is propelled by Miami’s outreach to India to increase communication and connectivity. Currently, India is MIA’s fourth-busiest Asian trade market; it was also MIA’s largest source of pharmaceutical product imports in 2016, at a value of $52 million. In the first half of 2017, freight tonnage at MIA grew by a total of 4.8 percent, which is a significant leap compared to the less than 1 percent increase for the same period in 2016. This large growth can be attributed to exponential growth for both Mexican and Middle East cargo carriers. Middle East cargo increased 114 percent over the first half of 2017, while Mexican cargo grew 308 percent. Nevertheless, there were large cargo increases across the board. Latin American and Caribbean carriers increased by 2.7 percent, European carriers increased by 11.7 percent and Asian carriers rose by 10 percent. Specifically, domestic freight increased by 8.3 percent, and international cargo grew by 3.7 percent. Industrial boom The industrial real estate market of Miami has benefitted from exponential growth over the past decade. Demand outpaces new supply as tenants and investors are continuously attracted by Miami’s international reputation. In Q4 2017, sales volume totaled $103 million for 17 transactions of 874,000 square feet, which was a 12 percent increase from 2016 sales. The majority of these sales took place in the North Central Dade (35 percent), Medley (28 percent) and Doral (21 percent) submarkets. A major sale took place in January 2018, when Pepsico sold its Doral offices and bottling plant for $40 million to a joint venture between Terra and Terranova. They plan to create 500,000 square feet of commercial space on the property. Lease rates have reached an all-time high in the Miami market. Year-over-year, warehouse and distribution center rent averages are up 6 percent, to $7.24 per square foot. Rents have increased 41 percent since 2010 in the Miami area as well. Net absorption for 2017 totaled 2.8 million square feet. The majority of these lease transactions took place in Doral (40 percent), Medley (17 percent) and Miami Lakes (17 percent). The best indicators of the healthy industrial market are the low vacancy rates. Specifically, the Miami industrial market has remained under 4 percent vacancy for 13 consecutive quarters. As long as
TRADE & LOGISTICS OVERVIEW
demand continues to exceed supply and Miami continues to be a global city, the future of this market looks bright. With more than 2 million square feet ready to be occupied in the next six months, absorption is expected to exceed record numbers in 2018. Various factors are driving the growth of Miamiâ&#x20AC;&#x2122;s industrial real estate space. E-commerce is the most significant factor, as many e-commerce companies are increasingly occupying warehouse space and becoming the leading industrial tenants. In fact, e-commerce tenants were taking up 18 percent of industrial real estate in Miami and 12 percent of industrial space nationwide as of January 2018. The growing population also has led to more congestion, so people are seeking offices outside the heart of the city (in areas like Coral Gables, Doral, etc.) to avoid traffic. Deregulation by President Trump is boosting industrial real estate as well. Parts of the Dodd-Frank Act were
amended and updated in November 2017 to provide relief to banks by easing regulations and increasing their ability to lend capital, thus promoting more real estate development. Trade matters The U.S. pulled out of the Trans-Pacific Partnership less than a week after Donald Trump assumed his role as president, but a recent proposal might reverse this. At the time of printing, President Trump was considering reentry into the multicountry trade deal in order to protect the U.S. agriculture sector, which was negatively affected by the U.S. exiting the TPP. This is good news for Miami-Dade County, where a diverse agriculture industry employs more than 20,000 people and generates more than $2.7 billion in annual economic impact. In March 2018, President Trump signed an order to implement tariffs on aluminum and steel imports from ( )
E-commerce tenants were taking up 18 percent of industrial real estate in Miami in early 2018.
Miami continues to see increases in cargo traffic, both on land and at sea, due to a variety of factors, including the boom in e-commerce, pharmaceutical certification and significant infrastructure improvements. While the industry faces ongoing environmental and logistical challenges, local cargo carriers are optimistic about the future of transporting goods in and out of Miami.
Rasheme Richardson Vice President Airport Operations Amerijet International
What has been the impact on Miami of Amerijet receiving the IATA’s CEIV-Pharma certification in July 2017? In one word, “confidence” that South Florida has certified means of air transportation needed to get pharmaceuticals to and from our U.S. and international destinations in the most timely and expedient fashion. As an airline, we connect the gap. The certification gives a lot of comfort to both the consignee and the shipper — and ultimately the manufacturer — that we are doing our part to ensure product integrity. Using certified partners minimizes the amount of lost products due to contamination and delivery delays to destinations where they are desperately needed. We have formed a level of reliability in managing pharmaceutical products. With this assurance, shippers become more inclined to move their shipments to and through South Florida. That’s our impact. How has the growth of e-commerce affected the cargo-carrier industry? E-commerce growth has had a huge impact, and we are expecting the growth to continue. Cargo carriers are experiencing higher than normal e-commerce movements worldwide, and much of this growth is being driven by a rapidly expanding middle class in Latin America. Look at the 2017 holiday season: customers were shipping all the way up to Christmas Day. The product has to get there, so someone has to move it — and quickly. Airlines will continue to be a huge part of that supply chain. Overall e-commerce sales are up, and we are seeing a lot more e-commerce products moving in the system. It’s a positive trend. 108 | Invest: Miami 2018 | TRADE & LOGISTICS
Director Cargo Operations — Miami International Airport American Airlines Cargo
What improvements have you made to your processes and facilities? We have completely remodeled the interior of the cargo facility. In order to be successful in this business, you need to know what you have, where it is and where it’s going. And if you can’t answer those three questions, you’re not going to be successful. The first thing that we did was eliminate the rack system. We now stage our terminating cargo in a different manner, and we inventory twice a day; we have somebody go out and touch every single shipment. Here in Miami, we handle anywhere from about 300 to 600 shipments daily, so you can see how big a task this is. That translates into between 8,000 and 14,000 individual bulk pieces. And we can handle anywhere from about 60 to 110 customer-loaded containers, which equates to about 1 million pounds a day. What are some of the logistical challenges for pharmaceutical shipping, and what potential do you see for pharma in Miami? A lot of the pharma traffic comes out of Puerto Rico, which is still reeling from the effects of Hurricane Maria. There are some tremendous pharma facilities there that are still not back up and running. Here at American Airlines, we have one cooler with about 4,000 square feet dedicated specifically to ambient temperature pharma products. We have a racking system downstairs, which we’ve built in the past two years specifically to handle containers that are designed for pharma, where we can plug them in. We monitor them every single day. There’s certainly opportunity here. And we haven’t even touched the surface of it yet, in my view.
TRADE & LOGISTICS ROUNDTABLE
Cargo Manager, Florida and Latin America Cathay Pacific Cargo
What is causing the large growth in pharmaceutical cargo in Miami? We’ve seen a drastic increase in demand after Hurricane Maria. Many shipments that were stranded in Puerto Rico were originally slated to travel by sea but were reassigned to air travel. In the first quarter of 2018, we had growth of about 45 percent out of Puerto Rico. Out of that 45 percent, 80 percent was pharma cargo, which we’re expecting to be sustainable for the short term. We have an average of 100 tons every other week. The markets for pharma in Japan and China are only getting bigger. With the expansion of demand, we have seen new technologies come out that make the process smoother. This year, Cathay partnered with va-Q-tech, which produces temperature-controlled containers that don’t need to be plugged in; they just recharge, which will help with issues like power outages. We are shipping lifesavers. We have the belief that it’s more than just cargo. Better technology helps us treat this delicate cargo with care and attention. What other areas of cargo are growing quickly? We’ve seen a lot of new projects on the perishable side, shipping especially into China. This is due to the higher purchasing power of the middle class in that country. Many people are getting more knowledgeable and are polishing their palates. They want to try new things, including cherries, blackberries, salmon and live lobsters. High-quality perishables are in demand, and Latin America is looking to supply them. The market in Latin America is doing well, especially in the high-quality perishable sector.
Andres Bianchi CEO LATAM Cargo
What is your outlook for the cargo industry for the rest of 2018? The outlook is on the positive side. The economy in Latin America, the core of our business, is doing better than the last three years, and there are other structural tailwinds supporting growth. For instance, e-commerce — which is more reliant on air freight than other forms of trade because people want products faster — is a new source of growth. Having said that, we know we have to remain vigilant and flexible as things can change very rapidly in our industry. Current conditions point to relatively stable growth in the near future. However, there are some issues, like higher tariffs, that can disrupt the industry as a whole. We’re going to have to wait and see, but that certainly could be an issue as global trade experienced a huge downturn in recent years, and while things have picked up significantly, it is still an industry sensitive to a number of issues. What are the challenges of pharma transportation? Pharma, while being one of the fastest-growing segments of the industry, is still a very specific, demanding niche. Keeping products within the defined temperature range is one of the biggest challenges for pharma and perishables, as these are both very sensitive commodities. Maintaining them under optimal conditions, especially out of airports like Miami or some airports in Europe in winter, is tricky. This requires robust execution and the right infrastructure. Certifications like CEIV are a demanding but visible way to show shippers and agents that you can deliver on the promise you are making to them. www.capitalanalyticsassociates.com
TRADE & LOGISTICS OVERVIEW
( ) all countries except Mexico and Canada in order to limit threats to the U.S. steel and aluminum industry. With the goal of achieving low prices, the point of the tariffs is to limit overproduction of these materials in other countries. In addition to the aluminum and steel tariffs, the White House announced its plan to implement a reciprocal tax on countries that exploit U.S. trade. In September 2017, the Trump administration waived the Jones Act for Puerto Rico, essentially easing the process of sending hurricane aid shipments in the wake of the devastating one-two punch of Hurricane Irma and Hurricane Maria. The waiving of the act facilitates the delivery of food, medicine, clothing and supplies to the island.
of February 2018, India was MIA’s largest source of pharma product imports by volume, making up approximately 617 tons of cargo in 2016. Two of MIA’s pharmaceutical hub partners received global seals of excellence for transporting pharmaceutical cargo. In particular, Worldwide Flight Services and LATAM Cargo earned the International Air Transport Association (IATA) Center of Excellence for Independent Validators in Pharmaceutical Logistics certification. The seals of excellence are earned based on the handling of cargo on the ground at MIA, which is a good sign for the airport. These milestones continue to expand MIA’s role as a pharma hub. To continue to grow Miami’s role in pharmaceutical handling and transport and maximize pharma freight traffic, MIA and Brussels Airport — the only two designated pharma hubs in the world — partnered in 2016 to create Pharma.Aero., a collaborative group of air pharma stakeholders focused on bettering the handling of pharma in the air cargo industry. The collaboration has since added Singapore Changi Airport, Sharjah International Airport, Chhatrapati Shivaji International Airport, Brussels Airlines, Singapore Airlines, Brinks Life Sciences, Johnson & Johnson, Pfizer and Merck Sharp & Dohme Corp.
As of February 2018, India was MIA’s largest source of pharma product imports by volume.
Pharmaceutical hub In 2015, MIA became the first airport in the Western Hemisphere and the second airport in the world to be certified by the International Air Transport Association (IATA) as a pharmaceutical freight hub due to its reputation as a safe and efficient logistics hub. This certification was expected to increase pharma traffic at MIA by approximately $3.3 billion. Since 2010, when the value of pharma shipments to MIA was $1.8 billion, pharma trade had grown by 140 percent by April 2017. As
TRADE & LOGISTICS OVERVIEW
Michelle Porter Senior Operations Manager, North American Liner Operations, Marine Execution – Maersk Line In order to maximize land availability in Miami, container stacking will have to be higher and stowed more compactly in order to increase volumes. Everyone wants to see more volume coming in and out of the ports, and one way to accomplish this is with infrastructure development. How do we take that same amount of land and make it useful for an increased amount of cargo? In Port Everglades, we are seeing the use of automated systems and RTGs, which allows the ability to stack cargo higher and more compactly. I think these technologies will be a real game changer when they are introduced at PortMiami. Tech world Among the biggest changes in the realm of trade and logistics is the e-commerce boom, which has dramatically altered the way companies approach warehousing and distribution. While it is good for industrial real estate because it increases demand for warehouse and storage space, it also presents challenges in satisfying growing consumer demand for instant delivery. Consumers expecting same-day or next-day delivery are pushing e-commerce companies to make use of warehouse space as close to customers as possible. Companies are looking for stackable space to meet consumer demand, so multi-story warehouses might be the next strategy to increase efficiency in space-constrained areas. The recent digitalization of trade has also reshaped the way companies go about implementing technology and automation within their business models, and this pattern will continue to shift in the years to come. Technological advancements and innovations have slowly been addressing this shift in consumer demand. For instance, drone technology and self-driving cars have been tested as possible alternatives to driver delivery. In late 2016, UPS successfully tested drones to deliver parcels from the roofs of trucks in order to facilitate shipment in rural areas. UPS has also used new technologies to automatically sort packages in its hubs, as well as smartphone technology to optimize its driver routes.
As part of a new research partnership between Miami-Dade County and Ford, in February 2018, the automaker launched a pilot program that uses custom-built autonomous cars for delivery in partnership with several Miami-area businesses. Looking ahead As Miami-Dade is poised to become a global logistics hub, the county is preparing for challenges and increased global competition by adopting digitization and expanding its international presence. But while Latin America has begun to emerge from a period of economic and political instability — good news for the U.S., considering our neighbors to the south comprise 20 to 25 percent of total U.S. trade — there is still an imbalance between northbound and southbound cargo coming into and out of Miami. Goods coming from countries like Brazil, Argentina and Colombia are in high demand in the U.S., but there isn’t reciprocity. Many shipping lines struggle with active northbound routes and little to no southbound cargo to offset the transit costs. A lot of Miami-area carriers are looking at alternative routes to relieve some of the pressure, while others are increasingly shipping technology south to under-automated Latin America. Whatever challenges Miami faces, it has a history of innovating and overcoming. Despite some volatility, predictions for global trade are strong for 2018 and beyond, and Miami-Dade’s trade and logistics industry is looking at a bright future.
In 2016, UPS successfully tested drones to deliver parcels from the roofs of trucks in order to facilitate shipment in rural areas.
Infrastructure, Utilities & Environment: With an exponentially growing population and the continuous threat of rising sea levels, investment in infrastructure is critical to the longevity of Miami-Dade County. The county has demonstrated its commitment to creating more sustainable and effective infrastructure through its embracing of solar energy and its proposals of environmentally conscious projects, such as the Underline and the Miami LOOP.
Foundation for growth: Miami is tackling a number of environmental and infrastructure challenges as it works to support a growing population Miami, like all major cities, has infrastructure and utility challenges, but it also has a set of challenges that are unique to its climate, location and environment. Sandwiched between the Everglades and the ocean, Miami has limited room to grow and must capitalize on the small amount of remaining space that is developable. Faced with an expanding population, ongoing weather events and sea-level rise, Miami has its work cut out for it. Updating infrastructure, dealing with environmental factors and coping with a rapidly growing population are all issues to be tackled, but the experts who take care of this city are more than up to the task. Ecosystem To understand the environment-based issues that Miami is up against, a knowledge of the region’s ecosystem is necessary. Before areas of South Florida were drained to create farmland, Lake Okeechobee would overflow during the rainy season and drain through the Everglades, but development has disrupted this system, leaving the water with nowhere to go, causing flooding and other issues. Saltwater intrusion into the Everglades is causing issues like peat collapse, which 114 | Invest: Miami 2018 | INFRASTRUCTURE, UTILITIES & ENVIRONMENT
lowers the ecosystem’s ability to retain freshwater, bringing saltwater farther inland. One project to restore natural flow is the ongoing Tamiami Trail renovation. The road acts as a dam across the Everglades but is being raised to allow water to flow under it. Restoring some of the natural flow of the area can help to increase drainage and keep sealevel rise at bay, preventing the ocean’s saltwater from mixing with the drinking water South Florida’s residents rely on. By working to restore balance to its natural surroundings, in addition to preserving the landscape for future generations and ensuring the safety of its current residents, Miami will be investing in its robust tourism industry. Millions of visitors come yearly to enjoy Miami’s beaches, as well as tour the Everglades. Changing climate Hurricane Irma, which swept through Florida in September 2017, was the strongest storm in the Atlantic since Hurricane Wilma in 2005, as well as the strongest storm to affect the continental U.S. since Katrina. The storm landed in Cudjoe Key as a Category 4 hurricane on September 10, taking 93 Floridian lives.
INFRASTRUCTURE, UTILITIES & ENVIRONMENT OVERVIEW
This storm was a wake-up call for Florida’s disaster response system, but it wasn’t the only one. In December 2016, Florida’s Division of Emergency Management was audited, and the report stated that serious steps needed to be taken, including stockpiling more food and water in the Orlando distribution center and updating contracts for private companies to provide cots for shelters. Both of these shortcomings became problems during Irma. In the aftermath of the storm, 92 percent of Florida Power & Light (FPL) customers in Miami-Dade County lost power, and many had outages that lasted more than a week. The most tragic issue was the loss of 12 patients at a rehabilitation center in Hollywood. The facility lacked a backup generator, and when the storm disrupted the air conditioning, the victims died of heat-related issues. In March 2018, Governor Rick Scott approved a law requiring all nursing homes and assisted living facilities to have emergency generators. A less headline-grabbing issue for Miami is climate change, which is causing problems including sea-level rise, stronger storms and increasing temperatures. The South Florida community is working to counteract these issues as it prepares for the future. For example, in 2018 the City of Miami approved the Miami Forever bond, a $400 million general obligation bond, half of which will go towards flood prevention and sea-level rise projects. Miami Beach is making improvements
as well, using a stormwater fee for homeowners to fund the projects. While these projects come at high costs, they will help bring Miami into a safer and more sustainable future. Water In the wake of Hurricane Irma, issues with Miami-Dade’s water and sewer infrastructure drew attention. Miami’s sewage plants are strained by growing populations and are often troubled by storms and flooding. In addition, based on data from 2015, a study by the Natural Resources Defense Council released in the summer of 2017 found that 7.5 million Florida residents receive their water from plants with safety violations. Although the issue is worse in rural areas, safe and clean drinking water is a necessity, and government officials are working to fix this issue. Miami-Dade’s infrastructure is aging; much of it is decades old and not intended for the current population of the county. To combat this, Miami-Dade County applied for and won a Water Infrastructure Finance and Innovation Act (WIFIA) loan from the Environmental Protection Agency (EPA). The department will use these funds to create new injection wells, which redirect effluent discharge. Recently completed projects include a $10 million water main installation and updating water lines, as well as installing additional fire hydrants. A new plant is planned near the wetlands for filtration, ( )
The South Florida community is working to counteract climate change issues as it prepares for the future.
William Holly President – Patton Commercial Real Estate
When I grew up, the architecture was specific to a very humid, subtropical environment. Since the 1980s, it has been about building boxes with as much air conditioning as possible. The first thing that appealed to me about constructing the first green office building was health. The average person spends a good deal of her life in an office building. Some older buildings are like airplanes; they recirculate air and germs. We want to create buildings that are healthier and more sustainable, so it starts with health and the environment. Our green building takes less energy, is more efficient and is healthier for those inside. Green buildings like Miami Green benefit the community.
INFRASTRUCTURE, UTILITIES & ENVIRONMENT INTERVIEW
Sustainable power How Florida Power and Light is innovating to serve Miami’s growing population with reliable and sustainable energy solutions
Eric Silagy President & CEO – Florida Power and Light Company (FPL) to those who already live and work in the area. And of course, we must continue to improve and enhance our storm preparation and response planning so that we are able to get the lights back on as quickly as possible after a major storm — particularly in an economic hub like Miami.
What are some of the main challenges to energy supply and distribution in South Florida? In Miami-Dade in particular, it’s critical that we continue to support growth in the region in a comprehensive and forward-thinking manner. The construction boom in Miami over the last few years has been enormous, but it can be challenging from an infrastructure perspective. A lot of planning needs to be done in advance to be able to meet the needs of the new developments. We’ve made great strides in working with regional stakeholders to understand what is coming and the timeframe for these investments so that we can properly plan and execute projects on our end to be ready to support these developments. It’s important to work together to provide opportunities for continued growth while minimizing the impact 116 | Invest: Miami 2018 | INFRASTRUCTURE, UTILITIES & ENVIRONMENT
How do you balance the growing demand for energy with environmental sustainability concerns? As Florida continues to grow and prosper, energy is a critical piece of the puzzle — and we must provide it as cost-effectively and sustainably as possible. We continue to build a diversified portfolio of different energy sources, all of which have different costs and benefits and all of which are critical to our energy future. Over the last three years we have built more than 820 megawatts (more than 3.6 million panels) of solar throughout Florida, and we’re continuing one of the largest solar expansions in the southeastern U.S. with another nearly 300 megawatts planned over the next year, including a 74.5 megawatt solar power plant in Miami-Dade County. We’re also moving forward with pilot projects to test out battery storage technologies in different configurations; while not yet a viable economic solution, energy storage is an option that we expect to play an increasing role in our energy future. But we must also continue to invest in clean energy sources like emissions-free nuclear and efficient natural gas technology. That’s why we’re moving forward with the FPL Dania Beach Clean Energy Center in Broward County, as well as pursuing the renewal of the operating license for FPL’s Turkey Point nuclear units. Both of these sites have provided decades of reliable, affordable energy for customers and are an important part of providing power for South Florida 24/7.
INFRASTRUCTURE, UTILITIES & ENVIRONMENT OVERVIEW
( ) and this move away from the coast is intended to limit the effects of sea-level rise. Another big issue for Miami-Dade is wastewater. While Florida leads the nation in the amount of wastewater it reuses, Miami-Dade is lagging behind, reusing only 4 to 7 percent of its wastewater as of the summer of 2017. Historically, Miami’s wastewater has been pumped out and dumped offshore, but this practice was limited by a 2008 state law. Miami-Dade’s golf courses and parks are watered with drinking water, while other areas like Palm Beach County use recycled wastewater for this process. Due to aging and leaky pipes, some of Miami-Dade’s wastewater is contaminated by saltwater, making it unusable for many such processes. With a 2025 deadline to reuse 60 percent of the county’s wastewater, one idea, announced by Mayor Gimenez in January 2018, is to partner with FPL to build a wastewater treatment facility and use the treated water to fix the cooling canals at the Turkey Point nuclear plant. Wastewater is not Miami’s only problem. Within the next 20 years, half of Florida is projected to have water supply problems. South Florida is especially vulnerable due to saltwater intrusion; it’s estimated that 90 percent of the area will have supply issues. Knowledge of these issues will be key as Miami pushes forward into a more sustainable and updated future.
noted earlier, many residents lost power for extended periods of time following the storm. One proposed solution is burying more lines below ground, which would cut down on service disruptions from falling tree limbs or debris hitting the lines. As of late 2017, approximately 37 percent of FPL’s lines were underground. This process is expensive, and some claim that it simply shifts the risk from falling limbs to flooding damage. Regardless, FPL moved quickly compared to its response after Hurricane Wilma in 2005. In 2017, 40 percent of customers who lost power regained it after one full day of work, compared to 4 percent 12 years ago. The community of Coconut Grove used social media to identify and compile a map of downed or damaged lines and forwarded that information on to FPL, which increased the speed of service. These tools allow communities and individuals to help with the logistical issues following a natural disaster. Another bright note was FPL’s AEIC Achievement Award in 2017, which honored the company for preparing for and using preventative measures to minimize intermittent power failures. Smart grid technology has been a part of that effort. New equipment is able to predict when an outage is imminent and allows FPL to address the issue before power is disrupted. The company is also integrating drones to locate power issues. The Turkey Point nuclear power facility will be expanding. In early April 2018, the U.S. Nuclear Regulatory Commision approved the construction of two new reactors in FPL’s facility near Homestead.
Florida leads the nation in the amount of wastewater it reuses.
Electricity Like Miami-Dade’s water systems, electricity also had difficulties in the wake of Hurricane Irma. As
Kevin Lysnskey Director – Miami-Dade Water and Sewer Department
The cost-effectiveness of reusing wastewater is a function of both future water needs and supplies available to meet those needs. We are fortunate that through conservation and other factors, we are able to meet future drinking water needs until at least 2035. We are very actively considering water reuse options that might be feasible to meet cooling needs at the Turkey Point electrical production facility and also to deliver much-needed water to the coastal wetlands adjacent to Biscayne National Park.
INFRASTRUCTURE, UTILITIES & ENVIRONMENT OVERVIEW
Humberto Alonso Senior Regional Business Development Director Atkins North America
The amount of development we’re seeing in South Florida today is unprecedented. Economically speaking, the area is unique. If you look at the great recession and how we came out of it, we have done very well since about 2013. I think that’s indicative of the dynamism in this region. Miami is growing fast, and transportation systems like the Metrorail and Metromover have been underutilized. Part of the reason ridership is down on our public transit systems is because the systems are at a point where service is not predictable. That’s a huge part of public transit: you have to have a schedule you can count on. We need to invest in mobility options to make Miami attractive, especially to the younger generation. One of the challenges in South Florida is that solutions for transportation that work elsewhere involve building more miles of road or widening streets. We’re past that point here, particularly in Miami-Dade County. There’s no more room to build, so we need to look for other solutions. Technology will be a part of it, but there has to be an infrastructure investment as well. People have to change the way they think about going from one place to another. We are working with Miami-Dade County to modernize their traffic signal system. We’re also involved with the SMART plan. While there will always be a need for cars, the program focuses on providing people with affordable alternatives. I have seen probably four or five development cycles in South Florida, but I never cease to be amazed by the volume and scale of the development cycle we’re in. It is beyond anything that’s happened before. We’re seeing a change in the city that we haven’t seen before. It’s really exciting, and I think it is going to be extremely powerful. This is an evolution, and what will come out of it is technology, arts and culture. We have become a magnet for young professionals from all over the world because everyone feels comfortable here. Miami has become a brand that attracts because it is Miami. 118 | Invest: Miami 2018 | INFRASTRUCTURE, UTILITIES & ENVIRONMENT
The new reactors will take years to construct and will likely not be ready for use before 2031. Critics of the project point out that FPL used a one-foot-percentury sea-level rise projection, while the National Oceanic and Atmospheric Administration projected in 2016 that the actual increase could be as much as eight feet per century. Despite these criticisms, many are confident that these additional power sources will help sustain Miami’s energy supply to support the region’s continued population growth. Alternative energies Florida is called the Sunshine State for a reason. Due to the state’s favorable weather and climate, Florida has the potential to be the third-largest solar power producer in the U.S, and progress is starting in this direction. The Miami-Dade County Solar Energy Center, FPL’s largest solar investment in the county, will be located in the southwest corner of Miami-Dade. It will house hundreds of thousands of panels and will begin producing by the middle of 2019. Solar power is coming to the region on the individual level as well. Six solar co-ops were launched by Solar United Neighbors and the League of Women Voters of Miami-Dade. Multiple homeowners pool their resources to save on the installation of solar panels. Several mayors are working to promote clean energy in their cities. The Sierra Club’s Mayors for 100% Clean Energy initiative includes several local mayors, among them Mayor Stoddard of South Miami and Eugene Flinn of Palmetto Bay. South Miami has gone a step further. In September 2017, an ordinance went into effect requiring that all new residential constructions, as well as some largescale renovations, include a certain number of solar panels per square foot of sunny roof space. Mayor Stoddard fought for the ordinance, explaining that the act would reduce the cost of homeownership and limit the city’s contributions to climate change. Wind farms are slower to come to the MiamiDade area, although there are growing discussions of offshore wind turbines, as opposed to offshore drilling for oil, making their way to the area as well. Florida is less windy than it is sunny, so we should expect to see more solar come into the area before we see an expansion of wind farms. Telecommunications Miami is ranked as one of the world’s top five most interconnected cities, and it isn’t slowing down. In April 2018, the International Data Corporation awarded Miami one of its inaugural Smart Cities
INFRASTRUCTURE, UTILITIES & ENVIRONMENT OVERVIEW
Melsie Ordonez Director of Operations, Senior Mechanical Engineer – Ross & Baruzzini The biggest issues in older hospitals is usually the infrastructure — the electrical, plumbing and mechanical systems. A space doesn’t work if there isn’t enough electricity. If air conditioning systems are not sufficient, mold issues will develop. Systems are outdated or undersized in many of the older hospitals in South Florida. The original infrastructure installed was not sized to handle the current load. North America Awards; Miami won the award for Smart Buildings. Miami-Dade is also home to the third-largest data center in the world: the NAP of the Americas building. At this facility, more than 160 networks converge, and it is the primary network exchange between the U.S. and Latin America. Investments are being made in Miami’s connectivity. Leaders are beginning to update the wireless infrastructure in the area in order to make way for 5G service. The transition to this service could make things
like virtual reality and autonomous cars commonplace. Miami was one of the 11 markets where Verizon tested 5G service in 2017. Being at the forefront of 5G would make Miami attractive to new or relocating businesses. Challenges and opportunities The most infamous infrastructure issue in Miami-Dade in 2018 was the collapse of the FIU-Sweetwater UniversityCity Bridge on March 15. The bridge was being constructed in order to allow FIU students easier ac-
INFRASTRUCTURE, UTILITIES & ENVIRONMENT OVERVIEW
been stopped, as the collapse occurred while workers were tightening structural tendons. The bridge was touted as an example of accelerated bridge construction, a method that, for the short term, will receive additional scrutiny. Another ongoing, county-wide project is the Miami LOOP, 225 planned miles of bikeable and walkable trail. The project will encourage more individuals to leave their cars behind for their commutes or other trips. As of the spring of 2018, 54 percent of the trails are already complete, and 86 percent of the corridors are publicly owned. This project will reduce the county’s carbon footprint and give residents more choice in their transportation.
Solar panels are one way Miami leaders are promoting clean energy.
cess to the City of Sweetwater. The 320-foot-long bridge collapsed five days after the main span was installed, killing one construction worker and five people in cars stuck in traffic on the Tamiami Trail underneath the structure. The exact cause of the collapse is still under investigation, but many wondered why traffic had not
Looking ahead Miami-Dade is committed to creating more sustainable and effective infrastructure while taking an active role in preventing and managing environmental issues. Miami-Dade’s infrastructure leaders are moving ahead with updates to compensate for the continued population growth by updating pipelines and installing solar panels. Miami’s nature conservation efforts and climate change measures are practically one and the same, decreasing the county’s carbon footprint, as well as lowering the risks associated with sea-level rise and storms. In January 2018, Governor Scott, in talks with the federal government, was able to exempt Florida from an offshore drilling initiative, protecting the state’s beaches and waterways. All in all, Miami is moving forward into the future, embracing new technology and expanding its infrastructure to make the city a safe and supportive home for its residents.
INFRASTRUCTURE, UTILITIES & ENVIRONMENT INTERVIEW
Meeting demand How Florida City Gas is investing in infrastructure, workforce recruitment and liquefied natural gas (LNG) to meet Miami’s energy needs
Carolyn Bermudez Vice President of Operations – Florida City Gas How is Florida City Gas investing in improving its operations? We have worked with the Florida Public Service Commission on modernizing our system and investing in piping technology through the implementation of the Safe Access and Facility Enhancement, or SAFE, program. The initiative has allowed us to move our infrastructure from the backyards of residential customers to the front. It also benefits customers because we no longer need to make multiple visits to perform service updates. Another big item that we are working on is filing our first rate request since 2003. By focusing on prudent and effective cost management, our customers have not had a base rate increase since 2004. During this period we have invested more than $284 million in improving our ground infrastructure, capturing greater operational efficiencies and reducing our annual operating expenses by more than $9 million. As Miami-area communities continue to grow and the demand for natural gas service increases, FCG must meet our commitments to deliver clean, safe, reliable and affordable natural gas to our customers. Because of this, it was necessary for us to ask the Florida Public Service Commission to approve new base rates, which will support investments such as continued modernization of our infrastructure, recruiting and retaining a highly technical and skilled workforce and innovating with liquefied natural gas (LNG) solutions to address the critical issue of limited pipeline capacity. Is South Florida’s existing infrastructure able to meet the energy needs of the area’s growing population? For many years, Florida Gas Transmission and Gulf Stream were the only two pipelines bringing natural gas into the state of Florida. Both of those pipelines are currently fully subscribed, meaning they are unable to support any new capacity. We do have capacity that we own on pipelines, which we use to serve our customers,
but as more industrial users come to Florida, the demand for natural gas is increasing. One of the things that we are doing to make natural gas more readily available to consumers and to allocate a certain capacity for growth is looking into liquefied natural gas (LNG) options. Our existing system is largely oriented around peak usage days. With LNG, we will be able to take on more customers using our available peak capacity. We will in part give up some of that peak-day design, and should we still need it, the LNG plant will kick in and backfill the system. To bring new pipelines into a state, we have to go through the process of acquiring land right of way and pay between $3 million and $5 million per mile of pipeline laid. Incurring that capital expenditure would increase the actual usage cost for customers about fivefold, which is unaffordable for our primarily residential customer base. www.capitalanalyticsassociates.com
INFRASTRUCTURE, UTILITIES & ENVIRONMENT INTERVIEW
Hot-tech How Hotwire is helping to keep Miami at the forefront of innovation by upgrading technology and improving bandwidth capability in the city
Kristin Johnson Karp President – Hotwire Communications How friendly is local government to technological innovation? Technology is key in making city government more efficient. From former Mayor Levine and current Mayor Gelber in Miami Beach to Mayors Suarez in the City of Miami and Gimenez in Miami-Dade, all are focused on efficiency, technology and keeping Miami at the forefront of innovation. Improving tech was one of Mayor Suarez’s running platforms. Our city’s leaders know that smart city innovations make city government more efficient. It’s very exciting to work with people who are being creative about how we can get ahead of some of Miami’s challenges. The City of Miami Beach recently decided to upgrade all of its lighting to smart lighting as a first step in a SMART city initiative; the end result will be bandwidth connected via all the city poles, which will enable new technologies like high-density security cameras and upgraded air and water sensors that require that extra bandwidth. Hotwire will be participating in helping to evolve those networks. We see more than just talk about technology; we’re seeing steps being taken and real commitments being made. What will be the process of improving Miami’s connectivity infrastructure? We’re already hearing about self-driving cars here in Miami, but currently they do not have access to real-time communication between vehicles because the existing 4G wireless and telecommunications infrastructure cannot support this today. However, that technology needs consistent and ubiquitous bandwidth, which needs to be enabled by low-latency telecommunications infrastructure. For Miami to get to that point we need improved wireless connectivity and bandwidth capability. 5G cellular networks combined with dark fiber are a big compo-
nent of upgrading technology in the city. Hotwire just won a bid with T-Mobile to upgrade the cellular network throughout certain high-congestion areas in South Florida. 5G and wireless augmentation go hand in hand with what we do, which is building fiber networks to support and enable last-mile connectivity. A key component of upgrading and improving bandwidth connectivity is having the fiber optic cable laid. Installing the cable involves physical construction work and shutting down streets, but there is good news. The outward limit of the bandwidth capacity for fiber has not yet been discovered. Right now, one pair of fiber has up to 30 terabytes of capacity. We just launched 20 gigabits to several properties; that capacity is more than 100 times what we need today. Of course electronics will need to be switched out, but you don’t have to lay that physical infrastructure again for at least 100 years. Very few industries can say that. www.capitalanalyticsassociates.com
Health: Somewhat of a fragmented health reform policy is still circulating in Washington, which has caused uncertainty for the healthcare sector at the local level. In light of this, Florida lawmakers intend to secure a healthy future for Florida residents, as evidenced by the 42 percent increase in healthcare spending for the 2018-2019 budget. In addition, Miami providers are turning to new innovations and technologies to improve patient outcomes and advance healthcare research.
Investing in health: Miami’s vibrant healthcare industry is a pioneer in clinical care and research and is adopting new technology to secure a healthy future Miami-Dade’s healthcare sector is vibrant, with new technologies appearing and major investments occuring in 2017. Miami boasts some of the best healthcare institutions, both in-state and nationwide, in terms of research and practices. As of January 2018, some 392,000 people were employed in health and education services in the Miami area, according to the U.S. Bureau of Labor Statistics. This represents approximately 15 percent of Miami-Dade’s total nonfarm employees, a 1.3 percent increase from the beginning of 2017. Miami-Dade County is currently served by 36 hospitals, according to the Florida Hospital Association. The top five hospitals in the county in terms of specialties and patient care, as ranked by the U.S. News and World Report, are Baptist Hospital, University of Miami Hospital, South Miami Hospital, West Kendall Baptist Hospital and Homestead Hospital. The top five health systems in order of net operating revenues, as ranked by the South Florida Business Journal, are Jackson Health System ($1.23 billion), Memorial Regional Hospital ($975.54 million), Baptist Hospital of Miami ($877.95 million), University of 126 | Invest: Miami 2018 | HEALTH
Miami Health System or UHealth ($629.79 million) and Nicklaus Children’s Hospital ($621.94 million). Together, these amount to approximately $4.34 billion in net operating revenue. Innovation and expansion Miami-Dade is a nationally acclaimed academic center for clinical care and research. With an expanding population, South Florida has seen much growth in the healthcare sector in order to accommodate the influx of people. Over the year 2017, employment in the education and health industry grew 4.7 percent. Major investments in both new and existing health facilities are underway across the county. The University of Miami (UM) recently unveiled its new $18 million simulation hospital on its Coral Gables campus. The five-story, 41,000-squarefoot project was partially funded by a $1.7 million donation by Helene Fuld Health Trust. Construction began in 2015 and was completed in September 2017. The simulation hospital will better the education of Miami’s healthcare professionals and allow them to develop new strategies to address disaster response, healthcare delivery and patient experience.
UM also recently invested $8.2 million for an office building in Broward County’s Deerfield Beach for the expected expansion of its Sylvester Comprehensive Cancer Center. The purchase of the building was part of an effort to improve the university’s cancer research effort after receiving a $50 million donation from Pap Corps Champions for Cancer Research. In December 2017, Baptist Health invested $12 million in a vacant site in South Miami to create a new medical office development near its South Miami Hospital. The goal of the project is to support the growth trend in Miami. In January 2018, Tenet Healthcare Corp. signed a deal with the Hospital for Special Surgery (HSS) to break ground on a new South Florida surgery center in West Palm Beach. Construction plans have not yet been unveiled. In terms of sector job growth, various expansions of existing healthcare facilities have facilitated
employment growth in the industry. For example, Simply Healthcare plans to add 160 new employees as it expands its headquarters office space in Miami-Dade. Humana, Inc. subsidiary CAC-Florida Medical Centers also promised 91 new jobs at its new healthcare facility in Little Havana, which should be completed in late 2018.
Health policy reform was one of the most critical issues demanding Florida lawmakers’ attention in 2017.
Healthmakers Health policy reform was one of the most critical issues demanding Florida lawmakers’ attention in 2017, and for good reason. Florida was ranked number 31 nationally for healthcare by U.S. News and World Report last year. The largest portion of the state’s 2017 budget was allocated towards healthcare, at an approximate cost of $1,347 per family per month. Measures have been taken at the federal, state and county levels to continue to advance the healthcare industry. In May 2017, the U.S. House voted to pass the American Health Care Act (ACHA), often nicknamed ( )
Innovation How Nicklaus Children’s Health System is keeping Miami on the cutting edge of healthcare research and technology
Dr. Narendra Kini CEO – Nicklaus Children’s Health System evaluating use of technologies like 3D printing and noninvasive imaging innovations in providing personalized care and improving outcomes. South Florida is a majority of minorities and reflects what much of the U.S. will look like in the next 20 years. We are uniquely suited to provide insight into the health and wellness of the next generation of Americans. This is critically important as minorities have historically been underrepresented in research studies, making it more challenging for providers to determine the best possible treatment. As part of the Sanford Children’s Genomics Consortium, we are partnering with six hospitals from around the country to define best practice for pediatric genomic medicine and to create repositories for genetic material from cohorts of children with various diseases and from varying backgrounds.
What areas of research is Nicklaus Children’s Health System currently investigating? At Nicklaus, we partner on discovery science and deliver on clinical impact. We are in the midst of a major transformation in healthcare where technology and patient-centered care converge. One of our major research initiatives involves genomics and personalized medicine, two of the fastest-moving areas in this space. Our personalized medicine initiative launched last year and covers four primary areas: 1) figuring out the most effective use of genetics and genomics in pediatrics; 2) creating a biospecimen resource that reflects the rich cultural and ethnic mosaic of South Florida; 3) identifying barriers to personalized medicine implementation from provider and patient comfort through reimbursement and health economics; and 4) 128 | Invest: Miami 2018 | HEALTH
How can new advances in healthcare IT be of particular use for pediatric care? One of our new six-story towers is an advanced care pavilion that includes exclusively intensive care or specialty hematology/oncology and neurology/ neurosurgery care beds. This particular building has brought to Miami a fusion of technology that might be one of the most advanced of its kind. We have cuttingedge technology literally embedded in the building itself — everything from next-generation bluetooth tracking for aggregating medical data to small robots entering patients’ rooms to provide remote connection to doctors. Families can log into the room’s IT grid from outside of the network, which connects pediatric patients with their friends and families via video. There are next-generation infection control and sterilization technologies that draw on artificial intelligence capable of mining that data and provide safety alerts. Miami now provides one of the most advanced intensive care environments in the U.S. as a result of this.
( ) “Trumpcare,” to repeal the Affordable Care Act left behind by former President Barack Obama. The Congressional Budget Office estimated that the AHCA would increase the number of uninsured people by 23 million over 10 years while decreasing the government deficit by $119 billion over the same amount of time. While the act failed to pass the Senate, the GOP tax bill signed into law in December 2017 had an impact on Obamacare. The tax legislation carries a provision that repeals the individual and employer mandates. Although this does not exactly repeal the ACHA, it eliminates the monetary penalty for people who do not have health insurance. Governor Rick Scott passed legislation in January 2018, during the aftermath of Hurricane Irma, that enforced stricter rules on nursing homes. The new law requires all homes to have generators, that they maintain operations and comfortable temperatures for at least 96 hours after a power outage and that they purchase ample resources in preparation for emergencies. One of the main threats to public health is the fact that prescription drugs are too expensive for many people to afford. In an effort to make them more accessible, Florida lawmakers are looking at ways to reduce prescription drug costs. Recently, lawmakers have looked towards Canadian imports, which are about 80 percent cheaper. Flagler County, Florida, expected to save $200,000 in 2017 alone thanks to Canadian imports, a 10 percent decrease from the prior year. Fortunately, Miami-Dade has already found ways to reduce drug costs. The Publix supermarket chain launched a new prescription drug program that will offer low-cost medications — just $7.50 for 90-day supplies of common drugs used for blood pressure, cholesterol, diabetes and other conditions like Parkinson’s disease. The program includes 29 medications with 85 dosage options. In a country where healthcare costs continue to rise, this program promises to be extremely beneficial by encouraging patients to refill their prescriptions regularly and maintain their health at a low cost. Exchange rates In 2017, Florida had the highest healthcare exchange enrollment of any state in the country. Approximately 1,760,000 Florida residents enrolled in the exchange’s private health plans — a 1 percent increase from 2016. Nationwide, exchange enrollment saw a 5 percent decrease. The national average of people
Carlos A. Migoya President & CEO Jackson Health System
How is Jackson Health Systems helping to meet South Florida’s growing healthcare demands? Our partnership with UHealth goes back 60 years, and we just recently opened a new residency program in emergency management. The summer of 2016 was the first class for 15 residents in the three-year program, so the 45 residents we will soon have in emergency management is a critical expansion thanks to our partnership. We help graduate about 300 doctors every year, and over the last 20 years, around 70 percent of these graduates stay within a 50-mile radius of Jackson Health. Our partnership offers a direct investment in training doctors who mostly stay here to provide care in South Florida. What is the impact of state healthcare budget reductions on Jackson Health? Florida’s 2017-2018 state budget had a negative impact of about $25 million on Jackson, but that is just the most recent of many cuts. Florida’s budget cuts over the last six years add up to more than $100 million, so Jackson has been facing cuts to the state budget and Medicaid for some time. Irma cost Jackson about $7.5 million. In the three days after the storm, we had almost double the number of emergency room visits, about 90 percent of which were uninsured patients. How does the uniqueness of South Florida’s patient population impact healthcare in Miami? The diversity of our population presents greater challenges and unique opportunities, particularly for researchers. Miami sees infections not seen anywhere else in the country because so many people come here from all over the world. Our professionals are particularly experienced in infectious disease management. This creates a completely unique experience from a research standpoint in terms of infectious disease management, which is obviously attractive to many physicians, especially those focusing on research. The Centers for Disease Control looked to Jackson during the Zika outbreak, as well as during the Ebola and Chikungunya outbreaks. www.capitalanalyticsassociates.com
Miami boasts some of the best healthcare institutions and professionals in the country.
covered by individual market plans in 2017 was 6.4 percent. In Florida, that number was almost double, at 12.7 percent; in South Florida, it was 20 percent. About 90 percent of the Florida marketplace receives premium subsidies that reduce average premiums from $442 per month to $118 per month. While under the Trump administration the national open enrollment period was six weeks shorter (from November 1 to December 15) for 2018
plans, enrollment in Florida was about 16 percent higher as of December 10 compared to the 2017 open enrollment period. Floridaâ&#x20AC;&#x2122;s particular enrollment period was extended until December 31 due to Hurricane Irma. Miami-Dade County has a higher rate of uninsured individuals between the ages of 18 and 64 compared to the state average. While approximately 16 percent of Floridians ages 18 to 64 do not have health insurance, about 23 percent of the same age group are uninsured in Miami-Dade. This can be explained by increasing healthcare costs coupled with a higher cost of living across South Florida. With the prevalence of small to medium-sized businesses (SMEs) in the county, health insurance is a huge expense due to persistent cost increases that small businesses struggle to keep up with. In addition, Miami-Dade is a highly international county with a large number of immigrants who are not accustomed to having to obtain their own health insurance. For 2018, the state approved an average 44.7 percent increase for health insurance rates due to the assumption that the federal government would not fund cost-sharing reductions (CSRs). Six insurers offer Florida coverage for 2018: Florida Blue, Florida Blue HMO, Florida Health Care Plan Inc., Ambetter (Celtic), Molina and Health First Health Plans. Their rate increases for 2018 are 38.1 percent, 36 percent, 26.5 percent, 46.1 percent, 71.2 percent and 39.3 percent, respectively. Aetna and United Healthcare exited the Florida exchange at the end of 2016, while Humana had exited the country entirely by the end of 2017.
Rachel Sapoznik President & CEO – Sapoznik
The fastest-growing trend we’ve seen is more emphasis on creating a culture of wellness. We have programs where we go into our clients’ offices, and our team talks to people and educates them on how important it is for them to take care of themselves, physically, mentally and financially. With all of the mini-clinics popping up, people are putting Band-Aids on issues. We want to get to the core problem.
Special treatment Cancer care has seen significant investment and has received a lot of attention in Miami since 2017. Leading the way in advancement is the Miami Cancer Institute (MCI), part of Baptist Health South Florida, and Memorial Sloan Kettering Cancer Center, which celebrated its one-year anniversary in Miami in February 2018. Since its grand opening in 2017, the institute has initiated 55 clinical trials and is looking to expand due to its newfound success. MCI announced the grand opening of South Florida’s first state-ofthe-art Proton Therapy Center in March 2018. It is
currently treating patients with the most advanced methods of radiation oncology available today. In January 2018, the University of Miami Health System’s Sylvester Comprehensive Cancer Center announced plans for a second proton therapy program in South Florida. The center purchased the Varian ProBeam Compact Proton Therapy System, the newest cancer treatment technology available on the market. It will provide cancer patients with even more opportunities for clinical trials by the spring of 2018 in order to research treatment methods for the disease by 2020.
Dr. Marc Agronin Vice President for Behavioral Health and Clinical Research Miami Jewish Health System Currently, over 5.5 million Americans suffer from Alzheimer’s disease, and many millions more suffer from other forms of dementia. For these individuals, the loss of cognitive abilities makes it more difficult to be independent and to be understood. Miami Jewish EmpathiCareSM, a care-model based on empathy, is something we’re deriving at Miami Jewish Health. EmpathiCare is building on the best practices that are already in use. We’re not inventing a new way for people to interact with one another; we’re putting it into a practical model where people can be more mindful of it. My goal is to create a teachable formula that makes caregivers more mindful of their own empathic behaviors. Research shows that when you have more empathy, you have better relationships, greater job satisfaction and are more engaged in culture. The key is that we want to create something that goes above and beyond slogans and sayings: a method that people can be held accountable for. The S. Donald Sussman EmpathiCare Village’s design stems from our understanding of life with dementia. We know that even as people have cognitive losses, they have a greater need for familiar settings. It is important to have anchor points, as well as to be able to explore. The village allows people to go wherever they want; there’s no limitations throughout the entire village. They can walk from the household, to the garden, out into the town square, to the café and on to the community center. Everywhere they go, there will be empathically trained people to interact with and monitor them. The creative arts studio will have staffing and programming that will accommodate the needs and limitations people have but also will elevate their strengths. Even when people have memory loss or cognitive changes, they still can be very creative, and our programming will reflect that. The bottom line is this: EmpathiCare is designed to optimally respond to the needs of others. We have a process of engaging with people and learning about their interests, needs and strengths, then we shape the environment to what we’ve learned. 132 | Invest: Miami 2018 | HEALTH
Ever since South Florida was ranked number one in the country for diagnosed HIV diseases, Miami has poured investment into HIV prevention efforts. Pre-Exposure Prophylaxis (PrEP), an innovative drug treatment designed to prevent HIV, was launched in Miami in December 2017 and is being offered at UHealth clinics. The State of Florida is also considering expanding the needle exchange program in order to prevent HIV and other bloodborne diseases among drug users. Miami-Dade County began a five-year pilot program in December 2016, and approximately 600 people have taken advantage of the program since that time. Although exact numbers are not confirmed, it is likely that the number of needle use-related deaths in Miami has decreased because of this. Geriatric care has also been a key specialization for South Florida. After an unfortunate blackout at a nursing home during Hurricane Irma in September 2017 in which 12 elderly patients died, the state took immediate action by issuing emergency rules to protect the elderly. The rules required all nursing homes and assisted living facilities in the state to purchase ample resources in order to maintain operations and comfortable temperatures for at least 96 hours after a power outage. It also requires each facility to have a generator inspection and an emergency plan approved by the government. The Miami Jewish Health Memory Care Village is a planned campus-based community that will provide tailored care for those suffering from Alzheimer’s. The village, which is expected to open in 2018, will cost $51 million and comprise 99 units. Modeled after the Dutch village of Hogeway, where all 152 residents live with some form of dementia, it will offer a safe place for those with cognitive disorders, providing them the freedom to move around and engage in cultural offerings while receiving round-the-clock care from experienced medical professionals. Partnerships Some interesting partnerships have emerged in the Miami healthcare industry that will undoubtedly benefit Miami residents. In February 2018, Baptist Health announced a partnership with the New World Symphony. Two of South Florida’s most innovative nonprofit institutions are collaborating in a dynamic way to explore the intersections between wellness and music. New World Symphony Fellows will be playing music for Baptist patients and their families throughout the Baptist community. The partners also announced an official Day of Wellness
at the New World Center, which will take place in the fall of 2018. In January 2018, COTA, a healthcare data and analytics company, partnered with the Miami Cancer Institute of Baptist Health in order to find ways to combine the latest technology in order to provide more personalized cancer care. This partnership is focused on improving cancer care in South Florida. In the summer of 2017, the Miami Dolphins announced a partnership with the UHealth System that will recognize the health system as the official healthcare provider for the team and the Hard Rock Stadium. Public matters Mental health garnered much of the health industry’s attention following February’s tragic school shooting at Marjory Stoneman Douglas High School in Parkland, Florida, located just 50 miles north of Miami. In the wake of the shooting, Governor Rick Scott organized a workshop in order to address mental health issues in the state. Better integration of data, coordination of care and early screening and assessment were key recommendations. These workgroups were organized in order to help with proposing new legislation by March 9. The opioid epidemic was another growing concern for Florida lawmakers. Florida’s Drug Policy Advisory Council created a report in January 2018 outlining over a dozen steps the state can take in its fight against the opioid crisis. The plan is making its way up to Governor Scott and should enable big changes at the state level later this year. On a monetary level, Governor Scott allocated a significant portion ($53 million) of the state’s health and human services budget for 2018-2019 to combat the epidemic. Flu activity was also at its highest in late 2017 and early 2018 since the 2015 flu season. Nationwide, 53 children died, and five of those deaths were in the state of Florida. The total hospitalization rate this flu season was the highest it has been since 2010. The H3N2 virus was particularly difficult to overcome with vaccines. Healthy future Looking forward, Miami’s healthcare industry is on the brink of opportunity. With millions of dollars being granted to healthcare institutions, more innovative products and practices will undoubtedly emerge out of Miami-Dade. But while Florida remains the highest-enrolled state in the country, Miami’s predominantly ( )
Nelson Lazo CEO Doctors Hospital Miami Orthopedics & Sports Medicine Institute
What are the biggest challenges facing area hospitals today? This is a tough business to have a margin in. I don’t think any hospital is seeing profits from the inpatient side. No matter what, we serve the community as a nonprofit hospital. Our focus has to be on the outpatient side of the equation. Outpatient procedures are also better for your patients. Most would rather come in as an outpatient, have a procedure done and go home rather than sit in a hospital bed. Driving people towards outpatient is much more economical and efficient. The challenge right now is being efficient, making sure costs are appropriate and moving many people to an outpatient setting that’s more efficient, more convenient and less costly. It’s a tough balance. What new technologies are changing healthcare? The area of robotics has been a big change. We do a lot of robotic surgeries here at Doctors Hospital, particularly in women’s services, in general surgery and urology. A robotic procedure is completed by a robot operated by a physician sitting at a console. Robotics have made a tremendous difference in the last couple of years in terms of how we treat our patients with less traumatic and less invasive means, which provide better outcomes. Robotics is a key shift in healthcare. Also, we have made tremendous advancements in both knee and hip replacement surgeries. That is one of the things we are best known for here at Doctors Hospital along with our top-notch sports medicine program. How does the hospital’s focus on wellness impact the community? We work with our community to keep people from needing inpatient hospital services. We would rather make you healthier, with a better diet, exercise and the right medications, than have you in our emergency room with a deteriorating situation. There’s a big emphasis on wellness and keeping people out of the hospital. The Affordable Care Act has a lot of emphasis on community outreach and establishing community needs. www.capitalanalyticsassociates.com
Diverse needs How UHealth takes a personalized approach to medicine to cater to Miami’s diverse population and healthcare needs
Dr. Edward Abraham CEO – University of Miami Health System A good example of personalized medicine is our precision oncology program. If a patient fails his or her initial therapy and the tumor starts to progress, we can take a piece of the tumor in a biopsy, then perform molecular testing that allows us to look at the genetic changes that have happened in the tumor. These changes may indicate sensitivity of the tumor to specific chemotherapies or targeted therapies. This way, we don’t waste time giving the patient drugs that will not be effective and instead give him or her drugs to which the tumor should be responsive.
What makes Miami’s healthcare market unique? Miami has a very diverse set of healthcare providers. Miami is very diverse in terms of diseases. This wonderful, diverse community has people and health issues from all over the world, particularly the Caribbean and Latin America. It’s unlike any other American city, so we fully take advantage of that. We just had our National Institute of Health (NIH) Clinical Translational Science Award renewed. That award is about the translation of medical discoveries in a lab into treatments for populations. A real focus for us is diversity and bringing new therapies into diverse populations, which allows us to take advantage of our community’s strengths and to personalize healthcare for them. Knowing various genetic backgrounds and how drugs work help us to choose the best therapies for patients based on how their genes affect their response to disease. 134 | Invest: Miami 2018 | HEALTH
What is the University of Miami Health System’s response to the opioid crisis? It’s something that we see everyday, among many of our patients, so we have to react to it constantly. We have a unique needle exchange program, in which people can exchange used syringes for clean ones, lowering the risk of transmitting HIV and other diseases through shared needles. People addicted to opioids are a complex population. When they come in for needle exchange, we test them for HIV and will give referrals to HIV clinics; some will go, some will not. It’s reflective of their social situation. We can also give them access to detox programs, and some will take advantage of that, but many will not. Localized infections, hepatitis and HIV are reduced by this needle exchange program. What is your outlook for the local healthcare climate for the rest of 2018? We’ll continue to see growth in the need for healthcare as the population grows and ages. It’s unclear how reimbursement patterns will change, but I think these will be pretty stable. Since it’s an election year, I doubt Congress will take up any big issues between now and November. We are getting more and more calls to schedule appointments, and I’m expecting that need to continue to grow.
Fred Stock, MSW President & CEO – Jewish Community Services
Investors are looking for stable communities. Of course, they’re looking for affordable housing, too, but mostly stable communities. What we do at JCS is work with the local entities in the community, whether it’s the human service agencies or the schools, to help create stable communities by supporting our children. By providing counseling and case management services for our youth, we assist our schools in creating a pathway for our children to become earners.
( ) Hispanic population tends to be uninsured. The ACHA has begun reversing this pattern; 2017 saw a major increase in the number of insured persons in the region. At the time of printing, the GOP was still pushing for fragmented health reform, as evidenced by the tax bill passed in December 2017. Over time, Washington plans to reduce and cap Medicaid spending, expand lower premium insurance, loosen ACA consumer protections, soften employer and individual mandates and repeal taxes and fees. These implementations have already seen
premium price hikes and fewer enrollees for 2018, but the long-term results of these changes are still uncertain. At the state level, Governor Scott allocated approximately $37 billion of the state’s $87.4 billion budget for 2018-2019 for health and human services. This represents a 42.11 percent increase from the budget allocation for the 2017-2018 year, mostly due to the uncertainty stemming from the GOP. This makes clear the state’s intention to secure a healthy future for Florida.
City of North Miami: North Miami is a vibrant, well-connected city focused on its future. Previously known as â&#x20AC;&#x153;The City of Progress,â&#x20AC;? North Miami has since outgrown its nickname and has reemerged as a family-friendly community with a strong local government focused on transparency and safety. As millennials become the largest group of homebuyers, the affordable housing market of North Miami is becoming increasingly attractive compared to its more expensive neighbors.
City for the future: North Miami is leading the way in sustainable growth as it sets its sights on a vibrant future The City of North Miami, a suburban enclave in northeastern Miami-Dade County, sits on the northern shores of Biscayne Bay, sandwiched between Fort Lauderdale, 20 miles to the north, and Miami, 10 miles to the south. Conveniently located along the busy I-95 corridor, it enjoys easy access to Fort Lauderdale-Hollywood and Miami International Airports, as well as South Florida’s bustling seaports, Port Everglades and PortMiami. With its charming arts district, abundant nature preserves and vast cultural offerings, North Miami is a vibrant, diverse and family-friendly community focused on its future. Natural wonder to growing city During the Third Seminole War (1855-1858), U.S. soldiers cut through the area’s thick mangrove forests to create a military trail that would later become the county’s first roadway. The trail crossed Arch Creek (now dried up) over a unique natural limestone bridge, said to have been one of the greatest natural wonders of South Florida. The settlement that grew up around this scenic attraction became the Town of Arch Creek.
138 | Invest: Miami 2018 | CITY OF NORTH MIAMI
By 1905, the Arch Creek Railroad Depot had become the town hub, and a school and post office both opened nearby. By 1912, the population was still under 100, and the area was primarily agricultural. When the Biscayne Canal was dug in 1924, it seeped moisture out of the area’s soil and made farming no longer profitable. Fortunately, the Florida land boom of the 1920s was in full swing, and this drained land was prime for partitioning, lot sales and development. In 1926, Arch Creek incorporated as the Town of Miami Shores. A terrible hurricane in September of that year burst the land speculation bubble, but the community itself recovered. Residents built their first city hall, published their first newspaper and constructed the historic William Jennings Bryan School. In 1931, the Town of Miami Shores was renamed the Town of North Miami when the wealthy Shoreland Company, located to the south, lobbied the Florida legislature to be named the Village of Miami Shores. At the end of World War II, a steady influx of military veterans and their young families changed the ( )
CITY OF NORTH MIAMI INTERVIEW
Endurance How North Miami continues to attract new business, upgrade its infrastructure and invest in resiliency strategies to secure quality of life for its residents
Dr. Smith Joseph Mayor – City of North Miami How is North Miami welcoming new businesses? We are continuing to nurture a symbiotic relationship with the businesses based here in North Miami. We are partially subsidizing those who need funding from our North Miami Community Redevelopment Agency (NMCRA) programs. A few years ago, we were able to resuscitate our NMCRA despite some obstacles and adversities and come to a good internal agreement with the county. We are now reaping the benefits. Our NMCRA funding is a tool we are using to let developers know that we are open for business and are a city on the move. Attracting new businesses is still one of our top priorities, but nurturing those we already have are at the top of the list as well. The SoLē Mia Local Preference Office (LPO) is continuing to offer free consulting to local businesses and also opens its doors to residents looking for help in crafting or improving their resumes. The Beacon Council’s selection of North Miami as the recipient of the Business Climate & Policy Award this April goes to show that North Miami is continuing to improve its business climate to the benefit of our residents and our businesses. What’s new in North Miami in 2018? We’ve already completed several capital improvement projects so far in 2018. We’ve planted Florida-friendly trees in Sunkist Grove and north-central North Miami. The restrooms in Pepper Park were refurbished. The North Miami Stadium received some upgrades, including new synthetic turf and an upgraded drainage system. Our biggest goals are passing the general obligation bond, creating more quality jobs and putting North Miami on the map for investors and developers. Can you tell us about the general obligation bond? One of the biggest challenges of my new term will be levying a general obligation bond for rebuilding infrastructure and addressing sea-level rise issues. This
bond is badly needed for the city’s infrastructure. While there has been some resistance in the community, this resistance is normal in any process of change. You can observe the same in the evolution of all creatures. The proposed $120 million bond would benefit projects chosen with the input of North Miami residents last year, including improvement of parks and community centers, construction of seawalls, road and sidewalk improvements and investment in affordable housing. The city’s biggest challenge in the future will be the continued stress of climate change, but North Miami has proven its endurance. We were the first city to take a leading role in dealing with the threat of rising sea levels, and we are recommitting to that with this general obligation bond. My vision of a resilient city, able to withstand storms and sea-level rise, is inching closer. As a city, we will not bend. We will not fall. We will stay strong. We will remain the “City on the Move.” www.capitalanalyticsassociates.com
CITY OF NORTH MIAMI OVERVIEW
North Miami in numbers: GROWTH
AVERAGE HOUSEHOLD INCOME
58,786 2010 FOREIGN BORN PERSONS
MEDIAN HOUSE PRICE (OWNER OCCUPIED)
Racial makeup (2016): PERSONS WITHOUT HEALTH INSURANCE (UNDER 65)
PERSONS IN POVERTY
2% 10.4% White
MEDIAN GROSS RENT
1% Two or more
HIGH SCHOOL GRADUATE OR HIGHER (AGE 25+)
BACHELOR DEGREE OR HIGHER (AGE 25+)
Source: U.S. Census Bureau
( ) face of the town. This rapid expansion brought the need for a high school, as well as a new charter and a new name. The charter for the newly christened City of North Miami was officially enacted by the state legislature in 1953. Modern makeover Once dubbed “The City of Progress,” North Miami weathered some challenging times but today is re-emerging as a progressive and innovative community with a strong local government focused on transparency and accountability. In a county struggling with unaffordable housing and persistent flooding, North Miami offers relatively inexpensive land located on high ground. In the past decade, the city has cut unemployment in half and increased its general revenue by $65 million. It also became the first city in the county to address sea-level rise and climate change concerns. North Miami prides itself on being a family-friendly city that offers a wide variety of community events and facilities to its young, growing population, but no demographic is left behind. In 2017, a new So140 | Invest: Miami 2018 | CITY OF NORTH MIAMI
cial Services Division was created with a focus on seniors; it now falls under Community Planning and Development. As it looks toward a vibrant future, the city’s focus is on modernization through revitalizing aging buildings, repairing cracking infrastructure and improving technology. This facelift is packaged in the form of a general obligation bond, officially branded the NoMi GO Bond, not to exceed $120 million, $10 million of which will go to affordable housing. The estimated cost to homeowners is an increase of about $2.89 per $1,000 of assessed home value to be added to the city’s current tax rate of $7.50 per $1,000. Residents will vote in a special election to be held in May 2018. The city’s Community Beautification Program aims to enhance neighborhoods, improve livability and promote community pride. Recent initiatives include stump removal, restoration following Hurricane Irma and cleaning up the city’s streets through the regular Keep North Miami Beautiful Community Clean-Up projects in order to raise curb appeal and attract new businesses and residents.
CITY OF NORTH MIAMI OVERVIEW
“There is a positive transformation taking place in North Miami without the negativity of gentrification,” Jimmy Tate, president of Tate Capital, told Invest:. “The people within their own community are taking pride in their homes, streets, parks and places of business. Communities are improving and values are going up all around. The market has been improving, and people are gaining confidence. They’re working and investing in their homes and businesses.” In a continued effort to spur economic growth, as outlined in the city’s 2015 Adopted Comprehensive Plan, the 2017 Land Development Regulations updates will help to ensure quality, safety, resiliency and the general welfare of the community as a number of new projects break ground. Additionally, the Downtown Revitalization Initiative focuses on sparking redevelopment as it works to transform the physical image of downtown. Suds, sounds and the silver screen A big part of North Miami’s recent efforts to attract new business have been focused on breweries, music and film. With a Tri-Rail station proposed for the corner of NE 125th Street (bids for a master design of the transit station started going out in August 2017), higher density and redevelopment are on the horizon. The city is looking to breweries to help activate foot traffic, stimulate nightlife and spur the economy in that area. In June 2017, the North Miami CRA (NMCRA) and city council approved a $150,000 business attraction grant for Descargo Brewing Company to open in 2,800 square feet of space at 12355 NE 13th Avenue, with three barrels of production, seating for 60, a 1,200-square-foot tasting room and an outdoor beer garden. In July, Lost City Brewing Company signed a five-year lease with a five-year option for 3,800 square feet at 12207 NE 13th Court. The city has also signed a five-year agreement with Florida International University (FIU) to host the North Miami Brewfest, a one-day festival featuring some of the state’s best craft breweries and their unique beers, through 2021. In 2017, the festival moved to the MOCA Plaza. Officials continue to explore the idea of positioning North Miami as a Music City. In 1958, Mack Emerman bought a building and opened the first recording studio of many to come to this location. In 1965, James Brown’s classic “I Feel Good” was recorded at Criteria, and today The Hit Factory Criteria remains one of the largest and busiest recording venues in
Larry Spring, Jr. City Manager City of North Miami Executive Director North Miami Community Redevelopment Agency
What impact do you think the SoLē Mia project will have on North Miami? I think it’s a multifaceted impact. The obvious one will be the economic impact of new property taxes and the additional sales taxes that will be generated by the retail in that area. It will also invite a new type of resident — the young professional — to live, work and play in our city. Not only is it bringing new people, but it’s actually also encouraging other real estate developers to move forward with their own developments. What experience-based retail is NoMi focusing on? Descarga Brewing Company is a great example. We provided some funding to the organization to help it get situated here. We’re in discussions with another brewer about a location on West Dixie. We are the title sponsor and a partner with FIU for Brewfest, which is now physically located at our MOCA Plaza, as a result of us making that investment. We have also been encouraging a lot of restaurants as a part of our rebranding strategy. We’ve seen some restaurants that get to their threeyear mark and fizzle out, but we’ve been able to line up the locations and bring in additional replacement restaurants. We also have the new NoMi Bar & Grill that opened in the old Moca Café space, which is right there next to Café Creme in the downtown area. Our CRA is trying to attract more to make our downtown more inviting to residents and visitors. What makes the city a great place to do business? We have it all. We are a family-oriented community, with multiple generations that really believe in the character and nature of the city. We’re perfectly positioned geographically between Miami and Fort Lauderdale. We’ve got everything: waterfront, bay views, big parks and a hometown feel. People like coming downtown to have dinner and walking to the cultural attractions in the area. The city refined and approved new land development regulations, so we’re ready and open for business. North Miami is at the beginning of its journey as a redeveloping city. All are welcome. www.capitalanalyticsassociates.com
CITY OF NORTH MIAMI OVERVIEW
Michael Tillman Managing Director LeFrak
Over the past year, we have started to see SoLē Mia come to life. Warren Henry and Costco have commenced construction and intend to open in late 2018, and we are well underway on the first two residential towers. We intend to deliver the first tower in early 2019 and the second tower a few months thereafter. We’re very excited about the amenities we will be offering our residents both within the buildings and outside, including the ten-acre Crystal Lagoon, which will come online with the residential property. As we continue to develop the project, there will be active parks; walking and jogging trails; green spaces; a full clubhouse for residents with a host of amenities, including dining, gym/spa, etc.; and activities all around the Crystal Lagoon. These will include beaches, floating marinas and non-motorized water sports such as paddle boarding and kayaking, as well as slides and other water activations that cannot be re-created elsewhere. No one is going to find 185 acres on a main corridor in South Florida anymore, so we have the opportunity to do something here that will be unique and inimitable. When we filed the plans for our first two residential towers, they were the first sets of plans for a high-rise building in North Miami in nearly two decades. It’s great to see other developers paying attention to the city. Those developers are gaining interest in North Miami because they know that this project is something great and that it is going to happen with the sponsorship of two very strong and capable developers, LeFrak and Turnberry Associates. We also know that if this project is successful, North Miami will see a resurgence. If the city continues to incentivize businesses and developers to come in, as it is currently doing, I think we will see the City on the Move quickly realize its tremendous potential. 142 | Invest: Miami 2018 | CITY OF NORTH MIAMI
the Southeast. Most recently, the City of North Miami Public Information Officers Eunicia Baker and Kassandra Timothe recorded the city’s #Get2NoMi theme song at Criteria Studios with producer/engineer Scott “Scottie Nova” Crawford, free of charge. A number of other studios have also taken up residence in the area from NW 135th to 141st Streets between 7th Avenue and I-95, offering a variety of space, equipment and vibes to artists ranging from Justin Bieber to Juvenile and from Kool & the Gang to Cocaine Cowboy Mickey Munday. Hollywood and Atlanta aren’t the only places vying for film and production companies. North Miami locations have been featured in such shows as “Ballers” and “Burn Notice,” and Greenwich studios, one of the largest studios in South Florida, also calls the city home. In June 2017, North Miami approved a film incentive program that reimburses 30 percent of filming costs over $10,000, up to $50,000, to be paid by the NMCRA as long as the filming is done in the city’s redevelopment area. Production companies are also eligible for free parking for their equipment based on their spending, as well as a waiving of fees for the use of city facilities. This program comes after the State of Florida failed to replenish the Florida Entertainment Incentive Program, which ended last summer. North Miami is committed to maintaining its place as a popular shooting location and values the importance of film as a vehicle for culture, education and entertainment, as well as economic growth. New developments In February 2016, the North Miami City Council designated a 16-block area of NW 7th Avenue between NW 119th and NW 135th as the Chinatown Cultural Arts and Innovation District. The master plan, prepared by urban designer Keith & Schnars, was completed in July 2017 and cost the city $175,000. In November 2017, the NMCRA approved the masterplan and committed to spending a minimum of $3 million on infrastructure, streetscape and business grants. The District, which will feature two ornate gates leading into the region’s first Chinatown, will celebrate Chinese art, culture and innovation. The hope is that this forward-looking plan will put the city on the international map, attract new business, create jobs and raise property values in the area. In addition to the large-scale master-planned SoLē Mia community, which promises to be a huge taxation and employment boost for North Miami, a number of other projects were recently completed or are
CITY OF NORTH MIAMI OVERVIEW
currently in the works. Audi North Miami opened in October, Publix opened a store at the 127th Street Shopping Center in December and in January 2018 the North Miami Planning Commission recommended approval of the Biscayne Harbour Apartments, an 11-story, 52-unit development at Broad Causeway and 123rd Street. Parkview Villas, at 2500 NE 135th Street, and East of 5th Townhomes, at 12121 NE 5th Avenue and 509 NE 121st Street, are also both under construction. “We work with developers to take an environmentally impacted site and transform it into a usable piece of property for both residential and commercial industrial development,” Eddy Smith, senior vice president at SCS Engineers, told Invest:. “Our work in North Miami has been focused on the SoLē Mia project. It really is a prime piece of real estate that is being transformed from a dump into a really nice development.” In February 2018, the city considered a proposal from Blue Road for a mixed-use development project dedicated to senior and assisted living. Part of the proposal included 1,795 square feet of groundfloor retail space reserved for the Museum of Contemporary Art (MOCA), which is run by the city. “The City of North Miami is setting a good example that will continue to be replicated,” Kobi Karp, president of Kobi Karp Architecture and Interior Design, told Invest:. “Since there isn’t an influx of developers moving into the area, the growth is sustainable and gives time for support systems and infrastructure to keep up their pace.” Attractive city Millennials are the largest group of home buyers in the country and are quickly becoming the most influential adult generation. With an average monthly price of $1,418, North Miami’s rental market is more affordable than nearby cities like Miami ($1,632), North Miami Beach ($1,523) and Doral ($1,763), making it an attractive place to live for the younger generation. And for millennials looking to buy, North Miami’s median home price of $157,000 is much lower than the City of Miami, at $326,000. With its affordable housing, community offerings and burgeoning nightlife, North Miami is hoping to encourage more millennials to call it home. In 2017, the city launched its Housing Improvement Program, a repair and rehabilitation grant designed to address aging and deteriorating homes by providing up to $20,000 for home repairs for income-eligible homeowners. Applications for the
SoLē Mia SoLē Mia, a 184-acre, $4 billion mixed-use, master-planned community in North Miami, is one of the largest development projects in South Florida, spearheaded by billionaire families Soffer and LeFrak (hence the name: “So” for Soffer, “Le” for Lefrak and “Mia” for Miami). Since the 1960s, a variety of attempts to develop this desirable land just south of Aventura — the more creative of which included an amusement park and ski resort — have failed. The area housed a municipal landfill from 1975 to 1981, and the City of North Miami leased the land to Oleta Group, led by the Soffers, in 2015. While the visionary project has experienced several delays, in September 2017, developer SM Multifamily LLC secured a $101 million HUD-insured loan from Wells Fargo for two 17-story luxury residential towers with a total of 400 units and attached parking. This first phase is expected to jumpstart the development, which hopes to bring long-term economic growth to the city. The whole project is projected to take two development cycles and 15 years to complete. When finished, SoLē Mia will feature an innovative 10-acre lagoon with beaches; 12 residential buildings; a “Mainstreet” area with shops, restaurants, a hotel and other entertainment venues; and a Warren Henry car dealership. In April 2017, the city also filed a permit to build an $85 million Costco warehouse store at the site. www.capitalanalyticsassociates.com
CITY OF NORTH MIAMI OVERVIEW
The North Miami Brewfest, held annually at MOCA Plaza, features local breweries and their tasty beers.
program, funded by the city and the NMCRA, were made available beginning in December. This effort will not only help to instill pride in the cityâ&#x20AC;&#x2122;s current residents but will also make the city more desirable to potential new residents, both young and old.
May 2016 due to concerns about training and record keeping, among other things. Additionally, a new Florida state law requiring police departments to establish autism training took effect in September. In January 2017, the North Miami Police Department signed a five-year, $533,000 contract with Point Blank Enterprises to implement body cameras and a video management system to hold its officers accountable. The city budgeted $125,000 for the cameras in 2017. Statewide, police departments are testing a shield firearm camera, which mounts on the bottom of service weapons and starts recording when the guns are taken out of their holsters. City Manager Larry M. Spring, Jr., CPA, created a community council in July 2016 to improve and strengthen relations between the police department and North Miami citizens. This continues to be an important forum for open communication.
The City of North Miami budgeted $125,000 for body cameras in 2017.
Safety first Following the 2016 shooting of unarmed behavioral therapist Charles Kinsey, the North Miami Police Department has undergone several important changes, with a focus on improving both officer training and community relations. In 2017, the police department shelled out $84,000 to the Police Executive Research Forum to conduct a four-month review of its crisis intervention training procedures. The training review was part of a longer-term plan to regain accreditation with the Florida Commission on Law Enforcement, which the department lost in
144 | Invest: Miami 2018 | CITY OF NORTH MIAMI
CITY OF NORTH MIAMI OVERVIEW
In November 2017, the Miami Dolphins announced that they would help sponsor North Miami Police Athletic League (PAL) programs. The team noted that PAL programs, which center on helping the community’s youth, provide an opportunity for police to connect with kids and positively influence their development. Dolphins players and representatives regularly show up at community events in support. Other youth-oriented programs the North Miami Police Department participates in include lunching with students at the city’s schools and the county’s 5000 Role Models program, which guides minority male students through their schooling in an effort to close the achievement gap and increase their employability in higher-wage, higher-skills jobs. Mind and body High-quality educational institutions like FIU, Johnson and Wales (which consistently ranks number one in the region for diversity) and Barry University in nearby Miami Shores form an integral part of North Miami, providing ample opportunities for learning and workforce development. “We work with the City of North Miami through a number of initiatives and have a great working partnership,” Larry Rice, president of Johnson and Wales University, told Invest:. “We’re one of the few colleges in the city, maybe even in the county, that has an open campus. This was intentional, and we have become part of the fabric of the North Miami community. We are not exclusive. We have a walking campus not only for our students but also for people who live in the community.” Healthcare options ranging from the Miami Beach Community Health Center North and Jackson North Medical Center to the Villa Maria Nursing Center and a Borinquen Medical Center, along with a number of urgent care and walk-in clinics, keep the city’s diverse population healthy. Additionally, in 2018, the City of North Miami was named a finalist in the South Florida Business Journal’s Healthiest Employers Awards for its efforts in encouraging its employees to participate in wellness programs and lead healthier, happier lives. In April, the City of North Miami received the 2018 Miami-Dade Beacon Council Award for Business Climate and Policy. This category recognizes an organization or community that advances business policy solutions that facilitate economic development opportunities by reducing barriers to business growth. In 2017, the City of North Miami implemented sev-
Major Timothy Belcher Neighborhood Enhancement North Miami Police Department
What were some highlights for the Neighborhood Enhancement Division in 2017? Children in North Miami’s PAL (Police Athletic League) program had a special opportunity last year. They visited the Miami Dolphins training camp to meet NFL players and discuss the importance of education, physical fitness and positive choices in a safe and fun environment. The Dolphins and NFL commissioner Roger Goodell partnered with the North Miami Police Department (NMPD) by holding a roundtable discussion about policing and community issues. Additionally, they made a generous donation to the PAL program, which offers tutoring, sporting activities and relationship building between youth and law enforcement. The department also organized events like community bike rides and Coffee with a Cop — programs designed to create connections between the community and the NMPD. Another important program is the gun buyback initiative, in which we offer gift cards in exchange for firearms brought in by community members. This program is an effort to remove guns from our community, especially our streets and schools. What are your goals for North Miami’s community engagement in 2018? We will make a positive impact on our community and deliver positive customer service by enhancing our partnerships with the citizens, businesses and organizations of North Miami. We are working to build trust with the community, especially the younger generations, through respect and professionalism, and we educate people so they understand and follow ordinances and laws within the city. Another focus is teaching our community to reach out to us when they see issues as part of our See Something, Say Something campaign. We will continue our community outreach through social events and neighborhood and business visits. The NMPD respects the sanctity of life by focusing on quality training, de-escalation, community policing and effective communication. www.capitalanalyticsassociates.com
CITY OF NORTH MIAMI OVERVIEW
eral innovative economic development programs, including its film incentives program and the Green Rehabilitation Grant.
North Miami Community Redevelopment Agency (NMCRA) The North Miami CRA kicked off 2018 with a fun-filled celebration of music, art, design and dining featuring musical performances by Grammy-nominated singer Angie Stone and family activities in MOCA Plaza. The event was designed to showcase the city’s unique business, cultural, artistic and entertainment options. Covering an area of 3,250 acres, or approximately 60 percent of North Miami, the NMCRA is an independent government organization whose purpose is to eliminate areas of slum and blight in the city. It does this by increasing taxable values for a limited time in deteriorating areas in an effort to transform them into economically viable neighborhoods that contribute to the greater health of the community. The NMCRA offers a number of grants and business incentives to encourage sustainable redevelopment. One such incentive the NMCRA implemented in 2017 is a $7,500 grant available to existing mom-and-pop businesses to help them develop customer-friendly tech platforms, provide training and purchase equipment for their business. It also provides six months’ rental reimbursement for business expansion to new and existing business in the NMCRA district, as well as a 50-50 match for rehabilitation up to $100,000 (up from $80,000 in 2016). The NMCRA is a major engine behind the revitalization of North Miami, encouraging the community to actively participate in and celebrate the city’s growth. 146 | Invest: Miami 2018 | CITY OF NORTH MIAMI
“Eccentric, rhythmic, tasteful and artistic” North Miami is known for its diversity and authenticity, offering the area’s largest concentration of mid-century modern buildings and an array of eclectic shops. It’s a place where you can find weave salons next to dollar stores next to high-end antique stores peddling $20,000 sofas. Residents and visitors alike can enjoy live music (like monthly Jazz at MOCA), shop for unique home furnishings and boutique fashion and experience art and culture all in one place. In 2017, the NMCRA won a Florida Redevelopment Association (FRA) award for its planning study, which included an outline of 14 economic development goals and a step-by-step guide to achieve them. This plan for revitalization and the slogan “To NoMi is to love me,” adopted in 2016 under the guidance of Pompano Beach-based Redevelopment Management Associates (RMA), are part of the NMCRA’s ongoing rebranding efforts, showcasing the “eccentric,” “rhythmic,” “tasteful” and “artistic” experiences on offer in the city year round. In January 2018, after a two-year search, North Miami’s crown jewel the Museum of Contemporary Art (MOCA) named a new executive director, Chana Budgazad Sheldon, to continue its reputation for trailblazing in the art community. Under Sheldon’s expert guidance, the museum will maintain its tradition of making contemporary art accessible to diverse audiences. Bright future North Miami is truly a city on the upswing. Perhaps its biggest challenge is to promote its attractions and encourage responsible, sustainable development without isolating its current residents and while continuing to ensure local stakeholders’ positions. City leaders, hand in hand with the NMCRA, appear more than capable of rising to the test.
Capital Analytics would like to thank the City of North Miami for its contribution in compiling this chapter. To learn more, visit their website: www.northmiamifl.gov
BANKING & FINANCE OVERVIEW
Banking & Finance: Itâ&#x20AC;&#x2122;s no secret that Miami has a high concentration of capital, both foreign and domestic. To capitalize on this money, various financial institutions have flocked to the city, giving Miami-Dade the secondlargest concentration of domestic and international banks on the East Coast of the U.S. The growth of fintech startups in the county, coupled with business-friendly state legislation, is expected to positively contribute to the industry moving into 2018.
Banking & Finance in numbers: Top 5 community banks in South Florida (as of December 2017) : Bank
Florida Community Bank
City National Bank of Florida
Source: South Florida Business Journal
Top 10 national banks in South Florida, ranked by deposits: Bank
S. Fla. deposits as of June 30, 2017
S. Fla. deposits as of June 30, 2016
S. Fla. locations
S. Fla. market share
U.S. corporate headquarters
Bank of America
San Francisco, CA
New York, NY
New York, NY
Miami Lakes, FL
TD Bank NA
Cherry Hill, NJ
City National Bank of Florida
Coral Gables, FL
Source: South Florida Business Journal
Miami-Dade County banks with assets more than $1 billion (2017): Bank
Assets (by thousands)
Bankunited, National Association
City National Bank of Florida
Mercantil Bank, National Association
BAC Florida Bank
148 | Invest: Miami 2018 | BANKING & FINANCE
Banking evolution: In a changing financial landscape, Miami’s banking institutions are continuing to innovate and adapt Known as the financial capital of Latin America, Miami-Dade County is home to the largest concentration of domestic and international banks on the East Coast south of New York City. With bullish world financial markets, high investor confidence and Latin America poised for modest recovery as it emerges from a period of recession and sluggish growth, 2018 looks to be a promising year for Miami’s banking and finance sector. Even so, regulatory challenges, consolidation trends, evolving financial technology and a shift toward customer-centricity continue to change the face of the financial world. “Wealthy” growth Miami-Dade’s continued population growth has contributed to a healthy local banking sector, as a larger mass of people equals more money and a growing deposit base. (Florida has the highest percentage of bank deposits held at out-of-state-headquartered banks.) December 2017’s tax reform legislation, providing corporate and individual tax cuts, promises to put more cash in consumers’ pockets and bank accounts. Private banking, wealth management and trade finance services remain in high demand to serve the
area’s prevalence of high-net-worth individuals. “There’s a lot of money in Miami,” J.C. de Ona, market president at Centennial Bank, told Invest: “There’s old money. There’s new money. There’s international money. There’s more money than people sometimes realize. It creates constant opportunities for business and wealth management services.” While in mid-2017, loan growth was down by 50 percent at South Florida’s biggest banks, by the end of the year, the majority of area banks reported strong loan growth, attributed primarily to commercial and industrial lending. This means local businesses are growing as well, which is good news for Miami-Dade’s economy. The number of “troubled or problematic” banks in the Miami area — or banks whose fiscal health might be in danger — declined from 6.6 percent in Q2 2016 to 5.1 percent in Q2 2017. Two of Florida’s six most profitable banks as of Q3 2017 were located in Miami-Dade: Bank United in Miami Lakes, with $29.5 billion total assets and $75 million net income, and City National Bank of Florida in Miami, with $9.8 billion total assets and $22.7 million net income. Showing their commitment to the community, many South Florida banks waived fees and offered breaks on www.capitalanalyticsassociates.com
BANKING & FINANCE OVERVIEW
loan payments to those in disaster areas after Hurricane Irma, which barrelled through the region in September 2017. Many banks relied heavily on technology to weather the storm, processing a surge of digital deposits even though their physical offices were closed. A bank-eat-bank world With persisting low interest rates (despite three increases in 2017), tight regulations and new developments in financial technology pushing banks to offer more products and consumer-friendly services, South Florida banks seem to be faced with one of two choices: acquire or be acquired. “Unfortunately, the regulatory market is such that the compliance burden on small banks is so great that they are almost compelled to sell if they want to provide their shareholders with a reasonable return,” Brian Hagan, Florida market president for First American Bank, told Invest:. “It’s really hard to keep up with cybersecurity regulations when offering all the newest and best online products, such as apps for smartphones. It’s a particular challenge for a very small bank. It’s a difficult proposition to get those banks to grow and remain independent.” In 2017, two of the largest banking acquisitions in Miami-Dade were finalized and a third was announced. When IberiaBank purchased Sabadell United, located in Miami, for $1 billion, it brought the number of South Florida-based banks with over $5
billion in assets down to four. The Louisiana-based company then acquired Gibraltar Private Bank and Trust for $223 million. Miami-based City National, which reported in February 2018 that it broke the $10-billion-asset ceiling, announced in December its plans to acquire TotalBank for $528 million. This deal will consolidate two of South Florida’s largest and most historic banks. This consolidation trend has significantly reduced the number of financial institutions in the region: 10 years ago there were about 80 banks; today, that number is closer to 40. Out-of-state banks like IberiaBank continue to move to South Florida, acquiring local banks to capitalize on the region’s abundant deposits. International banks aren’t faring much better. “We’re seeing a shrinking number of players in the market,” David Schwartz, president and CEO of the Florida International Banking Association (FIBA), told Invest:. “At the peak, we had over 200 foreign banks and agencies here, and now we’re down to less than 100.” But the news isn’t all mergers and acquisitions. Amidst all this consolidation, South Florida could be getting its first de novo bank in almost a decade. Pending approval from regulators, Coastal Community Bank plans to open in Hollywood in Q3 2018. While the cost of regulatory compliance has been too high for many smaller banks to stay competitive ( )
In 2017, two of the largest banking acquisitions in Miami-Dade were finalized.
150 | Invest: Miami 2018 | BANKING & FINANCE
BANKING & FINANCE INTERVIEW
Community-minded How TD Bank is meeting the needs of Miami’s communities and supporting the growth of local businesses
D. Nicolas Miceli Regional President, Florida Metro – TD Bank How does TD Bank connect to the neighborhoods it serves? Our primary focus is on meeting the needs of the communities we serve. This also entails employing a store team that is reflective of the community. For example, in many of our stores we have multilingual staff so the experience for all customers is positive and seamless — or as we like to call it at TD, “Legendary.” It’s important that we offer customers an array of services, solutions and products. Financial services are not one size fits all, and we want to ensure we are serving all customers with offerings that best meet their individual needs. When we enter a new market, it’s important that TD feels like a natural addition to that neighborhood. For example, we opened up a location on Calle Ocho and built an environmentally friendly rooster (to go along with the many rooster statues in that area) to showcase the community. Before opening each of our locations, we talk to local historians and look through archives to find vintage pictures of that community from the 1920s and beyond. Then we have a mural painted on one wall of our office that illustrates where this community began and where it is today. How can banks support growth in their communities? One answer is to support small and young businesses. It can be a challenge to get a loan from a bank, but we believe we have a responsibility to show every business what strategies and resources they can use to obtain financing to grow their business. We partner with agencies like the Small Business Administration, which can reduce the risk of financing young businesses and enable them to grow and flourish. Constructing empty buildings with the hope of creating jobs is not the best approach. Our strategy has always been to assist in incubating businesses. If you can create jobs first, then buildings will come. The opposite
can be seen in many cities, where investors overbuilt in anticipation of job growth that never came. That’s why we invest in small businesses — to create those jobs of tomorrow, which will drive real estate expansion. How do you see the tax overhaul affecting Miami? I think we’re already seeing positive effects within the market. It’s flowing into the community, and that process is ongoing. We are seeing more confidence and more investments. Miami is a port city, which gives rise to tremendous amounts of businesses that can support the whole infrastructure of trade and importing goods. There are pockets of amazing growth and expansion. It’s wonderful to see that ecosystem within the community. Confidence is what it’s all about; businesses look to expand where they feel confident. www.capitalanalyticsassociates.com
BANKING & FINANCE OVERVIEW
Brickellâ&#x20AC;&#x2122;s brick and motor offerings are modernizing, with sleek and tech-forward interiors to better serve customers.
( ) with their larger counterparts, potential rollbacks to Dodd-Frank in 2018 could ease some of this burden. Fueling finance Florida is known for its wealthy population, business-friendly legislation, favorable tax environment and large market, so it comes as no surprise that financial service firms make up 11 percent of the stateâ&#x20AC;&#x2122;s employment. In the Miami area, almost 180,000 people are employed in financial activities. Bolstering this thriving sector is strong commercial real estate (CRE) lending, particularly for office and industrial projects. For several years, Miami-area banks have been preparing for a softening of the
152 | Invest: Miami 2018 | BANKING & FINANCE
market that hasnâ&#x20AC;&#x2122;t come, meaning they have liquid capital readily available. In addition, more insurance companies, family trusts and individual investors with deep pockets are entering the market and competing with big-equity firms to fund commercial projects. In the industrial sector in particular, Miami is seeing a lot of institutional investors. On top of that, the commercial mortgage-backed security (CMBS), which used to be the chief driver of CRE financing, is on the rise again after it fell out of favor during the financial crisis. This time around it promises to be better serviced and regulated. While office and industrial lending remain hot, condo and some retail lending have cooled. Wells Fargo
BANKING & FINANCE OVERVIEW
reported no new condo loans in the South Florida area in 2017, though it expects to close at least one in 2018. On the retail side, the slowdown can be attributed to a need to absorb what has already been built and a flattening out due to the growth of e-commerce. Despite this, Wells Fargo reported that half of its CRE loans in 2017 were retail. Projections for 2018 are lower. Recent years have seen a rise in the number of private equity (PE) firms in Miami-Dade, and this trend is expected to continue as the tax bill spurs company growth. 2017 saw a total of 259 PE deals in South Florida, which is up from 256 in 2016. Healthcare is the biggest sector for PE deals, accounting for 22 percent, though 2018 will likely bring increased investment in technology. Private banking and wealth management continue to be major growth drivers in Miami-Dade’s banking and finance industry. Ranked as the sixth most important city in the world to ultra-high-net-worth individuals (those with a networth over $30 million), Miami especially caters to the wealthy international client. It serves as headquarters to a large number of international banks and businesses, particularly those from Latin America. In 2018, outbound investment is expected to be an important accelerator behind Latin America’s economic recovery — meaning more good news for Miami. “The same characteristic that makes Miami’s market interesting makes it challenging,” Gail Cohen, chair and general trust counsel at Fiduciary Trust Company International, told Invest:.“The amount of cross-border planning in South Florida is higher than one finds in most other areas. We have to familiarize ourselves with the specific laws of each country in order to make the best financial decisions for our clients.” Trade finance is another service that is seeing healthy growth in Miami-Dade. This type of financing helps companies — especially small to medium-sized enterprises (SMEs), which often lack the resources to advance funds in order to import or export goods — engage in world trade. For lenders, trade finance has a low credit risk level and a shorter period to recover loans than other asset classes (120 days versus 437 days). While all this wealth and economic growth is positive, economic disparity remains a tangible issue in MiamiDade. In October 2017, a federal regulator told Miamibased Helm Bank, Florida’s 13th largest bank with
$780.9 million in assets, that it needed to do a better job of meeting the community’s credit needs. Fortunately, many of the county’s financial institutions are putting efforts toward making lending accessible to everyone. With support from JPMorgan Chase, Grameen America, the fastest-growing microfinance organization in the U.S., opened its first branch in Miami’s Little Havana neighborhood in 2017. Grameen provides small loans to women living below the poverty level to help them start or expand their businesses. Risky business In the last 130 years, Florida has been hit by almost twice as many hurricanes as the country’s next two most hurricane-prone states, Texas and Louisiana. Following Hurricane Irma’s assault on the Miami area in September 2017, the spotlight has been on climate change, sea-level rise and natural disaster preparedness. In South Florida, 2.4 million people and 1.3 million homes are situated just 1.2 meters above the high-tide line. By the end of the century, sea levels are expected to rise up to 2 meters. So what keeps the region growing even in the face of these overwhelming odds? The answer: insurance. “South Florida is a hot market and is one of the most desirable places for people from all over the world to visit, live, work and play. As our population and number of visitors continues to increase each year, their demands create opportunities for new developments and expanded services to meet their needs,” Zeb Holt, area president, South Florida, for Arthur J. Gallagher & Co., told Invest:. “Insurance is the lubricant for commerce. Without it, almost nothing can happen.” In 2015, $10.8 billion worth of homeowners’ insurance protected more than 6 million properties across Florida. The total insured value in the state was $2.1 trillion — almost equal to the entire economic output of India. In hurricane-prone areas like Miami, property insurance is required to protect loans, which makes for one colossal insurance market. Global insurance linked securities (ILS) have turned South Florida’s hurricane vulnerability into an attractive financial asset class in which investors trade the risks of large natural disasters. Approximately 15 percent of total reinsurance capital comes from pension funds, endowment funds and sovereign wealth funds. The catastrophe bond, a kind of alternative insurance,
In South Florida, 2.4 million people and 1.3 million homes are situated just 1.2 meters above the high tide line.
Guillermo Castillo Former Managing Director & South Florida Region Manager JPMorgan Chase
What are the main growth drivers of JPMorgan Chase’s Miami operation? The main growth driver for our business in South Florida is our ability to provide solutions across all lines of business that serve consumers, commercial and institutional clients. According to the latest FDIC data, JPMorgan Chase’s market share in South Florida is up to 8.56 percent in less than 10 years since the Washington Mutual acquisition. We think we will continue to grow at a faster rate going forward as the economy picks up steam in the next couple of years. That view reinforces what we’ve been doing to support the growth of the business, which is hiring more professionals, senior bankers, customer service and operations people across all businesses. What role does small business banking play in terms of your market strategy? The impact of small business on our market strategy is huge. While JPMorgan Chase is known for the fact that we cover some of the largest companies in the world, our bread and butter is really our work with small business. Chase serves more than 4 million small businesses nationally. In the South Florida market specifically, the target market is probably 80 percent to 90 percent small businesses, with annual revenues between $5 million and $150 million. It has been well documented that 90 percent of businesses in Florida have fewer than 20 employees. We like that the focus in Florida is small business, and we do very well here. At Chase we have the capacity to bank a top global company as well as a much smaller local company with solutions that meet their needs. South Florida has always been a place rich with startup activity, so we are spending a fair amount of time addressing the needs of those businesses. These entrepreneurial businesses eventually become bigger businesses, and we want to start building relationships with them from the get-go. 154 | Invest: Miami 2018 | BANKING & FINANCE
turns investment capital into reinsurance (essentially insurance for insurers). The global alternative market for insurance grew from $17 billion in 2006 to $89 billion in the first half of 2017. Issuance of catastrophe bonds broke records in 2017, surpassing $10 billion for the first time in market history, and 2018 is promising to be equally strong. In Miami, there are about 30 firms in the reinsurance business today, and premiums are estimated to be over $2 billion. Currently, national carriers account for only one-fifth of the Florida insurance market, which means small to mid-sized insurance firms have been picking up the slack. These companies are required to buy ample reinsurance to make sure they can cover their policyholders in the event of a disaster. Hurricane Irma was the first test of the reinsurance market since it gained real traction with investors, which meant the industry was sitting on a large capital cushion and weathered the storm well. The news isn’t quite as good for South Florida consumers, however. Florida’s largest property insurer, Universal Property and Casualty, is raising rates an average of 9.9 percent in Miami-Dade in 2018. Citizens Insurance customers in the county can expect rates for multi-peril coverage to rise an average of 10 percent. Still, many would say this is a small price to pay to live in such a beautiful and booming city. The robust property insurance industry is keeping that boom alive. Going digital Today banking services are synonymous with digital services. Fintech companies have been revolutionizing the financial services marketplace since the crisis 10 years ago. They spur innovation, facilitate payment and provide cybersecurity and fraud protection, among other things. Venture funding for U.S. fintech companies reached $21.6 billion globally in 2017, the highest level since 2000, and global VCbacked fintech companies brought in a record $16.6 billion in 2017. In South Florida — a hotbed for fintech startups, with 700 operating in the region — these forwardthinking companies have brought a significant number of unbanked and underbanked consumers to mainstream financial services. Chief among them are millennials, who have a reputation for distrusting traditional institutions. While area banks have been a bit slow to adapt to changing technology, they are indeed adapting. To compete with companies like Venmo, which offer direct peer-to-peer money transfers, traditional banks are offering digital payment networks like Zelle that allow customers to instantly transfer money between bank accounts.
BANKING & FINANCE OVERVIEW
Teri Williams-Cohee President & Chief Operating Officer – OneUnited Bank
A critical need facing many Miami residents, particularly black residents, is financial literacy. This topic is something that should be taught in schools, but most people figure it out hit or miss. A large segment of people in the black community just don’t trust banks. Historically, banks have redlined and sub-primed our community and made us feel like second-class citizens. At OneUnited, we have done a lot of work to make sure the community feels welcome in our branches.
“Banks don’t decide what channel the client wants to engage in; the client decides,” Mario Trueba, regional president for South Florida at IberiaBank, told Invest:. “We have to speak with our clients about what we can do better, whether it is in regard to our robust mobile app, a remote deposit capture, a standalone machine in somebody’s office, a drivethrough or even a walkup. If a bank offers only one channel, then it makes itself less convenient.” Miami’s fintech companies and financial institutions are increasingly finding synergy as they partner up to provide consumers and businesses with convenient and fast mobile and online service. Today, more than 77 percent of Americans own smartphones, and more than half of them use their phones for some kind of mobile banking activity, making up-to-date technology essential to staying competitive. Fintechs bring the innovation, and banks provide clients and regulatory compliance.
Underscoring the value of Miami-Dade’s fintech industry, in December 2017, FinTech Acquisition Corp. announced that it would be acquiring Miamibased wire transfer platform provider Intermex Holdings for $260 million. 2017 saw some of the biggest security breaches in recent years with the Equifax and Yahoo! data hacks. As digital banking, blockchain technology and other fintech innovations continue to revolutionize customer experience, they also raise risk levels associated with user confidentiality and cybersecurity. Banks are putting a lot of resources toward keeping transactions safe. “Cybersecurity is a significant issue in the banking industry that banks take very seriously,” Agustin Velasco, president of Interamerican Bank, told Invest:. “We continue to undergo regular annual audits and examinations in order to ensure compliance with any updated technologies and to provide ( )
oundtable: Wealth management
Private banking and wealth management are major growth drivers in Miami-Dade’s banking and finance industry. From national and international corporate headquarters, to investors from home and abroad, to families with generational wealth needs, Miami attracts the attention of high-net-worth individuals, and its wealth management industry is uniquely suited to serve the needs of both these businesses and individuals.
Carlos Constantini CEO Banco Itaú International
The declining interest rates in South American countries are pushing clients to diversify their investments. They cannot sit on their investments in their home countries because the returns are not what they used to be. When they consider diversification, it starts to make sense to review their portfolios and to buy more or keep some of their assets abroad. That creates an opportunity for the private banking industry. Top-down drivers such as interest rates and amnesty programs are pushing investors to diversify. And this is different from the cyclicality of the region; countries sometimes are doing better and sometimes they’re doing worse. In many cases, we’ve seen clients diversifying because they want to avoid downturns in their home countries. Unfortunately, that’s not sustainable. When the country improves, the money goes back. Because more investors are diversifying, there will be more players coming into the Miami market and more competition. At the same time, the entire industry is going to grow. We will see company growth and more activity for two reasons: 1) South Florida has a strong connection with Latin America and a lot of South Americans have family or second homes here, and 2) from a logistical standpoint, this is the best place you can be. It’s easier to cover Latin America out of Miami than from Latin America. A flight from São Paulo to Peru can be a nightmare, but from Miami it’s a simple trip. For Latin American private banking in South Florida, this is the right time and the right place. There is a big generation of wealth right now in the region, and I expect more and more inflows from Brazil and the rest of Latin America. 156 | Invest: Miami 2018 | BANKING & FINANCE
Brian P. Mormile
Managing Director, Divisional Executive, SE Region US Trust, Bank of America Private Wealth Management
Miami is a little different from other markets. Nationally, about 30 percent of our high-net-worth client base are business owners, and that percentage is a little higher in Miami given the heavy concentration of entrepreneurs. In addition to investment management, we also assist these clients with complex estate and succession planning needs. Two of our fastest-growing segments are in philanthropy and art. Over 91 percent of high-net-worth individuals give to charity. U.S. Trust has worked with hundreds of successful individuals, families, foundations and corporations to help them achieve their personal visions and create a tradition of giving. From mission statements to governance structures to grant-making programs, we work with our clients on many aspects of their strategic giving, helping them integrate their philanthropic vision into their overall wealth management plan. You can learn a lot about an individual and his/her family by asking three questions: 1) What do you need to live on to maintain your lifestyle, 2) What are your philanthropic goals and 3) How do those goals shape your legacy for future generations? While we have always done work in the philanthropic and institutional space, we have put more emphasis on it and have dedicated significantly more resources to it in the past three or four years. Since the end of the financial crisis, our growth in the philanthropic segment has been trending up. Looking forward, I believe the South Florida economy is going to continue to do well. Corporate balance sheets are stronger than they’ve ever been, and people want to invest here.
BANKING & FINANCE ROUNDTABLE
Jeremy Straub CEO Coastal Wealth
There are several trends we’ve noticed in wealth management in the past few years. Consumers are looking at low-cost investments and more indexes to try to get a bigger piece of the asset management side. They are being more conscious and want to understand how much money they’re spending on their investments. Additionally, the integration of technology into asset management is becoming more important. Clients expect to get ahold of their advisors more quickly. People expect to have information about their accounts instantly instead of waiting two or three months for an in-person meeting with an advisor. They want to text, call or email someone that night and receive a quick response. Baby boomers have the largest amount of wealth nationwide, and they are moving towards retirement. They’re looking to transition that wealth and turn portfolios into income. They want to mimic pension checks so they know how much money is coming in and when. Many new products from financial firms replicate that pension or a type of income stream, whether it’s structured notes, annuities or other similar concepts. We’ve seen that demand for structured income in the past few years. Miami has its own specific issues and trends due to the city’s international makeup. For example, an individual with a business in Mexico, residence in Miami and dual citizenship has more complicated needs than a U.S.based W-2 employee. Additionally, Miami has a strong entrepreneurial culture. When people start businesses here, there’s an opportunity for our firm. Whether it’s group benefits, retirement accounts or business structure, we can help. For a financial planning firm, that’s a good opportunity. CRN202005-23086
Regional Managing Director Southeast Florida Wells Fargo Private Bank
South Florida is a key market for Wells Fargo Private Bank and our wealth management services. We have one of the largest teams in our footprint, with more than 110 advisors based in the region. We see a significant Latin American clientele in South Florida on the trust and investments side. In fact, we have specific specialized wealth services focused on serving individuals from other countries based in South Florida because of the high volume of affluent international clients here. We also hire team members with international capabilities. For example, we have planners with expertise in helping international clients coming to the U.S. to protect and maintain their assets. The typical client is a savvy investor with a variety of assets, including investable stocks, bonds, securities and real estate. Many of them have ties to other countries but want to be in the U.S. because of the safety and security of our financial system. They have children living in South Florida who will eventually inherit their wealth. Much of what we do is help them plan for the transfer of wealth. Several are business owners who have U.S. operations. Very often their U.S. headquarters are based in Miami. They are experienced with working with large financial institutions. They understand the U.S. financial system and want to work with an organization that understands their unique needs. As a gateway to the U.S., Miami is a welcoming city and is extremely attractive to international clients. The market brings an influx of clients who live in Miami a majority of the year and spend the rest of the year either outside of the country or in other states. At Wells Fargo Private Bank, we have the ability to serve these clients whether they are here in Miami or in other parts of the U.S. www.capitalanalyticsassociates.com
BANKING & FINANCE INTERVIEW
Client focused How City National Bank’s South Florida roots and committment to positive client experience position it for continued growth
Jorge Gonzalez President & CEO – City National Bank How is the trend toward consolidation affecting City National Bank? In the last 10 years in the U.S., the number of banks has dropped from around 7,000 to around 5,000, so consolidation certainly has taken a toll on the number of banks out there. In Florida the number is down to around 100 banks. There will continue to be consolidation, and the reason for that is cost: technology is expensive, people are expensive, the regulatory environment is expensive. The more expenses you have associated with the business, the more scale you need to be able to absorb those costs. This consolidation bodes well for City National Bank because we are a South Floridabased bank, and a good deal of the consolidation that’s taking place is by big banks from outside the area. We will be the only homegrown institution of our size and scale that’s dedicated to Florida and South Florida. We will be positioned between the very largest banks that can’t deliver a good client experience and the small community banks that don’t have the scale to deliver the products and services clients need. What is your outlook for the Miami market? We continue to be cautiously optimistic about 2018 and 2019. Overall, the economy seems to be heading in the right direction. There’s not the same amount of speculation in the real estate market as there was back around 2007. It’s a different world, and the visibility around Miami and South Florida globally is expanding exponentially, which bodes very well because there’s capital coming here from all over the world. It used to be capital primarily from South America, and now we see capital from all over Europe, Asia and even the Northeast and West Coast of the U.S. The next 10 years are going to be extremely strong. We might have a slowdown, but Miami is going to continue to grow and be the epicenter for everything that happens in the hemisphere. 158 | Invest: Miami 2018 | BANKING & FINANCE
How is City National Bank working to improve its online platform? We are committing heavily to making sure that the client experience is well supported with the right digital platform for the organization. Banks are notorious for being extremely focused on products and not prioritizing the client experience, so we are in the process of making sure that our people and our strategy are centered on defining the best possible experience for our clients. Once we define that, it will be a lot easier to determine what type of technology we need to be able to execute that experience. We are starting with the clients first, putting them at the epicenter of our strategy, making sure we understand what they want, how they want it and when they want it.
BANKING & FINANCE OVERVIEW
( ) surveillance over the effectiveness of our current policies and procedures to mitigate any risk factors. Technology is constantly changing, and we make sure the bank follows all the necessary security measures.” Regulatory uncertainty At the end of 2017, Miami-Dade’s banks were all in agreement that a loosening of the strict regulations put in place in response to the financial crisis would lead to a healthier economy and banking sector. The Dodd-Frank Act places a heavy burden on banks and their compliance departments. Compliance is expensive and reduces a bank’s ability to invest in business growth and job creation. The key — and the challenge — is to find a healthy balance between easing regulation and ensuring compliance. The potential changes proposed by the Financial Choice Act — which passed the House in June 2017; passed the Senate in March 2018 in the more narrowly focused Economic Growth, Regulatory Relief and Consumer Protection Act; and then returned to the House to reconcile fixes — carries the most weight for Miami-Dade. Most importantly, the bill would diminish the authority of the Consumer Financial Protection Bureau and eliminate the Volcker Rule, which restricts banks from using depositors’ funds to make certain speculative investments on their own accounts. On the flip side, potential reform to the antimoney laundering rules under the Bank Secrecy Act (BSA) could be problematic in Miami, particularly in regards to international investors. “Regulation is important when it comes to banking foreign nationals,” Israel Velasco, Florida region executive at Popular Community Bank, told Invest:. “Knowing your customer and BSA regulations are extremely important in keeping a clean deposit portfolio. We have a very good international private banking area that does a great job of conducting the enhanced due diligence required to bank these customers — because you just can’t open the door without the proper documentation required.” Another piece of legislation local financial institutions are keeping an eye on is the Clarifying Commercial Real Estate Loans Act, which passed the House on November 7 and was introduced in the Senate in February 2018. This bill would reduce banking restrictions on high-volatility CRE loans (HVCRE), which were marked high risk under the Basel III mandate. Currently, banks have to keep more capital on the books for HVCRE loans in an
Jorge Villacampa Region Bank President, South Florida Wells Fargo
Why is there so much foreign capital in Miami? Many Brickell condos were bought by foreign nationals — including Italians, Spaniards and South Americans. South Americans feel especially comfortable with the culture in South Florida and Miami’s well-established banking system. In fact, many of the major banks are represented here, and because of Miami’s proximity to South America, it is often referred as the gateway to Latin America. That foreign capital coming into South Florida has a huge impact in the local economy. How do interest rates affect customers and banks? I haven’t seen any major changes in consumer behavior based on the recent fed rate increases. Rates affect people in different ways. For example, borrowers prefer that the rates stay low, but investors — particularly cash investors — want the rates to increase. At the end of the day, the forces equalize each other. With mortgages, we have seen a big boom in refinancing. Anyone with a mortgage rate of 5.5 percent, which is a fairly low rate compared to numbers a decade earlier, who had an opportunity to refinance to 3.05 percent did so. We’re not seeing much activity in the refinance business because the rates have bottomed out, but we will continue to see some strong movement in home purchases. How is Wells Fargo continuing to introduce new technology to assist its clients? We have introduced assisted ATMs and are adding more. At a typical ATM, the customer can do a lot of transactions, but the machines are also somewhat limited. In many cases, you cannot withdraw over certain cash limits. You might only be able to withdraw $300 or $500, and you certainly can’t make loan payments. Our assisted ATMs can do everything a teller can do, but we will have an employee on hand in case the customer needs an approval. We have these new ATMs installed in about 20 of our branches and will add more by the end of this year. www.capitalanalyticsassociates.com
BANKING & FINANCE OVERVIEW
Mario Rivera CEO FlexFunds
FlexFunds’ Securitization Program provides a simple solution for investment management and distribution. Our program satisfies the needs of asset managers to securitize opportunities. It combines the versatility of a traditional fund, the asset protection of a trust and the power of distribution of an exchange-traded fund, or ETF. The ETF market share continues to grow. These funds are unique as they are easily accessible to investors, allowing them to invest in a specific category. The ETF disadvantage is that the underlying asset is generally passively managed and does not allow for further targeted products. For example, investors who want to participate in the real estate market category can buy an ETF for their portfolio. The caveat is that investing in a market category might be too broad to interest certain investors. A FlexETP, like an ETF, maintains the advantage of issuing a security that can be bought by investors from their brokerage accounts. In addition, it allows further underlying asset targeting and product customization. A FlexETP can also securitize a larger variety of underlying assets, including a portfolio of securities, a loan or any type of real asset like a building, a piece of art or a farm. Such efficient new product creation can reach wider audiences, which can be a significant growth driver in asset management. FlexFunds is a thought leader in securitization, always maintaining the highest standards for transparency and social responsibility. It facilitates the structure and issuance of efficient investment vehicles that can reach existing and new audiences. While at the forefront of asset management innovation, FlexFunds intends to have a global impact in business and society.
160 | Invest: Miami 2018 | BANKING & FINANCE
effort to prevent them from damaging the economy by taking on too much risk. This translates into higher costs for the borrower. Loosened restrictions could have a big impact on Miami’s already strong CRE sector. While the banking industry is optimistic that regulatory rollbacks are on the horizon, 2018 is poised to be another wait-and-see year. Changing times Cybersecurity, regulatory uncertainty and consolidation are the words at the tip of every bankers’ tongue in Miami and across the nation. But as 2018 takes shape and we look toward a bright financial future, there are other important challenges afoot. Talent management is becoming critical, particularly for community banks, whose staffs need to be up-to-date and in tune with risk and management strategies. As technology continues to evolve, it becomes crucial for institutions to be able to identify risks before they become priorities. Banks will need to spend both time and money on proper training. While the economic boost regulatory reform promises is a positive thing, it will also likely bring an expansion of financial services, shining a light on the process, quality and development of new products. It will become increasingly important to ensure that proper infrastructure is in place to control risk. The financial industry’s reliance on third parties is also poised to become a bigger challenge, as are the intricacies of catering to a restive customer base that wants what it wants and wants it now. But perhaps most importantly, automation continues to accelerate change in the industry’s workforce. In addition to permanent employees and contractors, we will start to see more freelancers juggling multiple banks, fintech innovators and even robots working alongside humans. Traditional work environments are starting to shift toward more collaboration and inclusivity, with a focus on work-life balance. Bank employees will need to be digitally enabled and customer-oriented to provide a richer experience to consumers. Fortunately, MiamiDade’s young and diverse population is perfectly suited to evolve with the times. With the recent tax cuts, changes in monetary policy, economic recovery in Latin America, a rethinking of regulation and continued advancements in technology, Miami’s banking and finance sector is poised for positive growth for many years to come.
Commercial Banking Director, SVP Popular Bank
South Florida has a very strong business climate. It remains one of the worldâ&#x20AC;&#x2122;s most attractive real estate markets because of its affordability relative to other getaway cities, let alone our wonderful weather. We attract new businesses/investors, thus creating a continuous population growth with high buying and rental demands. A couple of years ago, we surpassed New York, and today Florida is the third most populated state in the nation. Here in South Florida, there are many real estate investors with strong appetites due to lower costs and tax benefits. We see a great deal of foreign visitors coming to invest, but other investors from the U.S. outside from Florida are aggressively penetrating our markets. There has been an influx of New Yorkers buying real estate properties in South Florida because our market is strong with great potential, and they want to position themselves here.
It should be a strong year for financial institutions in general. The economy has been humming along for almost 24 months, and the outlook remains optimistic. Interest rates rose slightly in the spring, which will improve interest margins for banks. Recent tax reform should encourage businesses to staff up, raise wages, buy new equipment and make any necessary capital improvements that they might have been putting off. Because of these factors, there should be a good demand for lending. While the economic support structure is currently strong, should another economic downturn arrive, it would likely have a much lesser impact to unique and diverse markets like South Florida.
Market President, South Florida, Commercial TD Bank
Brian San Miguel
President of Miami-Dade County BB&T
We had almost 10 percent growth in loans. This comes from a combination of commercial real estate, attractive interest rates and commercial industrial or, in other words, small businesses growing and buying equipment and property. The net population growth in Florida was hundreds of thousands last year. This growth is fueling the demand for products and services. The recent tax cut has made people feel more confident about what their savings are going to be, and they feel secure in reinvesting those savings into businesses. On top of that, people have more confidence in leasing facilities, buying equipment and so on.
Today, banking services are synonymous with digital services. With such widespread connectivity, modern consumers expect speed, efficiency and security as they bank online and on their phones. Miami’s financial institutions are rising to the challenge.
Michael Friedman Market Lead Capital One
As banking changes, people are looking for things to be easier from a transaction standpoint. With technology, our customers are empowered to make these financial decisions and explore their relationship with money. They are able to take ownership of that journey as banking now takes place in their pockets. As we spoke with our consumers, we learned a few things. To no one’s surprise, people are banking digitally more and more. Transactions are easier and faster, but our customers let us know that even though the transactions are easier than they had been, money is still stressful. They still don’t like going to the bank. We decided to build a model that serves customers and allows them to bank on their terms. We concluded that we had an opportunity to reimagine the entire banking experience, so we came up with our café concept. Capital One Cafés can be a part of our customers’ daily lives. They can come in and get a cup of coffee, enjoy the free Wifi and use our nooks for semi-private conversations and meetings. We’ve become a community hub in that way. It’s a great space that no one else offers for free. If someone does happen to have a Capital One card, they get half off their coffee and tea, but the cafés are open to absolutely everybody. We have our digital explorer screens in each location, which serve several purposes. You can begin a banking discussion or browse upcoming events, which are always free and open to anybody. The cafés were designed with purpose. There’s plenty of seating, and the room is open. The atmosphere is very relaxed and laid-back. We got rid of tellers behind windows and bankers in three-piece suits. We dress like our customers dress. This allows us to truly engage on a level that they feel comfortable with. Visitors instantly know they can make this space their own. Then if they decide to have a banking conversation, they can make that conversation their own as well.
162 | Invest: Miami 2018 | BANKING & FINANCE
BANKING & FINANCE ROUNDTABLE
Head of Channels & Enterprise Banking TSS Latin America, CitiBank
CEO GardaWorld Cash Services
We live in a world where individuals stay in strangers’ houses and ride in strangers’ cars. We need a trusted entity for payment, and we need it to be fast. The longest an institution can take for trusted payment processing should be three to five seconds, or as long as a credit card transaction. How is that accomplished? Blockchain. It’s the fourth industrial revolution that brings speed, efficiency and transparency. As consumers, we need to trust who we’re paying and know that they are who they say they are, and we need that decision in fractions of a second. When people hear the term blockchain, they think of public blockchains, which are associated with Bitcoin and other cryptocurrencies. They don’t realize that NASDAQ and insurance companies have blockchain as well. Some blockchain technologies are permissioned, so they allow equal systems to connect to them. Cryptocurrencies also have different types. Some have denominations that are based on a mint currency, and others are based on values or smart contracts. At the end of the day, coins are just one of the features of blockchain technology. Another is transparency — because now anybody can know the journey of a transaction from the beginning. This technology is part of today, tomorrow and the future. That is how we see blockchain changing banking. Moving forward, instead of having coins and bills in a traditional bank, our vaults will contain data. Data is what we use to provide value to our customers. With data, we can do that on a multidimensional level. We’re still looking to discover all the value that can be unlocked from data. It helps us understand our clients better, identify key pain points and ultimately allows us to create a better client experience. If I read my data well, I attract more business; if I attract more business, I collect more data. It’s a continuous cycle.
There are still many unbanked people in the U.S., so there is a larger number of people who only have cash as a means of payment. There are a lot of smaller financial institutions in the U.S., and they all have different systems, so it’s harder to agree on the standards needed for electronic systems. This explains the slower adoption of innovative electronic methods of payment. We have extremely sophisticated ways to pick up, handle and process cash. Our employees are trained properly, and we have the right equipment. The tools that we’re using for planning ensure that we don’t expose our employees to unnecessary risk. We also work very closely with financial institutions to address cybersecurity risks. Significant investment has been made by financial institutions to protect their data systems, but we have to make the assumption that there will always be risk, and this risk has to be managed proactively. We constantly reinvest in our businesses and our employees and work closely with financial institutions, retailers and other stakeholders. Cybersecurity is one significant risk, but there are other risks, such as natural disasters, that we also need to plan for. South Florida is getting more and more diversified as an economy. A lot of it is still service-based, but technological innovations, security, banking and other financial services are all strong segments for the area. We’re going to see significant growth, which is great. There is going to be a growth in employment opportunities outside of the tourist industry, and attracting a more diverse talent pool will create a more robust economy. Education is also key to the growth of the economy. Educational establishments in South Florida are doing a fantastic job. The better these institutions are, the more companies South Florida is going to attract.
Year of Bitcoin: In 2017 cryptocurrencies joined the global financial system; now lawmakers are scrambling to figure out how to regulate them 2017 was the year Bitcoin and other cryptocurrencies joined the global financial system; they no longer operate solely as the de facto currency of cybercrime. Bitcoin was the first and most recognizable cryptocurrency to enter the market. Its value surged 1500 percent against the dollar in 2017 as it gained popularity among both Wall Street and real estate investors. Cryptocurrency can be defined as “virtual” money created from code whose economy is monitored by blockchain technology — basically, entry into a public ledger through a process called mining — rather than by a central server. Think of a database whose entries are limited, must be verified and can’t be changed unless specific conditions are met. With a limited and controlled supply, cryptocurrencies are not changeable by governments, banks or any other centralized institution, so they’re secure from political influence. They’re not subject to inflation; rather, their value is preserved and often even increases over time. Proponents laud cryptocurrency for its security, stability and deflationary quality even as critics denounce it for these very same things. While Bitcoin remained the largest cryptocurrency in early 2018, its influence was starting to wane, perhaps partially spurred by Facebook’s announcement that it would ban all ads for cryptocurrencies and ICOs. Ethereum was the only major coin to end January in the green. One of the biggest challenges to cryptocurrency is the issue of regulation, or more specifically, the ambiguity surrounding it. Governments around the world 164 | Invest: Miami 2018 | BANKING & FINANCE
have made clear their intent to legislate and regulate cryptocurrencies, and many major financial institutions are waiting to see what those regulations will look like before entering the market. “Some banks are refusing to allow purchases of virtual currency with their credit cards,” FIBA President and CEO David Schwartz told Invest:. “This demonstrates that banks are extremely hesitant to get involved with any virtual currency activity, and the motive behind it is always the issue of money laundering and regulation. Until, at the federal level, some sort of regulation comes about, banks are going to remain hesitant.” As of March 2018, the U.S. government had no coherent direction on regulation of the currencies or legalization of blockchain signatures, but individual states were starting to take action. Florida House Bill 1357, which included multiple stipulations that blockchain ledgers and smart contracts be treated as legally binding methods of data storage, was introduced in January 2018 but died on the calendar in March. Schwartz told Invest: that FIBA is working with the State of Florida to draft regulations governing cryptocurrency traders in the Sunshine State. Currently, these traders are regulated under laws governing money service firms like Western Union. “We’re working on trying to take it out of the money transmitter section,” Schwartz said, “and actually create a virtual currency regulation so that it’s properly regulated. It’s going to be an interesting challenge.”
Education: Miami-Dade County's educational platform has one main goal: prepare the future workforce. This goal has been achieved successfully over the years, and further strides were made in the Miami education sector in 2017, including the 98 percent placement rate of University of Miami business school graduates and the highest bar exam pass rate statewide of FIU law school students. The county's One Community One Goal initiative also continues to support the business needs of the Miami market by connecting students with firms in local industries.
Expanding minds: Miami-Dade’s educational insitutions are investing in innovation to produce more competitive students and job-seekers Miami-Dade’s educational platform continues to transform, improving the lives of the county’s residents and its business community. Florida has the second lowest costs in the nation for public colleges and universities, and there has not been a tuition increase since 2013. This allows more Miami residents to access higher education and the many innovations and opportunities that Miami’s institutions are investing in. Business remains one of the most popular majors at many of the local institutions, but psychology and liberal arts are also in demand. In 2018, many institutions are looking to expand their physical campuses to accommodate more students and facilities and are searching for innovative learning opportunities. Through these expansions, Miami will boast more productive schools, as well as more competitive students and job-seekers. A provision that was originally included in the national tax legislation — taxing graduate students’ tuition waivers — was not part of the final legislation. This would have caused serious strain on both students and universities and reduced the number of students earning graduate degrees around the country. The provision’s omission allows students to 166 | Invest: Miami 2018 | EDUCATION
continue their studies and universities to continue educating needed professionals for Miami’s growing business community. Global props Miami’s schools are being recognized for excellence throughout the world. Despite declining levels of international students throughout the U.S. (in 2017, international undergraduates were down 2.2 percent and graduate students 5.5 percent), Miami Dade College, St. Thomas University and the University of Miami (UM) saw steady growth in their international student numbers. The school with the most international students nationwide is Melbourne’s Florida Institute of Technology. Miami-area universities are focused on the future and making sure their students are prepared to enter the job market. For example, the University of Miami Business School and St. Thomas University’s Gus Machado School of Business are focusing on small business entrepreneurship in order to help graduates adapt to Miami’s market. The global accounting firm KPMG recognized UM’s business school as a top priority for recruitment due to the institution’s 98
percent placement rate for graduates and high CPA exam pass rates. Florida International University also has something to brag about: its law students had the highest pass rate for the Florida Bar statewide for the fifth time in the last three years. The Talent Development Network, an initiative of The Beacon Council’s One Community One Goal program, continues to connect local industries with students for paid internships. This gives them experience in the field of their choice and provides local companies with access to young talent. By tailoring education to the job opportunities available, Miami’s higher education institutions are creating young talent ready to contribute to some of the most-needed areas of the economy. Miami’s K-12 schools also made waves this year. Albert Carvalho, the superintendent for Miami-Dade public schools, was tapped for the New York City school chancellor position. The transition was officially announced in late February 2018, but it was reported that the decision had been made weeks prior and the announcement was delayed by the Parkland high school shooting. A few days after the official announcement, Carvalho turned down the position during a televised board meeting, in which he was expected to announce his acceptance.
million from the state for renovations and broke ground earlier this year on a new parking garage and building for the Medical Campus. The Center for Learning, Simulation and Innovation will have a simulated hospital floor and an ambulance box to give students simulated experience. Similarly, UM opened a simulation hospital with high-tech models, actors to play patients, an emergency room and a labor suite to simulate a variety of scenarios. Additionally, the Lennar Foundation Medical Center opened its doors last December. The facility will house services from the Sylvester Cancer Center and the Bascom Palmer Eye Institute, as well as many other academic health groups. The university also began a 640,000-square-foot student housing project on eight acres. The planned project includes the construction of 25 new buildings, as well as the renovation of existing facilities. Florida International University (FIU) also did well in the state budget, gaining $10 million to expand the engineering college and $15 million for the school of international and public affairs. The university also partnered with Daxko to create a better platform for campus recreation management to handle the large student population and the variety of recreational opportunities provided. The football stadium has gotten some attention as well. Now named the Riccardo Silva Stadium, the facility boasts a new turf field and an 1,800-squarefoot jumbotron.
Miami’s top institutions are expanding and updating their facilities.
Expanding campuses Miami’s top institutions are expanding and updating their facilities. Miami Dade College received $10.4
Joanne Li Dean – Florida International University College of Business
The goal is for FIU Business to bring in The Beacon Council as our collaborative partner to open up the space in terms of tech transfer, commercialization, new venture and startups. FIU sets up the ecosystem, and then at the same time, we invite the College of Engineering and Computing to the table. These are your barebones players. FIU Business hosts groups via our Small Business Development Center. We already have a group with the know-how to help startups with a goal to make the system sustainable so that companies will be able to scale up and therefore be attractive to the investment of a community.
Irma Becerra Provost & Chief Academic Officer St. Thomas University
How is construction coming on the business school? We are designing a state-of-the-art facility where students will experience the latest design in space utilization and technological advancements. It is designed by nationally renowned architect Willy A. Bermello and will be a signature building for us. The facility will feature a SOC/hacking lab for students enrolled in cybersecurity programs and a 40-seat simulated trading room with trading terminals. The project will add 56,000 square feet, including outdoor space, to the university. We believe that our new state-of-the-art School of Business building will help us capitalize on our commitment to the academic and professional success of our students becoming ethical leaders in our global community. We will feature eight different undergraduate degrees and 17 graduate degrees/certificates that will create a stronger talent pool to fit the needs of business and industry in the Greater Miami area. What issues exist in Miami’s education system? We are challenged by the same problems as any other urban educational system born in the U.S. We must ensure that every one of our students acquires the necessary academic preparation to be successful in their pursuit of their educational goals. Frequent communication with our students and working with their parents early on is critical to this success. I also have observed that Hispanic women are not competing academically at the same level as women in the U.S. in general. Here in Miami, with such a large Hispanic population, we have the opportunity to make a positive impact. Change is not going to happen by itself. We need to create a more conducive environment to support women so they will continue to further their education. Infrastructure needs to be created, but young Hispanic women also need role models who will empower them to chase their academic and career goals. Miami is a great place to start this change. If we can recognize the problem and address what needs to be done to change things, then it will serve the entire country. 168 | Invest: Miami 2018 | EDUCATION
Despite the difficulty of finding land for expansion, Miami’s top institutions continue to increase their footprints and their ability to train quality students. K-12 Miami’s primary and secondary schools continue to empathetically shift to fit the needs of their students. This year, Florida reached a 14-year high for its high school graduation rates. Miami-Dade Public Schools had much to celebrate this year. Not only is Superintendent Carvalho staying in Miami, but also from 2016 to 2017, Miami-Dade went from having seven F-rated schools to zero. The ratings by the Florida Department of Education are based on standardized testing, graduation rates and other factors. The changes for some were dramatic; for example, Skyway Elementary in Miami Gardens jumped from an F to a B in one year. The district also received more National Magnet Merit Awards from the Magnet Schools of America than any other district for the seventh year running in 2018. One challenge has been the need for substitute teachers. During the 2016-2017 school year, approximately 15 percent of substitute requests were not covered in Miami-Dade County. This may have been caused by the declining unemployment rate; few are looking for temporary work. Following the mass shooting at Marjory Stoneman Douglas High School — located in Parkland, about 45 miles north of Miami — in February 2018, thousands of Florida students gathered at the capitol to advocate for gun reform, and tens of thousands nationwide walked out of their classrooms in protest on the one-month anniversary of the attack. This was the largest student protest since the Vietnam War and indicates that Florida’s youth are becoming both politically involved and community minded. Private schools in Miami are also thriving. Ransom Everglades will expand by seven acres and 302,527 square feet, which will allow for more students, parking and staff. Gulliver Prep raised over $800,000 for its annual fund to enhance the facilities, create scholarships and enrich its professional development programming. However, the school ran into trouble with the Pinecrest government when it was revealed that it had more students than the allotted 650 and had been in violation for over 10 years. Belen Jesuit, which has a mainly Hispanic student body, is diversifying its classrooms and enrolling students of other ethnicities in partnership with Breakthrough Miami. “We need to educate our young men to be open to the fact that not everyone thinks the same way or has the same expe-
Dr. Maria C. Regueiro President & CEO – Florida National University
There is a big need for knowledgeable nurses who can emphasize the needs of the patients, as well as be channels of communication for patients’ families. All the local hospitals are hiring our nursing program graduates. Jackson Memorial, Mount Sinai and North Shore are all growing and have a great need for qualified candidates.
riences or culture,” Father Guillermo Garcia-Tuñón, president of Belen Jesuit Preperatory School, told Invest:. “Therefore, one challenge we face is figuring out how we can develop these children to be leaders in a multicultural society.” Charter schools are also a viable option for students in Miami-Dade. In the fall of 2018, the second KIPP charter school in Florida will open in Liberty City. The school will serve traditionally underfunded communities with the goal of college admission
for its students. Governor Scott gave a boost to these schools, signing a law that requires public school districts to divert some of their taxpayer funding to charter schools. While unpopular with many public school administrators, this will boost the 650 charter schools throughout the state. Innovation Local universities and K-12 schools are working to form partnerships with local businesses, as well as
investing in new, innovative technology to help their students learn. By innovating the way they educate, they are bringing their students a fuller and more educational experience. For example, StartUP FIU, the university’s entrepreneurship program, incubated a project for an app called CoinStash, which helps students pay off their loans more quickly by rounding up their credit or debit transactions, and an engineer’s idea to integrate physical therapy and virtual reality. Miami Dade College’s Idea Center launched a new Innovation Prize in 2017, sponsored by the Veronica and Gaston Taratuta Foundation. The entrepreneurship competition encourages Miami Dade College students and alumni to submit their business solutions. Winners split a $50,000 prize. High-tech equipment isn’t the only way to bring innovation into education, as St. Thomas University demonstrates. “Our students have to create a behavior modification plan; they don’t just sit in the classroom and hear this theory on learning,” Pamela Cingel, dean of Biscayne College, told Invest:. “By working with students at Carol City, our students see the progress from the time they start to 15 weeks later. We really focus on that hands-on experience that you can’t get in a classroom.” As mentioned earlier, Miami Dade College and UM opened simulation hospital facilities to train their medical students. By embracing this new technology and style of learning, these institutions are giving their students the most realistic and useful training. UM is training its business students with another innovative tool: the school’s Florida 50 index. The project was started in 2016 ( )
Students enjoy Miami's many beautiful campuses as they prepare for their future careers.
John Quelch Dean – University of Miami Business School
Most successful entrepreneurs are grounded in the basics of business through experience and education before they can run their own show. A creative idea that is not backed up by an understanding of accounting and finance remains just a creative idea. Our role is to help students transform their creative ideas into business realities that are sustainable in the marketplace. Many successful entrepreneurs did not major in entrepreneurship. They majored in finance, accounting or management. They had the entrepreneurial spirit, but their grounding in the fundamentals enabled that spirit to convert to profit.
Community oundtable: One One Goal
One Community One Goal is the long-term strategic plan for Miami-Dade County’s future economic development success. It brings together a broad spectrum of MiamiDade organizations to advance the goal of a thriving, inclusive and diverse community.
John Wensveen Vice Provost, Academic Schools Miami Dade College
To better connect Miami’s industrial community with Miami Dade College, we’ve developed a brandnew model. Miami Dade College Targeted Industry Ecosystem (MDC-TIES) is a teaching-training-learning-research model whose purpose is to accelerate opportunities that relate to the emerging industries in Florida. We looked at Miami-Dade County and the One Community One Goal initiative to create talent pipelines supporting the targeted industries. We are identifying high-growth sectors that require skilled talent both now and in the future. We’re developing new career pathways so students aren’t faced with career decisions only as they get close to graduation. They’ll have familiarity with the different, high-growth types of industries and occupations the moment they are introduced to Miami Dade College. With this model, we are co-investing, along with the different targeted industries, to create noncredit and credit opportunities for students that come in the form of internships, a new apprenticeship model and, ultimately, job placement. The most important thing is that a student is engaged with industries and specific organizations right from the beginning. To actively engage the community, we invite industries onto our campus. There are more than 40 industry advisory committees, and we make sure we have uniform representation. The community is engaged in helping with the curriculum design and the opportunities needed to serve our ultimate mission. Moving forward, there will be more collaboration among academic institutions. One of the challenges that academia faces is access to resources. It’s not always financial; there are also things like physical infrastructure, knowledge and personnel. In order to stay competitive in today’s world, academic institutions need to complement rather than compete with one another. Industry must co-invest with academic institutions to create workforce opportunities that best serve the community. 172 | Invest: Miami 2018 | EDUCATION
EDUCATION OVERVIEW EDUCATION ROUNDTABLE
Executive Vice President and Provost University of Miami
Vice President for Engagement Florida International University
My first event at the University of Miami was a One Community One Goal meeting, which underscores how important it is. The Academic Leaders Council is particularly focused on the opportunity of Amazon’s second headquarters and making sure that all of the academic institutions are projecting their ability to recruit and create talent. One goal is to ensure that the talent we bring in, at both the faculty and student levels, stays here in Miami. Programs at Miami-Dade Public Schools mesh nicely with some of the programs that Miami Dade College, FIU, the University of Miami and other universities are doing. A company like Amazon is going to look for talent, but not just technical talent. They need computer science, electrical engineering, digital media, law, business and so on. Together, we can provide that. The Beacon Council has an internship program to help find opportunities for the talent we bring into the region. The internship program is important as it gives our students an opportunity to hone their skills. Our students know that likely pathways to their first jobs are co-ops, internships or volunteering. The quicker they can start using what they’re learning and demonstrating their excellence, the greater opportunity they have to make an impact earlier and get that first job. We also partner with community entities to create opportunities for both parties. We have a development agreement with the City of Coral Gables; every year we get together to talk about our pending projects and figure out which of them we can collaborate on. Some examples are the beautification along Ponce de Leon Drive and the rail system on Ponce, as well as other road projects and entrances to campus. We’re trying to create low-cost, low-barrier opportunities for the entrepreneurship community. There is very interesting cross-pollination going on.
Great partnerships are not transactional; they’re transformational. It has to be a win for our partner, for our institution and for our community. We as an institution actively embrace our responsibility as a solution center. We want to be at the forefront of how our communities are responding to the biggest challenges, and to accomplish that we’re channeling opportunities and potential. Partnerships are a great way of doing that, but they require open communication, transparency and an understanding of how we align our mission sets and goals. One of our strategic efforts, which is a product of the One Community One Goal initiative, was the creation of the Talent Development Network. This paid internship portal, which brings all seven academic institutions together in conjunction with The Beacon Council, is essentially a dating app for internships. The goal is to connect students with companies that are willing to make investments in their potential in the form of paid internships. These businesses are getting an opportunity to access talent, talent is getting an opportunity for paid internships and we know that we’re creating a big impact in our community. Similarly, we are able to create more intentional pathways for students in the community to connect with FIU through our dual enrollment program, which basically means Miami-Dade County public school students are able to take classes at FIU for university course credit. This year we were able to expand our platform of dual enrollment classes offered at Miami Beach High. Moving forward, we are focused on impact. We want to get to the next level with the partnerships that we currently have, and we’re looking at what other opportunities are out there. We continue to look very closely at what’s happening in the innovation ecosystem. We’re fortunate that we have a resource like Startup FIU, which is very much at the center of the innovation ecosystem. www.capitalanalyticsassociates.com
( ) and was the first custom S&P Dow Jones index to be owned by a university. In the first quarter of 2018, the index gained by .95 percent and performed better than the broader S&P 500 by over 2 percent. Beginning in the spring of 2018, FIU became the first university to offer a degree program specializing in the Internet of Things (IoT). Students will focus on IoT hardware, communications and cybersecurity. IoT devices will make up half of the world’s connected devices by 2021, which means there will be plenty of workforce demand for students with these skills. The One Community One Goal initiative continues to focus on its seven target industries, including aviation, hospitality and tourism and information technology. Working with many of the colleges and universities in the area, the program works for an educational system that supports the
business needs in the Miami-Dade area. By hosting events and providing speakers for students, as well as working directly with the leadership of local schools, the initiative creates a more logical link between Miami’s education systems and its industries.
IoT devices will make up half the world’s connected devices by 2021, which means there will be plenty of workforce demand for students with these skills.
174 | Invest: Miami 2018 | EDUCATION
Looking ahead Looking into the rest of 2018 and beyond, Miami’s educational systems will be challenged by the increasing population of Miami-Dade County. While many of the institutions are expanding their physical facilities to accommodate more students, this will certainly be an ongoing issue for the public schools in the county. By continuing to partner with the city’s industries, Miami’s educational facilities will keep producing quality talent, targeted to the specific fields required by Miami’s business community.
Tourism: Despite obstacles like the Zika virus outbreak and Hurricane Irma, Miami continued to thrive as an international tourist destination in 2017. Whether drawn to the beaches, the nightlife or the diverse cultural offerings, tourists cannot get enough of what the city has to offer. Tourism and hospitality account for a large part of the MiamiDade economy, so investments in the industry are constantly being made to spur local growth.
Tourism in numbers: Origins of overnight visitors to Greater Miami (thousands 2012-2016):
Where overnight visitors stayed (%, 2016): Coconut Grove
% change from 2015 to 2016
2.90% South Miami-Dade
Total domestic visitor
International regions Latin America
North-Dade/ Sunny Isles Beach
Total international visitors
Source: G reater Miami Convention & Visitors Bureau
Source: Greater Miami Convention & Visitors Bureau
Top 15 domestic markets (# of visitors):
Top 15 international markets (# of visitors):
% change from 2015 to 2016
% change from 2015 to 2016 -5.00%
Total top 15
Total top 15
Source: Greater Miami Convention & Visitors Bureau
176 | Invest: Miami 2018 | TOURISM
Source: Greater Miami Convention & Visitors Bureau
Global destination: Miami is emerging as a cultural powerhouse, offering events and festivals year-round to complement its robust beach and cruise offerings Miami-Dade continues to thrive as an international tourist destination. No longer are the only draws the beautiful beaches and pleasant climate; today, spring-breakers and business travelers alike are discovering all that Miami has to offer, including heritage neighborhoods like Little Havana and growing cultural attractions such as the Pérez Art Museum and the Frost Museum of Science. Despite some disruption from Hurricane Irma, Miami’s tourism numbers in 2017 were not strongly affected. Hotels and cruise lines both saw growth as record numbers of visitors flocked to the Magic City. Welcome to Miami! Tourism is a huge, $90 billion piece of Florida’s economy that employs 1.4 million people statewide. From September 2016 to August 2017, the 15.9 million visitors to Miami spent a record-breaking $26 billion. Brazilian visitors, who for the past few years have made up the largest group of tourists coming to the area, were not as numerous in 2017 due to economic instability back home. However, as a whole, international travel was up 3.1 percent, with more visitors coming from Germany, Argentina and Colombia.
The tourism industry held its breath as Hurricane Irma barreled through South Florida in September, but overall Miami-Dade saw growth in visitor numbers, hotel sales and tourist expenditures, though not as robust as in previous years. Assisting this modest upswing were displaced vacationers looking for an alternative to Puerto Rico and other parts of the Caribbean, which were devastated by the one-two punch of Hurricanes Irma and Maria. “Obviously, there was negative impact in September due to the hurricane,” Oliver Key, general manager at the St. Regis Bal Harbour Resort, told Invest:. “Demand is currently good and has been affected by what happened in the Caribbean and Puerto Rico. That’s been a positive driver for us; tourists are unsure if they can go to the Keys or destinations in the Caribbean, so that’s pushing more demand to us.” Transportation in Miami was improved on several fronts in 2017, helping to create a more visitorfriendly atmosphere. Brightline, the nation’s only privately owned and operated rail line, opened in 2018 with stops in West Palm Beach, Fort Lauderdale and Miami. Miami International Airport (MIA) launched nonstop service to Tel Aviv with EL AL www.capitalanalyticsassociates.com
Israel Airlines and announced that direct service to Brazil with GOL airlines would return in November 2018. Mexican airline Volaris and Aer Lingus flying to Dublin also added routes through Miami’s airport this year. The citywide SMART plan is working to make Miami a place where having a car is an option, not a necessity, further contributing to its visitor accessibility. Vacations don’t always look the way we think they do. Miami has been changing things up to offer both traditional and unconventional experiences. If visitors are not interested in a typical hotel, they can stay at a hostel with communal dining or maybe an Airbnb. In late 2017, Miami-Dade County passed new regulations on Airbnb and other home-sharing sites that will limit guest numbers for each residence and bring the hosts into compliance with the county. Some cities are getting even stricter. “Airbnb is having a hard time in Miami Beach,” Flavio Rossato, CEO of Domus Group, told Invest:. “Local government is enforcing that all Airbnb hosts have licences and pay additional taxes. About half of the available Airbnb units in Miami Beach are in complexes where they aren’t actually allowed.” The hope is that these regulations will improve the quality of tourists’ experiences in Miami and keep the competition healthy between peer-to-peer home rentals and traditional hotels. Even the luxury market is joining the sharing economy. The Ritz-Carlton Residences Miami Beach plans to offer a Sharing Room when it opens later in 2018. Residents will be able to both donate and buy or
rent used luxury items, among them items like golf clubs, musical instruments, artwork and designer handbags. After 60 days, anything left in the Sharing Room will be donated to charity. Budgets and branding Despite continued growth of the tourism industry, funding for the statewide Visit Florida campaign was in danger in 2017. The $76 million budget was almost cut to $25 million, but in the end, the full budget passed with some strings attached. Moving forward, any contract worth $750,000 or more is subject to legislative approval, contracts must be publicly posted and salaries have been capped, among other restrictions. The Senate’s budget for 2019 has $50 million allotted for Visit Florida, so a similar compromise could be reached in 2018. Visit Florida’s CEO Ken Lawson is considering virtual and augmented reality marketing strategies to entice more visitors to Florida, as well as targeting business travelers to keep them for a few leisure days after their business is done. When President Trump proposed drilling off the East Coast of the U.S., Governor Scott met with Interior Department Secretary Ryan Zinke, and Florida was exempted from the planned expansion. With Florida’s coast free from drilling, tourism will continue to flourish. Miami is well known for its nightlife and beaches. To expand on this narrow “party-town” view of the area, the Greater Miami Convention and Visitors Bureau (GMCVB) launched a new marketing strategy ( )
In late 2017, Miami-Dade County passed new regulations on Airbnb and other homesharing sites.
Mathew Pargamente General Manager – ME Miami
As a company, we believe Miami is a culturally driven, international market. The pillars that resonate with the ME brand are culture, fashion, music, art and design and are synonymous with Miami. Hence, Melia and the ME brand’s decision to be a part of this multicultural environment. An opportunity for Miami is the continuous transition of its labor market. With the growth and advancement in Fort Lauderdale, there is a greater importance put on finding and engaging labor that is trainable to our particular standards.
178 | Invest: Miami 2018 | TOURISM
Cruise capital How Carnival Cruise Lines is capitalizing on Miami’s strategic location and partnerships with the county to provide exceptional vacation experiences
Arnold Donald President & CEO – Carnival Cruise Corporation & PLC What potential do you see for market saturation in the cruise industry in Miami and also worldwide? Despite our industry’s record growth, cruising is underpenetrated in every market in the world, including here in the U.S., which gives us a significant opportunity to further capitalize on our growth potential. It’s important to remember that our primary competition is land-based vacations, and if you total up all the cabins in the cruise industry, we account for only about 2 percent of the hotel rooms in the world. Our goal is to go after the other 98 percent and take a larger share of the vacation market by encouraging more travelers to try a cruise. As research consistently shows, once people go on a cruise vacation, they discover why it is such an extraordinary way to enjoy time off, as well as a great value — and the vast majority want to go again. Our hometown of Miami and the Greater South Florida region benefit greatly from having the Caribbean right here in our backyard, which is a tremendous draw for vacationers and remains by far the most popular region for cruising. Similar to the strength we saw across the industry in 2017, PortMiami set new records as the world’s leading cruise port, with over 5.3 million cruise passengers traveling through the port last year. PortMiami expects continued growth based on rising demand for cruising, projecting the port will soon reach 6 million passengers annually. How can Miami continue to be the world’s cruise capital? As home to the world’s busiest cruise port, Miami has several key advantages, including great weather, topnotch port operations and facilities, a solid customer base and proximity to the Caribbean — by far the largest cruise market in the world. South Florida’s strategic location enables the industry to capitalize on easy access to one of the most beautiful parts of the world and provide cruise guests with tremendous itineraries and
destinations that help make a cruise to the Caribbean such an exceptionally popular vacation experience. That is why Miami remains one of the most popular ports for our guests and many of our brands, including our namesake brand Carnival Cruise Line, the largest individual cruise line in the world. Additionally, forecasts from Miami-Dade County note that PortMiami could potentially see an 80 percent jump in its passenger figures in the next five or so years, a significant boon for our hometown area. Overall, in addition to leveraging the natural advantages in Miami, we are continuing to see great partnerships between the cruise industry and the county, along with new investments in facilities and infrastructure, which will help Miami remain one of the world’s leading ports for many years to come. www.capitalanalyticsassociates.com
The Frost Science Museum opened in April 2017 and continues to attract visitors to its impressive and innovative exhibits.
( ) in May 2018. Dubbed #FoundInMiami, it emphasizes the cultural experiences and local flavor the city has to offer. This branding highlights institutions like PAMM and the Frost Science Museum, as well as whole neighborhoods like Wynwood and Little Havana. This campaign seeks to attract new types of travelers to Miami, especially culture seekers, who are looking to experience the local flavor of an area. Miami International Airport (MIA) continues Brand USA’s “Market the Welcome” campaign, which was introduced in 2016. The program was designed to welcome international travelers to the United States with friendly imagery and language, geared toward Miami’s tourist and business opportunities. MIA was the first airport in the U.S. to implement the campaign, which has since opened in four other locations. 180 | Invest: Miami 2018 | TOURISM
The Beacon Council continues to support local tourism by highlighting special programs throughout the year, including Miami Romance Month and Miami Spa Month, among others. Keep on cruising Miami continues its reign as the cruise capital of the world. PortMiami announced a record-shattering year in 2017. A total of 5.3 million passengers set sail out of PortMiami in the 2016 to 2017 season, which was a tremendous increase from the 4.9 million the previous year. Port authorities are preparing for a 20 percent bump in 2019. Terminal F opened in January to service MSC Cruises, and another terminal for Royal Caribbean will open later this year. PortMiami is in talks with Virgin and Norwegian cruise lines for additional terminals as well.
Gene Prescott President of Seaway Hotels Biltmore Hotel
How have guest levels been in the last few years? For us, 2016 started out very strong. We then got a little bit of a jolt with the Zika scare. The fallout of that, which happened in the summer and fall of 2016, bled into the early part of 2017. It was a big story that drew national and international attention. While Miami-Dade County reacted quickly, it took a little while for the market to regain confidence, so some effects did carry over into 2017. Then the impact of Hurricane Irma made the fall of 2017 somewhat challenging. We didn’t see the growth that we had anticipated.
Royal Caribbean unveiled a new ship packed with amenities in April 2017. The Symphony of the Seas has seven different areas, or neighborhoods, and features robot bartenders, a Lego wall, a zip line and an acrobatics show. This ship, and other ships like it, will continue to bring millions of tourists into Miami. More additions include cruises to Cuba, with both Carnival and Norwegian adding tours to that country. This will facilitate “people-to-people” exchanges between tourists and Cuban citizens, transactions that are now allowed by the U.S. government after years of closed doors. Carnival is cruising somewhere else new: China. Originally scheduled to begin service in 2017, Carnival will be beginning cruises in Shanghai later this year. The Panama Canal expansion project, which doubled the capacity of the canal for ship traffic, is ( )
How will the Jim McLean Golf School headquarters moving to the Biltmore affect your guests’ golf experience? The move will significantly elevate the teaching capabilities that the Biltmore golf course provides. Jim McLean is an outstanding teacher; his golf school has a great reputation, and it brings a lot of prestige to the Biltmore and Coral Gables. The beneficiaries will be the golfers and our members in particular who will have access to teaching, facilities and the level of expertise that they previously did not have. This will impact our transient business in a very positive way, with students and golfers staying at the resort when they previously did not consider us. What are the advantages of being located in Coral Gables? We couldn’t imagine a better location. We are surrounded by an incredible, upscale residential community in a vibrant, growing city. We are very active in the chamber and support city efforts to market this destination as both a great place to live and a great place to do business. I think it’s evident that an increasingly broad and diverse business community is investing in Coral Gables. That’s to the benefit of us all. www.capitalanalyticsassociates.com
Royal impact How Royal Caribbean provided hurricane relief in the wake of 2017’s storms and continues to be a pioneer in innovative technology onboard its ships
Adam Goldstein President & COO – Royal Caribbean Cruises Ltd. All the cruise companies in the Florida-Caribbean Cruise Association participated in an effort to communicate to the world that the Caribbean was still open for business. While marquis cruise ports like St. Maarten, St. Thomas and San Juan were directly affected by the storms, between 80 and 90 percent of Caribbean destinations had zero impact from the storms. In the affected destinations, there was and continues to be an incredible effort not only to build back but to build back better. However, it will definitely take time for the public to get totally over what they saw on television and online, but that reaction will work itself through.
How did Hurricanes Irma and Maria affect the cruise industry in 2017? These storms were tremendous in their intensity and disrupted a considerable portion of the eastern Caribbean routes that we and others run. However, it affected our business only in the short term. During that time, we weren’t able to operate a number of scheduled cruises, which opened up opportunities to participate in hurricane relief. We found ourselves in a very unusual position where we had ships available to transport people who needed to get help. It was something that we made up on the fly. Now that a few months have gone by, it’s very clear to me from interactions I’ve had that the bonds between ourselves and the destinations we were able to assist are by far the strongest they have been in my 30 years. They genuinely appreciate that we and other cruise companies were able to provide assistance, and it was a reminder to them of the beneficial impact of the cruise sector on their economy and on their social fabric. 182 | Invest: Miami 2018 | TOURISM
How are you leveraging new technology to improve your guests’ experience? Bringing new technology into the cruise experience is one of the biggest things that’s happening at our company and in the industry right now. It’s not due to competition between cruise lines; we’re competing with hotels and other onland vacations, which have invested a great deal in digital enablement, and if we want to be competitive with that, we have to augment our legendary customer service reputation with technologies that enable greater customer service. We want to put our customers in charge of their vacation experience from the time they begin to research their vacation options until after the cruise is over. Hopefully, they will book their next cruise before they leave the ship. We want them to have the cruise calendar accessible in detail and have the ability to change their minds and switch one entertainment program, specialty restaurant or short excursion for another. We can also offer further control of the environment of staterooms with additional technology for temperature and music. There are virtually unlimited opportunities to bring technology into the equation in the right way.
In 2017, the Pérez Art Museum of Miami attracted record-breaking numbers of visitors, both from the community and from out of town.
( ) spurring a good deal of cruise traffic for the 2017–2018 season. Over 200 cruise ships will traverse the channel this season, increasing cruise interest in Central America. Cruise industry events are popping up all over Miami. SeaTrade took place in Fort Lauderdale in early March of 2018. This 30-year-old event brings together cruising leaders from around the world for networking, innovation and education. In 2017 over 11,000 attendees from over 90 countries were in attendance. Looking forward to 2019, Skal International, a global group of tourism leaders, is bringing its general assembly to PortMiami.
Pérez Art Museum of Miami In 2017, the Pérez Art Museum of Miami (PAMM) welcomed its one-millionth guest since the opening of the new building in 2013. The museum also began a monthly free community night, which encourages residents of Miami for whom the entrance fee is a barrier to enjoy the museum and resulted in record-breaking attendance. More than $500,000 was raised for the Fund for African-American Art, which will continue to foster artists and promote African-American artistic representation. In 2018, the museum will host exhibitions featuring works by Meiro Koizumi, a video performance artist, and Liliana Porter, a conceptual artist. These exhibitions, along with the museum’s permanent collection, will continue to attract guests, both from the community and from out of town.
Miami’s cultural institutions are continuing to improve their quality while entertaining Miami’s residents and tourists.
Cultural center Miami’s cultural institutions are continuing to improve their quality while entertaining Miami’s residents and tourists. From the museums to the ensemble performance groups, Miami’s cultural offerings are raising the bar when it comes to delivering enthralling and educational content to audiences increasingly hungry for authentic experiences.
Phillip and Patricia Frost Museum of Science The Phillip and Patricia Frost Museum of Science opened to the public in April 2017 after five years of www.capitalanalyticsassociates.com
William Talbert III President & CEO Greater Miami Convention & Visitors Bureau
It was definitely a year of multiple headwinds for the Greater Miami Convention & Visitors Bureau (GMCVB). In 2016, we dealt with Hurricane Matthew and Zika, which thankfully was not an issue in 2017. Some of the challenges impacting the tourism industry in 2017 included the closure of the Miami Beach Convention Center for expansion and renovation, the strong U.S. dollar and the ongoing economic challenges in Brazil, which had been our number one international market. While Hurricane Irma had a negative impact on tourism, it did not affect Miami in the way Houston was impacted by Hurricane Harvey. We had a very different situation here. Miami was up and running in just a few days as the GMCVB launched a campaign with the hashtag #MiamiNow to communicate to the world that we were open for business as usual. Despite the challenges faced in 2017, we had the strongest July in our tourism history. Miami, worldrenowned as a big event destination, welcomed Major League Baseball’s All-Star Weekend and the international soccer match known as El Clásico, which was played between FC Barcelona and Real Madrid at Hard Rock Stadium and attracted tens of thousands of fans from around the world The outlook for 2018 is optimistic, which is reflected in our business environment as well. Although the financial crisis devastated the local housing market in 2008, it did not take long for the construction cranes to return. Even now, as investors anticipate possible overbuilding in the condo segment, new units are selling. Miami continues to offer far more than just beautiful beaches. Art Basel locked in a seven-year extension with Miami Beach in September 2017, and Design Miami announced its extension in December 2017. The New World Symphony, America’s Orchestral Academy, is increasingly recognized as a world-class performing arts institution. The recent opening of the Frost Science Museum is also adding to our destination’s appeal. 184 | Invest: Miami 2018 | TOURISM
construction. The $305 million facility boasts a 250seat planetarium, multiple exhibitions and three levels of aquariums. Things were not looking so sunny a few years ago. In 2016, Miami-Dade County bailed out the museum for $49 million due to lack of private support. Happily, attendance in the first year outstripped expectations, with half a million visitors touring the new facility in the first six months of operations. Moving forward, the museum is planning on gearing more exhibitions towards young adults, as more of this demographic visited than was expected. New World Symphony The New World Symphony (NWS) continues its legacy of excellence this year with performances featuring works by Mahler, Ravel and Bach. The symphony, composed of 87 musicians preparing for leadership in professional ensembles, has both free and ticketed events, allowing everyone to enjoy the professional-quality sound. Since 2009, the MusicLab program has brought NWS musicians into the classrooms of Miami-Dade public schools to foster a love of music and musical skill in young people in South Florida. Another program is Yoga Mornings, supported by Jackson Health System, a monthly yoga class accompanied by NWS musicians. The symphony continues to bring classical music to residents and visitors of Miami. Adrienne Arsht Center for the Performing Arts 2018 marked the 10-year anniversary of Adrienne Arsht’s landmark contribution to the performing arts center, now named the Adrienne Arsht Center for the Performing Arts of Miami-Dade County. In the last decade, millions of visitors have enjoyed performances, including 17 world premieres, that have generated more than $2 billion in revenue. Performances this year include “Come From Away,” “White Christmas” and “Hello, Dolly!” With more than 400 events each year, the center will continue to draw diverse audiences. Miami City Ballet The Miami City Ballet, founded in 1985, continues its history of stellar performances, as well as providing ballet classes to students throughout Miami. In 2017, the company debuted a revamped George Balanchine’s “Nutcracker,” which was praised for adding a new spin to this classic Christmas production. 2018 performances will include Concerto Barocco, pieces by Brahms and Handel and One Line Drawn, a piece commissioned for the Miami City Ballet by Brian Brooks.
President Phillip and Patricia Frost Museum of Science
There is a long-term vision to broaden our scope and partner with the other cultural entities in Miami to create larger, inter-organizational events. The relocation of the Frost Museum to Downtown has added to what is becoming a museum campus, together with the Pérez Art Museum of Miami, the Arsht Center, American Airlines Arena and even the Children’s Museum on Jungle Island. All of these institutions come together geographically and create valuable critical mass that positions us as not only a focal point of Miami but also a cultural hub within the city as well as the region. At Frost, we have all of the right ingredients needed to become one of the key cultural attractions in Miami. In 2017 and 2018, we may even end up as the most highly attended cultural institution in Miami-Dade.
In 2017 not only did we have a record year for attendance, but we also had our friends at Frost Science Museum join us on our shared campus. The way that we approach our content and the way we approach modern and contemporary art is an expansive mode, so to add a museum next door that is looking at culture from the point of view of science is perfectly aligned and, in my opinion, complementary. It makes our campus exciting and a great destination for all. One of the most important parts of being a museum in the 21st century is that we are able to take advantage of new technologies, to be willing to take risks and be exploratory. Because we have the generous support of the Knight Foundation, we are able to try out new ideas. Innovating new ways of seeing is part of our mission, and this is what we’re currently doing through a variety of programs, including augmented reality exhibitions.
President & CEO New World Symphony
186 | Invest: Miami 2018 | TOURISM
Franklin Sirmans Director Pérez Art Museum of Miami
The Knight Foundation has proven that culture binds communities. From our digital work, we know that technology connects like-minded citizens in new and vivid ways. These truths are clear, based on the New World Symphony’s facility and program. NWS WALLCAST® concerts are democratizing classical music locally and serving as a model for others around the country. The Kennedy Center is building a wall for outdoor simulcasting. NWS Connect is an online/ in-person community led by NWS Fellows and serving talented high school music students here in South Florida, around the U.S. and in South America. In the cultural sector, the digital future is hard to predict, but NWS knows why and how to create the free and flexible environment essential in shaping a bright future for classical music and for Miami.
Events and festivals Events in Miami, chief among them Art Basel, continue to bring visitors to the area. Music festivals in particular attract diverse audiences. Ultra Music Festival, one of the biggest electronic music festivals in the world that takes place annually in March, has had over 150,000 attendees every year since 2012, reaching 165,000 in 2017. Other music festivals include the World Music Conference and Jazz in the Gardens. Another festival, the Miami Book Fair, has become a model for other book fairs in the U.S. and brings over 300 authors to Miami. More than 200,000 people attend this yearly celebration of literacy. Other annual events bringing in visitors include the South Beach Wine and Food Festival, the Miami International Boat Show and the Winter Party Festival. Art Basel will continue to be an important event in Miami. Last year, Art Basel signed a five-year deal with Miami Beach, estimated to have a $400 million impact. Art Basel is now guaranteed to be in Miami Beach until 2024. In 2017, there were 268 galleries featuring art from over 30 different countries. Artworks on display include paintings, sculptures, photography, film and large-scale outdoor pieces, which draw over 77,000 visitors each year. Festivals and events add to the enticement of Miami’s yearround offerings. Hotel city After Hurricane Irma passed through South Florida, hotels saw an 8 percent jump year-over-year. Despite the challenges and damage that the hurricane caused locally, there was higher demand in the months following the storm, as Puerto Rico, the Keys and the tropics continued to recover from the damage from both Irma and Maria. While the Keys officially reopened to tourists three weeks after the storm, by February 2018 one-fifth of the region’s hotels remained closed. Some South Florida hotels also needed time to recover, including the Ritz-Carlton on South Beach, which laid off nearly 300 employees due to storm damage. But new hotels are already on the way, including Celino South Beach, Palihouse Miami Beach, Wyndham Hotel in Brickell, EAST Hotel and SLS Brickell. The Miami Beach Convention Center completed renovations in 2018, increasing its size to 14 million square feet. However, plans to create a hotel at the convention center continue to face challenges. Currently, Miami Beach lacks 1,500 convenient rooms, which are often required by large
Historic Virginia Key Beach Park During the era of segregation in the South, people of color were systematically excluded from many of Miami-Dade County’s most famous attractions, including its pristine beaches. Fortunately, there were areas that, by mutual understanding, were exclusive to the African-American population. One such place was a beach located on Virginia Key known as “Bear Cut,” which could be reached only by boat. In 1945, thanks to the bold efforts of the Negro Service Council, Virginia Key Beach Park became an official “colored only” recreation site. Virginia Key Beach quickly became a cherished getaway, social gathering place and even sacred site for religious services. Though the beach remained segregated through the 1950s, its shaded picnic areas, colorful cottages, convenient boat ramp and the famous mini-train and carousel rides lured thousands to this tropical paradise. In 1982, the City of Miami closed Virginia Key Beach Park, citing the high cost of maintenance and operations. The park remained closed except for daily rentals and large events and as a training facility for law enforcement agencies. In June 1999, the Virginia Key Beach Park Civil Rights Task Force was established in response to plans for private development. Later that year, the Miami City Commission established the Historic Virginia Key Park Trust to oversee the development of the historic park property. Since its inception, the trust has been working to provide the community with a site for family events and community and corporate meetings, as well as a place for swimming and water activities. In August 2002, the park was placed on the National Register of Historic Places. Historic Virginia Key Beach Park reopened to the public in February 2008 with many of its historic amenities, as well as some modern upgrades. Today, the historic beach is open to the public, and ecosystem restoration projects, interpretive signage and the construction of an interpretive/cultural center are underway. www.capitalanalyticsassociates.com
Guy Forchion Executive Director – Historic Virginia Key Park Trust
Our community involvement has been largely inbound, with school trips and visitors coming to the park. We want to start building arms to reach out to the mainland and create a better connection with other African-American cultural and historical organizations in the city. Historic Virginia Key Beach Park is a community meeting space; that’s what this spot has been for communities of color in the past. Now it is a space for everyone. A lot of community activities, dialogues and fellowship can happen here. conventions. Many prospective clients have shied away from Miami Beach due to this issue, but it is unclear whether the hotel will be approved, as its public land lease was rejected in a vote by Miami Beach residents in 2016. The Greater Miami Convention and Visitors Bureau introduced Miami Hotel Months, which ran from July through September 2017, to entice Florida residents to indulge in a luxury hotel experience in the state. This strategy is intended to compensate for summer’s slowdown in out-of-state visitors. More than 50 area hotels, including the Fontainebleau on Miami Beach and the Mandarin Oriental on Brickell Key, participated for the inaugural summer. Hotels benefit from conventions and events throughout Miami-Dade County, but existing hotels continue to update their offerings to stay competitive. Due do the downturn in Latin American
188 | Invest: Miami 2018 | TOURISM
business, many hotels are catering to more European visitors and doing more marketing in that region. Despite some setbacks, Miami’s hotels continue to bring in more tourists and business travelers, and the outlook is strong for the rest of 2018. Flourishing future Miami’s tourism industry had a good year despite Hurricane Irma’s impact. For 2018, the industry will continue to push forward on the post-Irma uptick, as vacation properties in some Caribbean countries and Puerto Rico might not be operational yet. Tourism leaders will be keeping an eye on Visit Florida’s budget for 2019, as cuts could affect tourism throughout the state. A marketing focus on events and festivals taking place in Miami could help supplement Miami’s beach and cruising image to increase visitor numbers from across the country and the world.
Sports: Miami boasts some of the best sports fans, so it’s no wonder that sports occupy a big place in the hearts of the city’s residents. Various key events can be identified in the 2017-2018 Miami sports sector: the return of Dwayne Wade to the HEAT, the introduction of Derek Jeter to the Marlins and the official announcement for the launch of David Beckham’s new MLS soccer team. World-class sporting events such as the Miami Open and the Race of Champions continue to bring many visitors to Miami and spur economic growth.
Season of change : Miami sports are undergoing positive change as they welcome a new team and an old star and build for the future Sports have a huge place in the hearts of Miami’s residents and draw crowds of visitors to events throughout Miami-Dade County. Florida’s sports industry brought 16 million visitors to the Sunshine State in 2017 — about 15 percent of the state’s total tourism numbers. Sports, from professional football to hunting and fishing, generated $33 billion in direct sales statewide last year. While everyone has their eyes on teams’ rankings and performance, Miami’s professional teams also maintain great relationships with their Miami family. “I think it’s important to have the players out in the community,” Matthew Caldwell, president & CEO of the Florida Panthers, told Invest:. “It’s important whether you’re winning or losing to keep up a steady stream of community work. I want people to know, win or lose, we are going to be out there.” Fútball, not football Excitement over David Beckham’s MLS team has grown, especially after he was officially granted the franchise in January 2018. While in 2016 the team’s ownership group bought land in the City of Miami’s Overtown neighborhood with the intention to build 190 | Invest: Miami 2018 | SPORTS
a stadium there, in March 2018 it was announced that they were looking into other options, challenging their original five-year timeline. This isn’t Beckham’s first attempt at bringing an MLS team to Miami. Four years ago, the project fell through due to financing issues and stadium site complications. Beckham will be looking to replicate the success of Atlanta United, which joined the league in 2017 and already has the highest average home attendance in MLS history. Replicating Atlanta United’s community investment will be top of the list for Beckham once the stadium development gets underway. Return of a star Things have been looking up for the Miami Heat. In 2017, the team went 11-30 before turning the season around for a 30-11 stretch at the end of the year. They barely missed the playoffs, losing a tie breaker to the Chicago Bulls. Between 2017 and 2018, the team’s net-worth increased from $1.35 billion to $1.7 billion, a difference of $350 million. The number is more impressive when compared to the $50 million increase from 2016 to 2017. At the beginning of the team’s 30th season, fans were looking forward to seeing Goran Dragić and Dion ( )
Rebuilding How the Miami Marlins are rebuilding their organization from the ground up and reengaging the community in the process
Derek Jeter CEO – Miami Marlins You made some roster moves soon after taking over as CEO. How will the trades help the team rebuild? We took over an organization that hadn’t been to the postseason since 2003 and hadn’t had a winning record since 2009. It also had the worst farm system in baseball. It is incumbent on us to build an organization that can have sustained success. We brought in some very talented people who know how to work hard and have a singular goal in mind: to win. I think it’s fair to say the fans and this organization have a complicated history. We are committed to our plan, and we will not venture off our path to success. We have said from the start that we would have to make some unpopular decisions. But each decision that is made is with the best interest of this organization at the top of our minds to create a product of which this community can be proud and to bring a championship back to South Florida. We keep reminding everyone to have patience because it will be a rewarding process — and we want all our fans along with us for that journey. What are your strategies for continuing to strengthen corporate partnerships and landing more local marketing deals? Partnering with Ocean Bank, a longstanding South Florida brand with strong ties and commitment in the surrounding community, was a pivotal part of our offseason. We’ve received a tremendous amount of support from community partners as we go out and tell our story and reengage with these key members of the market. Overall, we signed 24 new corporate partners for the 2018 season. We remain dedicated to finding ways to partner with — and include — members of the local business community in the fan experience at Marlins Park.
What role do you think the Marlins organization plays in the South Florida community? One of our goals when we bought this team was to reengage the community. This organization has always had a great presence in South Florida. We want to continue these efforts but make sure we are creating impactful interactions between our organization and the surrounding community to really establish Marlins Park as a destination for the community. We were pleased to be able to invite students from Marjory Stoneman Douglas to a game and also honored to host one of their baseball games on our field. We believe in the Miami market and are committed to this community. We believe in the passion and the diversity of Miami and South Florida. Miami is an exciting city, and we want to embrace that excitement to bring the same energy and environment inside Marlins Park. www.capitalanalyticsassociates.com
Tom Garfinkel President & CEO Miami Dolphins
How has the renovation of the stadium improved guest experience? Our focus was on the end-to-end experience — everything from driving in, parking, getting through security and so on. We added 27 percent more bathrooms for men and more than 70 percent more for women, so the lines at the bathrooms are gone. We added local-branded food and beverage options. We added more magnetometers, so safety is increased and the wait to get through security is cut down. The canopy shades most of the stadium from the sun now. We’ve also brought in 21 pieces of international art from Wynwood Walls through a partnership with Goldman Global Arts. All those things combined are providing a great fan experience. What is the Dolphins’ social media strategy? About three years ago, we built an in-house creative services team to be more in control of our brand. In order to do that, we had to put out a lot of quality content on a consistent basis. To do so, we’ve created platforms like Dolphins Now, The Grind and The Audible and post constantly on social and digital media. In this past year, we led the NFL in video views on social media with more than 240 million views. These views have had real results. For example, we generated more than $4 million in new business from leads from Facebook. How does Hard Rock Stadium increase Miami’s global reach? Bringing in El Clásico Miami, Real Madrid versus Barcelona, was a ground-breaking event for the stadium and for Miami. To have the world’s largest sporting rivalry here was fantastic. To that end, 70 percent of the people who came here for El Clásico Miami came from outside the state of Florida. For the August 2018 Beyoncé and Jay-Z performance, about 50 percent of the tickets were purchased from zip codes outside the state of Florida. We’re building a network of people from around the globe, which is why we consider the stadium to be a global entertainment destination. 192 | Invest: Miami 2018 | SPORTS
El Clásico Miami was a ground-breaking event, attracting 70 percent of its attendees from outside the state of Florida.
( ) Waiters take the lead. Dragiċ, a native of Slovenia, has been with the Heat since 2015 and has been having a particularly strong season. He scored a season-high 29 points against the Suns in November 2017 and was named to Team LeBron for his first All-Star appearance. After a stellar season in 2016-2017, Dion Waiters began this season strong but was forced to the sidelines with an ankle injury that required surgery, benching him for the remainder of the season. New to the team this year were Kelly Olynyk and Bam Adebayo. Olynyk played for the Celtics for four years before coming to Miami, where he led his new team to the Eastern Conference Finals for the first time since 2012. The Canadian center/power forward signed a four-year contract with the Heat, and in December, he scored a career-high 32 points against his old team in a 90-89 win over the Celtics. The team, already within playoff territory, received unexpected news in February: Dwayne Wade was coming back to Miami. After brief stints in both Chicago and Cleveland, Wade returned to a standing ovation and a win over the Milwaukee Bucks on February 9. The cheapest tickets for that game were over $100; normally you can snag a seat for $15 to $20. Ticket prices weren’t the only lucrative response to Wade’s return. From before the announcement to af-
ter putting up multiple Wade jerseys for sale on the team website, sales went up 8,000 percent, with over 100 orders from 15 countries coming in one evening. In April, the team topped their division in an overtime win against the Toronto Raptors and faced off against the Philadelphia 76ers in the first round of the playoffs. Marketing wins Unfortunately, 2017 did not bring improvements to the Miami Dolphins’ game. In 2016, the Dolphins went 10-6, including a 9-2 run at the end of the season, and were beaten out for the wildcard spot by the Pittsburgh Steelers. This was the team’s first winning
record since 2008. In 2017, the Dolphins’ fortunes flipped, ending in a 6-10 record. The trouble began as early as August, when Ryan Timothy Tannehill, the starting quarterback, tore his ACL before the first game and was out recovering for the entire season. Fortunately for the team, he will be back in 2018, according to head coach Adam Gase. Some things are looking up for the Dolphins. The team’s franchise value rose to $2.57 billion, an increase of $200 million from the year before, due in part to the vast renovation of Hard Rock Stadium that was completed before the 2017 season. The video boards and canopy over the main seating area were highlights of that renovation, but additional changes are still being made. Thousands of trees have been planted around the stadium, and improvements to the canopy and sound system are ongoing. To get the word out about their improved stadium, the Dolphins have harnessed the power of social media by hiring an in-house creative content team. Their content was viewed more than 240 million times in 2017, which was the highest social media reach in the NFL. The content also won five Emmy and two Clio awards and spurred a 250 percent growth in digital revenue. Facebook profiles the Dolphins as a success story, as their campaign highlighting the renovations of the stadium generated 4,600 leads, more than any other campaign in Facebook’s history. The Miami Open, which has been played on Key Biscayne in Crandon Park for over 30 years, will have a new home at Hard Rock Stadium beginning in 2019. After a legal battle forced the tournament off Key Biscayne, Stephen Ross, owner of the Dolphins, offered to create facilities at Hard Rock Stadium as an alternative, and the project broke ground in March 2018. Many tennis players expressed mixed feelings about the move, including Serena Williams. “When I heard they were going to move it, it literally broke my heart,” she said in an interview. “I’m so happy this tournament is still going to be in Miami.” However, she and others were excited about the upgrades to come with a new facili-
Revenue per fan
Wins-to-players cost ratio
Miami professional sports teams’ value (2018):
Valuation breakdown (2018): Miami Dolphins
ty. The 29 tennis courts will take up some parking lot space but provide the Miami Open with an increased number of seats and more gym and locker room space. In 2017, the event had an economic impact of over $380 million, and that money will migrate north to Miami Gardens to follow the tournament. New beginnings The Miami Marlins had their ups and downs in 2017. The team finished with a record of 77-85, slightly
improving on their 2016 numbers of 79-82, and ended the season in second place in the eastern division, trailing the Washington Nationals by 20 games. The franchise value jumped from $265 million to $940 million, an increase of over 39 percent. Japanese outfielder Ichiro Suzuki had his last season with the Marlins in 2017. He returned to the Seattle Mariners, where he spent the first 11 years of his MLB career, for the 2018 season. In his last season with the Marlins, Ichiro surpassed Rod Carew as the all-
time leader in the MLB for hits among foreign-born players. In June 2017, the outfielder also made his 365th interleague hit, which surpassed Derek Jeter’s record of 364. The Marlins hosted their first All-Star game in July 2017. Over 37,000 people attended, and 9.28 million watched from home, up from a record low in 2016. Two Marlins, Giancarlo Stanton and Marcell Ozuna, played on the National League team in a 1-2 defeat against the American League. After losing Jose Fernandez in a boating accident in 2016, plaques commemorating both him and Felo Ramirez, the longtime Marlins announcer who passed away in 2017, were put up outside Marlins Stadium in March 2018. Original plans for a statue were set aside for the more sedate memorial, which features Fernandez’s number, 16, but not his name. The most exciting news for the Miami Marlins came in the fall of 2017: Derek Jeter, the famous career New York Yankee, bought a partial share of the Marlins and was nominated the team’s CEO. The new management has been shaking things up and has traded many well-known Marlins — including Giancarlo Stanton, Christian Yelich, Marcell Ozuna and Dee Gordon — in order to secure a winning lineup. The team has not been to the playoffs since 2003. Jeter’s fame will hopefully help with game attendance, as the Marlins ranked third from the bottom in the league in terms of home game attendance in 2017. Need for speed The Race of Champions, an international racing competition, took place at Marlins Park in January 2017. This is the only race in which famous drivers from multiple racing sports, including Formula One and NASCAR, race against one another on an equal playing field in the same kind of car. 2017 marked the first year the race was held in North America, giving Miami a place in the event’s 30-year history. The champion of champions, or individual winner, was Colombian driver Juan Pablo Montoya Roldán. The team prize went to Germany. Despite his teammate being injured in a crash, Sebastian Vettel managed to win seven consecutive races, securing the team victory despite his lack of teammate. In 2018, the race will move to Saudi Arabia and the King Fahd International Stadium. Formula One racing might make a reappearance in Miami soon. In November 2017, representatives of Formula One met with Mayor Suarez to discuss a grand prix in Miami in 2020. A few months later, the possible timeline was pushed up to 2019. Because Formula One races take place on city streets rather
Kim Stone Executive Vice President & General Manager The Heat Group
We’re in the middle of a more than 350-game streak of sellouts that dates back to 2010, when the Big Three of Lebron James, Chris Bosh and Dwyane Wade first came together. The impressive thing is that we have been able to sustain this after the Big Three departed. We have seen our community and fan base grow from being fans of individual players to fans of the Miami Heat. This year, we are thrilled that Dwyane Wade has returned. From a business standpoint, he is the Miami Heat, so he drives increased interest in terms of tickets, viewership on TV, merchandise sales and enthusiasm for our team. Still, to our fans, it doesn’t matter what name is on the back of the jersey; the name on the front, Miami, is what matters. To better serve our fan base, we have developed an app, Miami Heat Mobile, and this was the first year that all the features were operational. We really hit the ground running. The app allows us to give convenience and utility to our fans and also helps us gather data, which we are able to use for additional business value. We want to make sure the features that we have in the app are meeting the needs and demands of our customers. It’s important to us to be deeply invested in a myriad of ways in the community. The owners have that personal belief, and it filters down to everyone working here. We worked with families affected by the Marjory Stoneman Douglas shooting and organized a “Loud and Proud” dance party in response to the Pulse nightclub shooting. Those are the sort of things that we want to do to make a difference in the community. We don’t do it for the publicity, so we feel good about our work. Every day we are contributing to the community in a positive way. Miami is a sports town but one with a lot of other things to do. With all those other distractions, the fact that we are having sellouts speaks to how much the community loves us and how much we’re invested in the community. www.capitalanalyticsassociates.com
Post-game fireworks at Marlins Park, located in the City of Miami’s Little Havana neighborhood.
than on a track, they require more planning and government involvement than other races. The race has faced opposition from the outset, with complaints of future noise, construction and closed-down roads. The Homestead-Miami Speedway will continue its tradition of closing out the NASCAR season in November 2018. Known as Ford Championship Weekend, the event comprises the final races in each of the three major series. Last year, the three race winners were Chase Briscoe, Cole Custer and Martin Truex, Jr., with Truex winning both the race and the series. In 2017, the event sold out all of the Speedway’s 46,000 seats. New in 2018 will be the South Florida SportsCar Challenges, taking place in April, which will be sure to draw crowds of visitors, as well as many locals. There’s a big market for amateur racing in Miami as well. “It’s amazing how the city has exploded into the luxury car industry,” Lino Fayen, owner of Collection Suites, told Invest:. “Once buyers realize they can’t race their cars in the streets, they turn to organized racing. Amateur racing, and racing in general, is going to keep growing rapidly in this area.” Collegiate games The Orange Bowl, which takes place yearly at Hard Rock Stadium in Miami Gardens, ended in a defeat for the Miami Hurricanes in 2017. The Wisconsin badgers won 34-24 in front of an audience of over 65,000 spectators. The Hurricanes had a good year overall, with a record of 10-3 for the season and 7-1 for the ACC conference. The team won its division 196 | Invest: Miami 2018 | SPORTS
for the first time but lost in the ACC championship against Clemson. FIU football also had a decent season in 2017, finishing 8-5 and second in their division. Like UM, they lost their bowl game against Temple in St. Petersburg. In the 2018 NCAA Tournament, sixth-seed UM lost in the first round to 11th-seed Loyola, as the Ramblers scored a three-pointer in the last second of play to win 64-62. For the 2017-2018 season, the Hurricanes went 22-10. The women’s team had a similar record for their season, going 21-11, but were also eliminated from the tournament in the first round due to a loss against Quinnipiac University. Clarissa Cutliff, a junior at FIU, was invited to the NCAA Division I indoor track and field championships and earned First-Team All-American honors in the high jump for the second year in a row in 2018. She finished fifth in the nation with a jump of 1.84 meters. Looking ahead Overall, Miami’s professional teams are performing decently, but 2018 does not seem to promise any championships for South Florida. New and familiar faces like Derek Jeter and Dwyane Wade will create positive change as sports in Miami continue to draw spectators and viewers at home. High-profile events like the Miami Open and the Race of Champions mark Miami as a global entertainment destination, while the city’s universities continue to compete at a high level. Miami provides both the skilled teams and comfortable venues to keep its sports fans happy.