(l-r) Bilzin Sumberg partners Alexandra Lehson, Jay Sakalo and Jon Chassen in Miami. Courtesy photos

An opportunity zone project in Miami’s Overtown neighborhood made a $73.5 million leap forward with help from a trio of Bilzin Sumberg attorneys.

Partners Alexandra Lehson, Jay Sakalo and Jon Chassen in Miami secured the financing July 31 for the Soleste Grand Central apartment tower.

The financing came from two loans. Bank OZK, based in Little Rock, Arkansas, and formerly known as the Bank of the Ozarks, issued a $55.1 million mortgage. An additional $18 million mezzanine loan came from Columbus, Ohio-based Nationwide Life Insurance Co., a subsidiary of Nationwide Mutual Insurance Co.

Both loans are for 42 months. The mortgage has a floating interest rate, and the mezzanine financing has a fixed interest rate, Sakalo said.

The 18-story, 360-unit Soleste project, which will have retail and offices, will rise on 1.3 acres, a short walk from the Virgin MiamiCentral train station. The tower will be completed in summer 2021 at 218 NW Eighth St. south of the historic Greater Bethel AME Church and east of Interstate 95.

Soleste Grand Central will have unit sizes ranging from studios to three bedrooms.

PTM Partners LLC, a development company founded last year to focus on opportunity zones and with offices in Miami and New York, and Estate Investments Group, a prolific South Miami-based developer of apartments in Miami-Dade County, are working on Soleste Grand Central.

The project exemplifies three of the biggest trends in real estate, namely the healthy multifamily market driven by high demand, the construction of new projects near mass transit and the appetite for opportunity zone, or OZ, investment.

“It took a really good deal and made it an even better deal because of the long-term tax benefits for the investors,” Lehson said of the opportunity zone aspect. “It’s a win for the investors because of the tax benefits. It’s a win for the community because it provides something that’s missing.”

One of the things missing in Miami is affordable rentals with a growing population and prohibitive barriers to entry for first-time home buyers.

At Soleste Grand Central, 40 will be priced below market rate and the other 320 will be market rate.

Affordable housing in Miami is “a real need that needs to be addressed,” Lehson said.

The affordable units will be allocated based on income levels. Ten units will be designated for households making no more than 80% of the area median income, 15 for households making no more than 100% and the remaining 15 for households making no more than 120%, according to Scott Meyer, PTM chief investment officer.

The area media income in Miami-Dade County is $54,900, which means that households making no more than $65,880 would qualify for the reserved units. Ten will be designated for households making up to $43,920 and 15 for those making up to $54,900.

The 40 units will be composed of up to 15 studios, 14 one-bedroom units and at least 11 two-bedroom apartments, Meyer said.

Rent estimates for the affordable and market-rate units haven’t been made available.

The opportunity zone location is a benefit for investors as well as the Overtown community as the project is expected to spur economic growth and job creation, Lehson added.

The Tax Cuts and Jobs Act in 2017 created opportunity zones to encourage new projects in economically distressed areas through tax breaks.

Investors can defer taxes on their capital gains from any commercial venture by putting the money in an OZ fund that spends it on an OZ project. If they keep their investment in for five years, 10% of the capital gains won’t be taxed. A seven-year commitment means 15% won’t be taxed, and a 10-year commitment eliminates the tax on capital gains.

Soleste Grand Central will cost about $100 million to build, leaving the balance not covered by the two loans open to OZ funding.

PTM and Estate Investments in February bought the site for $9.7 million through an OZ fund.

“The way the OZ funds are structured, it doesn’t eliminate the need to put debt on the property. There is still debt, mortgage and mezzanine debt here for construction purposes,” Sakalo said. “The difference between the debt that’s being placed on the project and the balance that needs to be contributed for completing the construction, that’s where the OZ funds have come in in this transaction.”

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Opportunity Zone Project in Miami’s Overtown Scores $73 Million Financing