MIAMI—Rancho Luna just sold as part of a creative 1031exchange land transaction that's worth dissecting. TheMiami parcel fetched for $1.625 million.

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Franklin Street's Deme Mekrasand Elliot Shainberg represented both the buyerand the seller in the transaction. First American ExchangeCompany, a qualified intermediary for BaloghFamily Partnership and Housing TrustGroup, acquired the asset. The buyer plans to maintain theland as an income-producing commercial property with an interest inmultifamily development. Rabelo RealEstate Enterprises#1 owned the property for decades.

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“This transaction was a highly structured 1031exchange between the buyer and the seller,” says Mekras.“This transaction shows that buyers are willing to get creative andtake unique risks in order to make deals work in core areas.”

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While the property's current use is not typical of the buyer'sacquisition targets, Mekras says it is in a prime location for analternative, redeveloped use of affordablemultifamily housing. The property was previouslyon the market at the end of 2012 and part of 2013 pending a taxcredit funding application which was not obtained.

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“This local developer believes in the long-term value of thelocation and was willing to buy the asset with no guarantee thatthey will obtain tax credits to subsidize the development ofaffordable housing because they will have sufficient cash flow inthe meantime,” Mekras says. The property is operating with twotenants: Rancho Luna , the oldest Cuban restaurant in Miami, and acar wash.

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“We did put the property under contract at above our previousasking price, which was well north of a million dollars higher thanthe price it ultimately sold for the next year,” Mekras says. “Theprevious high price was only feasible with the rare possibilitythat a developer was able to secure low income housing tax creditsto subsidize construction, which unfortunately never materialized.When the property ultimately sold, it was at a reduced price morein line with the market and a price that was necessary consideringthe risk and opportunity the site offered the market and theultimate buyer.”

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Located at 45 Northwest 22 Avenue, the land sits in the LittleHavana submarket. Little Havana is known for its landmarksincluding Calle Ocho and its Walk of Fame, the Firestone/WalgreensBuilding, and most-recently, the new Marlins ballpark. The area haseight elementary schools, three middle schools, three high schools,three libraries, and Miami-Dade College's InterAmerican campus.

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