Investing in Florida Real Estate Development: A Guide for European Investors

Traditional real estate investment in Florida generally involves acquiring an existing property to generate rental income and potentially benefit from long-term appreciation.

Investing in a real estate development follows a different approach.

Investors provide equity capital to the entity undertaking the development. This equity typically forms part of the project's capital structure alongside the sponsor's own investment and bank or institutional financing.

Value is created through the development process, with the investment ultimately seeking an exit through the sale, refinancing or stabilization of the project.

This approach is therefore closer to private equity real estate than to traditional property ownership.

Miami Square Capital primarily focuses on the following sectors:

• residential and condominium developments
• hospitality and hotels
• branded residences
• mixed-use developments
• multifamily

Each development has its own financial structure, investment horizon, exit strategy and risk profile.

A real estate developer — commonly referred to as the sponsor — typically combines several sources of capital to finance a development.

Part of the capital comes from equity invested by the sponsor and its investment partners, while the remainder may be financed through bank or institutional debt.

The distribution structure may include a preferred return to investors, followed by a sharing of profits between investors and the sponsor according to a predefined waterfall set out in the transaction documents.

Professional investors commonly consider several metrics when assessing a real estate private equity investment:

IRR – Internal Rate of Return

An annualized measure of the projected return over the investment period.

MOIC – Multiple on Invested Capital

The ratio between total distributions and the amount of capital initially invested.

Preferred Return

A preferential return that may be allocated to investors before certain distributions are made to the sponsor.

These metrics should never be considered in isolation. The sponsor's experience, its own financial commitment, leverage, development costs, market assumptions and exit strategy are equally important elements of the investment analysis.

The analysis begins with the underlying real estate and the experience of the sponsor.

Miami Square Capital pays particular attention to factors including:

• 01quality and location of the site
• 02sponsor experience and track record
• 03sponsor equity commitment
• 04equity and debt structure
• 05total development cost
• 06revenue and valuation assumptions
• 07potential return relative to risk
• 08development timeline
• 09exit strategy

For European investors, the expected investment horizon and the visibility of the exit strategy are also important considerations.

An investment in a U.S. real estate development should be considered within both the U.S. legal and tax framework and the investor's own country of residence.

Investments may be made through an entity established specifically for the transaction or through another structure determined by the sponsor and its advisors.

European investors — including investors based in France and Luxembourg — should consider the cross-border legal and tax implications of any U.S. investment with advisors familiar with their individual circumstances.

Miami Square Capital was created with a clear purpose: to build a bridge between European capital and the U.S. real estate development market.

Based in Florida and developing relationships with private investors, family offices and institutional investors in France, Luxembourg and across Europe, Miami Square Capital brings a European investor perspective to opportunities originated by U.S. developers.

Our approach focuses on understanding the underlying real estate fundamentals, the economics of the development, the sponsor's positioning and the investment criteria typically considered by European capital.