Miami Attorney Executes 'Funky' Air Rights Deal for Downtown Apartments

Downtown Miami has very little available land, but that’s not stopping developers from getting creative by planning towers above existing low-rise buildings under air right deals.

That’s how Grand Station Partners LLC found room for its 31-story multifamily project on a coveted location on the southwest corner of Miami Avenue and Northeast Third Street south of the federal court complex.

Attorney Kevin Grossfeld represented Grand Station Partners in all facets of the deal, from leasing the air rights for the tower from the public Miami Parking Authority to most recently securing a $53 million construction loan.

“It was a sophisticated deal,” said Grossfeld, a partner at Saul Ewing Arnstein & Lehr in Miami. “Given the complexity of the deal with the air rights, with the different parts of the deal, the parking garages, the residential tower, the storage, the retail parcel and then the affiliated declarations of covenants and governing documents that were required to put it all together, it just took some time.”

The loan deal closed Feb. 27 after a year of negotiations and work. The entire venture, from the air rights lease and other agreements with the parking authority to the loan closing took three years.

Grand Station Partners is an affiliate of Coral Gables-based ROVR Development LLC led by The Related Group veterans Oscar Rodriguez and Ricardo Vadia.

The project is rising on 1.66 city-owned acres at 40 NW Third St. adjacent to the parking authority’s Courthouse Center Garage. The Courthouse garage and the new project will be connected.

Under the air rights deal, Grand Station is building a new 376-space garage for the city and topping it with the apartment tower. The parking authority retains land ownership on the project set for completion next year.

The 441,170-square-foot tower will have 300 market-rate apartments and 5,000 square feet of commercial space, including retail. There also will be storage space for residents. Grand Station will control the ground-floor retail. The new garage will be from floors two to six.

“It’s a funky deal. I don’t know that you could find a deal like it in South Florida,” Grossfeld said.

Air rights development deals like this one have been the norm in other cities and are picking up in Miami as the city grows.

“In big developed cities, in New York, Chicago, heavily developed cities, you run out of land at some point,” Grossfeld said. “And Miami is getting to a point where it, too, is running out of land so you have to be creative.”

The transaction was complex since air rights deals are a complicating factor.

“If you lease land, it’s a little more cut and dry. But when you lease air rights, it gets far more complicated. You have to actually define the space those air rights are within,” Grossfeld said. “Surveys are far more complicated. Understanding the rights and obligations of the parties in the transaction were more complicated. It’s not as simple and straightforward as land. Your rights will begin and start at a certain point in the air.”

His work included smoothing out details such as who is responsible for insurance and maintenance.

Saperean Capital III Note Lender, an affiliate of Saperean Capital, issued the loan. Saperean is a division of Los Angeles-based alternative investment manager Kayne Anderson Capital Advisors LP. Aside from real estate, Kayne’s investment platforms focus on energy, infrastructure, credit and private equity, according to its website.

Grossfeld declined to provide the loan-to-cost ratio, loan term and interest rate.

“You can’t just go find a corner and build on it. Land is scarce,” he said. “As the city developers, land becomes more and more scarce and hard to come by and you have to be creative.”