FLORIDA: An Introduction

Real Estate, Land Use, and Environmental: Florida continues to have one of the hottest real estate markets in the country. Low mortgage rates and great weather contribute to the growth in the residential sector. A strong dynamic and diverse economy coupled with a pro-development government make Florida an exceptionally good market for investors in retail and office. Additionally, the sunshine state remains a dominant international tourist destination contributing to its thriving hospitality market.

South Florida’s climate and location lend themselves to continued expansion and growth in a wide array of sectors, including housing, hospitality, infrastructure, and transit-oriented developments. With the age of various affordable housing communities as well as a need for upgraded infrastructure and easier connectivity to basic transportation, Miami is ripe for critical upgrades to its systems. To that end, South Florida is seeing the development and adaptive reuse of major corridors in order to accommodate these uses. Key to the success is the intersection of the legal, business and government communities working toward these goals.

As Florida’s population grows, novel environmental conditions and policies present new development and investment opportunities. Guided by pointed environmental strategy, former golf courses and brownfield sites offer significant residential and commercial redevelopment opportunities. Further, Florida’s unique ecology has led to trailblazing regulatory schemes in the areas of wetlands mitigation banking and management, including an effort to streamline state and federal permitting processes significantly.

Public-Private Partnerships: As one of the early adopters of public-private partnerships, the State of Florida’s outlook in the infrastructure space remains strong. In January 2020, Plenary Justice Miami successfully achieved financial close on the Miami-Dade County Civil and Probate Courthouse, an approximately 600,000-square-foot justice center financed with a $310 million private placement. Miami-Dade County is also currently in the process of procuring a mass transit P3 to connect the City of Miami with the City of Miami Beach and has a number of other large infrastructure projects in the pipeline. Similarly, the Jacksonville Transportation Authority remains focused on modernization and expansion its downtown circulator and is likely to move forward with a P3 delivery model. Many other local governments throughout the state are also pursuing infrastructure P3s and joint public/private real estate development projects.

At the state level, the Florida Department of Transportation is working with its private development partners, an Archer-Western-deMoya consortium, to accelerate delivery of its Signature Bridge Project in Miami. The Department’s I-4 Ultimate Project, a managed lanes P3 project between Orlando and Tampa, is expected to come online in late 2021. The Department also recently announced a number of potential P3 projects, including the St. Johns River Crossing, a four-land bridge project that is expected to be delivered under a design-build-finance model.

Commercial Litigation: Florida has three primary adversarial avenues for dispute resolution - state court, federal court, and arbitration. In Florida, many of the state courts have established separate complex business divisions within the individual circuits. While there are varying standards for which cases qualify for assignment to the complex divisions, generally, the highest value and most complex cases within that circuit's system will be designated to such divisions.

Florida's federal courts are known to move quickly at the District Court level. With rare exceptions, federal judges seek to expedite the ultimate resolution of their cases through active case management and assignment to specific tracks. Each case is also assigned to a magistrate judge to further advance the cases. The magistrates generally handle all discovery-related disputes at the request of the judge, as well as any other matters that either the parties or the judge deem appropriate.

Finally, Florida - and particularly Miami - is often the seat of arbitrations. It is, therefore, no surprise that a number of dispute resolution centers, including the American Arbitration Association International Center for Dispute Resolution (AAA-ICDR) and Judicial Arbitration and Mediation Services (JAMS), have offices in Florida.

Corporate M&A: M&A activity in Florida in 2019 continued to be robust, although the volume of deals and aggregate deal size decreased from 2018, which was a record year. Deal flow was expected to continue to be active in 2020, but now many deals are on hold as the COVID-19 crisis has created uncertainty about how soon and to what extent the economy will rebound. Federal loan facilities made available under the CARES Act may help existing portfolio companies weather the crisis, but this funding will not jump-start the M&A market immediately. Well-capitalized strategic buyers may, however, use the downturn as an opportunity to acquire competitors or extend product or service lines. Private equity funds with large cash reserves also may see an opportunity to acquire companies in distress or at least lower values than would have been the case otherwise. In addition, companies may be forced to dispose of non-core assets at discount prices to raise capital, which will create another opportunity for well-capitalized buyers. In all events, these deals likely will occur toward the latter part of the year when visibility will be clearer. As a result, 2020 will be a challenging year for M&A.

Bankruptcy: Over the past several years and into 2020, bankruptcy filings have declined nationwide, Florida included. However, we anticipate a sharp increase in bankruptcy filings and out-of-court restructurings beginning later in 2020 and continuing into 2021, largely resulting from the COVID-19 pandemic and its large-scale macroeconomic consequences. In Florida, significant industry impacts are likely to be in the hospitality and tourism industry, real estate, and health care sectors. This increase in reorganization cases may be further bolstered by the newly-enacted Small Business Reorganization Act of 2019, which provides an alternative Chapter 11 reorganization process for qualifying debtors that is expected to be faster and less expensive. Under the CARES Act federal stimulus law enacted in response to COVID-19, access to this streamlined Chapter 11 process is expanded to larger businesses with greater amounts of debt, which will likely increase filings as well as drive alternative out-of-court restructurings.

Tax & Estate Planning: With its lack of a state income tax and state estate tax, Florida continues to be an attractive destination for individuals looking to relocate. Not surprisingly, many individuals move from the northeast states, where state income taxes are high and no longer deductible to the same extent they were prior to the passage of the 2017 Tax Cuts and Jobs Act. Even President Trump filed a "declaration of domicile" in 2019, stating that his Palm Beach home was his permanent residence. While there may not be any income tax imposed on individuals, corporations conducting business or earning income in Florida are subject to a 5.5% state corporate income tax. Additionally, Florida generally charges a 6% tax on the sale or rental of goods (with municipalities being able to charge a separate tax).

Although property taxes in Florida are among the highest in the country, favorable homestead exemptions are available with respect to primary residences. Florida's homestead laws also provide favorable creditor protection, adding to the list of reasons why more and more people choose to move to Florida permanently.

With its close proximity to Latin America, South Florida also continues to act as a gateway for international investment.