Our Investments

Our mission is to provide our investors with a superior return within unique asset classes that diversify and enhance their portfolio.

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Kite partners with a select group of accredited investors.

For over a decade, our experience and success with real estate, tax lien certificates and tax deeds has led to the natural evolution of our business into related fields, including Community Development District bonds (CDDs), foreclosures, distressed debt and real estate auctions.

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Every year, municipalities throughout the U.S. auction off their accounts receivables on monies owed by individual property owners in the form of real estate tax lien certificates.

Tax lien certificates (Certificates) are liens secured against property (real estate) for non-payment of municipal charges. These charges include real estate taxes and assessments owed to the municipality.

Wages for school teachers, police officers, firefighters, bus drivers, municipal employees and other critical services are paid through the collection of property tax revenue. When a municipality is unable to collect these taxes, it jeopardizes the municipalities’ ability to provide these services to the taxpaying residents.

Unpaid ad valorem or property taxes become a lien on the property once they become delinquent. In Florida, for example, 2012 property taxes become due November 1, 2012 and are delinquent if not paid by April 1, 2013. The tax obligation is recorded in the records of the local government where the property is located, and until the taxes, penalties and interest are paid the tax lien remains.

Local governments auction off their accounts receivables on monies owed by property owners in the form of real estate tax lien certificates. This allows the local government to obtain the money for the Certificate at the sale, rather than waiting for the taxes to be paid to receive the funds. As the holder of the Certificate, the investor steps into the shoes of the government and has the right to receive the government’s interest and the same rights over the property that the government would have.

Typically, the value of a Certificate is approximately 2% of the tax assessor's value of the underlying property. Depending on the jurisdiction, after 1-3 years, the owners of these Certificates are entitled to have the issuing government agency auction the underlying property in order to pay off the total monies owed under the Certificate. Tax lien certificates have a priority of repayment over and above almost any other non-government lien. Tax lien certificates are superior to mortgages, home equity lines, construction or other liens, and condo or homeowner association liens and claims.

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Introduced to Florida in 1980, Community Development Districts (CDDs) present an alternative mechanism for real estate developers to finance, construct and maintain the necessary infrastructure to horizontally develop a community.

This includes the construction of roads, sewers, electrical grids, clubhouses, golf courses and other amenities. Noteworthy CDDs include:

  • Vierra East (Palm Bay, FL)
  • St. Lucie West (Port St. Lucie, FL)
  • The Villages (The Villages, FL)
  • Tampa Palms (Tampa, FL)
  • Westchase (Tampa, FL)
  • The Reserve (Port St. Lucie, FL)
  • Midtown Miami (Miami, FL)
  • Nocatee (Ponte Vedra Beach, FL)
  • Heritage Harbor (Tampa, FL)
  • Champions Gate (Champions Gate, FL)

Instead of securing a traditional bank loan to finance this construction, CDDs allow developers to create a special purpose quasi-legislative government for the community. This enables developers to issue tax-exempt bonds that are collateralized by the underlying real estate without incurring upfront development costs. The total debt of the bond issuance is allocated proportionately among each platted property within the CDD. Known as debt special assessments, the principal and interest are collected on each property over the course of 30 years to ultimately repay the bondholders in full. The obligation to pay this debt special assessment passes with the property’s chain of title from the developer to the homebuilder and, finally, to the homeowner(s).  

In addition to debt special assessments, the CDD may issue a second special assessment to fund the community's operations and maintenance (O&M assessment). This amount is calculated annually and ensures the District’s property and infrastructure is adequately maintained. Property owners are obligated to satisfy debt and O&M assessments along with their annual property taxes as a  “non ad valorem” line item on their tax bill.

Since 1980, CDDs have evolved into the preferred financing mechanism for residential developers. The bond debt’s affordable interest rates and low up-front financing costs permit developers to offer upgraded amenities and higher construction standards to homeowners while responsibly funding the community’s ongoing operation and maintenance. These communities have provided an effective means for growth within the State of Florida by providing a mutually beneficial solution to developers and homeowners alike.

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CDD Tax Lien Investing in Florida

The acquisition of tax certificates on property within a Community Development District (CDD) can provide an investor with a significant return under the right circumstances with the proper due diligence.

When a property owner fails to pay property taxes, a tax certificate is sold at a tax lien auction to the lowest bidder. If the property owner fails to pay the taxes and corollary interest within 22 months, the bidder may elect to send the property to foreclosure via a tax deed auction. The winning tax deed bidder emerges from the auction with title to the property.

In most cases, the tax deed auction process administratively extinguishes any encumbrances on the property including mortgages and construction liens.  Similar to a typical tax deed auction, when a CDD property is auctioned at a tax deed sale the winning bidder may take immediate possession of the property following payment. CDD's are a quasi-legislative body, and like other governmental liens they are not extinguished by a tax deed sale.
Following the global economic recession of 2008, property owners of all types struggled to pay annual property taxes. Among the most adversely impacted asset classes were unimproved lots within CDDs. Of the 600+ CDDs in Florida, over 400 were created between 2003 and 2008. As institutional lending for new home construction disappeared, CDD developers were unable to sell their finished lots to homebuilders.  

These developers were left with a difficult decision: continue to pay the property taxes, debt special assessments, and O&M associated with their properties, grant a deed in lieu of foreclosure to the District, or abandon the property altogether. In most cases, developers elected to sign a deed in lieu of foreclosure, thus transferring title to the District. Without any source of O&M income from property owners, these CDDs often fell into disrepair and operated with large deficits. This left the State with vast a surplus of undeveloped and unimproved lots within hundreds of newly founded CDDs.  

In the years following the recession, uninformed tax lien investors purchased property tax liens on thousands of improved (fully developed but without a house) lots within CDDs throughout the State. Unaware that the CDD debt survived the tax deed auction, these investors left County auctions satisfied that they were the owners of a developed lots within a gated community at a significant discount to market prices. Upon realizing their error, these tax lien investors sought to recoup their investment by selling their liens; often at a significant discount.

Example:

50’ Front Single Family Lot:
  • Non-CDD Market Price: $40,000
  • CDD Lot @ Auction Price: $20,000
  • Outstanding Accelerated Debt Assessments: $55,000
  • Total Basis (assuming payment of accelerated debt): $75,000

In this chaos, KCP saw an opportunity to track new housing starts within defunct CDDS. As homebuilders and bondholders negotiated deals to resurrect defunct CDDs, KCP simultaneously acquired tax certificates and, in some cases, the corollary CDD bonds for the properties within the community.

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Goldstein Kite Environmental

In 2019, KCP announced a formal partnership with Michael Goldstein, an environmental attorney with unparalleled experience in Brownfield law and redevelopment, to found Goldstein Kite Environmental (GKE). GKE was created to finance the acquisition, remediation, and redevelopment of Brownfield properties throughout the Southeast United States. The stigmatized asset class presents significant barriers to entry and considerable opportunities to investors.

While practicing environmental law for over 25 years, Mr. Goldstein forged important relationships among local and federal government regulators advocating Brownfield redevelopment. GKE harnesses these relationships to utilize a broad array of local and federally sponsored initiatives designed to incentivize the remediation and redevelopment of infill properties with environmental contamination issues. Through these channels GKE is able to source undervalued investment opportunities while coordinating entitlement strategies to address affordable housing and other underserved needs of the local community.

Prior to investment, GKE conducts thorough due diligence by partnering with industry leading land use attorneys, engineering firms and environmental consultants who are experts in mitigating risk within the niche asset class. Upon acquisition, GKE works with the same professionals to conduct environmental remediation while concurrently entitling its investment properties for their highest and best use. Following successful remediation and entitlement efforts, GKE’s properties become administratively eligible for vertical development and are marketed for sale to a growing list of institutional builders with a desire to develop Brownfield properties.

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Opportunity Zone Investments

Opportunity Zones are federally recognized, economically distressed communities where new investments, under certain conditions, may be eligible for preferential tax treatment. This initiative allows investor developers to diminish capital gains taxation and future appreciation by reducing their rate of taxation. These incentives are most beneficial when developers construct and hold the property for ten year or more.

In response to this legislation, KPC entered into a joint venture with environmental attorney Michael Goldstein to form Goldstein Kite Environmental investment fund (GKE).  The fund was created to finance the acquisition, remediation, and redevelopment of Brownfield properties throughout the Southeast United States. Not coincidentally, many historically industrial submarkets were designated as opportunity zones to address a high concentration of environmentally contaminated and brownfield properties.  

Brownfield properties are the beneficiaries of significant development incentives including tax credits, which can provide up to 90% reimbursement for environmental remediation and horizontal development costs. Brownfields located within an opportunity zone, however, are the recipient of the capital gains incentives in addition to their Brownfield tax credits.  

In October 2019, the partnership acquired the Former Biscayne Chemical site, a former chemical distribution facility located within an opportunity zone in the Overtown neighborhood of Miami, FL. The Florida Department of Environmental Protection recognizes the property as eligible for the Brownfield Site Rehabilitation Act. As remediation and redevelopment occur, GKE continues to source additional properties, which suit this unique criteria.

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Development

KCP primarily adds value through restructuring outstanding debt, correcting title defects, entitling land to its highest and best use and environmental remediation. In addition to these services, KCP is an active developer throughout Florida, specifically when investment properties meet certain criteria.

Property Type
  • Industrial
  • Office
  • Retail
  • Hospitality
  • Single & Multi-Family Residential
  • Mixed Use
Regional Focus

KCP focuses on the acquisition and development of properties in Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and Tennessee.

Entitlements

Prior to the development of a commercial property or residential community, developers are required to coordinate with local municipalities to ensure that the property’s proposed use meets local codes.  Obtaining the uses necessary for a landowner to develop a proposed use is known as entitlement. Entitling property to be developed to its highest and best use typically results in the addition of significant value to the underlying real estate.

With extensive backgrounds in property development and real estate law, KCP co-founders have overseen the horizontal construction of various commercial and residential developments. Prior to founding KCP, Kelly Kite oversaw the ground-up development of numerous nationally branded hospitality properties. His responsibilities included land acquisition, coordination of zoning, and entitlement changes with local municipalities and construction. As the former President of the Indian River County Board of Realtors, Joseph Schlitt worked closely with residential developers as they brought new communities through the entitlement process.

Since 2009, KCP professionals have successfully worked with local municipalities throughout the State in obtaining entitlements for a wide array of real estate asset classes. The firm has familiarized itself with this process while forming important relationships on the City, County and State levels. Additionally, KCP has forged long lasting relationships with industry leading engineers, attorneys and consultants. With unparalleled experience and strong local relationships, KCP is able to seek development approvals quickly and efficiently.

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Pine Ridge Plantation Community Development District
Clay County, FL

Established in 2006, Pine Ridge Plantation Community Development District (CDD) is a 740-acre gated residential community located in Clay County, FL in the southwestern portion of the Jacksonville MSA. The community originally consisted of 736 single-family lots, which were sold to a regional homebuilder. From 2006 – 2008, 400 of these lots were improved with single-family houses and sold to end-users. However, following the housing crisis of 2008, 336 of the lots remained unimproved. The regional homebuilder eventually ceased payment of their property taxes as well as their annual CDD bond payments causing the lots to fall into default.

By 2014, KCP was actively acquiring tax certificates within functioning CDDs in large metropolitan MSAs. After analyzing the robust Duval and Clay County housing trends, the firm began to acquire tax deed eligible certificates at a significant discount to their par / redemptive value. Simultaneously, KCP negotiated the discounted purchase of numerous lots, which had been acquired by third party investors at tax deed auction. Following negotiations, KCP agreed to sell all tax-deed eligible certificates and tax deeds to the property owner resulting in a positive gain for its investors. By acquiring property tax certificates within a recently constructed CDD in the Jacksonville MSA, KPC was able to acquire significant interest income with minimal downside risk.

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Spring Ridge Community Development District
Spring Hill, FL

Established in 2000, Spring Ridge Community Development District (CDD) is a gated residential community located in Southern Hernando County. The community originally consisted of 550 single-family lots, which were sold to various homebuilders. From 2000 – 2008, 360 of these lots were improved with single-family houses and sold to end-users. However, following the housing crisis of 2008, 190 of the lots remained unimproved by the various homebuilding entities. These homebuilders eventually ceased payment of their property taxes as well as their annual CDD bond payments causing the lots to fall into default.

By 2014, the Hernando County residential housing market was in full recovery. KCP began to acquire tax deed eligible liens on unimproved lots remaining within the District at a discount to their par / redemptive value. Simultaneously, KCP negotiated the discounted purchase of corollary tax exempt, fixed-income bonds secured by the properties. KCP coordinated with the previous property owners, the District’s Board of Directors, the District Attorney, institutional bond owners, and Hernando County to secure marketable title to the properties. In November 2017, KPC successfully sold the properties to a publicly traded homebuilder, realizing a significant return to its investment fund.

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© Kite Capital Partners, LLC. All Rights Reserved.
Disclaimer: This Information contained herein is being furnished on a confidential basis, is limited and not intended to provide a representation of the merits or risks associated with an investment in the Fund. Nothing in this presentation constitutes an offer to sell or the solicitation of an offer to buy securities. Returns were reported quarterly rather than monthly up to Q4 2014. Years 2009 through 2013 have not been submitted to or reviewed by an independent third party auditor and this document is in no way a guarantee of the accuracy of those returns.