Florida’s long-running effort to lure Wall Street hotshots is gaining traction thanks to a provision in the federal tax law that hits residents of high-tax states.
The Sunshine State’s most recent conquests are two of the founders of I Squared Capital, Sadek Wahba and Adil Rahmathulla, who are among executives relocating to Miami from New York, according to a person familiar with the moves. The private equity firm plans to open an office in Miami later this year, said the person, who spoke on condition of anonymity. A company representative declined to comment on the relocation and the reason for it.
The former Morgan Stanley dealmakers, whose infrastructure firm will manage more than $12 billion in assets after its second fund closes later this year, stand to benefit tax-wise -- as would any other executives from the financial industry who make the move from New York or Connecticut. That’s because Florida doesn’t have a state income tax and its property taxes are relatively low, whereas the tri-state area has among the highest property taxes in the country.
Their relocation rewards years of work by Florida officials to entice the investment crowd with promises of warm weather and zero state income taxes. The federal tax law’s new cap on state and local tax deductions at $10,000, which includes property taxes, has reinvigorated their campaign. Money managers in high-tax states may have previously written off hundreds of thousands of dollars in property taxes annually.
“SALT has been the No. 1 theme when we speak with finance companies” about relocating or opening branch offices in Miami, said Nitin Motwani, a lead developer of a $2 billion skyscraper in Miami. “Naturally, we are in favor of getting rid of that deduction, because it’s great for this market.”
The hope among Florida officials is that the personal tax hike will motivate investment managers to buy homes in Florida, and eventually move business operations down south.
In April, members of the Miami Downtown Development Authority traveled to midtown Manhattan and Stamford, Connecticut, for a “spring outreach” trip to sell their city to financial professionals. The tour included a roundtable discussion with executives from Morgan Stanley’s institutional equity division and a lunch at the Tommy Bahama restaurant with the Managed Funds Association, the main lobbying group for hedge funds.
Two meetings also took place about confidential deals code-named “Project Apple” and “Project Sunshine,” according to a copy of the itinerary obtained by Bloomberg News.
Christina Crespi, the acting executive director of the Miami authority, declined to comment on the April trip. Alisha Tischler, an outside spokeswoman for the group said that another fund was in late-stage discussions to relocate, but declined to name it, citing confidentiality agreements.
Hedge fund billionaires relocating to Florida for tax reasons is nothing new, with marquee names like David Tepper, Paul Tudor Jones and Eddie Lampert moving in recent years. But Florida officials are banking on the new law being the final push to rebrand Miami as “Wall Street South” and Palm Beach as “Hedge Fund South.” As the tax bill was being negotiated last year, Florida Governor Rick Scott, a former resident of Greenwich, Connecticut, made trips up north to court investment firms.