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Incentives Bring New Life To Film Industry In Miami-Dade

After a few starts and stops over the past two years, Miami-Dade’s film industry is coming back to life and reclaiming its reputation of being one of the most desirable shooting destinations in the world.

Miami is on everybody’s radar, with winter conditions that are far more favorable here than shooting practically anywhere else in the US, said Bruce Orosz, CEO of ACT Productions and Greater Miami Convention & Visitors Bureau chairman.

“We are continuing to work very aggressively on broadening out and continuing incentive development, which has become one of the anchor points for any film or TV project that’s being developed, because when they look at the bottom line, they all also look at what are the gives and gets from a location,” he said.

Miami-Dade has its own incentive program, which offers a $50,000 tax credit to productions spending $500,000 up to $1 million and $100,000 to productions surpassing $1 million. To qualify, productions must hire 70% of cast, crew and vendors locally and shoot 70% here.

“That’s a 10% return and, in addition to that, we have some other local municipality incentives that you can bundle up,” Mr. Orosz said. “Assuming you meet all the criteria, you can pick up additional incentive dollars. So, there’s some tremendous opportunities now for producers and studios to monetize and help cut the expenses. There are ways to probably push incentive numbers up somewhere around 15%.”

As a filming-friendly environment, production companies still have covid testing and protocols in place, and that increases the cost of the projects, however the safety-first approach allows for film projects to continue moving forward, said George F. Andrews, Miami-Dade County Mayor Daniella Levine Cava’s senior advisor for policy and planning.

“The county has been at the forefront for resuming safe and healthy filming through the Greater Miami Convention & Visitors Bureau’s initiative #PracticeSafeSets Program,” he said. “Over 80 hotels are offering a variety of flexible, safety-first production options from sequester quarantine scenarios for actors and crew to using Miami hotels as filming locations to utilizing ballrooms to build sets.”

Following the protocols of local health officials and CDC regulations adds to the expertise of the local film community, Mr. Orosz added. “We have what they called ‘safe sets,’ and that speaks to the way we do business here, which is to keep it at the highest possible level of professional production, and we want to keep that image.”

 

Source:  Miami Today

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Offices On The Beach: Billionaires Bankroll Class A Office Space Near Their Homes

Since the beginning of the 20th century, when developers cleared away vegetation and alligators from a sandbar just off the coast of Miami, Miami Beach has been a retreat for the wealthy wishing to escape cold winters.

But now the wealthy don’t want to just play in Miami Beach; they want to work there, too. More wealthy executives, including those who arrived during the Covid-19 pandemic, are bankrolling buildings and leasing office space close to their sprawling mansions and luxury condominiums. It’s a burgeoning trend that could help change the perception of Miami Beach as a place just for fun and sun.

The city is poised to welcome its first top-of-the-line Class A office projects in years as officials are eager to fast-track office development to diversify the municipality’s economy beyond hospitality.

Stephen Rutchik, executive managing director of office services at Colliers, said the demand for Class A office space is driven by principal decision-makers and their employees who live in Miami Beach and want to avoid commuting on South Florida’s congested roads.

“Living and having an office on Miami Beach is a quality-of-life decision,” he said.

There are 4.9 million square feet of office space in greater Miami Beach – which includes Surfside, Bal Harbour, Bay Harbor Islands and Sunny Isles Beach – according to Colliers’ 2021 fourth quarter office market report. However, only 1.3 million square feet of that are the Class A spaces sought by companies hoping to encourage remote workers to spend more time in the office.

By comparison, downtown Miami has 5.1 million square feet of Class A space available, and the Brickell Financial District has 4.8 million square feet, the Colliers report stated.

Lyle Stern, co-founder of Miami Beach-based commercial brokerage Koniver Stern Group, said billionaires, technology and investment companies have been opening offices in Miami Beach for years, but that pace has quickened during the pandemic. However, hardly any Class A office space has been built since the early 2000s, he said.

“The vast majority of [wealthy] folks who moved down here during the pandemic want an office here; they just cannot find office space,” Stern said. “We are not just talking about someone sitting at home with a computer, but someone who has six, seven, eight, nine, 10 analysts working for him, as well.”

With vacancies at a considerable low in the city, some billionaires have sought to build offices of their own.

Barry Sternlicht, president and CEO of Starwood Capital Group, an investment firm overseeing $100 billion in assets, moved his company’s headquarters out of Lincoln Place at 1601 Washington Ave. after completing a new 144,430-square-foot building at 2340 Collins Ave. And energy investor and Miami Beach resident Wayne Boich is constructing a 15,997-square-foot office at 1910 Alton Road that will include a penthouse for him on the fifth floor.

Colliers’ Rutchik said he is negotiating per-square-footage rents in the low to mid-$100s for Eighteen Sunset, a mixed-use office project at 1733 Purdy Ave., which is slated for completion in 2023. The project is being developed by Marc Rowan, CEO of New York-based Apollo Global Management (NYSE: APO), and Bradley Colmer, managing partner of Miami Beach-based Deco Capital Group.

Colmer said he originally planned to build a residential building in Sunset Harbour. But he opted to build a Class A office project when he noted older office buildings in Miami Beach were snaring premium rents “for product that you would typically call Class B,” leaving money on the table for any developer willing to offer more amenities.

“We thought there was an opportunity there,” he said.

Diversifying The Economy

The Miami Beach City Commission already increased the height limits of office buildings to 75 feet on Terminal Island, western segments of Alton Road, and within the Sunset Harbour Overlay district. On Collins Avenue between Sixth and 16th streets, where height for new construction is maxed out at 50 feet, an urban plan designed by architect Bernard Zyscovich would include 75-foot-tall Class A office structures. The city also issued a request for proposals for developers interested in turning three city parking lots and the municipality’s 17th Street parking garage into Class A offices.

Rickelle Williams, Miami Beach’s director of economic development, said encouraging more Class A office development is part of a strategy to attract businesses in industries that employ a high-wage workforce. That includes technology and financial services firms, as well as companies willing to relocate corporate or regional headquarters, or expand existing offices. That mostly leaves out hospitality businesses, known for paying lower wages.

The city’s strategy includes expediting the permitting process for office projects and giving up to $60,000 a year for the next four years to companies with more than 10 full-time jobs that pay more than $69,385 a year. (The exact amount awarded depends on the number of jobs.)

 

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Migration From North Triggering Continuous Economic Growth In Miami

The increasing migration of Northern high-income executives is accelerating the real estate markets and the overall economy in South Florida, while banks are reporting substantial profit gains and are eager to welcome their businesses.

The nation’s biggest banks reported record profits for 2021 thanks to higher investment banking fees and lower loan losses during by the pandemic, according to the Financial Times. JP Morgan increase its profits from right under $30 billion in 2020 to almost $50 billion; Goldman Sachs Group went from around $10 billion to over $20 billion; and Morgan Stanley increase its profits from $10 billion to around $15 billion, according to data from S&P Capital IQ, reported by Bloomberg.

Bank of America, in its third quarter report of profits, showed a revenue of $22.87 billion, a 12% increase since last year. CitiBank, in the release of its 2021 fourth quarter net income, reported $17 billion, compared to $16.8 billion a year ago.

David Glickman, Wealth Market leader for TD Bank in Florida, said that the Covid-19 pandemic has changed the way a lot of companies do business.

“Executives can now work remotely,” he said. “We have a lot of people who are migrating down to Florida for the nice weather, but also because we have no state income tax.”

As professionals are settling in South Florida, they are establishing bank accounts. “That’s a big benefit to local banks,” Mr. Glickman said. “These people are selling their homes and moving down to South Florida, so a lot of banks are going to benefit because people are looking for lending to buy or construct new homes, which in turn impacts the economy, the construction companies… it’s a domino effect.”

According to the Florida’s State Office of Economic and Demographic research, from April 2020 to April 2021, avout 330,000 people moved to Florida. “And all the people coming down are executives, entrepreneurs; they’re going to create opportunities that help expand the economy,” Mr. Glickman said. “There will be a continuous growth, and it’s going to expand beyond South Florida, as Sarasota is expanding rapidly, and Tampa [too]. This is good for the state of Florida, but certainly Miami will be a benefactor with all the money pouring in.”

With the almost 900 people moving to Florida every day, according to Jimmy Patronis, Florida’s chief financial officer, the state’s population has grown by 2.7 million in the last ten years, Harvard Politics reported.

For the banks, this translates into increased deposits, wealth management advisory demand, lending and new relationships with local institutions.
The influx of high-earning professionals relocating to South Florida is bringing economic advantages to the area as they start setting roots, said J.C. de Ona, Centennial Bank’s Southeast Division president.

“Overall, a lot of them are buying homes, leasing office space or buying office or industrial space,” Mr. de Ona said. “So it’s bringing opportunities for banks to do mortgages and to finance them. And with the executives come other employees within their business structure.”

This migration is helping the mortgage industry and the local developers of multi-family projects, Mr. de Ona said.

“It helps the economy in so many different ways – from home buying, to offering jobs and getting office space, to their kids going to our schools, and them buying automobiles, or going to restaurants. A lot of them come down here to invest in business creation or get real estate.”

The New York State 2022 budget legislation is increasing the corporate franchise tax from 6.5% in 2021 to 7.25% in 2022 for companies earning more than $5 million. Personal income tax is also increasing for top-earning New York residents. Taxpayers earning up to $5 million would have a 9.65% income tax rate; taxpayers earning up to $25 million, a 10.3% personal income tax rate; and for people earning more than $25 million, a 10.9% personal income tax rate.

Mr. de Ona said that the trend of New Yorkers migrating to South Florida will continue well into 2022.

“With the tax changes we’re seeing in New York,” he said, “every indication is that they’re going to continue to migrate down here, as South Florida is becoming more and more attractive.”

 

Source:  Miami Today

 

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Ex-Google CEO Owns Major Interest In South Beach Class A Office Project In The Works

A proposed five-story Class A building that is majority-owned by the former CEO of Google and his philanthropist wife is scheduled to come before the Miami Beach Planning Board on Jan. 25.

Eric and Wendy Schmidt own a 88% interest in 411 Michigan SOFI Owner LLC, the developer of the proposed building, at 411 Michigan Ave. Eric Schmidt was a top executive and adviser for Google and its parent company, Alphabet Inc., from 2001 until 2020. Wendy Schmidt is the president of the Schmidt Family Foundation, a Palo Alto, California-based nonprofit that holds over $1 billion in assets.

Lauren Pressman, director of investments for Hillspire, LLLC, the family office for the Schmidts and the Schmidt Foundation, has a 2% interest in the venture, according to city records. Sharing the remaining 10% interest are New York-based real estate developers Davide Bizzi, Saif Sumaida, and Amit Khurana, as well as New York entrepreneur Paramdeep Singh.

Called “Fifth and Michigan,” the planned 75-foot-tall building is slated to become the first project in the United States designed by Spanish architect Alberto Campo Baeza if the building can get the necessary approvals from the city, including a conditional-use permit from the Planning Board.

According to a memo from Planning Director Thomas Mooney, the building “as presented by the applicant” will be 41,377 square feet in size and include 38,252 square feet of office, 3,2125 square feet of retail, and mechanical parking. The project also involves moving and lifting a two-story structure built in 1933 and turning it into a cafe, the memo stated. A one-story structure on site is slated to be demolished.

 

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Looking To Lease Office Space In South Florida? Here’s What You Can Expect To Pay

Despite remote work trends, South Florida’s office market showed signs of a full rebound as asking rental rates surpassed pre-pandemic levels, according to recently released data from Colliers.

Among the three counties, Miami-Dade County’s per-square-footage average asking rate of $44.72 was still the highest in the fourth quarter of 2021. That’s a 15.14% increase from the same quarter in 2019, before Covid-19 surges made working from home the norm for many companies.

In contrast, Broward’s average asking rate was $35.47 in the fourth quarter of 2021, which is 13.4% higher compared to two years ago. Palm Beach County’s was $37.25, up 13.29% from the fourth quarter of 2019.

In the Class A office category coveted by businesses wishing to recruit talent and encourage employees to return to the workplace, the rise in per-square-footage asking rates during pandemic times were more modest: up 9.84% to $50.58 for Miami-Dade, 5.9% to $40.30 for Broward, and 8.24% to $43.76 for Palm Beach County.

During that time, Palm Beach County’s office vacancy rate was 9.7%, the lowest of the three counties. In contrast, Miami-Dade had a vacancy rate of 11%, while Broward’s was 12.5%, Colliers reported.

Unlike the other three counties, Palm Beach County’s vacancy rate was even lower than the pre-pandemic fourth quarter of 2019, when it was at 10.7%. During that same quarter two years ago, Miami-Dade’s vacancy rate was 9.1% and Broward’s was 9.7%

“That’s because a growing number of financial companies are migrating from other parts of the United States and setting up shop in downtown West Palm Beach, particularly the substantially completed 270,000-square-foot 360 Rosemary that’s being developed by Stephen Ross, chairman of the Related Cos. in New York,” said Michael Falk, a managing executive director from Colliers’ West Palm Beach office.

These companies aren’t flocking to the area for a bargain: West Palm Beach’s central business district had an average asking rate of $66.07 a square foot ($70.50 for Class A), the highest rate of South Florida’s submarkets during the fourth quarter of 2021.

West Palm Beach’s office boom didn’t just benefit the downtown area. Falk said it had a positive “ripple effect” in other parts of the county, where offices are being repositioned and upgraded, resulting in higher rates and better product in other parts of the county.

“Trends are improving for Broward, too,” said Jonathan Kingsley, executive managing director of office services in Colliers’ Fort Lauderdale office.

He pointed out that Broward gained 218,822 square feet of newly filled tenant space in the third quarter of 2021, and another 150,917 square feet in the following quarter.

 

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Cryptocurrency Starts To Make A Splash In Luxury Housing. Will It Trickel To Larger Residential And Commercial Markets?

So far, much of the buzz around cryptocurrency in real estate has been the luxury segment of the for-sale housing market. But a few early adopters in commercial real estate have begun to accept crypto in transactions.

Harbor Custom Development Inc. of Gig Harbor, Washington, will soon begin accepting 13 digital currencies as payments for its listed land, development lots, houses, condos and apartment buildings across multiple states it works in.

“We see the writing on the wall that cryptocurrency and blockchain technology, in some form or another, is here to stay,” said Jeffrey Habersetzer, chief operating officer of Harbor Custom Development, in an email. “Opening access to the $2.5 trillion cryptocurrency market is a logical first step for the company, and we are excited about catering to these new buyers.”

Habersetzer said the reception thus far, ahead of the program’s Jan. 24 launch, has been positive. He said he anticipates cryptocurrency buyers to run the gamut: first-time homebuyers searching for a starter condominium, move-up buyers that need more space, luxury homebuyers and Institutional investors looking for entitled land, developed lots or multifamily projects.

But, Habersetzer said, there seems to be a lot of apprehension in the marketplace right now to accept digital currency. He said the firm has partnered with a team of industry experts to create a process that’ll look very similar to a standard cash real estate transaction, with low barriers to entry to those with significant cryptocurrency holdings.

San Diego-based REIT Presidio Property Trust Inc. (NASDAQ: SQFT) last month said it would begin accepting cryptocurrency for tenant payments and common area maintenance charges. The firm is now accepting currencies that include Bitcoin, Ethereum, Dogecoin and Litecoin.

Attempts to reach Presidio by deadline for more information about its program were unsuccessful.

“We believe that these additional payment options will be attractive to some of our current and prospective tenants, especially in new, expansion markets,” said Gary Katz, senior vice president of asset management of Presidio, in a statement last month.

Erin Sykes, chief economist at New York-based residential and commercial brokerage firm Nest Seekers International, said she thinks there’s perhaps even more opportunity for commercial real estate to adopt cryptocurrency than the residential market. But it’ll take optimization across different points of a transaction — owners, contractors, tenants and so on — for it to become widespread, she added.

 

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AMAC Acquires 1800 Alton For $32.5M, Showcases Strength In Miami Retail

AMAC has acquired 1800 Alton, a trophy urban retail center in Miami Beach for $32.5 million from Saber 1800 Alton, LLC.

Acquired in partnership with Daniel Neary, a Miami Beach real estate developer, the property is prominently located in Sunset Harbour at the intersection of Alton Road and 18th Street with great visibility on one of Miami Beach’s busiest intersections.

Designed by award-winning, Miami-based architect Kobi Karp and built in 2018, the five-story urban center contains 31,840 square feet of class “A” retail and 136 parking spaces across the three-level parking garage. The property currently contains two long-term tenants and two vacant spaces on the ground floor measuring 2,233 and 1,803 square feet.

“We are thrilled to complete the acquisition of the class A property developed by Saber in one of Miami’s most desirable locations,” said Maurice Kaufman, Founding Principal at AMAC. “We are committed to the long-term future of Sunset Harbour and have already received strong interest in the property.” 

1800 Alton is ideally positioned in Sunset Harbour, the vibrant neighborhood at the gateway into South Beach, with many high-end residential buildings, retail spaces, and the Sunset Harbour Marina.

Jordan Gimelstein and David Spitz of the Koniver Stern Group were the sole brokers on the sale of 1800 Alton Road. Jordan and David are the Directors of the Investment Sales division at Koniver Stern Group and have been involved in many high street transactions throughout the Urban Core of Miami and Miami Beach.

 

Source: REW

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Transit-Oriented Wynwood Parcel Sells For $19.5 Million

Metro 1 announced the $19.5 million sale of a 1.4-acre development site in Miami’s Wynwood neighborhood.

Located at 45 Northeast 27th Street, the site is zoned T5-O under Wynwood’s NRD-1 zoning overlay and steps away from the proposed Wynwood commuter rail station and two potential Metromover stations. Metro 1 managing director Juan Andres Nava represented the sellers, CHO RE Holdings, LLC (a Tony Cho owned entity) and Scott Silver and Newcomb Properties LLC, while the firm’s Jack Conrad represented the buyer, Fifield Companies.

The transaction emphasizes continued demand for Wynwood real estate and expansion of Miami’s mixed-use development pipeline and transportation-oriented development.

“The Metro 1 team prides itself in thoughtfully curating these types of deals, connecting buyers with the right sites to not only ensure successful development, but community wide benefits,” said Metro 1’s Nava. “Demand for Wynwood development opportunities is incredibly strong as one of Miami’s cultural hubs and sought-after locations for relocating companies in the tech and finance sector.”

Still in the planning stages, Fifield looks to develop a mixed-use apartment community on their newly acquired site. Preliminary plans include 210 rental units, 11,500 square feet of retail and 296 parking spaces. The development would also include a pedestrian “paseo” connecting Northeast 27th and Northeast 28th Streets.

 

Source:  CRE-sources

 

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Former Miami Rescue Mission Building Trades In Off-Market Deal, Creating One Of The Largest Contiguous Sites In Wynwood

In an off-market deal, Soho, LLC, an entity managed by The Faith Group, has purchased the former Miami Rescue Mission headquarters building located at a 2159 NW 1st Court in Wynwood.

The 1962-built 11,810-square-foot building, which is situated on a 6,812-square-foot lot, was purchased from FBWS development Senior LLC for $3 million.

The deal closed December 9.

The building is located adjacent to Soho Studios, a 45,000-square-foot creative event space, on a 68,000-square-foot lot located at 2136 NW 1st Ave, which is also owned by The Faith Group.

Roy Faith
Roy Faith

“This was a strategic purchase as this building is on a corner lot adjacent to our Soho Studios,” commented Kevin Faith, CEO of the Faith Group. “This was the last piece we needed to create a 75,000-square-foot footprint, one of the largest contiguous sites in Wynwood.”

“Having seen how Wynwood has evolved over the past 10-15 years, our group firmly believes we are still in the early stages of one of the most vibrant communities in the US,” added Roy Faith. “With the continued developments currently online and many more to come, there is a long runway still ahead and we are excited to be part of it. We are looking at several different concepts for the property.”

 

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CRE’s Growth Forecast For 2022

ommercial real estate can be expected to perform well this year despite the prospect of higher interest rates, according to the National Association of Realtors.

While interest rates are expected to broadly rise by about 75 basis points, they will still be low compared to historical levels and should not cause a severe decline in investment activity and the ability of companies to service their debt.

Bottom line: CRE’s underlying demand fundamentals should more than mitigate the impact of the slightly higher interest rates in 2022, according to NAR’s 2022 Commercial Real Estate Outlook report.

Office Vacancy Rates to Tick Higher

Only the office real estate market will continue to see higher vacancy rates in 2022.  Ongoing construction is equivalent to 2.6% of the current inventory and it is expected to further raise the vacancy rate to 13.5% (12.2% in 2021) and cause a decline in office rent by 0.8% (-1% in 2021).

However, as seen in the 2021 trends, the high office vacancy rates will remain concentrated in the primary metro areas of New York, San Francisco, Chicago, Los Angeles, Washington D.C., and Boston.

Meanwhile, secondary markets with lower cost of living (home prices or rent) and lower office rents will continue to attract businesses and workers into the area.  Based on the level of under construction activity, developers/investors are bullish on secondary markets like Dallas, Austin, Atlanta, Charlotte, Nashville, Miami, and Salt Lake City.

COVID Will Drive Office Re-Entry

The timing of “the big re-entry” to the office is still dependent on the course of the COVID variants. However, it appears that the Omicron virus is not as deadly as COVID-19 with vaccinations reducing the risk of death.

Beyond the short-term effect of the re-entry on absorption, the long-term effect of the pandemic pertains to the need and use of office space (e.g., overall square footage and per employee square footage) and the allocation of office space for employees (fixed or hot desking/hoteling).

CBRE’s 2021 Occupier Survey reported that in the United States, 62% of employers expect to adopt a hybrid schedule with employees going to the office 2.5 days a week. A higher fraction of U.S occupiers expect a contraction of their office space, at 44%, compared to 29% that expect an expansion and 27% that expect no change.

Class B Office Conversions Could Draw Interest

However, the adaptive reuse of office space for other uses such as for lab science and multifamily housing could increase investor interest for office properties, especially the older properties with floor plates and design that are suitable for such conversions.

NAR’s analysis on office-to-housing conversions shows a strong potential for the conversion of Class B office units into housing in New York, Chicago, Los Angeles, and Boston but less potential in Washington D.C. and San Francisco.

Industrial Demand to Remain Robust

The demand for industrial space is expected to remain robust given that consumers have shown a preference for both online and in-store shopping.

With brick-and-mortars also providing online shopping services to complement in-store shopping, the demand for last-mile delivery services will drive the demand for warehouses and distribution centers.

About 460 million square feet of industrial space is under construction, or about 2.6% of the current inventory. NAR foresees that this construction will lead to slower industrial rent growth of 7.4% on an annual basis from the current rate of about 8.4% as of 2021 Q4 (6.7% in 2021). The vacancy rate is expected to slightly increase to 5% (4.9% in 2021).

In the retail brick-and-mortar market, growth will continue to be driven by smaller shops such as neighborhood centers, strip centers, and single-tenant stores. Given the current low vacancy rate at brick-and-mortar stores and with the rise of experiential retail that will drive foot traffic to the malls, vacancy rates are likely to decline further to 4.6%.

Higher Mortgage Rates to Boost Rental Demand

In the multifamily market, higher mortgage rates will boost rental demand as a mortgage payment becomes slightly more expensive. NAR forecasts that the vacancy rate will further tighten to 4.8% in 2022 (5.1% in 2021) and rent growth to average at 10% (7.8% in 2021).

Renters have started returning to the primary metro areas of New York, Chicago, Boston, Washington D.C., Los Angeles, and San Francisco, in part attracted by the huge rent discounts during the pandemic. However, asking rents are picking up strongly which will tend to drive renters to less expensive secondary/tertiary markets or to outlying suburbs of these primary metro areas, especially with the opportunity to work from home.

Rental demand is likely to continue to be strong in the West region and New England states where owning is more expensive than renting. Meanwhile, retiring Baby Boomers are likely to fuel demand in the Sunbelt markets, which will boost demand for commercial space (retail and small offices).

 

Source: GlobeSt.

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