Crocker Partners Exec: 'Having Some Developers Go Bust Is Actually Good'
There is a way to help the affordable housing crisis: let developers go broke, and people can pick up units cheaply, Crocker Partners Managing Partner Angelo Bianco says.
His comments were made during an Oct. 24 panel hosted by Bisnow, which included other lively moments such as billionaire Jeff Greene verbally sparring with the mayor of West Palm Beach.
Experts came together to talk about the state of the real estate market in West Palm Beach. Most agreed that the area boasts a high quality of life, especially compared to Miami, and good transportation infrastructure, but needs a better education system, more high-quality jobs, and, of course, affordable housing.
“Having some developers go bust is actually good,” said Bianco, musing on how the housing crisis ultimately led to a revival of Miami's downtown. “We saw a ton of developers lose a ton of money, and that's OK — not for them, but all those units priced to the markets.”
As prices came down, young people moved in to the suddenly affordable urban core.
“They brought life and energy and, most importantly, retail to the downtown,” Bianco said.
He said that downtown Miami used to seem dead at 5:30 p.m., but around 2009, when he saw a young woman jogging along Biscayne, he felt things turning around. Crocker Partners then became one of the leading office space investors in the region.
“Having that kind of population growth, having some developers go bust is actually very good, and we should be very supportive of that effort,” Bianco said to laughs and groans from the crowd.
“Coming back down to planet Earth, though … Miami was paid for by the crash," Greene said. "There was probably trillions, hundreds of billions lost. We can't count on that to build our city.”
He said that, in Florida, it is expensive to build and thus necessary to pass on costs to end users. He owns thousands of apartments throughout West Palm Beach.
“The price of a unit at [Greene's building] City Palms is less than you could build it for," Greene said. "We're stuck around $2 a foot here, and there's about to be a thousand new luxury units coming on the market.”
He said that he has several more parcels already with entitlements, but has been holding off on developing them.
“I own this land; I'm not raising crops on it,” he said. One parcel, “Clematis Place, it's in the center of everything. I'd love to build it, but I'm sitting here … I want to make sure rents don't collapse.”
Greene said that, except in affluent Palm Beach, most people in the area struggle to cobble together a living.
"I was trying to figure out why when I looked at the payroll of my Tideline Hotel — which barely makes a profit, by the way, my 134-room Tideline hotel in Palm Beach," he said. "On a payroll of 130 employees, I think eight of them get salaries.”
Palm Beach County is heavily focused on tourism and recreation, he said, industries that do not commonly give out high-wage, stable jobs enough to cover the rents that will make a project profitable.
"I'm challenged trying to build because my rents aren't high, and I understand why they're not, because most of the population can't pay $2,500," he said. "But you can't build if you don't get $2,500 a month for rent.”
Despite the cost imbalances, panelists were generally optimistic about the city's fundamentals.
“West Palm Beach has an infrastructure that is really unmatched,” said RDJ Group Managing Member Michael Masanoff, who is behind a plan to build a 1.1M SF project on the western edge of downtown West Palm Beach with a hotel, offices and residences.
Masanoff said the city has a port, freight trains, the Tri-rail commuter train, and soon, the privately run commuter train Brightline going from Miami to Orlando.
“Think of Penn Station, what it became to Long Island,” Masanoff said. "Downtown West Palm Beach, from a transportation perspective, beats everything."
Jeff Greene said that when he left California, he first moved to Miami, “which I really couldn't stand.” But he loved the quality of life in Palm Beach County, with the beach so close, the Norton Museum, baseball spring training and the airport.
Mayor Jeri Muoio, who spent much of her career as an educator in New York State before moving to West Palm Beach in 2002, said the city is not a retiree haven, as some may imagine, with a median age of 39.
Greene and Muoio butted heads over a recent city vote that would have created a new zoning area, the Okeechobee Business District, in order to accommodate two towers proposed by Related Group. Muoio said major businesses want to come to the city but have trouble getting contiguous Class-A office space, and the Related project would have helped.
The commission voted 3-2 against the district, killing the project despite her support.
Greene was glad for the vote. He argued that a high-density zone already exists along Quadrille Boulevard, and projects should be built there first to have workers come down in elevators “and fill up all these restaurants that can't make it and are failing.”
He said developers get upset if they spend $300M to build a tower only to have zoning changed afterward and a taller building allowed next door.
“Mr. Greene, did we not give you variances?” Muoio asked. “So don't talk about rules, when you wanted us to change the rules for you."
Greene said the changes he had requested were not of the same magnitude.
“This is why I do industrial,” McCraney Property Co. CEO Steve McCraney, sitting on their panel, said in response to the banter.
After their exchange, both Muoio and Greene complimented each other and refocused on their love for the city.