'Juice Your Return': South Florida CRE Experts Ready To Synergize With Newcomers
As the longtime CEO of Trust Hospitality, Richard Millard oversaw the management of hotel properties for big chains like Hilton and Marriott as well as smaller, boutique brands, all from his home base of Miami. Amid a pandemic and massive industry shakeup, Millard became managing director of hospitality management company Highgate when the firms merged in October.
“It was very popular amongst those of us that live here to say something bad about Miami [30 years ago],” Millard said on a Bisnow webinar Dec. 9. “That dynamic has completely, completely changed. There is a whole pride in this kind of area. There's a vibrancy.”
In recent weeks, there has been a flurry of press about New Yorkers and Californians beelining for Florida now that the coronavirus has made remote work normal. Area real estate professionals and city leaders are now focused on finding synergies with the newcomers.
Millard cited great weather, lack of state income tax and a luxury vibe as benefits for companies relocating to Miami.
“There's not another city in America that has five Ritz-Carltons,” he said.
During the Bisnow webinar Why South Florida? the locals pointed to additional benefits for incoming developers. Andrew Schimmel is a senior project representative for the city of Miami, working in the department of real estate and asset management.
“In the city of Miami, the zoning code that's in effect, which is called Miami 21, actually has a lot of incentives built into it already that smart developers are aware of and they utilize quite frequently,” Schimmel said.
To encourage transit-oriented development, the city allows developers who build near a rail station to reduce the number of parking spaces, sometimes to zero, Schimmel said. Developers can also get bonus entitlements by including designated affordable housing or workforce housing units in projects. They can also buy unused development rights from historic properties and apply them to other projects.
“So if you're in the urban core and you own a property but you need more [floor area ratio] or you need more density, your hotel units, you can utilize this tool and juice your return even more,” Schimmel said. “So there's a number of incentives that are built into the existing code, and just reading through it and really penciling out your pro forma and scrutinizing it, I think there is significant returns to be had for using those tools.”
Gopal Rajegowda is senior vice president at Related Cos. and a partner in its Southeast Division. In downtown West Palm Beach, Related Cos. has spent tens of millions of dollars redeveloping its 20-year-old outdoor mall, CityPlace, and the surrounding blocks as Rosemary Square.
There, adjacent to a train station where commuters can take the Brightline to travel between Fort Lauderdale and Miami, Related Cos. has demolished a Macy's to build a 21-story mixed-use tower called 575 Rosemary. It is also developing a 300K SF Class-A office building called 360 Rosemary, which includes enhanced air filtration, touchless elevators and outdoor meeting space.
Rajegowda said that, as with Hudson Yards in New York, Related Cos. intends to offer premier office space in the market.
“There's a familiarity with South Florida for Northeast and Midwest CEOs, right?" he said. "A lot of these companies are now looking at big plays here and moving either satellite offices or their full companies.”
Rajegowda said Related Cos. got height and density bonuses on its residential development site by including a 15% workforce housing component.
“We are working very heavily with the city of West Palm Beach on this and the mayor and the commissioners in thinking about what incentives and incentive pools can be available to incentivize these companies to come to South Florida versus going to Nashville or Atlanta or other places in the Southeast, or even Austin, Texas, or other opportunities across the country that have also great tax advantages," Rajegowda said.
Schimmel said the city of Miami is one of the largest landowners in South Florida, with assets under management valued at approximately $12B. Melissa Rose, managing director of JLL’s capital markets group in Miami, noted the city has been getting creative on how to activate its public land without selling it.
“I think the use of ground leases and allowing developers to enter into long-term ground leases that will allow them to activate spaces that previously haven't been used. It's really effective," Rose said. "And I'm pleasantly surprised that I'm starting to see more leasehold financing requests come in with developers that are working in partnership with the public. So these pieces can get activated and bring amenities and benefits to local Miami people.”
Rose also broached the topic of climate change, an ongoing concern investors often raise when vetting South Florida.
“I certainly don't think that this is a near-term concern, but I do think we need to continue to address and be thoughtful about sea-level rise and how that's going to impact the communities that we live in," she said. "I don't think that's a next-five-year worry, but it's something that, as residents of South Florida, we should all be aware of, talking about it and really focused on identifying solutions.”