Are South Florida prices too high for some investors?

The cost of land and projects were a hot topic in a panel discussion about the State of the Market: Southeast Florida at a day long real estate seminar at FIU’s North Campus. Panelists had some pro views on the attractiveness of the market, but some national buyers are getting a big finicky. 

This is one of several posts I’ll have today about the conference sponsored by Marcus & Millichap and Institutional Property Advisors.

This panel was moderated by Gene Berman, Executive VP, Marcus & Millichap


Casey Cumming: Ram Realty Services

Joel Altman, Chairman, Altman Companies, fourth generation builder

Adam Lustig, Partner, Bilzin Sumberg

John Guitar: Senior Vice President Business Development, All Aboard Florida

Nitin Motwani: Managing Principal, Miami Worldcenter Associates

Andy Ansin, Vice President, Sunbeam Properties, includes Miramar Park of Commerce

Here are some of the backgrounds and comments given by the panelists:

Guitar: All Aboard has a long heritage in Florida. One of the main assets it owns is Henry Flagler’s railroad that originally spurred development. All Aboard is building the first privately funded intercity railroad in country – 32 trains a day from Miami to Orlando with stops in Fort Lauderdale and West Palm Beach. All Aboard is a tenant at Orlando International Airport, but doing 1 million square feet each in West Palm Beach and Fort Lauderdale and 3 million square feet in Miami. All Aboard expected to be operational in first quarter of 2017.

Motwani: Company owns 30 acres near All Aboard Miami site. Forbes and Taubman are parnters and have landed Macy’s and Bloomingdales as anchor tenants. Marriott Marquis Hotel with 1,800 rooms – the largest in the state. Also have Encore equity fund – Paramount Fort Lauderdale Beach condominium is one of its projects. Breaking ground early this year on Worldcenter with initial project on 17 acres, creating 10,000 construction jobs during its various phases.

Altman: Founded company in 1968. 1,300 units under construction. Just sold a major portfolio. [The deal appears to be the 270-unit Altis in Coconut Creek that went for $62 million or $229,000 a unit.] They usually sell to institutional investors or high net worth individuals. Cap rates are getting compressed. There is foreign money coming to South Florida.  Just experienced best lease up and most profitable job in Pembroke Pine.

Business has a lot of tailwind because of the changing preference in housing type. Heard estimates of 1.1 million new multifamily unit demand for each percentage drop in purchasing vs. renting. We are at 63 to 64 percent home ownership level and heading down – that represents 7 million additional rental housing units. Industry historically produced 450,000 a year. Last year around 600,000, which will be about the same as this year. “I think there is still demand, although there will be pockets of slow lease ups.” Apartments are still one of better sector for investment in real estate economy.

What income does it take to qualify tenants since it may tie into job market? Median income in Coconut Creek community was $70,000, but in Pembroke Pines north of $113,000. Their products are designed for renters of choice.

Ansin: Miramark Park of Commerce being built on land bought by grandfather. They are building last two warehouse buildings. Speed of deals has increased, but haven’t seen as much increase in pricing as it should. Market is about $1 a square foot below where it should be. Flagler Station is a factor in pricing since building a lot of product and has a lot of land left to build on. Seen net rates go up 50 to 100 percent from trough during recession.  They look at quality of tenants. Healthcare and aviation were stalwarts during the recession.

Guitar: Miami is on the precipice of going to the next level of an international city. Looking to understand the impact of transportation on the community. Denver is an example of rates 20 percent higher and absorption of apartments quicker near mass transit. Florida doesn’t have the infrastructure to support its size. Transit will provide the infrastructure to continue development. All Aboard takes a longer view on its investments.

Orlando market is incredible with 50 million tourists a year. the ability to connect that market to Florida is a major opportunit – then Jacksonville and Tampa later.

Lustig: Cost of land for new development has gotten so expensive that it’s difficult  to buy land and make the numbers for our clients to work. Very little office and apartment development in Miami due to the pricing of land. Condominium development very favorable with buyers putting up 50 percent deposits. Some real estate funds are buying in places like Charlotte and Austin where they see growing employment and higher cap rates. They shy away from the pricing in the South Florida market.

Altman: Anything on the horizon that could replicate a 2008-2009 market place? We made the unfortunate mistake that we thought we could do condominiums as well. If not for the condominiums, we would have come through the recession unscathed. They finance development at 65 percent at the lesser of total cost or appraised value,  and 35 percent equity.  Mortality rate of 60 to 70 percent in condo contracts. Doesn’t see apartment market having anything like debacle we went through. At some price a well-placed apartment building will rent. There is always somebody who is going to live in an apartment – the question is what price.

Guitar: Aske if he sees the opportunity to fill rail gap between Orlando and Tampa? In the future we would certainly like to expand the service if it makes sense. It’s such a heavy pull to do what we have now. Need to make sure it’s successful and well thought out.

Altman: Tenants moving to less expensive projects? Number of people moving out is nowhere near pre-recession

Ansin: Likes it when they move out and gave an example of a new tenant paying 100 percent more. “If you are not seeing tenants leave because your price is high, you are not pricing your property high enough.”



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Drew Limsky

Drew Limsky



Drew Limsky joined Lifestyle Media Group in August 2020 as Editor-in-Chief of South Florida Business & Wealth. His first issue of SFBW, October 2020, heralded a reimagined structure, with new content categories and a slew of fresh visual themes. “As sort of a cross between Forbes and Robb Report, with a dash of GQ and Vogue,” Limsky says, “SFBW reflects South Florida’s increasingly sophisticated and dynamic business and cultural landscape.”

Limsky, an avid traveler, swimmer and film buff who holds a law degree and Ph.D. from New York University, likes to say, “I’m a doctor, but I can’t operate—except on your brand.” He wrote his dissertation on the nonfiction work of Joan Didion. Prior to that, Limsky received his B.A. in English, summa cum laude, from Emory University and earned his M.A. in literature at American University in connection with a Masters Scholar Award fellowship.

Limsky came to SFBW at the apex of a storied career in journalism and publishing that includes six previous lead editorial roles, including for some of the world’s best-known brands. He served as global editor-in-chief of Lexus magazine, founding editor-in-chief of custom lifestyle magazines for Cadillac and Holland America Line, and was the founding editor-in-chief of Modern Luxury Interiors South Florida. He also was the executive editor for B2B magazines for Acura and Honda Financial Services, and he served as travel editor for Conde Nast. Magazines under Limsky’s editorship have garnered more than 75 industry awards.

He has also written for many of the country’s top newspapers and magazines, including The New York Times, Washington Post, Los Angeles Times, Miami Herald, Boston Globe, USA Today, Worth, Robb Report, Afar, Time Out New York, National Geographic Traveler, Men’s Journal, Ritz-Carlton, Elite Traveler, Florida Design, Metropolis and Architectural Digest Mexico. His other clients have included Four Seasons, Acqualina Resort & Residences, Yahoo!, American Airlines, Wynn, Douglas Elliman and Corcoran. As an adjunct assistant professor, Limsky has taught journalism, film and creative writing at the City University of New York, Pace University, American University and other colleges.