Sunny Money

Avenue Magazine
January 26, 2018

By Linda Marx

During last year’s controversial election season, the real estate action in Palm Beach lagged, just as it does the last month of hurricane season. “Sales were flat,” says Dana Koch of the Koch Team at Corcoran Group Palm Beach. “It was hard to wrap our arms around it”. But a year later, interest in buying on the island has increased. “The momentum is here now, and we are seeing a good season.”

Pam Gottfried, director of luxury sales for Douglas Elliman Palm Beach, agrees: “We have had record breaking sales with new residents in recent months, and nobody who lives here wants to leave Palm Beach. We keep politics out of real estate!”

Donald J. Trump’s presidency has thrust Palm Beach into the international spotlight, but its bustling real estate market has little to do with his celebrity or his frequent visits to Mar-a-Lago.

Palm Beach has been under a microscope since the Donald’s election. All of the scrutiny and buzz has placed the island on the world stage. His name has brought more international tourists to Palm Beach and won the island hundreds of headlines. But his presence, despite the annoying traffic lines, delayed flights and increased security, is no different than having any other sitting president spending time in Palm Beach. Most  observers don’t attribute increased real estate sales to a Trump bump. They agree that Palm Beach is an island unto itself that continues to attract wealthy people who want its privileged lifestyle.

“There is no data to support a presidential impact on real estate sales,” says Suzanne Frisbie, president of the Palm Beach Board of Realtors. “People buy for Palm Beach’s tropical climate, inherent beauty and safety of investment. Statistically, due to the contentious 2016 election, there was a bit of a lag at the beginning of the year. But volume has picked up nicely.”

Property values continue to rise based on this unique quality of life, enhanced levels of security, positive market trends and favorable homestead tax advantages. People want to make Palm Beach their private residence and move their businesses there. “Palm Beach captures the very essence of extraordinary,” boasts Mayor Gail Coniglio. “Its beauty, architecture and tradition coupled with spectacular beaches and warm sunshine make it a real estate paradise.”

The lure of the sunny, year-round weather, and the feel of a small, sophisticated seaside community continues to attract successful people. In 2017, there were more than 21 $10 million-plus sales, including global investment firm Citadel founder Ken Griffin paying $215 million total (over several years) for the Blossom properties four-side-by-side parcels of land totaling eight acres on the ocean, and a neighboring billionaires row estate-where he plans to build a 55,000-square-foot estate with a new private entrance on South Ocean Boulevard; designer Tommy Hilfiger and wife Dee Ocleppo’s $34 million oceanfront home; and a north end spec home on Indian Road that sold to a trust for $49 million.

According to market reports and interviews, 2017’s average sale price is up 25 percent over last year. While the majority of transactions in that period were under $10 million, October recorded a sale of $37 million. And four properties with asking prices of more than $20 million-one as high as $70 million and another nearly $65 million-have been under contract, which could show more than a whopping 50 percent increase in sales over $20 million as compared with 2016.

Longtime Palm Beach broker Earl Hollis attests that the market is so healthy, he can’t imagine it going any higher. “I have seen a 25 percent increase in the past three years with prices going up 20 percent. Land values have risen what I sold for $225,000 35 years ago now goes for $2.2 million. People are tearing down the old, and opting for new homes with major improvements. This has nothing to do with Donald Trump. It has everything to do with Palm Beach being a wonderful place to live.”

Making Palm Beach even more spectacular are improved commercial areas that are being redefined with new restaurants and exclusive retail offerings, like super-chic Royal Poinciana Plaza (on Royal Poinciana Way) with its new international shops like Rani Arabella and Cremieux, and the ongoing mixed-use project across the street, which will be created out of the demolished Testa’s restaurant. The Breakers Palm Beach Company bought the ground floor to open a restaurant and handle retail leasing; the Frisbie Group plans to design and sell the second floor condominiums.

And for those who want to live on the ocean yet be a few minutes away from Palm Beach, Manalapan, a beautiful oceanfront town where the median listing price is just under $9 million for a single family home, is a close enough drive for a chic dinner, but out of range of Trump traffic and seasonal congestion.

Young couples with children who are downsizing from their parents Palm Beach mansions, as well as couples or families relocating from the Northeast, Chicago or internationally are seeking new construction in single-family homes or condominiums. They are buying both on the island and over the bridge in West Palm Beach, which has raised its profile in the past couple of years.

On the island, 3550 South Ocean is the first luxury oceanfront residential building created during the past decade. The light and airy 30-unit building is a gem. It is being developed by DDG with interiors by Champalimaud, the design firm that created the bungalows at the Beverly Hills Hotel, the Little Nell in Aspen and the Pierre in New York. Two- and three-bedroom residences (2,700 – 3,000 square feet) start at around $1,875,000. With stellar amenities, an oceanfront saltwater pool and private beach access, this residence bespeaks the new Palm Beach.

“This is a super building that goes along with what is happening in Palm Beach,” says Christopher Leavitt, a top broker with Douglas Elliman. “Hedge funds are moving here because Palm Beach is evolving in a tasteful and elegant way. It is a small, isolated nucleus, and there is a demand for it. New Yorkers want to be here.” Florida often comes to mind when successful people look to move to a state with lower taxes. Florida does not collect an individual income tax and also offers many asset protection benefits.

Increasing local taxes in the Northeast has made Florida, especially West Palm Beach with its stunning waterfront, an attractive place for companies to relocate because there is no state income tax. Plus, about 10 years ago, West Palm Beach developed a master plan designed to attract specific industries to work together with the Business Development Board of Palm Beach County.

“West Palm Beach is now seeing growth in residential and commercial real estate markets from this plan,” says Leslie M. Holvey, a Palm Beach realtor associate with the Fite Group, and marketing director for the Aquantis Group.

One of the biggest success stories highlighting the growing prestige of West Palm Beach is the Bristol, the first uber-luxury, high-rise, residential condominium ($5 million – $40 million per unit), which is already about 80 percent sold out. And many of the buyers come from Palm Beach, where the sales office is located.

Developed by Al Adelson and partner Flagler Investors LLC, the Bristol, with flow-through residences and great views of the Intracoastal, is the most expensive condominium ever built in Palm Beach County. (The average size of a unit here is about 4,500 square feet and goes for a cool $10 million.)

Right over the Royal Park Bridge (middle bridge) from Palm Beach, the 25-story waterfront building, which should be completed by the end of 2018, is another sign of the changing West Palm Beach demographic. “People now want luxury vertical living safe from hurricanes,” observes Jay Parker, CEO of Florida Brokerage for Douglas Elliman. Most buyers come from Palm Beach and other major U.S. metropolitan markets.

From Old Guard couples, to retirees, empty nesters, snowbirds, and professional singles, these buyers want to spend more time traveling and have less need for a five- or six-bedroom home. They see there is no residential location in Palm Beach that offers the safety, lifestyle and five-star amenities of the Bristol, which will function like a fine hotel.

Other West Palm Beach Intracoastal areas are seeing a boom in single family home renovations and sales. Around the Bristol in the neighborhoods of El Cid, Prospect Park and So-So (South of Southern Boulevard), many homes have increased in value by 20 to 25 percent in the past year, realtors say. These areas are attracting younger buyers, especially Europeans, Northerners, financial services company personnel and Palm Beachers with families who want change and convenience.

“If you have one child playing football and another in dance class, it takes too long to get to West Palm if you live on the north end of Palm Beach,” says realtor Holvey. “These families are leaving the island for the lovely Intracoastal West Palm Beach neighborhoods. They need the space of a house but want convenience and practicality.”

Aquantis Group, a West Palm Beach developer headed by Steve Bendat, a technology entrepreneur with projects in New York, Israel and Europe, has bought and re-created spec homes in these Intracoastal areas near downtown. They are being offered from $10 million to $15 million because the developer believes that the market is there.” Aquantis is introducing a premium level of luxury that has never been seen before in West Palm Beach,” says Bendat. “With so many financial service companies and hedge funds relocating to the area, the demand for new luxury waterfront homes is at an all-time high with virtually no letup in sight because of inventory restraints.”

In addition, West Palm Beach has enjoyed a complete infrastructure overhaul. The waterfront is beautifully preserved by limiting housing so all residents can enjoy the pristine beauty and the promenade for walking and cycling, which runs close to 12 miles, almost the entire length of the city. This path is fastidiously solid and immaculately clean, furnished at certain intervals with lovely landscaping, lighting and benches. It is soothing to take a simple walk along the Intracoastal, look up and see the beauty of Palm Beach unite with West Palm Beach like one blooming dream town.

“West Palm Beach has been a hidden jewel alongside Palm Beach for many years,” says Bill Newgent, real estate investor, activist and host of West Palm Beach’s influential City Voice podcast, one of the few who gives a nod to the proprietor of Mar-a-Lago. “Proximity to presidential power has piqued interest from those who didn’t know until now. Billions of dollars in development investments are coming out of the ground in West Palm Beach, which has been forward-thinking when it comes to working with developers while delivering for its residents. This is what will keep it special for generations.”

For example, Jeff Greene, the Palm Beach billionaire who owns an oceanfront mansion south of Mar-a-Lago, has invested heavily in West Palm Beach real estate, including office towers, apartment buildings and a namesake high school for potential students.

There are also regular downtown greenmarkets, new restaurants (many from Palm Beach chefs who have expanded over the bridge), well-designed rental buildings attracting millennials, and the elegant, new, 80,000-square-foot Restoration Hardware retail villa with a fourth-floor rooftop restaurant located across from CityPlace, the outdoor shopping, dining and entertainment destination.

It is entering a new phase, according to its owner. “I see the potential for art and culture to have transformative qualities, which is why it’s a focal point in our reimagination of CityPlace into a stimulating downtown urban district and one of the most important cultural hubs in the Southeast,” says Related Companies senior vice president Gopal Rajegowda.

This season, CityPlace is launching a series of public art installations in partnership with Culture Corps, an arts advisory service. It will feature artists Michael Craig-Martin, Stephen Vitiello, Frankie Cihi and others, which should transform the district, marked by the opening of Culture Lab, an immersive arts experience, in the former Macy’s department store space.

The area’s vibrant cultural scene has been a bonanza for growth with the Norton Museum of Art undergoing a $100 million expansion/renovation, the Kravis Center for the Performing Arts busy each day, Palm Beach Dramaworks’ live theater on Clematis Street packing in the educated denizens, and the Armory Art Center offering a variety of classes and activities.

“We have witnessed such a vibrancy in West Palm Beach that we decided to open a high-end real estate office in El Cid, near the Norton Museum,” says Ava Van de Water, broker/executive vice president of Brown Harris Stevens in Palm Beach.

“It wasn’t so many years ago that some Palm Beach real estate agents would joke that their cars didn’t know how to cross the bridge. Those days are definitely gone.”

With Palm Beach being a special island with no more land on which to build, many top-notch buyers, like Fortune 500 CEOs and other mega-successful entrepreneurs, who in the past would have thumbed their noses at West Palm Beach, are now buying there. And many long-term residents of Palm Beach are selling their homes, making killer profits, and relocating to West Palm Beach as a savvy business move.

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