🌊 Go With the Flow?

In partnership with

Happy Sunday Highest & Best! Today we’re talking twists, tweaks and tracks. Here’s the rundown:

🌊 A new “Flow” for this rental building

😍 Billionaires love Florida hotels

🚆 Brightline’s dim quarter

Let’s get to it!

Rental Glut Backup Plan: Make More Condos?

‘Flow’ — the apartment startup by WeWork co-founder Adam Neumann— is streaming in a new direction.

The company announced a major change of plans last week for its under-construction rental tower in Downtown Miami: instead of leasing out 466 units at the project called Flow House, it will sell them as condos.

Neumann, a billionaire prone to feel-good buzzwords, said he’d like to bring “a sense of belonging” to “anyone looking for a better experience from their permanent residence.”

🧐 But there’s a larger market force at play: Miami is awash in new rental units. And that oversupply is pushing down rents — which makes apartment construction a much riskier bet for today’s developers.

😮 By the end of this year, a record 23,863 new rental units will have been added in South Florida. That's nearly 10,000 more than the previous record set in 2021.

🫠 Miami’s rents are already falling. They were down 6.7% in August, according to the Miami Association of Realtors.

“That’s enough to change the attitude of the business plan,” Craig Studnicky,
CEO of brokerage ISG World, said in a recent interview— before Flow changed its plans from rentals to condo.

“A lot of these multifamily projects that were underwritten in 2020 and 2021 when rents were soaring —now they don’t work out as well,” he said.

Combine falling rents with the rising costs of construction and high borrowing rates, and it’s only a matter of time before more of South Florida’s new and planned rentals make an about-face to become condos, Studnicky said.

⏰ “I see that as a 2025 trend,” he said.

In fact, Studnicky — whose firm markets new condos — says apartment developers are already calling his office for advice on making the switch.

“They usually say ‘We’ve got this piece of land, we’ve got an architectural plan, we’re under construction, but we realize that rents are not what we thought they would be,’” Studnicky said. “That’s how the conversation starts. And within five minutes we’re in deep.“

 🔀 Studnicky’s firm is marketing condos at two South Florida properties that started out as rentals: Circ Residences, a 25-story tower in Hollywood that was completed and leased to tenants in 2019, but is now selling those apartments at prices ranging from $450,000 to $1.3 million.

Atlantica at Dania Beach is the other. An investment firm bought the just-built garden apartment community in June for $37 million, and promptly decided to sell the 124 units as condos rather than leasing them out. “Move-in ready” condos, ranging from 703 to 1,159 square feet, are listed for sale there starting at $500,000 according to the property website.

🌊 But back to Adam Neumann’s Flow House. The 40-story tower under construction at 697 North Miami Ave. is selling studio apartments starting at $450,000 and one-bedroom units starting at $600,000, according to a press release.

Amenities at the now-condo project, to be completed next year, include co-working office spaces, a podcast room, a dog run, a restaurant and meditation space. 🧘

⏪ Catch up on recent Highest & Best issues:

• Hangar Games, Sept 28, 2024

• Flip the Script!, Sept 20, 2024

• Rental Roller Coaster Ride, Sept. 14 2024

Your Florida News Source!

Join 100,000 Floridians who rely on Flyover Florida for their daily news fix! Our quick, concise updates make it easy to stay informed about local news, events, and stories that matter to you. In just a few minutes each morning, you’ll be up-to-date without the overwhelm. Discover the convenience of staying ahead with Flyover Florida, your essential source for all things Florida!

Subscribe with One Click HERE!

South Florida hotels are the new billionaire must-have accessory.

Several of the world’s wealthiest investors are homing in for a slice of the region’s most lavish retreats:

💰 An investment group led by Starwood Capital Group CEO (and billionaire) Barry Sternlicht got the go-ahead this week for its plans to overhaul the Standard Spa in Miami Beach and rebrand it as a “wellness-oriented oasis,” according to filings with the city.

The investors — which include Paypal co-founder Peter Thiel and former SoftBank Group COO Marcelo Claure (billionaires x2) — are seeking to raze and replace the hotel’s east wing with a five-story building containing 50 hotel rooms and six luxury condos on top. On the property’s west wing, 67 existing hotel rooms will be whittled down to 50 much grander units.

💰 British billionaires Simon and David Reuben are looking to buy a majority stake in the W South Beach for $400 million. They’re in advanced talks to do so with the current New York-based owners of the 395-room beachfront property.

💁‍♀️ Miami Beach has seen the biggest decline in hotel room rates within the Miami region. Room rates this year through August averaged $292.39, which is a 2% drop from the the same period in 2023, according to the Greater Miami Convention and Visitors Bureau. Occupancy, however, improved—to 74.4% (from 72.3% last year.)

💰 Oracle co-founder Larry Ellison —and now the world’s second-richest person— snapped up the Eau Palm Beach Resort & Spa in Palm Beach County’s exclusive town of Manalapan. He paid $277.4 million in August for the 8-acre oceanfront hotel, not far from the the personal estate he acquired for $173 million in 2022.

A MESSAGE FROM 1440 MEDIA

Daily News for Curious Minds

“I stopped watching the news, so sick of the bias. Was searching for an alternative that would just tell me WHAT happened, with NO editorializing. I found it. It’s called 1440. It assumes you are smart enough to form your own opinions.”

Sign up now!

Not So Brightline?

🫣 Brightline Trains Florida hit a bit of a speed bump, reporting a net loss of $420.5 million in the first half of 2024— due in part to the hefty costs of its expansion to Orlando.

In a financial update this month, the Miami-based company revealed that while more passengers hopped aboard and revenue was climbing, the Orlando launch came with some pricey baggage: Operating costs soared 128.7% year-over-year, jumping by $81.4 million to $144.7 million, the South Florida Business Journal reported.

On top of that, Brightline got hit with a $219.1 million charge for its early refinancing of debt in May—a move that should reduce interest costs in the long run, but didn’t do any favors for this quarter’s balance sheet. 🫠

That charge was part of a total $344.2 million in "other expenses" for the six months ending June 30, a whopping 747% increase from last year. That stew of “other expenses” also includes an $85 million jump in interest payments.

But here’s some upbeat stats:

🚆 Brightline ridership jumped by a healthy 46.5%, with 1.4 million passengers getting on board through Q2 2024—up from 956,120 last year.

🥳 The new Orlando route has been a big hit with the public, with 765,110 long-distance travelers taking the trip since it launched in September 2023.

⬇ Meanwhile, short-distance routes within South Florida carried 635,967 passengers, a 33.5% drop—likely because Brightline shifted its focus to the busier, more profitable Orlando trips.

That’s it for today!

Like what you’re reading? Send it to a friend.

Or send Highest & Best directly to your inbox by subscribing here: https://highest-and-best.beehiiv.com/subscribe