🛫 Hangar Games

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Happy Saturday Highest & Best. Here’s today’s rundown of South Florida real estate news, including a property update in the aftermath of Hurricane Helene, which made landfall Thursday night in Florida’s Big Bend region:

🛬 Park the plane near your desk

😍 New Yorkers still loving Miami office buildings

🏝 An island vista with a walk to work

🌀 The damage of Helene

When Your Office Has a Hangar — and a Private Airport

There’s lots of perks you could want in a Florida office. Water views are nice. A restaurant or fitness room is cool too.

How about a personal hangar — and no-fuss access to a private airport?

This 20,000-square-foot office on the edge of Fort Lauderdale Executive Airport, with a four-plane hangar — and the rights to build another — sold this week for $25.2 million, according to brokerage Avison Young, which marketed the deal.

The buyer is Patrick Bet-David, the podcaster, entrepreneur, and minority owner of the New York Yankees, according to property filings listing an LLC registered to him. Bet-David, the Fort Lauderdale-based founder of Valutainment Media, said in an interview this year that he never flies commercial and spends a “couple of million” annually on private planes. Asked by his interviewer whether he owns a private jet, Bet-David said he’ll wait to buy one until he can secure a hangar.

Now he’s got that.

The two-parcel property, at 1200 and 1400 NW 62nd St., sits on the edge of the airport, and its owner gets “through the fence” access to the runway — meaning a plane parked there can get through the airport gate without additional fees, according to John Crotty, a principal at Avison Young in Miami, who led the sale of the site (along with Michael Fay, David Duckworth, Brian de la Fé and Philip Shapiro).

In addition to the office and the hangar, the 11-acre property includes a two-bedroom apartment, and, perhaps more enticingly, an extra parcel that can be used to generate income. The site’s zoning allows for the construction of another hangar or a warehouse — both very in-demand items in South Florida that tenants would pay up to lease, Crotty said in an interview.

“There’s a real shortage of hangar space for private jets’’ Crotty said. “So having the ability with the extra land to build hangars and maybe lease that out, that was appealing” to potential buyers.

It’s unclear what Bet-David’s plans are for the site. He did not respond to an email seeking comment.

For what it’s worth, this site also has a backstory: The property was previously owned by entities related to Daniel Hurt, who pleaded guilty to a Medicare fraud scheme in 2022. As part of a settlement with the U.S. government, Hurt’s assets, including his plane, his Porsche, his home, and this hangar property were ordered to be sold. The sale proceeds will be used towards a $27 million settlement, and $97 million restitution Hurt is mandated to pay.

⏪ Catch up on recent Highest & Best issues:

• Flip the Script!, Sept 20, 2024

• Rental Roller Coaster Ride, Sept. 14 2024

• Office Ditch, Mansion Switch, Sept. 7, 2024

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New Yorkers Still ❤ Florida Office Buildings

New York investors are still bullish on buying office buildings in Florida.

Amid a slowdown in corporate migration to the state— and in turn, a less frenzied demand for workspace — two high profile buyers have steeped themselves into Miami’s office market this week:

💰 Elliott Investment Management, the New York hedge fund of billionaire Paul Singer, is nearing a deal to acquire 701 Brickell— a tower smack dab in the center of Miami’s financial district — for approximately $450 million. That sale price is pretty close to the eye-popping $500 million that the property’s seller was seeking when it began marketing the 33-story building in April.

The seller, by the way, is New York-based Nuveen Real Estate, a subsidiary of the Teachers Insurance and Annuity Association of America (TIAA), a firm that manages retirement funds for educators. TIAA bought the property in 2002 for $172 million. So a sale at $450 million would more than double their return. Way to go, teachers! 🥳

Buying 701 Brickell offers Elliott, the hedge fund, a chance to collect some of Miami’s highest office rents. The average asking rates for Class A offices in the Brickell neighborhood were $99.40 per square foot in the second quarter — a 5.8% jump from a year earlier, according to brokerage CBRE.

💵 In Doral, a suburb of Miami, New York investor Island Capital Group, picked up an office complex at a sizable markdown.

The investment company paid $71 million this week for One Park Square, a three-acre site that includes an 11-story office building, according to property intel firm Vizzda. The purchase price reflects a 26% loss for the seller — the retirement fund for Los Angeles County public employees — which paid $96.1 million for the property back in 2017 😬

Suburban offices just aren’t faring as well as those in Miami’s most prime and central locations. The Doral area has among the lowest asking rents in Miami-Dade County, and the second-highest vacancy rate (22%), according to brokerage CBRE.

Island Capital, the new owner, has been buying up other big real estate at a discount. In 2022, the firm co-purchased the Sheraton Times Square — New York’s largest hotel by number of rooms — for $373 million. That sale price marked a $365 million loss for the seller.

Island Vibes….With a Walk to the Office

Buyers have placed nearly $1 billion in reservations for future luxury condos on Miami’s Brickell Key. Now they can get a closer look at their eventual digs.

The Residences at Mandarin Oriental, a two-tower development on an island just off Miami’s financial district, opened an on-the water sales pavilion this week, with replica kitchens and terraces and sample Miami skyline views from the site where condo prices begin at $4.9 million.

The project, by developer Swire Properties, is a grand finale of sorts for Brickell Key, a man-made triangular island made up of dredged materials. Swire acquired much of it in the late 1970’s and since then, has developed the area piecemeal, with condo towers each decade and a hotel. The last remaining lot is 5 acres, with perfect city views — an opportune blank slate at a time when corporate and wealth migration is remaking Miami into a global center of influence.

“It’s just really the best site, the one on the tip of the island and it's a sizable lot,” said Henry Bott, president of Swire Properties, on a walk-through of the condo sales office this week.

Swire is spending more than $1 billion to build two Mandarin Oriental-branded towers on the property, with eight swimming pools around and between them. The taller building will have 66 stories and 228 luxury condos, for which sales started quietly last year, and where the priciest — and potentially record-setting — unit is a 16,000-square foot penthouse seeking $100 million.

The second building will be a new, 121-room Mandarin Oriental hotel, on top of which there will be more for-sale condos. The new hotel will be Mandarin Oriental’s North American flagship property and replace the existing Mandarin Oriental (opened in 2000) which will be razed next year.

The island of Brickell Key sits across a walkable bridge to Miami’s Brickell neighborhood, which has become a magnet for financial and legal firms (and their well-heeled employees) seeking a foothold in Florida since the pandemic. The hedge fund Citadel and Banco Santander are separately building new office towers in the neighborhood.

“If you work in Brickell, particularly if you come down from the Northeast or anywhere else in the US, you can have this island living, the tranquility and separation of Brickell Key, but also be so close to the action of the the urban core,” Bott said.

Of the $1 billion-worth of non-binding reservations for a condo at the future Mandarin residences, nearly half has “converted” into binding contracts, Bott said.

But even the most eager buyers will have to a wait a bit. Construction on the project won’t start until 2026, and the earliest move-in will be at the end of 2029, Bott said.

“To see how many people are happy to put their money down and be patient for the right product— it’s really quite encouraging,” he said.

The Damage of Helene

Hurricane Helene, the most powerful storm to ever hit Florida’s Big Bend, made landfall Thursday evening as a Category 4 storm, with 140 mph maximum sustained winds. It left a death toll of over 50 people across the US South and billions in property damage.

Insured losses from Hurricane Helene will reach at least $5 billion, surpassing the losses of Hurricane Idalia in 2023, according to a report by insurance credit rating agency AM Best. It could also throw a wrench into Florida’s property insurance market, which has been showing signs of price stability.

In Florida, the storm will be a major test for new insurance companies that cropped up in the past year to assume policies from Citizens Property Insurance Corp, the government-backed insurer of last resort. Citizens has been offloading a chunk of its policies to private firms, whittling 275,000 in 2023. This year, Florida regulators approved at least 13 private companies to assume another 354,000 policies from Citizens.

“This could be a stress test for the newly formed takeout companies that are thinly capitalized,” AM Best wrote.

Flood losses from Helene may also decrease the the appetite of private carriers to provide flood coverage in the Florida market, according to AM Best. Development along Florida’s coasts has made the state a riskier — and costlier —bet for insurers.

Here’s a link to AM Best’s full report on insurer losses from Helene.

That’s it for today!

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