😎 Happy Home Insurance Vibes

Happy Friday Highest & Best! Today we’re talking home Insurance— and condos built by face cream experts. Here’s the playlist:

🌞 Some sunshine for Florida’s troubled insurance market

💃 A fashion magazine that also builds condos

📉 Florida’s go-to condo lender has a bad week

Let’s get to it!

A Moment of “Optimism” for Florida Property Insurance?

“Optimistic” is not a word one hears often when describing Florida’s home insurance market.

🫠 Florida’s property insurance vibe is a tangled mess of the nation’s highest premiums, in a state prone to costly natural disasters, where several insurers have become insolvent, and others have simply left, stranding consumers with fewer options.

😲 Citizens Property Insurance Corp, the government-backed insurer of last resort, had the largest market share — about 15% — of any Florida insurer at the beginning of this year.

😎 Still, insurance credit rating agency AM Best published a report this week saying it is “cautiously optimistic” that Florida’s insurance woes are turning a corner.

Its outlook hangs on several points, chief among them is this: Florida-based insurers didn’t lose too much money last year. In fact, they nearly broke even, AM Best said in its report.

OK, yes, they got there because premiums doubled for the typical Florida homeowner over the last three years. And 2023’s hurricane season was relatively mild. Only one major hurricane made landfall—Idalia at Category 3—impacting a less-populated section of the state, AM Best said.

🥳 But there’s some man-made momentum for the insurance market too: New Florida laws that disincentivize lawsuits against insurers have cut carriers’ expenses significantly, AM Best said.

🥳 And Citizens — the government-backed insurer — has offloaded a chunk of its policies to private firms. In 2023, Citizens whittled over 275,000 policies, reducing its exposure by about $113 billion. This year, Florida regulators approved 13 private companies to assume another 354,000 policies from Citizens.

😎 At least eight Florida insurance companies have filed for rate decreases this year, the state Office of Insurance Regulation reported this month. Ten other insurers have not sought any increase in rates.

“While still too early to declare a win in the Florida personal property market, the signals look promising,” AM Best wrote.

🫣 Of course, all this could change with the weather: National Weather Service forecasters are predicting “above-normal hurricane activity” in the Atlantic basin this year. Their forecast suggests a range of 17 to 25 named storms, of which as many as 13 may become hurricanes.

Florida Insurers Operating Income/Loss 2014-23

⏪ Catch up on recent Highest & Best issues:

• Zeal of Fortune, May 24, 2024

• Broken Condo Blues, May 17, 2024

• Top-Shelf Tear Downs, May 10, 2024

Miami Condos for the Hair, Makeup and Fashion Set

Need a cream for your “turkey neck”? Elle magazine has suggestions.

Seeking “hair bonnets for a luxurious sleep”? Elle’s got those too.

Wanna buy a Miami condo that you can rent out on Airbnb? Yep, Elle again.

The fashion magazine and lifestyle brand announced this week that it plans to build a luxury condo tower in Miami’s Edgewater neighborhood.

The “Elle Residences Miami” will rise 25 stories and include 180 small condos ranging from 450 square feet to 845 square feet, the company said in a press release. Prices for the condos, which buyers can rent out on home-sharing platforms without restrictions, will start at $525,000.

It’s the latest— and honestly, most baffling— in a string of branded condos proposed for Miami’s skyline, hoping to cash in on pre-existing consumer loyalty. The Aston Martin Residences (nearly sold out) saw buyers start moving in this month, while the Bentley Residences (which lets you take your car in the elevator) broke ground in February. One New York developer has plans for both a 67-story Mercedes-Benz Places and a 90-story Dolce & Gabbana condo-hotel.

Anyway, this isn’t Elle’s first brush with real estate. The magazine company has lent its name to hotels in Paris and Amsterdam and has licensed its brand to cafes and beauty salons.

Elle’s planned Miami condo “will be an extension of the experience of the magazine,” which offers support to “millions of women all over the world, in all areas of their daily lives and in their desires,” the press statement said.

That’s a lot to expect of a one-bedroom condo unit.

Elle Residences, at 3618 NE Fifth Ave., will be co-developed by Vertical Developments and Urban Network Capital Group.

This Miami Condo-Loving Bank Had a Rough Week

Bank OZK, the Arkansas lender that’s bullish on financing Miami condo towers, saw its stock price fall hard this week after a Wall Street analyst downgraded the rating on its shares from a “Buy” to a “Sell.”

The downgrade, by Citigroup analyst Benjamin Gerlinger, was NOT based on concerns about the bank’s Florida property loans.

🤦‍♂️ But Bank OZK — which lent over $1 billion to South Florida-based developments within the last 6 months — was the largest construction lender in the U.S. last year by far, with over $3 billion worth of loans, according to MSCI. Its banking competitors lent about half as much. And that’s probably prompting investors to sit up and take a closer look at the bank’s assets— and its future financings.

“The company has had its name associated with skyline-altering commercial development projects, with minimal total loss content,” Gerlinger wrote in his the note to clients this week. “However, we have newfound, but substantial concerns” about two construction loans, including the bank’s largest: a $915 million financing of a research and laboratory complex in San Diego.

Interest in leasing space at the San Diego project is lackluster, the analyst noted, saying the location had been rejected numerous times by sizeable pharmaceutical companies, Seeking Alpha reported. Gerlinger slashed his price target for Bank OZK to $37 from $57.

Shares of Bank OZK fell 14% on Wednesday, the most since March 2020, following the the downgrade, Bloomberg reported.

🌴 In South Florida, Bank OZK loans are enabling a robust pipeline of luxury condo projects. It’s sent:

$239 million to Vita at Grove Isle, an “ultra-luxe” Miami condo development on a 20-acre private island; $259 million to a Ritz-Carlton branded condo tower in Pompano Beach; and  $328 million to Baccarat Residences in Miami’s Brickell neighborhood.

That’s it for today!

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