Real Estate
Florida's Strong Real Estate Story Needs Expert Guidance

FWR talks to a real estate investment and development specialist that has recently rolled out a fund in Europe and is broadening its international appeal so that more investors can capture the Florida story. The state's boom has not been without risks, however.
Wealth management firms have moved staff to Florida, set up
businesses there and courted the Sunshine State’s cohort of high
net worth clients. An absence of a state income tax and a
perceived business-friendly culture seem to work.
Of course, Florida’s growth carries a price – its rich wetlands
are important habitats which have been endangered in the past by
clumsy development. Cities such as Miami haven’t always shared in
prosperity and crime and deprivation remain problems. But it’s
been hard to ignore the positive noises coming out of the US
Southeast in recent years. And real estate reflects that.
According to the All-Transactions House Price Index for Florida,
the index has, as at the end of September 2022, risen almost 46
per cent from five years ago (source: St Louise Federal Reserve).
For the whole of the US, the index rose 36 per cent over that
period.
Riding the Florida real estate escalator might seem a cinch,
but it’s anything but – not least because of the risk of
over-confidence that the trend is going to endure without a
problem. There’s no substitute for expertise built from working
in the area.
So argues Bernard Wasserman, president of real estate investment
advisory firm Participant
Capital, a firm founded in 2011 with more than $210 million
of assets under management. Participant Capital provides
registered investment advisors and their clients with direct
access to a range of multi-family and mixed-use development
projects in Florida and Puerto Rico.
“Overall, I think that key Florida metros are well positioned to
continue to attract stable individual and corporate migration,
creating a medium- to long-term opportunity in Florida real
estate. Private real estate is best positioned to capitalize on
this and being less reactive to short-term shocks they can dampen
near-term portfolio volatility,” Wasserman told Family Wealth
Report.
The firm operates as the investment advisory arm of a
well-established Miami development firm, Royal Palm Companies
(RPC). RPC has been a fixture in the South Florida market for
40-plus years building multi-family, residential and mixed use
low to high-rise units in South and Central Florida. Participant
Capital was created by RPC’s founder, Dan Kodsi, to provide high
net worth investors with access to their ground-up
developments.
“We believe growth in this market will continue to be strong for
the foreseeable future,” Wasserman continued. “There are two key
factors pushing demand – shortage of housing coupled with
significant and persistent migration. The shift to remote work
has provided people with greater freedom and flexibility, and
they’re choosing to move to Florida, where they can enjoy a
higher quality of life, along with a much lower tax burden, the
latter of which allows them to scale up.”
“Even though South Florida, Tampa and other markets are in high
demand, wealthy buyers can afford to spend more as compared to
higher-tax states in the Northeast and California, where
out-migration is occurring. In addition to remote work, we’re
seeing many large businesses such as Goldman Sachs, Blackstone,
Uber, Spotify and Microsoft relocate a portion of their
operations to Florida. These employers bring high-paying jobs,
creating a multiplier effect of rising employment across the
local economy while also boosting the median household income,”
he said.
Wasserman said Participant Capital is expanding rapidly, with a
focus on the Latin American community. Latin American investors,
who are familiar with RPC’s luxury Miami developments, were
the first to invest in Participant’s Cayman fund, he said.
European play
Recently, Participant launched a Luxembourg RAIF (Reserved
Alternative Investment Fund), with an initial offering of an
open-ended fund that is targeting European investors in
Switzerland, Scandinavia, Spain and the UK. The five-year plan is
to raise half a billion (dollars).
Participant Capital’s funds provide investors with access to
RPC’s developments, including large-scale highly amenitized
residential buildings such as the Paramount Miami Worldcenter,
and mixed-use projects that combine residential, hospitality and
wellness amenities such as Legacy Hotel + Residencies. Both are
in the Miami Worldcenter.
In 2023, Participant will launch a multi-family focused fund,
Wasserman said. The firm is aiming to raise more than $200
million for this private closed-end vehicle which will focus
primarily on multi-family development opportunities in Florida.
The fund’s investment strategy will focus on low rise
developments in suburban growth markets such as Orlando and
Tampa, and high-rise opportunities in urban centers around Miami
like Aventura.
Retirees
Florida’s reputation – well deserved in the past – as one where
retirees drove markets no longer holds, said Wasserman.
“The work-from-home trend, accelerated by the pandemic, and the
move by US corporations to Florida from other, more highly taxed
states, is driving demand. They are attracted by Florida’s
business-friendly environment, low taxation, and better quality
of life,” he said. “There continues to be a stable flow of
migration.”
A differentiator for the firm as an investment advisor of private
equity real estate funds is its focus on development and
affiliation with an experienced development company, he said.
“In development, there are bound to be surprises which is why you
really should work with experienced developers with local market
expertise. Not all markets will outperform in 2023. This is not a
market where a rising tide lifts all boats.”
The journey so far
After its founding 11 years ago, by 2015, Participant Capital was
reinvesting its managed capital alongside institutional real
estate investors in large-scale real estate developments. In 2017
it started to set up domestic and international private real
estate funds for individual investors and created Participant
Capital Advisors, a registered investment advisor in 2017.
Among examples of its investments is its status as the principal
investor in Legacy Hotel + Residences, a luxury hotel and
residential tower with 310 branded residences sitting above a
219-room hotel in downtown Miami. In 2021, this RPC-led project
received the third largest construction loan in Florida history –
a $340 million loan from Silverstein Capital Partners.
Other projects include Dania Beach – a 487,000-square-foot rental
building in Fort Lauderdale – now under construction, that will
feature 293 luxury units and parking garage; and Grand Reserve –
a 2.2 million-square-foot, master-planned, mixed-use resort
development in Puerto Rico. Now in the planning phases, Grand
Reserve is the largest US oceanfront resort destination in the
Caribbean, sitting on an entire peninsula, Participant
said.
Wasserman said that while generalization is hard, it targets net
limited partner returns in its upcoming multi-family fund of
between 18 and 22 per cent.
Beware hubris
“After a period of rapid substantial valuation and rent growth,
there can be an expectation that after the volatility subsides,
the rapid appreciation will resume. This kind of hubris can lead
some investors to ignore the fundamentals,” Wasserman said.
“As we leave a period of historically low interest rates, there
won’t be a rising tide of inexpensive capital lifting all boats.
Investors will need to be more selective both in property type
and location. It’s back to supply, demand and cost of capital
fundamentals. Not all projects will makes sense.”
Wealth magnet
A number of wealth management firms are expanding in Florida to
ride the wealth story: Goldman Sachs, which has added hires in
its private wealth management business; Rockefeller Capital
Management, which has made a raft of hires; Evercore Wealth
Management has opened a new office in Palm Beach; Landsberg
Bennett Private Wealth Management launched as in independent
Registered Investment Advisor in Punta Gorda in 2019; and Boston
Private (now part of Silicon Valley Bank) appointed advisors as
part of its work with a Florida-based firm. In 2019, the personal
finance website WalletHub listed Florida as one of the states
with the highest return on investment in terms of its tax burden
and provision of public services.
In 2020, the three grandsons of Adi Dassler, founder of sports and apparel brand Adidas, created a Florida-based multi-family office. In March this year, Pitcairn, the family office, appointed former Abbot Downing senior figure Jay Goetschius as managing director and head of Florida as the business focuses on developing in the Sunshine State.