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.
“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.”
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.