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Some of Florida’s most prominent names gathered at an oceanfront Palm Beach mansion this month to raise money for a tantalizing prospect: building a local outpost of Nashville’s Vanderbilt University, an institution that would add educational prestige to an area booming with newcomers.
The guest list was a who’s who of state politics and finance, including Gov. Ron DeSantis and activist investor Nelson Peltz, according to people familiar with the matter. The host and owner of the 1930s estate, the billionaire real estate developer Stephen Ross, loomed above it all.
The Related Cos. founder, best known as the mastermind behind Hudson Yards, had no prior affiliation with Vanderbilt. He was a relatively new resident of the Sunshine State, having spent the bulk of his career in Manhattan. Yet bringing a renowned university to nearby West Palm Beach would be a key piece to one of his most ambitious bets yet.
In what’s likely to be the capstone to his career, the 83-year-old Ross is going all-in on West Palm — and south Florida — as a new power center. After joining the mass of New Yorkers who moved south during the Covid-19 pandemic to embrace the state’s sunny climate and low taxes, he’s reshaping the city with shiny new towers, while also trying to transform the entire region.
The meticulously landscaped, palm tree-lined streets of West Palm’s downtown already reflect his dominance. Related has amassed almost half of the office stock. A new 20-story glass-and-terracotta building houses the likes of Goldman Sachs Group and Steve Cohen’s Point72 Asset Management, fresh arrivals to the block. Soon, an even taller waterfront tower is opening with office rents rivaling those at top Manhattan skyscrapers. Further south is a condo development with units starting at $7.5 million in a city once meant for the working class who served Palm Beach’s wealthy.
A pedestrian- and outdoor-friendly environment, along with the nearby Brightline high-speed rail stop, makes for an airy, only-in-Florida feeling for Northeast transplants. If all goes to plan, Related will soon build a 20-story convention center hotel. Ross wants to bring health-care facilities and primary schools, along with the proposed Vanderbilt graduate campus for business and computing students.
“This is just the start of something, and creating something that will be much, much bigger than people can envision today,” Ross says from Related’s headquarters in New York, where he spends far less of his time these days. “I want to make West Palm a model city for the country.”
The pandemic exodus of wealth from New York and other major cities lifted few regions more than south Florida. Miami, the state’s cultural and economic center, has been booming thanks to an inflow of tech and crypto companies and the arrival of financier Ken Griffin, who’s poured millions into real estate and local politics. But for all the focus on the Citadel founder, Ross is arguably the billionaire reshaping the region at the most frenetic pace with his efforts about 70 miles to the north.
Ross, with an estimated fortune of $13.9 billion, according to the Bloomberg Billionaires Index, has spent much of his life fixated on overhauling entire neighborhoods, building carefully curated, mixed-use developments where affluent people can live, work and play. He sees West Palm as something bigger: a chance to build a thriving community and finance hub.
That involves a myriad of challenges outside his traditional realm of expertise, some of which stretch far beyond what money can solve.
The south Florida migration boom has tapered, and Palm Beach County lacks the infrastructure needed to sustain a new flood of workers. Some companies have had a hard time enticing young talent to relocate. While high-level managers might be able to afford multimillion-dollar homes in the area, the options are far more limited for midcareer workers who are relocating with families. New York finance workers are having trouble finding public and private schools that suit them. And the joke among locals was that if you got sick, you’re better off getting on a plane than going to a nearby hospital.
“It’s very hard to change a social system — it’s much easier to change a physical system,” says Mitchell Moss, a professor of urban policy and planning at New York University. “You can’t change a culture by bringing in institutions. They have to be grown and nurtured over time.”
But to Ross, who founded Related five decades ago and built it into a property giant with a $60 billion portfolio, West Palm could be one of the most attractive communities in the country.
“This is more like city-building, and it’s complex and challenging,” he says. “And I still love a challenge.”
Ross has roots in south Florida that date back to high school. Born in Detroit, he came from a modest upbringing with a homemaker mother and a father who was an inventor who never found success. He’s cited his uncle, Max Fisher, the Detroit oil magnate and philanthropist, as a business role model.
The family moved to Miami Beach when Ross was a teenager to help manage a hotel. As Ross went on to create Related, first as an affordable-housing developer in New York, he kept his Florida ties. He’s owned a Palm Beach home for several decades, and controls the National Football League’s Miami Dolphins.
It wasn’t until the pandemic that Ross officially relocated, seeing the potential of a “gold rush” in West Palm. Richer Palm Beach had long overshadowed its western neighbor just across the waterway, home to multimillion-dollar estates owned by billionaires such as Griffin, Paul Tudor Jones and Stephen Schwarzman — not to mention former President Donald Trump.
West Palm, by contrast, is more urban and less affluent, historically drawing retirees and snowbirds. Much of the downtown was undeveloped until Related first came to the area in the 1990s with a mixed-use project known as CityPlace, which had its own struggles and fell into distress after the global financial crisis. Even now, as luxury condos rise and New York staples such as Harry’s arrive to serve the new class of power brokers, midscale chains such as the Cheesecake Factory and a Publix grocery store sit on nearby blocks.
Major finance firms, attracted to Florida’s low taxes, followed New Yorkers fleeing to the area during the pandemic. Palm Beach County had a $7 billion net gain in adjusted gross income from 2020 to 2021, the most in the U.S., according to the Washington-based Economic Innovation Group. Manhattan’s home of New York County had $16.5 billion of outflows, the biggest loss.
Related was already planning a $550 million investment to transform CityPlace. But Ross noticed that an ultra-luxury condo tower called the Bristol, opened in 2019, quickly sold out. His offices at 360 Rosemary, which was also planned prior to Covid, started to fill at strong rents. “All of a sudden, when I saw what was happening with Covid and saw how they were renting, I said, ‘There’s a real opportunity here,’” he says. “We seized the moment.”
It was an opportune time for a move. Ross had stepped aside as chief executive of Related in 2012 and is now chairman, with CEO Jeff Blau and President Bruce Beal largely running day-to-day operations. But the founder still has his corner office on the 73rd floor of Related’s 30 Hudson Yards headquarters, with walls adorned with awards and personal photos, while two guitars sit in the corner — one with Miami Dolphins labeling. Unhung pictures, including a frame with a “Ross #1” jersey, sit on the floor nearby.
As with Palm Beach, Ross saw Hudson Yards as a legacy-making project; he still has a picture of the complex on his phone case. The $25 billion development — the most expensive mixed-use private project in American history — essentially created an office district on Manhattan’s far west side. It was the result of more than a decade of at times fraught development transforming a once gritty stretch of railroad tracks into offices, condos and a high-end mall. Ross says it was a live-work-play project at a scale “unknown to mankind.”
Hudson Yards is generally viewed as a huge success commercially, having lured tenants including KKR, BlackRock and Meta Platforms. But some New Yorkers say it’s designed to appeal to the richest residents and tourists. The second phase of the development is up in the air. Related had initially pitched mostly housing in the area, but sales of the condos in their first phase were slower than expected, and building offices is now a risky bet. The latest plan involves competing against a handful of developers for one of three casino licenses in downstate New York.
Ross, though, has moved on from his signature project, saying he’s “left it largely to Jeff.” He acknowledges that New York will always remain a hot spot for young talent drawn to the city. But he’s quick to praise Florida’s lack of state income tax, business-friendly politicians and ease of living.
In a challenge for attracting some New Yorkers, Florida has shifted sharply into conservative politics and its policies toward education, LGBTQ+ rights and abortion have drawn criticism from some parts of corporate America. Ross supported Trump in 2016 and hosted a fundraiser for him in 2019 with tickets costing as much as $250,000, but has since distanced himself from the former president. He says that the political dynamics of Florida are “excellent” and that DeSantis is doing a great job as governor.
“It’s very attractive for people to relocate,” Ross says. “You don’t have to be in the Northeast and pay the taxes and put up with the environment.”
Ross has tried expanding in Miami since the pandemic as well, but with more rocky results. Related and partner Swire Properties pitched what would’ve been one of the tallest office towers in the state. But they have yet to sign a major tenant, and the development is now stalled. A Related spokesperson said the firm is still actively working on the project and is in talks with a number of potential tenants. Ross also dropped plans for a Frank Gehry-designed hotel and luxury residences in Miami Beach after voters rejected the zoning changes he requested.
Related’s head of Miami, Jordan Bargas, has relocated to West Palm. If Miami is Florida’s Manhattan, Ross likens West Palm to Greenwich, Connecticut, the tony suburb that’s home to hedge funds and wealthy finance workers.
As of the first quarter, Related was building nearly two-thirds of the roughly 334,000 square feet of offices under development in downtown West Palm, according to brokerage firm Avison Young. The scale is tiny by New York standards — the Empire State Building alone has about 2.8 million square feet — but massive for the Florida city, which has only about 3.3 million square feet of existing space downtown.
“We could not have imagined that Goldman Sachs would be signing a lease to be in West Palm Beach — that was beyond the realm of possibilities prepandemic,” says Mayor Keith James, who took office in 2019. “Steve Ross is a tremendous visionary, and he could see things that others cannot.”
Related’s latest office project, One Flagler, has landed tenants including HighPost Capital and a firm tied to billionaire John Paulson. The developer is in talks to open a location of Eataly, the Italian food marketplace, in West Palm, according to a person with knowledge of the plans. Spokespeople for Related and Eataly declined to comment.
Other developers are following with their own Manhattan-like offerings. Richard Born, one of New York’s biggest hotel owners, is investing in Nora, a 40-acre mixed-use development just north of Related’s Square, with leases signed by foodie favorites Van Leeuwen Ice Cream and H&H Bagels.
Florida’s Related Group, which is owned by one of Ross’ best friends, longtime business partner Jorge Pérez, is planning a Ritz-Carlton-branded condo development. (Ross was part owner of Related Group until 2021, when he sold his stake to Pérez’s family, a move that allows Ross to pursue projects across the region more freely.)
“To attract the high-end companies that bring in high-paying jobs we have to provide a complete lifestyle to the workers of those companies,” Pérez says.
The Florida boom, though is showing signs of petering out. The sharp rise in interest rates has sent the US commercial real estate market into turmoil and increased the cost of financing projects. The state, one of the most vulnerable to climate change, is struggling with soaring property insurance. Rents for Ross’ West Palm office towers remain some of the highest in the country because of the dearth of high-end supply. Without the social infrastructure in place to attract high-finance firms, it may be hard to fill those buildings too.
Brian Carr, co-founder and managing partner at HighBrook Investors, opened an office at Ross’ 360 Rosemary after living in Florida during Covid lockdowns. “It made a lot of sense from a business standpoint,” he says.
Carr says the building is full most days, but the West Palm migration frenzy has faded. “The people that had moved down there due to Covid are already there, and I don’t see more people moving down now,” he says. “It’s not as affordable as it used to be, and there are other, more appealing places in the Southeast that they’re moving to now.”
Ross has been spearheading efforts to develop more amenities that appeal to affluent newcomers. Throughout the area, golf clubs nearby were full, so the billionaire made his first foray into the business by building a private three-championship-course club in Hobe Sound, just off Interstate 95 by Jupiter Island. He’s exploring options for hospitals, including bringing a Cleveland Clinic to the area, according to a person familiar with the matter.
Space is limited at schools such as Palm Beach Day Academy, where the highest tuition approaches $40,000 a year, and there are few other options for Northeasterners used to an array of elite institutions. Related and Frisbie Group, a local developer, have hired staff to better understand the business of education, but it’s been a challenging process, even with a slew of wealthy donors willing to provide generous gifts to make the deals happen. Pine Crest, a top private school with campuses in Boca Raton and Fort Lauderdale, was exploring a West Palm location but isn’t currently moving forward, a person with knowledge of the situation said.
“This stuff is incredibly complicated and difficult to get to the finish line,” says Cody Crowell, a partner at Frisbie Group, who’s also working with Ross on the Vanderbilt effort. “We have great sites, but we don’t have great schools yet.”
Still, he points to West Palm Beach’s small size as an advantage for young professionals such as himself: “In other places in the country, you don’t have access and ability to coordinate and collaborate with individuals such as Steve Ross,” he says.
Ross has been helped by a welcoming West Palm Beach government that’s a contrast to the more closed-off Palm Beach, which is closely guarded by its entrenched elite. Andrew Dance, who’s developing an office building in West Palm and previously worked at Related for 16 years, says Ross understands how to work with local officials to get things done quickly.
“We’re very lucky to have developers and folks who are investing in our city and our community on a larger level,” says Christina Lambert, a city commissioner. Still, she pointed to needs such as more affordable housing, calling the current supply “a drop in the bucket.”
Bringing in a university would be one of the most complex negotiations yet. While Palm Beach County has boomed, the knock on the area has been that it doesn’t have a Stanford or Harvard nearby to create a homegrown pipeline of highly educated workers. The Vanderbilt plan calls for the school to build mainly on vacant public land controlled by the city and county, where the University of Florida already tried and failed to develop a campus. Crowell, an alumnus, says he approached Ross with the idea of bringing his alma mater to West Palm instead.
Ross’ private event this month featured Vanderbilt Chancellor Daniel Diermeier, who was in town meeting with city officials and potential donors. Supporters have committed nearly a third of the fundraising goal of at least $300 million, contingent on certain conditions such as securing the land. Crowell says more fundraisers are planned this summer in places such as Nantucket, Aspen and the Hamptons, areas flush with the kinds of power players who can feed into Ross’ dreams of building a Wall Street South.
“The time is ripe to be doing something,” Ross says. “And, you know, I can’t help myself.”
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Natalie Wong, Bloomberg , 2024-04-30 12:03:04
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