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The Phillips Point office complex, a longtime trophy property in West Palm Beach, is under contract to be sold to an affiliate of New York-based Related Cos., according to a top Related official.
The Class A complex at 777 S. Flagler Drive went up for sale last year and will trade for $282 million, a source close to the deal confirmed. Current owner AEW Capital Management bought the property for $245 million in 2015.
The Related affiliate buying Phillips Point is said to be personally owned in large part by Stephen Ross, Related’s chairman, three real estate sources told The Palm Beach Post. Ross also owns the Miami Dolphins.
In recent years, Related has been keen to build office space in West Palm Beach. The company built and then sold CityPlace Tower, an 18-story, 300,000-square-foot office tower.
Currently, Related is building 360 Rosemary, a 20-story, 300,000-square-foot office tower next to Rosemary Square.
And Related plans to start construction later this year on another office tower: One Flagler, a 25-story, 270,000-square-foot tower planned for Flagler Drive and Okeechobee Boulevard.
But the grand dame of the West Palm Beach office market is and always has been Phillips Point.
The Class A, twin-tower complex, built in 1985, has always housed the city’s top tenants. The property’s location — at Flagler Drive and Lakeview Avenue, just over the Royal Palm Bridge from Palm Beach — offers tenants water views amid luxury finishes.
Phillips Point features financial firms Morgan Stanley and Goldman Sachs. The complex also counts top law firms as tenants, including Greenberg Traurig, Gunster and Akerman, and Senterfitt & Eidson.
The Phillips Point purchase gives Ross dominance in the West Palm Beach office market as well as ownership of a longtime premier property, said Neil Merin, chairman of NAI/Merin Hunter Codman in West Palm Beach.
Merin said the acquisition “means Mr. Ross will be controlling the Class A space downtown, which will give some stability to pricing and could lead to an upward movement in rental rates.”
Merin added that Phillips Point has shown strong economic performance “and will do very well with the continued (movement) of financial service firms here.”
Thanks to the pandemic, coupled with high taxes in other states, a number of financial firms are looking for space in South Florida, particularly in Palm Beach County.
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“Anyone with money is fleeing New York and coming here,” said Guy Clark, an agent with Douglas Elliman Real Estate. “It’s a seller’s market like I’ve never experienced.”
Some of the migration is paired with job relocation, as Wall Street firms and hedge funds set up bases in the Sunshine State. Others are pandemic refugees looking to flee Covid hotspots or take advantage of Florida’s lack of a state income tax. And some are billionaires increasing their footprints, such as Steve Wynn’s purchase of an additional Palm Beach home for $18.4 million last month, or Robert F. Smith’s $48.2 million acquisition of two properties in North Palm Beach.
The Palm Beach County Clerk’s office recorded more than 20 home sales last year exceeding $20 million, compared with 10 in 2019, according to the Palm Beach Daily News. Early next month, a home on North Ocean Boulevard is scheduled to go on the market for $75 million, fully furnished by designer Sara McCann with everything from chaise lounges to frying pans.
Unlike the aftermath of the 2008 financial crisis, which brought a glut of supply and sharp price decreases, there’s now very little in the way of offerings to show potential buyers.
“We’ve gone from anxiety buying to there’s no inventory and what am I going do?” said Liza Pulitzer, senior associate at Brown Harris Stevens. “We’ve even had people buy an interim house when they couldn’t find a rental.”
As for changes in residency, Florida makes it easy to domicile, while New York has a high bar to let people depart. Lawyer Paul Comeau of Hodgson Russ expects plenty of tax audits by New York state for the pandemic year of 2020. New York also issued guidance that employees working remotely outside the state would still be on the hook for city taxes unless the employer has local offices.
“Every single showing this week we have there is from people up north or different states, either wanting to have a presence here, so they don’t have to commute back and forth, or wanting to get out and move their firm here,” Sheinberg said.
“The residential market is driving this,” LeBrun said.