Most South Florida octogenarians plan to wind down in the region long known as a playground for retirees.
Not Steve Ross.
The 84-year-old Ross, who founded Related Companies 52 years ago, carved out its Southeast U.S. division this summer into Related Ross, which Ross leads as chairman and CEO. The firm’s primary focus: West Palm Beach, where Related Ross is the biggest Class A office landlord and is developing various projects.
“It’s a canvas. No matter what Steven [Ross] and I have done over all these years, we have never had a canvas that reaches this broad and this far,” Kenneth Himmel, formerly of Related Companies and now president of Related Ross, said at the Urban Land Institute West Palm Beach Forum on Thursday.
Himmel spoke on the panel “From ground up: A model city for the United States,” along with Thomas Steenburgh, professor of marketing at Vanderbilt University. The Nashville-based college plans a $520 million graduate school campus in West Palm Beach. Palm Beach County commissioners last month approved giving the university the 5-acre development site.
Himmel headlined the panel instead of Ross, who originally was slated as the speaker.
As a whole, Related Ross’ West Palm portfolio spans over a dozen office and residential buildings, including those purchased, under construction, completed and planned. It also has multiple retail holdings, including the CityPlace mixed-use complex that Related Companies developed in 2000.
In 2020, when Ross, at the time with Related Companies, was developing the 20-story 360 Rosemary office building, questions arose about the project’s viability in light of the pandemic and remote work shift. Instead of pulling back, he made an even bigger wager on West Palm.
“We doubled and tripled and quadrupled down. And it became pretty clear that the time we split between New York and especially West Palm Beach and Palm Beach County was leaning so much toward Palm Beach County,” Himmel said. “We decided to come down here and really do something in the last stages of our career.”
So far, preleasing is at about 65 percent to 70 percent at one of Related Ross’ pair of 500,000-square-foot office buildings planned to replace a movie theater and restaurant at CityPlace, Himmel said, adding that a medical technology company is among prospective tenants. Construction of the first building is expected to start in March, and a year later at the second building.
Equinox leased 35,000 square feet at 575 Rosemary, also home to Related Ross’ recently completed 21-story The Laurel apartment tower. Other retail leases at 575 Rosemary include a yoga studio, Crate & Barrel and Moxies restaurant, Himmel revealed at the panel.
Over 80 percent of The Laurel’s 322 units were rented out in the past six months at roughly $5.75 per square foot, more than the expected $4.50 to $4.75 a square foot, he added. Roughly half the tenants are from out of state.
The 25-story One Flagler office tower under construction at the foot of the Royal Park Bridge is nearly 85 percent preleased, with net rents averaging over $100 per square foot and reaching up to $140 a foot, Himmel said.
Generally, South Florida has come off the high point it reached in the past four years that resulted in record rents. This year, elevated interest rates, skyrocketing insurance and a slowdown of the influx of out-of-state residents and companies have calmed rent growth and put into question the viability of new projects.
But none of that came up during the panel.
“We can’t keep growing at this scale, going after all the same 5, 10, 15, 20,000-square-foot tenants. We need some 50, 100 and 200,000-square-foot tenants,” Himmel said, drawing a comparison between West Palm and the early years of Silicon Valley.
In Silicon Valley, “it was the money and the technology and innovation at that time that created that kind of fertile ground,” he said. “We have the basics for this right now thanks to Vanderbilt.”
The school potentially could develop its real estate program at its West Palm campus, Steenburgh said.
“This is not just a business school opportunity,” he said, adding that the business world is changing. “Finance is great on its own. It’s even better when coupled with data science.”
Ross started scaling down his role at Related Companies in 2012, when he stepped down as the firm’s CEO. He remains non-executive chairman.
Elsewhere in South Florida, Related Ross is partnering with Swire on the planned One Brickell City Centre office supertall in Miami’s Brickell. Ross also owns the Miami Dolphins, Formula One Miami Grand Prix and the Hard Rock Stadium in Miami Gardens.
“The market is here for us,” Himmel said at the forum. “We are going to keep going.”