Despite Downturn, Ft. Lauderdale Skyscraper Planned

Mike Vogel | 12/1/2008

All real estate companies will have to cut expenses and focus on basics such as tenant care, Stiles says. Valuations are down. He doesn’t expect the market to turn until 2010 or 2011. Stiles’ view squares with that of his peers nationally. Nine of 10 real estate executives describe themselves as bearish, and eight of 10 don’t expect a recovery until at least 2010, according to a September industry survey by legal services firm DLA Piper.

When the market recovers, it will function differently, Stiles says. Time was, buyers could put down what would now be seen as a small amount of equity, then leverage that investment, run a building well and expect a 20% return. That return target will be harder to hit, with lenders requiring 35% to 40% equity. Experienced operators are at a loss as to what a building they buy today will be able to be sold for or refinanced for in a year. “It’s a big crapshoot now,” Stiles says.

Against that uncertainty, Stiles is developing a Publix center in Hernando County, and the nation’s largest Lexus dealership in North Miami for dealer Craig Zinn and is planning a large-scale retail project for an undisclosed urban, infill site. In October, Stiles signed Fort Lauderdale-based AutoNation, the nation’s largest vehicle dealer and owner of the Maroone, Autoway, Courtesy and Mike Shad brands in Florida, to a lease for five floors in Stiles’ newest building, the 17-story 200 Las Olas Circle building.

With downtown land prices two-thirds of what they were in the condo boom, Stiles wants to tie up a site for a new office tower and reclaim primacy in the city skyline by building downtown’s tallest building. “I’m fairly optimistic because there’s money to be made with opportunities today,” Stiles says.

Downtown Fort Lauderdale has an 18% vacancy rate, higher than the rest of Broward, says Tere Blanca, senior managing director for Cushman & Wakefield in south Florida, but she says it’s a good time to start work on a building to come in three or four years, especially given Stiles’ resources. “He has relationships that are very strong in the marketplace,” says Blanca, enabling Stiles to land tenants such as AutoNation. In commercial real estate, “we all have tremendous regard for him and want to do business with him. He’s definitely the architect of downtown Fort Lauderdale and southwest Broward in terms of Class A office product.”

The dominos will eventually fall back in Florida’s favor, Stiles says. Retirees will come, creating demand for housing and support jobs. Employers will locate here, especially as the nation grows its knowledge-based economy. That gives the advantage to places with good climate and ambience. Downtown condos have fallen steeply in price, making them more affordable to working couples, fueling demand for restaurants and residential services, a 24-hour living city and a labor pool for employers to feed and draw from.

“You can’t ever discount it’s a great place to live,” Stiles says. “People are still coming here. People still love it when they get here.”

Tags: Southeast, Housing/Construction