I had lunch today with a friend (from school) who runs a multifamily development company in South Florida. His business is very similar to the apartment strategy that we are now working on in Toronto, in that he builds a repeatable apartment product (garden style apartments). In fact, he was telling me that he now has a dedicated design & QA/QC team within the company. Their job is to focus on continuous optimization and on reducing construction inefficiencies.

This is the way!

But each market is obviously unique. His rents are in the US$3 - 3.25 psf range (call it ~C$4.15 - 4.50 psf), whereas in Toronto you need something closer to C$5 psf to have a feasible project. Our yields are also lower on average. It's hard work to get to an untrended yield-to-cost of 5% here. But for him, he can't raise capital with anything less than 6.5%, which represents a development spread of at least 150 bps over where multifamily cap rates are today in his market (~5%).

Juicy by comparison.

The last year has been challenging for the hospitality industry. But at the same time, it was a good year to renovate. The W South Beach recently unveiled a $30 million renovation project that includes all 357 rooms. Designed by local studio Urban Robot Associates, the project directive was an interesting one. The team was asked to reimagine the hotel for the "new Miami." A Miami that is more grown up and cultured, but that, of course, still has a bit of an edge. With all of the attention that Miami and Florida are getting right now, this project feels timely and indicative of something broader underway. Indeed, it's hard not to acknowledge that Miami is having a moment right now. This also happens to be one of the last hotels that I stayed at prior to last March's lockdown. So I have a clear "before" in my mind. It's fun to see how much it has changed over the last year while I was mostly sitting at home. (Shameless plug: I also love the pale wood herringbone floors, which, coincidentally, will also be on offer at One Delisle.)

Images: Urban Robot Associates

This pandemic seems to have been good for real estate located in places that people like to spend time in, but maybe had to limit their time there in the past because of things they had to do like, you know, work in an office. This includes everywhere from "cottage country" outside of Toronto to sunny destinations like Miami.

Here are some figures that I came across for South Florida via Analytics Miami. Comparing November 2020 to a year prior, condo transaction volumes in Miami-Dade country are, interestingly, up 4.3% for condos less than $1 million and up 61.4% for condos worth more than $1 million.

Somewhat similarly, single family home transaction volumes in Miami-Dade county (for the same time period) are down 5.2% for houses worth less than $1 million and up 100% for houses worth more than $1 million.

Sometimes you see a decline like this (the -5.2%) because there simply aren't enough houses on the market for less than $1 million. But it could also be that more rich people are looking for expensive properties in Miami compared to last year.

As you may have gathered from here and here and here, I'm not all that bullish on the permanency of this whole working from home thing. But there's no denying that there's a very clear trend around people moving to places that are warmer. This was happening well before COVID-19.

There is also some evidence that rich people are starting (continuing?) to eschew high tax states like California for lower tax states like Florida and Texas. I don't have the data to be able to comment on how meaningful this trend is, but, for whatever it's worth, apparently Elon Musk just moved to Austin.

Photo by aurora.kreativ on Unsplash