The Next Financial Powerhouse Is... Miami?

[Wide Moat Daily]( The Next Financial Powerhouse Is… Miami? By Brad Thomas, Editor, Wide Moat Daily I’ve fallen in love with the Sunshine State. Sure, Florida summers are hot enough to drive a man (or woman) mad. However, it’s the place to be for a growing number of very big (air-conditioned) businesses. And that makes it the place to be for the individuals who work for them… Their families… And a wide range of smaller businesses that cater to them all. I don’t say this from a theoretical perspective. At this point, I honestly can’t tell you how many times I’ve been down to Florida this year alone. But it’s been more than enough to see the good things going on down there with my own two eyes. On my most recent trip, I was in Miami meeting with investors and touring some real estate properties. It was a great trip that I’m sure I’ll be telling you more about in future articles. I stayed at the Mandarin Oriental Hotel, where I usually stay when I’m in town. This hotel was built in 2000 and sits atop Brickell Key, a manmade island built in 1943. It’s surrounded by a literal moat, which felt fitting. Here’s another thing that’s caught and kept my interest – the food. It features a restaurant that is outright phenomenal: the no-flip-flops-allowed La Mar by Gastón. The baklava is to die for. I went there every single night of my five-night stay. It’s seriously that good. Today’s issue isn’t about reviewing hotels. And it’s not about baklava. But I share this to make a point: Florida in general – and Miami in particular – has a lot to offer. And it’s caught the attention of some notable executives. Miami (and Florida) Is So Much Bigger Than Baklava Though I compare Miami to a city like San Francisco, home to five-star hotels like Taj Campton Place and The Ritz-Carlton Halfmoon Bay. It’s seeing its market suffer. Thanks to a whole host of problems, including a major crime problem (which [I covered earlier this month]( tourists just aren’t as interested in visiting the once-booming city. Neither are businesses for big (or small) gatherings. In fact, the situation has become so bad that San Francisco hoteliers are drowning in debt. CoStar data shows their CMBS loan delinquency rate rising from 5.7% last June… To 41.6% two months ago. As a real estate investor, I pay very close attention to those kinds of fundamentals. Florida, meanwhile, is growing its visitors, up 1.64% year-over-year to 34.2 million during the second quarter 2024… many of whom end up in Miami. That market’s biggest problem? It’s too many commercial real estate developers building too many buildings. Though the right ones with the right management should continue to do just fine and then some. Take the Mandarin Oriental. It’s seeing so much business that its owner, Swire Properties, decided to scrap the entire hotel next year and replace it with two buildings – one 33-story condo/hotel and one 66-story residential tower. Please note that when I say “apartment,” I mean the luxury sort. We’re talking about the kind with units that start at around $5 million… with a $50 million penthouse at the top. I spoke with the sales team in charge of marketing these accommodations. And they told me they’re seeing strong demand, with contracts signed on more than half the units. Welcome to Miami. Like I said, it’s the place people want to be. “Sunbelt Acres” Is the Place to Be That demand is likely to continue thanks, in part, to the latest decision by Citadel. It’s a huge hedge fund with $63 billion in assets under management. The firm was founded and run by Ken Griffin, Forbes’ 41st richest person (as of yesterday). Worth a whopping $38.4 billion, he made headlines when he moved his headquarters from Chicago to Miami two years ago. And those plans are starting to become very “real.” Earlier this week, we got a glimpse of Citadel’s new headquarters, a 1.7 million square-foot, 54-story tower with room for office space, a 212-room hotel, a spa, and event space. Apparently, his research shows that effort and expenditure will more than pay off. I can’t say I disagree. Source: The Wall Street Journal, Foster + Partners Here’s the point I’m making: Miami specifically… Florida in general… and the Sunbelt at large will likely be one of the predominant business areas for the foreseeable future. Other cities like Chicago, San Francisco, and even New York are likely to struggle. These places are where businesses have been going and will continue seeking out. The same goes for families and the same goes for visitors. I’m sure there will be difficulties. There are issues like overbuilding I mentioned before. And not every company situated there is worth buying into. But my team and I are nonetheless keeping our eyes on the area, as are plenty of other big businesses. The influx of corporations moving their headquarters out of big cities like San Francisco and New York isn’t over yet. Neither are the effects of those moves. Citadel’s newest investment in Miami shows as much. It also shows me that key real estate moves in the Sunbelt are where I want to place my bets. Large-scale corporate migrations like this don’t happen often. But they do happen. One is happening right now. And it deserves our attention. Regards, Brad Thomas Editor, Wide Moat Daily [Wide Moat Research]( Wide Moat Research 1125 N Charles St, Baltimore, MD 21201 [www.widemoatresearch.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. 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