In the gold rush that is real estate development in West Palm Beach, nothing is more valuable than the dirt on waterfront Flagler Drive.
But there is no vacant land left for sale. Aging condos inhabit the remaining development sites, their boards controlled by unit owners with differing opinions on the fate of their tropical escapes. As they try to woo these often mercurial sellers, South Florida’s richest developers are also fighting each other for the last pieces of West Palm Beach’s rich waterfront and the chance to leave their mark on the future skyline of “Wall Street South.”
Billionaires have been snapping up sites along the road for years, among them Jorge Pérez, Jeff Greene and Wayne Huizenga Jr. (of the Blockbuster and Waste Management fortune).
Named for the Standard Oil magnate credited as the grandfather of modern Florida, Flagler Drive starts at the South End and stretches the length of the city’s Intracoastal Waterway frontage to a dead end at the border with Riviera Beach. The street and its city emerged from the pandemic triumphant, with a new flock of wealthy residents and finance sector office tenants.
Developers responded in kind, planning thousands of condo units, primarily along the Flagler Drive corridor.
After devouring the few vacant patches of land, they turned their attention to the aging condo buildings on the waterfront. In the aftermath of the Champlain Towers collapse, the state passed condo safety laws that trapped many older condos in financial binds. It was open season. Sources say nearly every building along Flagler Drive’s waterfront has fielded offers from developers. Every firm has their own courtship style in these deals — some forward, some coy — but they all want the same thing. The land.
Quiet luxury
Among the firms that take a more covert approach is Perko Development, a Jupiter-based team led by Phil Perko. Perko prefers to enter a building quietly, cordially, so as not to spook the sellers or alert the competition to his whereabouts. After orchestrating buyouts, he partners with a more high-profile developer to plan a new condominium.
He followed this method on Jupiter Island in 2017, arranging the acquisition of Bowling Rock Club and partnering with Jeffery Soffer’s Fontainebleau Development to build the 10-story, 21-unit SeaGlass. It sold out for $168.8 million in 2023, with buyers who had C-suite titles from companies like Krispy Kreme, Major League Baseball and the crypto platform BitPay.
After that success, Perko turned his attention to the West Palm Beach waterfront, this time in partnership with Kolter Group.
The pair honed in on Flagler House, a 38-unit waterfront condominium at 3705 South Flagler Drive. Built in 1985 on 1.4 acres, the majority of units have an estimated market value below $200,000, according to the Palm Beach County Property Appraiser’s Office. When Perko and Kolter closed on their $37.6 million buyout of the building in May, prices for units ranged from $850,000 to $1.8 million, property records show. In its place, the developers plan an 18-story, 39-unit luxury condo of the same name. Sales have yet to launch and the developers declined to comment on pricing.
It was a deal done with little fanfare or public angst. Some sellers walked away having made their money back tenfold, illustrating the profit potential for condo owners along West Palm Beach’s waterfront — that is, if they can reach the critical mass for voting consensus. This gets more challenging in larger buildings with a greater range of personalities and financial motives.
The poison pill
“Most condo boards have what they call a ‘poison pill,’” Serhant agent Christian Prakas said. He’s referring to the Florida law that allows for 5 percent of a condo’s total voting interest to block a condo termination, even if the remaining 95 percent are in support.
The poison pill has proven an effective defense against developers hoping to build anew on Flagler, including Al Adelson.
Adelson completed The Bristol at 1100 South Flagler Drive in 2019. It is widely considered the premier condo tower in West Palm Beach, and sales frequently top $3,000 per square foot, a once unheard-of number in the city. Adelson is planning a second non-waterfront condo dubbed The Berkeley, but last year he was quietly shopping for a waterfront site.
He approached two adjacent buildings spanning 5.5 waterfront acres, La Fontana at 2800 North Flagler Drive and Portofino at 2600 North Flagler Drive, with an offer: $300 million for the pair. For the 140-unit La Fontanta, that averages to $1.1 million per unit, and it’s $1.2 million per door for the 125-unit Portofino — far exceeding market value.
But the deal choked on the poison pill. La Fontana, a co-op with a lower termination threshold, was game, but Portofino’s owners couldn’t reach consensus.
“It’s very clear the value of land continues to go up and up, but there comes a point where I don’t think it’s worth more than I offer.”
“When you have more units, the more difficult it is to agree,” Adelson said. In larger buildings, where there are 100 to 200 unit owners, “each of them has a vote, and [they can] range from very successful people financially to people who are living on their savings and Social Security. They have different financial needs.”
In the case of La Fontana and Portofino, Adelson hit the upper limit on how much he was willing to sweeten the pot for opposing unit owners.
“The sellers have not agreed to sell, which means there are other people they feel will pay more money,” Adelson said. “It’s very clear the value of land continues to go up and up, but there comes a point where I don’t think it’s worth more than I offer.”
After the failed buyout, La Fontana’s owners were still seeing dollar signs. The co-op tapped Serhant to market the building as a development site asking $200 million. Prakas confirmed the 10-story building is under contract to a developer for near the asking price, which would average out to $1.4 million per unit. He declined to confirm who’s buying but said La Fontana received multiple offers from developers.
“This wasn’t the highest, but it was the strongest,” he said, adding that some of the offers were, like Adelson’s, contingent upon the building to the south, Portofino at 2600 North Flagler Drive, also selling. “We’re not confident in that happening.”
To Prakas, the La Fontana sale holds lessons in an era of buyouts, terminations and rebirth.
“A co-op buyout is so much easier than a condo buyout,” he said. Voting power is structured differently, and they are not as susceptible to the 5 percent poison pill, Prakas said.
While the deal is still months from closing, La Fontana’s buyout is a fairytale compared to the brutal battles playing out in neighboring buildings, where owners who bought $200,000 units decades ago find themselves in a legal tug-of-war between industry titans.
The big boys in the sandbox
Harbor Towers is a two-acre, two-building, 61-unit complex at 3901 South Flagler Drive. It’s one in a trio of waterfront sites on a prime 4.3-acre stretch of South Flagler Drive opposite the Intracoastal Waterway from Donald Trump’s Mar-a-Lago Club. It’s also close to the desirable El Cid and SoSo neighborhoods.
And Nadim Ashi’s Fort Partners and Steve Ross’ Related Ross have been dueling over it for the better part of a year.
By November of last year, Ashi had already secured the middle parcel, an apartment complex at 3906 Washington Road and 3907 South Flagler Drive for $20 million. Both developers had made offers on the third site, 60-unit Southbridge at 3915 South Flagler Drive, where Ross won out with a bid of $42 million, or $700,000 per unit. He started closing on units in December, although he hasn’t completed the full buyout yet.
With flags planted in the other two sites, it came down to Harbor Towers. By April, sources say it was apparent that Ashi had secured the majority of units in Harbor Tower and was on the path to termination. In a last-ditch effort, Ross filed suit in Palm Beach County Circuit Court, accusing Ashi of playing dirty and demanding an injunction that would prevent termination. The suit also targeted Jessica Julian, the Douglas Elliman agent who helped Fort secure its majority of contracts. Representatives for Ross declined to comment on the litigation for this story.
“It was a pretty normal block play,” Glen Waldman, an attorney for Ashi, said. “Every time you have big boys playing in the sandbox, …they fight, and that’s what they do. They’re not scared to fight.”
By September, blades were drawn.
“The only games being played here are by [Related] and its billionaire principal Stephen Ross,” read a legal filing from the attorneys for Fort Partners, who in the same document called Ross’ suit “meritless” and his lawyers’ latest tactics “comical.”
Ashi’s attorneys insisted Ross was stalling under the guise of nonexistent settlement talks, trying to block their efforts to depose him, a predictable move. Most billionaires try to avoid deposition.
“There is no settlement,” Ashi’s attorneys declared in the filing. Waldman said the case was fairly straightforward and that Ashi had the numbers on his side.
“You either have to bulldoze them, or settle with them,” Waldman said, summarizing the strategy.
As of September, they both seemed poised to plow ahead. But why? Did Ross really want this site that much, or did he simply want to keep a rival off his turf?
Representatives for Ross declined to comment on the suit. Whatever the reason, Adelson said, “It tells you how aggressive they feel they need to be to keep building in this market.”
Knock-out
In the end, they did settle. Terms of the deal are unclear, but Ashi is now in control of a slice of the city’s precious waterfront. He’ll be completing the termination of Harbor Towers.
The buyouts at Flagler House, La Fontana and Harbor Towers are merely the first few rounds in a years-long match-up between real estate’s champion fighters, and between developers and unit owners.
“Eventually, the economics are such that [developers] will be able to come to an agreement with most of the buildings on the water,” Adelson said. “It may take a little while.”
Sellers may also have to lower expectations, Prakas said. Other buildings have reached out to him and the Serhant team about buyout marketing, but they haven’t pursued any deals yet.
“When we told them what we thought it was worth, they weren’t as interested,” he said. “Some of these buildings thought they were going to get twice the market value.”
At the right price, there’s money for all parties.
“These owners were making so much money,” Ashi’s attorney Waldman said of the Harbor Towers deal. “There are no losers here.”
