Invest: Palm Beach 2019

Palm Beach 2019 An in-depth review of the key issues facing Palm Beach County’s economy featuring the exclusive insights of prominent industry leaders

$159.00 ISBN 978-0-9988966-1-8

59999>

9 780998 896618

Contents:

3 Economy:

4 Palm Beach County in Numbers

6 Strong footing: All indicators suggest that Palm Beach County will continue to enjoy economic strength, even as headwinds threaten to dim the outlook

9 Interview: Mack Bernard, Mayor, Palm Beach County

10 Interview: Kelly Smallridge, CEO, Business Development Board of Palm Beach County, Inc.

12 Market voices: Chamber moves

15 Interview: Michael Mitrione, Shareholder, Gunster

16 Roundtable: Business attraction – Keith James, Mayor, City of West Palm Beach; Mark Marciano, Mayor, City of Palm Beach Garden; Todd Wodraska, Mayor, Town of Jupiter; Steven Grant, Mayor The City of Boynton Beach

18 Interview: Raphael Clemente, Executive Director, West Palm Beach Downtown Development Authority 21 Interview: David Scott, Director of Economic, Development and Strategy, The City of Boynton, Beach 22 Interview: Mark Bideau, Co-Managing Shareholder - West Palm Beach Office Greenberg Traurig, P.A.

25 Real Estate:

30 Interview: Jeff Greene, Investor

32 Roundtable: Tracking trends – Michael Feuerman, Senior Vice President, Berger Commercial Realty; Mark Pateman, Managing Principal, Cushman & Wakefield; Jordan Paul, CEO, NAI/Merin Hunter Codman 36 Interview: Dionna Hall, CEO, Realtors of the Palm Beaches & Greater Fort Lauderdale

37 Interview: Rick Gonzalez, President, REG Architects

40 Interview: Dilip Barot, Founder, Creative Choice Group

46 Interview: Rex Kirby, CEO, Verdex Construction

50 Interview: Ramsay Bulkeley, Executive Director, Palm Beach County Planning, Zoning & Building

51 Interview: Angelo Bianco, Managing Partner, Crocker Partners

52 Interview: Dale Hedrick, President, Hedrick Brothers Construction

55 Interview: Kirsten Dolan, CEO, One Parking

57 Transportation & Logistics:

58 Strong backbone: Plans are already afoot to bolster the county’s transportation systems, from buses to planes, and solidify its position as a logistics hub

59 Interview: Manuel Almira, Director, Port of Palm Beach

62 Interview: Scott Kohut, Airport Deputy Director, Boca Raton Airport Authority

64 Interview: Steven Abrams, Executive Director, South Florida Regional Transportation Authority/Tri-Rail

66 Interview: Patrick Goddard, President, Virgin Trains USA

67 Banking & Finance:

68 Wall Street South: With a burgeoning reputation as a financial center on par with its northern counterparts, Palm Beach County’s star is on the rise

69 Interview: David Williams, Community Banking Gold Coast Region Bank President, Wells Fargo

73 Interview: Dennis Bedley, Chairman & CEO, Legacy Bank of Florida

41 Interview: Brett Forman, CEO, Trez Forman Capital

43 Construction & Infrastructure:

45 Interview: Michael Neal, Chief Executive Officer, Kast Construction

26 Real Estate in numbers

28 Demand conundrum: Demand drives supply. In Palm Beach County, the real estate market is having trouble keeping pace. Is that a problem in the making?

44 Fired up: Positive signs abound for the construction sector, with a strong commercial segment, while greater spending is propping up infrastructure

www.capitalanalyticsassociates.com

|1

CONTENTS

Contents:

77 Interview: Cressman D. Bronson, EVP, Regional President of Southeast Florida, PNC Bank 78 Roundtable: Shifting landscape– Jesse Flowers, Community President, CenterState Bank; Carlos Alvarez, City President, BBVA; Daniel Sheehan, Executive Chairman of the Board, Professional Bank; Kevin Rogers, South Florida President, Seaside Bank 80 Market Voices: Talent factor

81 Healthcare:

83 Interview: David Fitzpatrick, CEO & Scientific Director, Max Planck Florida Institute

84 Interview: Douglas Bingham, Executive Vice President, Scripps Research

86 Interview: Richard Rendina, CEO & Chairman, Rendina Healthcare Real Estate

90 Roundtable: Adapt and deliver – Lincoln Mendez, CEO, Boca Raton Regional Hospital; Pamela Tahan, CEO, Wellington Regional Medical Center; Darcy Davis, CEO, Healthcare District of Palm Beach County; Alice Taylor, CEO, Broward Health North

92 Interview: Caitlin Beck Stella, CEO, Joe DiMaggio Children’s Hospital

ISBN 978-0-9988966-1-8 President: Abby Melone Chief Financial Officer: Albert Lindenberg Regional Director: Jack Miller

93 Education:

82 Good medicine: Challenges abound for Palm Beach County’s health sector but all signs point to strength and further growth ahead

Palm Beach 2019

94 Class act: Education in Palm Beach County is enjoying positive recognition but also suffering teacher shortages and budget inequality 95 Interview: William Fleming, President, Palm Beach Atlantic University 96 Interview: Ava Parker, President, Palm Beach State College

103 Tourism, Arts & Culture: 104 Boom town: Record numbers of tourists are flocking to Palm Beach County and taking in all its attractions. One potential hiccup: keeping up 105 Interview: Jorge Pesquera, President & CEO, Discover The Palm Beaches 106 Interview: Judith Mitchell, CEO, Kravis Center 107 Interview: Tricia Taylor, Executive Vice President & General Manager, The Breakers Palm Beach

Senior Editor: Mario DiSimine Art Director: Nuno Caldeira Executive Director: Yulia Yurevich-Paranchuk Content Manager: Max Crampton-Thomas Writer: Sean O’Toole Intern: Sabrina Bocaranda Invest: Palm Beach is published once a year by Capital Analytics Associates, LLC. For all editorial and advertising questions, please e-mail: contact@capitalaa.com To order a copy of Invest: Palm Beach 2019, please e-mail: contact@capitalaa.com All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, without the express written consent of the publisher, Capital Analytics Associates, LLC. Whilst every effort has been made to ensure the accuracy of the information contained in this book, the authors and publisher accept no responsibility for any errors it may contain, or for any loss, financial or otherwise, sustained by any person using this publication.

Capital Analytics Associates, LLC accepts no responsibility for the return of unsolicited manuscripts and/or photographs, and assumes no liability for products and services advertised herein. Capital Analytics Associates, LLC reserves the right to edit, rewrite, or refuse material.

110 Market Voices: Milestones

Photo Credits: Contents: pg 1 – Delray Beach Community Redevelopment Agency Economy: pg 3 – Small - Delray Beach Community Redevelopment Agency; Large - West Palm Beach Downtown Development Authority pg 6 – West Palm Beach Downtown Development Authority pg 8,11, 14, 18, 20 – Delray Beach Community Redevelopment Agency pg 22 – West Palm Beach Downtown Development Authority

pg 32 – Related Companies

pg 60 – Southwest Airlines

pg 81 – Max Planck Florida Institute

pg 36 – Town Center at Boca Raton

pg 65 – South Florida Regional Transportation Authority/Tri-Rail

Education:

pg 40 – NAI/Merin Hunter Codman Construction: pg 43 – Large - Kaufman Lynn Construction, Inc.; Small - Kaufman Lynn Construction, Inc.

Banking & Finance:

pg 93 – Large - Palm Beach State College; Small - Palm Beach State College93

pg 67 – Small - PNC Bank;

pg 94,97 – Palm Beach Atlantic University

Large - Seacoast Bank

pg 98,100 –Palm Beach State College

pg 44 – Kaufman Lynn Construction, Inc.

pg 68 – Seaside Bank68

pg 46 – West Palm Beach Downtown Development Authority

pg 70, 73 – PNC Bank

Tourism:

pg 48,50 – Kaufman Lynn Construction, Inc

pg 76 – Seaside Bank

pg 52 – Hedrick Brothers Construction 52 pg 56 – Max Planck Florida Institute

Healthcare:

Transportation:

Real Estate: pg 25 – Large - NAI/Merin Hunter Codman; Small - Related Companies

pg 57 – Small - South Florida Regional Transportation Authority / Tri-Rail; Large - Southwest Airlines

pg 28 – NAI/Merin Hunter Codman

pg 58 – South Florida Regional Transportation Authority/Tri-Rail

pg 31 – Smith & Moore Architects

2 | Invest: Palm Beach 2019 | CONTENTS

pg 74 – Seacoast Bank

pg 81 – Small - Courtesy Scripps Research / www.scripps.edu; Large - Max Planck Florida Institute

pg 103 –Small - Sargent Photography - Art by Eduardo Kobra ; Large - Kravis Center for the Performing Arts pg 104 – Adrian Wilcox Photography - Art by Eduardo Kobra Pg 106 – Cultural Council of Palm Beach County

pg 82 – Lynn Cancer Institute Boca Raton Regional Hospital

Pg 106 – Philadelphia Museum of Art

pg 85 – Courtesy Scripps Research / www.scripps.edu85

Pg 112 – Cultural Council of Palm Beach County - Art by Dahlia Patricia Perryman

Pg 111 – Kravis Center for the Performing Arts

Economy: A strategic location, a thriving tourism sector and a rapidly-rising technology hub are keeping Palm Beach County at the top of its game.

A Triple-A bond rating underpins optimism for the area despite the potential impact from national and international economic and geopolitical clouds on the horizon.

www.capitalanalyticsassociates.com | 3

Palm Beach County in Numbers: Population 2019:

Median Age:

Year

Population

Growth

Growth Rate

2018

1,485,941

15,603

1.06%

2017

1,470,338

18,954

1.31%

2016

1,451,384

26,699

1.87%

2015

1,424,685

25,646

1.83%

2014

1,399,039

22,323

1.62%

2013

1,376,716

21,658

1.60%

2012

1,355,058

18,338

1.37%

2011

1,336,720

13,072

0.99%

2010

1,323,648

460,130

53.29%

1990

863,518

286,655

49.69%

1980

576,863

228,110

65.41%

1970

348,753

120,647

52.89%

1960

228,106

113,418

98.89%

1950

114,688

34,699

43.38%

1940

79,989

28,208

54.48%

1930

51,781

33,127

177.59%

1920

18,654

13,077

234.48%

1910

5,577

––

0.00%

Total

Male

Female

44.4 42.5 46.1 Source: US Census 2017 ACS 5-Year Survey (Table S0101)

Palm Beach County, Florida Renter vs Owner Occupied by Household Type: 80%

Married

20%

68.6%

All

31.4%

62.9%

Non Family Male

51.2%

Female

48.7% 0

37.1% 48.8% 51.3%

25

50 Owner

Source: US Census 2017 ACS 5-Year Survey

75

100

Renter

Source: US Census 2017 ACS 5-Year Survey (Table S1101)

Educational Attainment by Sex (over 25): 138,670

140,000 120,056

110,997

109,991

115,918

105,000 91,781

69,149

70,000

65,688

54,261

35,000

0

32,101 29,195

32,302 30,298

Less Than 9th Grade

9th-12th Grade

36,743

High School Grad

Male

Some College

Associates Degree

Bachelors Degree

Graduate Degree

Female

Source: US Census 2017 ACS 5-Year Survey (Table S1501)

4 | Invest: Palm Beach 2019 | ECONOMY

0

Overall Average

Male

High School Grad

Some College

Bachelors Degree

$50,872

$62,428

$40,717

$59,200

$47,896

$30,356

$40,028

$33,877

$30,516

$27,039

Less Than High School

$23,767

$25,000

$16,260

$19,879

$50,000

$31,087

$35,209

$40,062

$75,000

$21,563

$100,000

$84,604

Earnings by Educational Attainment:

Graduate Degree

Source: US Census 2017 ACS 5-Year Survey (Table S1301)

Female

Language:

Employment Status: 83.9%

35 - 44

Other

Asian

10.1%

85.9%

25 - 29

1.1%

1.6%

30 - 34

83.6%

45 - 54

Other Indo-European

82.8%

20 - 24

79.8%

55 - 59

74.2%

60 - 64

18.4%

60.4%

16 - 19

39%

65 - 74

Spanish

27.3%

75+

Labor Force Participation

6.7% 0

25

50

75

100

Source: US Census 2017 ACS 5-Year Survey (Table S2301)

Poverty: Islander

41.6%

Black

22.6%

Other

20.3%

Hispanic

19.5% 17.7%

Multiple

14.9%

Native

68.9%

11.6%

Asian

Rate

8.2%

White

Only English

0

25

Source: US Census 2017 ACS 5-Year Survey (Table S1601)

50

75

100

Source: US Census 2017 ACS 5-Year Survey (Table S1701)

19.8

Income by Household Type:

<10k Households

16.5

14.6

10k - 15k Families

9.5

10.3

13.3

13.3

7.6

3.6

2.6

5.9

7.3

8

8

11.5

13.3

16.8

16.8

17.4 14.4

12.7

11.1

13.3

4.8

7

7.1

1.4

4.3

0

2.6

1.9

3.7

5

6

7.6

9

10.1

12.4

16.3

10

10.3

10.8

15

17.2

20

15k - 25k Married Families

25k - 35k

35k - 50k

50k - 75k

75k 100k

100k - 150k

150k - 200k

>200k

Non Families

Source: US Census 2017 ACS 5-Year Survey (Table S1901)

www.capitalanalyticsassociates.com | 5

Strong footing: All indicators suggest that Palm Beach County will continue to enjoy economic strength, even as headwinds threaten to dim the outlook Palm Beach County is no stranger to economic success, and has long flourished thanks to a strategic location that allows it to thrive as a hub of trade, finance, tech, and tourism. In 2018 and 2019, these sectors and more put up remarkable numbers, indicating that Palm Beach County’s economy is on a good footing, despite headwinds from a murky national and global economic picture.

While the global economy remains a mixed bag thanks to the strained trade relationship between China and the United States and uncertainty in several parts of Latin America, Palm Beach County’s international trade with many parts of the world has remained strong, boosting the local economy, although that could change if global trends continue.

Despite the headwinds, Palm Beach County set new records for tourism and immigration in 2018.

Unemployment also remains low in the county, and growing numbers of highly-educated millennials are flocking to Palm Beach County, bolstering its cuttingedge workforce, while those already in the county are honed through worker development programs to ensure they meet the needs of today’s employers.

This world-class talent pool is attracting an increasing 6 | Invest: Palm Beach 2019 | ECONOMY

number of high-tech firms, thereby growing Palm Beach County’s economy even more.

Geographic location Palm Beach County’s location has long been a major contributor to its economic success. Carved out of Dade County in 1909 and subsequently reshaped several times over the years, Palm Beach County is the second-largest in Florida at 1,977 square miles, sitting just behind Collier County at 1,998 square miles and larger in area than Delaware and Rhode Island. The county boasts 47 miles of Atlantic coastline, four large lakes — Lake Osborne, Clear Lake, Lake Mangonia, and the massive Lake Okeechobee — and 526,000 acres of farmland. Through its combination of a naturally beautiful environment, countless cultural and artistic attractions, and incredible history, Palm Beach County attracts some 7.3 million tourists every year, who spend $4.6 billion. Businesses in Palm Beach County often use its strategic position to their benefit, as noted by Adam Marshall, founding member of Marshall Grant, PLLC. “A common misconception is that people think of South Florida as one massive market. They don’t understand that Miami, Fort Lauderdale, Boca Raton,

ECONOMY OVERVIEW

Christine Gagnon Director– EisnerAmper

One of our key focus points in West Palm Beach is our tech and life sciences practice. We are heavily involved with the Business Development Board of Palm Beach County.. Their goal is to foster a landscape where these tech and life sciences companies can thrive and have a more centralized place to do business, which would help facilitate investment and grow the early stage companies. EisnerAmper hosts seminars, provides workshops and offers office hours to help guide these younger companies along the way. It’s a great industry to be in in West Palm Beach,and we have the expertise to service it.

West Palm Beach and Palm Beach Gardens are five distinct markets with five distinct personalities. Being located strategically in Boca Raton is something that we did on purpose because being at this centralized location allows us to bridge all of those markets. We have access to travel and resources for our clients all because of our central location here in Boca Raton.”

The county makes additional money by capitalizing on its strategic location to serve as a center of trade and logistics. Palm Beach County has its own international airport, Palm Beach International, replete with a Federal Inspection Facility to handle international trade, a seaport with a Foreign Trade Zone, easy access to both the Florida Turnpike and Interstate 95, and is serviced by the FEC and CSX railways. This location makes Palm Beach County easily reachable by all major ports in Florida, and allows the convenient transport of goods from the county to any point along the eastern seaboard. Its strategic location also happens to put Palm Beach County inside the Miami Customs District, which is the first destination for goods from Latin America, the Caribbean, and China.

Global factors One factor affecting the economy of Palm Beach County is the health of global trade and the world economy. As one of the wealthiest counties in Florida and a key participant in international trade as a member of the Miami Customs District, Palm Beach County is keenly impacted by international economic fluctuations — and global trade and economic growth appear to be slowing down amid fears of another worldwide recession.

First, the growth of the U.S. economy is showing signs of sluggishness, slowing from 3% in the second half of 2018 to just around 2% in 2019. This will likely reduce the flow of imports coming into the Port of Palm Beach and Palm Beach International Airport (PBI), particularly from Palm Beach County’s major trading partners in Latin America and the Caribbean.

Great Britain continues to languish under an economic downturn precipitated by the ongoing negotiations surrounding Brexit, the UK’s proposed withdrawal from the European Union (EU), which could potentially end in a no-deal exit. The deadlock has stymied the UK’s ability to trade goods and services with international markets like Palm Beach County and, since the UK has the second-largest economy in the EU, this has a noticeable impact on Palm Beach County’s economy. The ongoing uncertainty surrounding Brexit is also resulting in a drag on the economies of other major European players, such as Germany, Italy, and France.

Asia and Latin America are also impacted by the effects of the lagging global economy. Palm Beach County does a good deal of trade with these regions and is sure to feel the impact of reduced imports and exports. China, a global powerhouse, continues to show signs of a contracting economy. In fact, China’s economy in Q2 2019 slowed to its lowest level in 27 years, thanks to the country’s ongoing trade war with the United States. As for Latin America, Mexico and Costa Rica are also experiencing slowdowns, Argentina is projected to experience another year of outright recession, and Venezuela remains in the grip of a political crisis. www.capitalanalyticsassociates.com | 7

ECONOMY OVERVIEW

There are 47 Miles of Atlantic Coastline in Palm Beach County.

The largest economy in Latin America, Brazil, is another question mark. Despite initial optimism for the pro-growth policies of new President Jair Bolsonaro’s administration, the post-election honeymoon appears to have faded and most analysts have downgraded expectations. For 2019, forecasts call for 1.7% growth, the lowest ever, with further declines projected for 2020. The Dominican Republic, Colombia, and Peru, also key partners for South Florida’s economy, however, are expected to grow economically.

Still, a slower economy does not seem to have heavily impacted tourism or immigration to Palm Beach County from Latin America. The county enjoyed record immigration in 2018 and an economic impact of $1.3 billion through September 2018, 2.8% more than at the same point in 2017. Immigration in the county is also expected to reflect the record number of immigrants entering the United States from various Latin American countries by way of the U.S.-Mexico border, who are then either transferred to various counties like Palm Beach County by the federal government or simply make their way here on their own.

Agriculture Agriculture is, and long has been, one of the most important industries in Palm Beach County, alongside 8 | Invest: Palm Beach 2019 | ECONOMY

construction and tourism. In fact, the county is one of the 10 largest agricultural centers in the United States and the largest in Florida, generating $1.4 billion in agricultural sales in 2017-2018. The county’s principal agriculture exports are sugarcane, sweetcorn, and sweet bell peppers, celery, lettuce, and radishes. About one-third of the county’s total landmass is used to cultivate sugarcane (400,000 acres), and more than 18% of the sugar produced in the United States comes from Palm Beach County.

To process its immense production of sugarcane, Palm Beach County is home to three major sugar mills, one large sugar refinery, and a major sugar and molasses shipping facility. There are also nine fresh vegetable packing houses, 396 horticultural nurseries, a large-scale hydroponic tomato growing operation, and a rice processing and packaging mill. These and other agricultural industry enterprises help Palm Beach County to lead the United States in agricultural wages and salary, with a total of more than $316 million.

Government Palm Beach County consists of 39 distinct, incorporated municipalities, each of which enacts its own policies and ordinances on a variety of issues and enforces them within its municipal boundaries. However, there ( )

ECONOMY INTERVIEW

Support is key Palm Beach County is pushing for businesses that are minority- and femaleowned while addressing affordable housing

Mack Bernard Mayor – Palm Beach County What were some highlights for Palm Beach County over the last 12 months?

There are several things we have been working on, one of which was to increase our participation and support for minority-owned and female-owned businesses.

Through our efforts, we were able to establish an MBE program and an MWBE program for Palm Beach County, which took effect on Jan. 1, 2019. This will hopefully result in our minority-owned and womenowned businesses acquiring more contracts with Palm Beach County.

Another issue we’ve been addressing is affordable housing. Many people who would like to live in Palm Beach County simply can’t afford to, so we’ve been focused on creating more workforce housing for our population, even when it comes to rental properties.

We’ve been working with our Business Development Board to create more employment opportunities in Palm Beach County. We have been concentrating on bringing high-paying jobs to the county. Specifically, we’ve targeted the western area of the county, which includes the cities of Belle Glade, Pahokee and South Bay. Commissioner Melissa McKinlay represents that area, and with such high unemployment we’ve been laser-focused on trying to create more economic development out in the Glades area.

What are your strategies for continuing to attract people to do business and live in Palm Beach County?

The reason unemployment in the county has been dropping is because the board of county commissioners and all of our municipalities have been working diligently to create the right economic environment in Palm Beach County. We work very hard on not only attracting new businesses but also assisting established businesses that want to expand. We are going to continue to work to create and maintain a favorable economic climate.

What are some of the notable economic development challenges facing Palm Beach County today?

We have to make sure that our kids are getting a quality education because we want them to be able to graduate from high school and compete in the workforce. That’s really important for us. We have to keep focusing on immediate and long-term housing needs throughout the county. We want to see our unemployment rate continue to go down. While it is currently quite low, we want to make sure that people are earning a living wage and that they are able to afford to make their home in Palm Beach County. We have to continue bringing in stable, growth-oriented businesses that are able to increase the wages for their workers. And finally, we must continue to reduce red tape. When businesses decide to move to Palm Beach County or expand their existing operations, it should be a seamless process without a lot of hassle. www.capitalanalyticsassociates.com | 9

ECONOMY INTERVIEW

Cluster approach Business Development Board’s business relocation efforts see results in number of new jobs created

Kelly Smallridge CEO – Business Development Board of Palm Beach County, Inc. Perhaps the most exciting news is that the Flagler Financial District — which represents a five-year effort to bring more hedge funds, private equity and venture capital firms, along with family offices, to Palm Beach County — has been very lucrative. This effort gained great momentum following the tax overhaul. As taxes continue to go up in Boston, Connecticut and New York, we continue to see a large number of companies in the financial services area interested in relocating to Palm Beach County.

Could you outline some of the highlights for the Business Development Board of Palm Beach in 2018?

We have a targeted industry cluster approach where we’re focused on specific types of companies that fall into the categories of aviation/aerospace, business/ financial services, communications technology, life science, corporate headquarters, manufacturing, logistics and distribution. Over the past 12 months, roughly 2,600 jobs were created through our direct efforts to facilitate the relocation of 27 companies and about $260 million in capital investment. Among the largest companies that have come into the area recently are United Technologies, which brought its Center for Intelligent Buildings and built a 230,000-squarefoot facility, as well as Niagara Water Bottling, which also built a 400,000-square-foot facility in the northwestern part of our county.

10 | Invest: Palm Beach 2019 | ECONOMY

How are you encouraging corporate relocation?

We have a large advertising campaign that positions Palm Beach County in certain publications and digital media, and we are now in our third year of saturating the northeastern market. The campaign is also tied to a website that allows us to see who is looking at our ads and who might be interested in Palm Beach County. Also, we partner with Enterprise Florida, the state’s economic development agency, on national and international outreach missions to market at trade shows and to individual companies. Between our digital campaign, print advertising, advertising in our airport and outreach missions through Enterprise Florida, we have a robust national and international reach to drum up the story of why Palm Beach County is one of the best places in the state of Florida to do business.

What is the biggest challenge the BDB faces today?

The biggest challenge facing most economic development boards is finding a skilled workforce.

It doesn’t matter what kind of incentives you have to offer, if a company cannot find the skilled workforce it needs, it most likely will not select your area. Working with our universities to develop data that clearly markets the availability of our skilled workforce is where we need to focus our efforts.

ECONOMY OVERVIEW

Palm Beach County is home to dozens of weekly events and street festivals.

( ) are also numerous countywide ordinances authorized under the Palm Beach County Charter that govern all 39 municipalities uniformly. Some of the major municipalities in terms of economic impact include Boca Raton, West Palm Beach, Delray Beach, Jupiter, Boynton Beach, and Palm Beach Gardens.

In terms of county and municipal measures and policies aimed at protecting the economy and resources of Palm Beach County, perhaps the most significant at the moment is the county’s response to the federal government’s proposed plan to transport hundreds of immigrants to Palm Beach and Broward counties from Border Patrol facilities along the U.S.Mexico Border. U.S. Border Patrol announced in May 2019 that some 14,000 family units may be flown to South Florida from detention facilities that are at capacity. Florida Gov. Ron DeSantis, the Sheriff’s Department of Palm Beach County, the mayors of both West Palm Beach and Broward County, and the community at large all expressed concern over the plan, which would have consisted of sending 270 migrants by plane to South Florida every week, who would then be split evenly among Broward and Palm Beach counties.

Such a sudden and substantial influx of immigrants was feared to present a humanitarian crisis that would devastate already-strained county resources, and

jeopardize the economy and morale of South Florida. The outcry appears to have led to the immigrant relocation plan being put on hold for the time being.

Another economic policy in Palm Beach County, and one that is far less controversial, consists of a pair of job growth incentive deals approved in April that will bring roughly 150 new jobs to the county. One of the deals is with major air conditioner and heating system manufacturer Carrier Corporation, which seeks to expand its Palm Beach Gardens facility and add 100 jobs through $1.35 million in state and local incentives. Of that, $700,000 will be in the form of Qualified Target Industry (QTI) tax refund incentives, with $560,000 from the state, $70,000 from the county, and $70,000 from the city over a six-year period.

Gulfstream Aerospace’s application for QTI incentives was also approved. It will receive $160,000 from the state and $40,000 from the county. To qualify for their respective QTI incentives, Carrier will create 100 jobs with an average annual salary of $92,124 within three years and maintain them for at least five years, while Gulfstream must create 50 jobs paying an average wage of $73,685 and maintain them for five years, as well as retain 114 existing jobs. Combined, the proposed expansions will result in a $375.6 million economic impact over a five-year period. ( ) www.capitalanalyticsassociates.com | 11

Market voices: Chamber moves

Dennis Grady

President & CEO Chamber of Commerce of the Palm Beaches

Our organization has been around for over 100 years. Over the last few decades we have seen the county grow from about 450,000 to 1.5 million residents. Geographically, Palm Beach County is one of the largest counties east of the Mississippi. We attract a lot of foreign traffic here due to our globally recognized facilities. This is an exciting region in Florida.

We are the largest producers of sugarcane in the country. We are also one of the most desired locations for businesses moving from the Greater New York City market. Palm Beach County has unique business opportunities in the sense that we have a lot of agricultural opportunities that places like Broward County and MiamiDade County do not. We have 50 miles of coastline, and the county extends 50 miles away from the coast, so we have a large expanse of land to produce goods that can’t be produced in other parts of the state or the country.

The greatest area of growth for the retail market has been at the retail Poinciana Plaza by the north bridge. It’s an Upmark project, a firm out of Massachusetts. They’ve done a remarkable job with refurbishing and revitalizing a landmarked building that had seen better days. They’ve aimed to make it a community center where people from all ages can gather. The restaurants are also phenomenal.

There needs to be a greater diversity of retailers. For example, on Worth Avenue we have 30 jewelers in a three-block area. It’s an imbalance, and it doesn’t reflect what the average resident needs on a daily basis. You can always buy a T-shirt, but you’re not going to buy a new diamond everyday.

Troy McLellan

CEO Boca Raton Chamber of Commerce

Laurel Baker

CEO Palm Beach Chamber of Commerce

Nearly half of all the corporate headquarters in all of Palm Beach County are located in Boca Raton. We have a very rich and robust corporate culture here, with an impressive list of major employers: Office Depot, ADT, Modernizing Medicine, the Boca Raton Resort + Club, the Boca Raton Regional Hospital and Florida Atlantic University to name a few. We’ve had that culture since IBM was located here several decades ago. The entrepreneurial roots run deep in Boca Raton. Even when IBM started to divest, a lot of that intellectual capital remained in our community. From a chamber standpoint, we’re very serious about making sure that our community and all of south Palm Beach County is pro-business.

We’re not apologetic at all about wanting our businesses to be successful and creating an environment where they can succeed, no matter the size.

12 | Invest: Palm Beach 2019 | ECONOMY

ECONOMY OVERVIEW

proposals so we are in the process of seeing which ones ( ) Economic performance In addition to agriculture, the best-performing sec- will be approved. As a city, we are working to make tors in Palm Beach County in 2018 and 2019 include sure that we have the space to house those who are many of the usual suspects, but also boast some new visiting, whether for vacation or business. Tourism is industries. In fact, Palm Beach County is rare in that it a driver for us, so we want to make sure that we have top options for people who are boasts as many as eight high-perchoosing Delray Beach.” Mayor of forming sectors, including manthe City of Riviera Beach Ronnie ufacturing, equestrian, tourism, Felder believes that new hotel agribusiness, financial services, development is not only vital to corporate headquarters and disaddress current demand but also tribution and logistics. for what is coming. “We need Tourism is always a behemoth, more hotels and restaurants, and as the county continues to which is a significant way for shatter annual visitor records, us to begin to push this city the construction of new hotels is Ronnie Felder into the future,” he told Invest:. steaming ahead to keep pace, with Mayor, City of Riviera Beach “We do not have enough hotels new and upcoming hotels such as the Hilton at the Palm Beach County Convention to accommodate a large influx of tourism, which is Center, an Aloft Hotel in Delray Beach, and a Canopy impeding our growth. We have to be aggressive in our Hotel in West Palm Beach. “Hospitality is booming development efforts. I want to see cranes throughout right now,” Shelly Petrolia, mayor of the City of Delray Riviera Beach because when you see cranes in the city, Beach, told Invest:. “We have new hotels coming in like that means economic growth, it means we are tapping Kolter Hotel, the Ray Hotel and Aloft. Our market is into our potential and that other businesses will see demanding more rooms. There have been a few more this and also want to be part of our city.”

When you see cranes in the city, that means economic growth.

ECONOMY OVERVIEW

Small Business is one of the cornerstones of the Palm Beach County economy.

Tech startups are also driving into the county.

Modernizing Medicine, is one example. The quicklygrowing medical records firm employs 500 in the county and plans to hire another 800 employees in the near future. Real estate is a perennial driver of the Palm Beach County economy, and recent developments in tax law, among other factors, have helped to sustain the county’s long-running real estate boom. The new $10,000 cap on the State and Local Income Tax (SALT) deduction has led to the flight of many high-income individuals from states with hefty income tax rates to the 0% income tax haven of Florida. These affluent new residents will arrive in a Palm Beach County that is in the midst of a decadelong shortage of new home construction, meaning many may have to rent space in one of the luxury apartment buildings or condos that are being constructed at a steady pace in the county. On the commercial side, things are very much the same, with vacancy rates and supply of office and industrial space remaining at record lows.

In addition to the wealth of flourishing industries in Palm Beach County, there are several other indicators of good economic health, including the county’s bond rating. Nationwide, 3,100 counties were analyzed by the three major rating agencies, Moody’s Investors

CONSTRUCTION ECONOMY OVERVIEW

Michael Mitrione

Palm Beach County per capita income is 50% higher than national average.

Service, Fitch, and Standard and Poor’s, and Palm Beach County was among only 22 that received the highest AAA rating from all three and the only county in Florida to earn this distinction. Fitch attributed its decision to the county’s per capita income, which is 50% higher than state and national averages, its diverse economic base, its moderate debt level, and its overall sound financial position.

Finally, as new companies sprout and flourish, they create more jobs, attracting more people and businesses, and it continues from there. This is exactly the trend that can be seen in Palm Beach County, where the job market increased by 1.4% from 20182019, and where job growth over the next 10 years is predicted to be 39.6%, or 6.1% higher than the natural average job growth.

Employment The employment market in Palm Beach County has been going strong for the last several years. At the end of 2018, unemployment in Palm Beach County fell to 3%, the lowest since 1990, and for the first time since 2005, job openings outnumbered unemployed people 31,667 to 22,225. With these numbers, Palm Beach County is outperforming the nation as a whole, which posted a 3.5% unemployment rate.

By sector, the biggest job gains in Palm Beach County from 2017-2018 were in: leisure/hospitality, 7,000 additional jobs; financial activities, 4,400 additional jobs; professional/business services, 4,000 additional jobs; construction, 1,700 additional jobs; education/health services, 900 additional jobs; and trade/transportation/utilities, 800 additional jobs.

The government was the only category to contract in terms of jobs during this period, losing 2,900 positions in the county. ( )

Shareholder Gunster

How much credit for your success can be attributed to the fact that you are based in Palm Beach?

Gunster certainly benefits from the fact we’re based in Palm Beach County. Our business comprises a high percentage of high-net-worth individuals and large companies. Palm Beach County is home to both of these types of people and companies. We are the anomaly among law firms in Florida in the sense that we grew up here while most other large law firms grew up in Miami and worked their way up the coast.

I attribute our success to the teamwork and the culture that we have. Our offices and our practices are not silos; in fact, people are incentivized to work with other people and other offices. We promote a culture of being involved in the community.

Have you experienced any challenges in hiring skilled labor in Palm Beach?

We have not had any trouble with hiring skilled talent in recent years. Whether it’s lawyers or administrative staff, we have been very fortunate. I think the Palm Beach community is unique in that it’s part city, part suburb.

I’m originally from New York City so I’m very much a city person, but I think we have the best of both worlds here in Palm Beach County, in particular in West Palm Beach. We have a lot of culture and diverse activities, but we don’t have some of the negatives that a very large city has.

Why do you believe people choose to do business in Palm Beach County?

There is a lot of opportunity here for anyone who is seeking a job or career and wants to make a name for themselves. At the core of every thriving economic region is a strong education system. Palm Beach County is one of the largest school districts in the entire country.

We have a very good school district that is continuing to improve. I think it’s imperative that the residents in the business community rally behind our education system. www.capitalanalyticsassociates.com | 15

®

oundtable:

Business attraction The mayors of four key areas tackle the issue of business development, discussing the opportunities each of their communities offers that sets them apart when it comes to enticing business. Sustainability, technology implementation and workforce housing also enter the conversation.

Keith James

Mayor City of West Palm Beach

Mark Marciano

Mayor City of Palm Beach Gardens

What are some of the unique business opportunities in West Palm Beach?

A unique benefit to look at in West Palm Beach is our workforce. We conducted an economic development study last year that showed that our labor shed was around 680,000 available workers, and an aboveaverage number of those people are college educated. A business that wants to locate in West Palm Beach should look at not only the caliber of the workforce, but also our location. There is a reason why Virgin Trains USA located a station in West Palm Beach and not in another part of Palm Beach County. I believe it has a lot to do with our urban core. More young people are looking to relocate into urban areas where they can walk to work, have an active nightlife and do not have to be burdened by a car.

What makes Palm Beach Gardens attractive the business community?

There are many opportunities for the whole region to create its own economic engine, but the center of that will be here in Palm Beach Gardens. The presence of companies located in Northern Palm Beach County, such as Scripps and Max Planck, brings an opportunity to encourage biomedical spinoffs. We are already seeing some venture capital showing strong interest in investing, and we are encouraging that growth. With the addition of Class A office space, we look forward to seeing more financial businesses moving into the city. We also have a very strong health network and we are starting to see more biosciences and world-class medical facilities moving into the region.

How do you keep the city’s growth sustainable for the future?

The key is to continue making a great effort to diversify. For example, at the north end of our city, there is a company called Rybovich, which has a tremendous business in retrofitting, renovating, repairing and maintaining superyachts. We have some exciting things happening, and for the most part the efforts toward economic growth have been more organic than anything else. It has not been local government saying, “Thou shalt build.” We certainly try to provide incentives like the creation and the branding of the Flagler Financial District, but a lot of it is talent and businesses that have been attracted to our area. My job as mayor is to continue to create the infrastructure and environment where businesses can thrive and growth can remain sustainable.

What are the greatest challenges facing economic development in Palm Beach Gardens?

While all the construction we have underway is ultimately a positive for the city, it has also caused some issues with transportation. This is something that we know needs to be addressed immediately, and we are now looking at ways to encourage alternative transportation options as well as how to ease the flow of traffic. On a larger scale all of the construction has some environmental impact on the local and surrounding communities. We are looking at ways to create more sustainable and efficient construction practices to reduce this impact. Ultimately our main challenge will always be finding the balance between meeting the community’s needs while also trying our hardest to not disrupt peoples’ daily lives.

16 | Invest: Palm Beach 2019 | ECONOMY

ECONOMY ROUNDTABLE

Todd Wodraska Mayor Town of Jupiter

What specific businesses or industries would the Town of Jupiter like to see more of?

We’re primed and ready for the bioscience sector and the biotech spin-offs of Scripps. We still have yet to land the big employer in the bioscience industry. Since Scripps came online, the Jupiter Medical Center has matured from a regional hospital into a powerhouse player on the healthcare front. By partnering with Scripps, the Jupiter Medical Center has blossomed into this fantastic healthcare facility. With some of the land that we set aside for bioscience, we’re ready to have a large employer locate its headquarters, or second headquarters, in the state of Florida.

What strategies will support workforce housing for teachers, law enforcement and medical workers?

We’re one of the only communities that has actually done something about this issue by adopting workforce housing ordinances. We learned our lessons coming out of the 2008-2009 recession. Since then we have put workforce housing regulations in place, and we now require a workforce housing component in any residential development that comes before us. This can be very challenging because property values in Jupiter are quite high. Right now, we have workforce housing in a new community called Barcelona, which was built three years ago. We also have several other workforce housing units on the books. Each project has to set aside a percentage of their overall budget for workforce housing or buy into a workforce housing program through a group like Community Land Trust or another type of workforce housing solution.

Steven Grant

Mayor The City of Boynton Beach

What are some of the unique business opportunities in Boynton Beach?

My vision for Boynton Beach is a family-friendly farming and fishing city. When Henry Flagler built the train station in the 1920s, that’s what this city was. We’re trying to adopt a version of that designed for the 21st century.

We have a great retail base here. But we’re going to have to start redeveloping that retail presence for the 21st century. Sears, ToysRUs and Sports Authority have all recently closed. We have a lot of the big-box retailers that will need to find a new market or model, and I feel there is a great opportunity now to transform those retail spaces for mixed-use, modern applications, whether it’s co-working spaces or incubators.

How can local government grow the economy while staying community-minded?

The fact that our local government is young and that we’re working toward economic development while having a 21st-century education is going to help us move forward.

We’re embracing new technology in Boynton Beach to make sure that we’re connecting and working with our residents while we all strive to develop as a community and an economy.

How will new technology grants for law enforcement be implemented?

We’re going to be developing a crime center, with cameras and a new dispatch and computer system display. The grant will allow us to start using an integrated camera system and algorithms to help police fight crime and to modernize police training. www.capitalanalyticsassociates.com | 17

Raphael Clemente Executive Director West Palm Beach Downtown Development Authority

How has the West Palm Beach Downtown District evolved over the last few years?

We have a tremendous amount of new development in the Downtown core. We have roughly 1,000 new residential units, about 400 new hotel rooms coming online, as well as two Class A office projects that have just broken ground. There is a tremendous amount of new investment across the region, and we have seen a trend in the adaptive reuse of industrial buildings. The urban vibe is definitely one of the draws of the area.

Palm Beach County’s overall population grew by more than 1% last year.

What impact has the DDA’s pedestrian traffic data collection program had on businesses?

We started working collaboratively with the City of West Palm Beach to measure and quantify the pedestrian traffic on key streets and we are using that information to help new and existing retailers succeed in the Downtown District. That has become a powerful tool for landlords to help recruit tenants. It also lets us measure the impact of events and understand the patterns of our district. One thing we learned right away is that we are becoming very much a 24-hour-aday urban center. The program is now being expanded to introduce 16 sensors in key corridors and locations to capture statistically-significant data on how people move through the Downtown area.

( ) Numerous agencies and organizations work tirelessly to make steady employment growth a reality, including the Business Development Board (BDB), CareerSource Palm Beach County, and many more.

The BDB offers a comprehensive list of services to companies and individuals to help them make a fully informed decision about whether to make the move to Palm Beach County, or to grow in the county if they’re already here. These services include an inventory of available industrial buildings, land and office space; and information on grants, assistance, and financial incentives available through the State of Florida, Palm Beach County, and local municipalities; local buyer and supplier information; and demographics and labor market information.

How does the direction of new developments in Downtown reflect market trends in real estate?

There is a large influx of residential and employment from suburban to urban. Urban hip is the way everything is going now. It is a much healthier and less stressful lifestyle. Walkability is a key component to residential quality of life, and that is something that the City of West Palm Beach and the DDA have focused on. West Palm Beach has been a leader regionally on walkability and quality urban placemaking. Employers are choosing to relocate into our Downtown because its amenities and quality allow them to recruit the talent they need.

Incentives There are a variety of public sector initiatives at the state and local level that are geared toward bolstering the economy of Palm Beach County. Among those is Enterprise Florida, a public-private partnership between business and government leaders throughout Florida, with the goal of expanding the state’s economy through job growth in a variety of competitive sectors.

Using a network of 67 economic development offices across the state, Enterprise Florida accomplishes its job growth goals by helping businesses locate, relocate, and expand in the state. Specifically, Enterprise Florida

18 | Invest: Palm Beach 2019 | ECONOMY

ECONOMY OVERVIEW

helps businesses by providing: a building and sites database, comprehensive Florida business climate research, detailed community profiles on Floridaâ&#x20AC;&#x2122;s 67 diverse counties, liaison with state agencies as needed, site visit coordination with Florida communities, a central contact for companies working with multiple Florida communities, identification of sites that match the required criteria, a determination of companiesâ&#x20AC;&#x2122; eligibility for business incentives programs and assistance with applications, coordination of financing programs and assistance, and facilitation of permitting and regulatory assistance. In addition to these general services, Enterprise Florida places special emphasis on helping Florida companies expand to become international exporters, which is a large and growing facet of Floridaâ&#x20AC;&#x2122;s economy, particularly in Palm Beach County given its strategic location. Finally, Enterprise Florida has a division, called the Minority and Small Business, Entrepreneurship and Capital (MASBEC) Division, dedicated to improving the business climate throughout Florida for minority-owned businesses, small businesses, and entrepreneurs.

The state also helps to incentivize economic growth

ECONOMY OVERVIEW

Renée Jadusingh Executive Director – Delray Beach Community Redevelopment Agency In the CRA District and Downtown, we have many smaller mom and pop-type stores and businesses that we want to keep in the area. Rental rates are continuing to increase. By providing better connectivity and low-cost office space, we can encourage economic growth in our district and within the Downtown. It also helps small businesses thrive and grow their operations. Also, we are preparing designs for a small office park that we would operate ourselves near I-95 and Atlantic Avenue since we own properties that would be appropriate. CRA lead commercial projects such as this increase the overall marketability of the City as a commercial, recreational and residential area that will ultimately increase the tax base in Delray Beach. within its borders, including within Palm Beach County, through the creation of a favorable business climate. The cornerstone of this favorable climate is Florida’s 0% personal income tax, which has obvious and immediate benefits for employees, and a host of tax exemptions for corporations. Florida also offers expedited permitting processes that allow businesses to get things done faster, which in turn allows them to get paid sooner. Finally, it is generally cheaper to do business in Florida, in terms of the cost of land, labor, and other overhead expenses, than it is in states like New York and California, especially for hightech companies. The state may even offer additional financial incentives to these types of firms.

Locally, Palm Beach County BDB is a sophisticated and active agency dedicated to the county’s economic

More than 7.3 million people visit Palm Beach County annually, and they spend approximately $4.6 billion while they are here.

20 | Invest: Palm Beach 2019 | ECONOMY

development. The BDB employees a playbook of literally award-winning strategies to promote the sustained and sustainable growth of Palm Beach County’s economy. In 2019, the BDB won three Promotional and Marketing Innovation awards from the Florida Economic Development Council for its publications Profile and Palm Beach County Business, and for its novel ad campaign targeting CEOs in the Northeast. The BDB was also recognized by the Palm Beach County Medical Society for its Innovation in Healthcare, and in particular, its more than 20 years of dedicated efforts to support the growth of the life sciences sector in Palm Beach County.

One of the most important ways in which the BDB promotes economic growth in Palm Beach County is by partnering with schools and students to ensure that the

CONSTRUCTION ECONOMY OVERVIEW

skills of graduates match the needs of employers. The BDB’s commitment to these workforce development partnerships culminated in its hosting of two important events in early 2019: the Academic Leaders Council, which focused on aligning the curriculum of county schools with the needs of employers in the tech sector. A few days later, the BDB and the Palm Beach County School District hosted the Claim Your Future Showcase, an event where students can learn about career opportunities in the county. Both events showcase the steps taken by the BDB and other community stakeholders to ensure the development of an informed, skilled workforce that is ready to seize its own future while facilitating the continued expansion of Palm Beach County’s economy.

Emerging tech One of the most exciting developments in Palm Beach County’s economy is its burgeoning tech scene. “Last year Palm Beach Tech membership, operations, budget and staff essentially doubled in size. As an organization we are growing, but ultimately our success is predicated on the success of the entire industry. That’s what we pride ourselves on,” Joseph Russo, executive director of Palm Beach Tech Association, told Invest:. West Palm Beach, in particular, is cultivating a reputation as a rival to Silicon Valley itself. This is due to a variety of factors, including the increasing competitiveness and expense of starting and running a business in Silicon Valley, as well as the favorable business climate and competitive talent pool of today’s Palm Beach County. This talent pool is particularly important to the expansion of the county’s tech sector. An everdecreasing median age, which sits at 39, is a sign that young people are moving to Palm Beach County, and with them will come an increased interest in and focus on tech. This is already apparent in the BDB’s Academic Leaders Council, which is focused on ensuring students learn the necessary skills for high-tech careers. The county is also working to make itself more millennialfriendly, which means better public transportation and more walkable, multi-use cities, which the younger generation values highly.

These efforts are already bearing fruit, with 162 high-tech firms and startups operating in Palm Beach County, including Ship Sticks, a company that transports oblong sporting equipment, and HotelPlanner.com, a hotel-booking service. Arrow, a West Palm Beach-based software development company, grew from 80 employees to 160 in under a year, a good sign for the further development of the depth of Palm Beach County’s talent pool.

David Scott Director of Economic Development and Strategy The City of Boynton Beach

How is Boynton Beach attracting investment and development?

Economic development in South Florida is currently at an all-time high, and Palm Beach County is well-positioned to attract new investments. As the third-largest city in Palm Beach County, the city of Boynton Beach embraces its role as part of the county’s economic ecosystem that supports business expansion and generates jobs.

Through our regional partnerships that include public, private, and nonprofit stakeholders, the city leverages our collective assets to spur development.

How is Boynton translating state growth to the city’s development?

Florida’s economy is projected to grow exponentially over the next few years. It is the city’s responsibility to translate this growth to our local economy. Doing so requires taking a unique approach to economic development. Rather than competing, which is the old way of approaching economic development, the city takes a regional approach by developing partnerships with various stakeholders. Kelly Smallridge, President/ CEO of the Business Development Board (BDB), is one of those conveners. The city is an active participant on the BDB Economic Development Stakeholders Taskforce, a group that works to leverage collective strengths in order to attract businesses and jobs to Palm Beach County. We support local legislation and policies that seek to transfer the benefit of economic development to local communities and encourage our developers to hire local and contract with local businesses.

What is your outlook for the coming year?

The South Florida population (including that of Palm Beach County and of Boynton Beach) is flourishing, partly due to the mild climate, active lifestyle, and growing economy. The city of Boynton Beach is very excited about what the future holds for attracting new businesses. It’s a great time to be in Boynton Beach. www.capitalanalyticsassociates.com | 21

Mark Bideau Co-Managing Shareholder - West Palm Beach Office Greenberg Traurig, P.A.

How much do you attribute the region’s business growth to Palm Beach County’s location?

Palm Beach County is a great place to do business because of the region’s population growth and demographics. People are attracted to our county due to our ability to offer a high quality of life, combined with low taxes and access to professional opportunities within some of the most progressive industry sectors – like aerospace engineering, information technology, energy, healthcare and life sciences. More traditional business sectors, like hospitality and agriculture, are also strong here. Together, the strength of the overall business community is what makes Palm Beach County’s economy strong and the county attractive to both companies and individuals.

Do you find it hard to attract new and professional talent?

Attorneys are naturally drawn to regions and firms where they feel their talent will best their serve clients, so Greenberg Traurig in West Palm Beach has always found it easy to recruit. Our attorneys know they have the benefit of being in a local firm that has global reach due to Greenberg Traurig’s platform that allows us to leverage the skills of legal teams to meet the demand from clients whenever and wherever it arises worldwide.

What is your outlook for the region in the coming year?

We foresee continued growth in the region. It’s evident when you drive around the downtown area and see all the new real estate development, especially in the residential housing sector. Part of this growth is due to changes in national tax laws.and Palm Beach County’s very favorable business environment. We at Greenberg Traurig expect to see this trend continue and look forward to growing alongside the region where we work and live.

22 | Invest: Palm Beach 2019 | ECONOMY

As of 2018, Palm Beach County had a base population of 1.49 million, making it the third-largest county in Florida behind MiamiDade and Broward.

Challenges Although the economy of Palm Beach County is an undeniable powerhouse, its continued population growth to more than 1.5 million residents over the coming years will not be without its challenges. Chief among these challenges is the need to update West Palm Beach’s downtown to accommodate the massive influx of companies and workers that is already underway and which shows no signs of slowing. This means expanding public transportation, housing, office space, and infrastructure. Fortunately, redevelopment efforts are already well underway.

For instance, consider the $145 million project at the site of the former West Palm Beach City Hall, which is scheduled for completion by the end of 2019 and will consist of 210-room Marriott Autograph Collection Hotel, 251 luxury rentals, a restaurant, retail space, and a parking garage. The hotel in particular is notable, in that it is the first waterfront hotel constructed in West Palm Beach in generations, helping address growing demand in the county. The new Brightline station on Clematis Street helps to improve public transportation in the area with high-speed rail service. There is also a new 25-story luxury condo on the waterfront called Bristol, which consists of 69 units.

However, alongside the wealth and growth of West Palm Beach, the county must also confront the economic development of the Glades, where three of Florida’s 10 poorest cities can be found. Several past attempts have been made to economically revitalize these three Glades cities, including adding jobs by opening a recycling facility, a candy factory, a Guy Harvey Outpost Resort and a fertilizer plant, but every

ECONOMY OVERVIEW

Tracy Gerber Co-Managing Shareholder - West Palm Beach Office Greenberg Traurig, P.A. We are consistently able to attract top legal talent because we provide sophisticated work opportunities and a culture of inclusivity and diversity where entrepreneurial and highlymotivated attorneys thrive. That success is a testament to the culture of our firm and the success we have had in Palm Beach, South Florida, across the country and beyond.

We have always been pleased to be a part of Palm Beach County’s growth story and are highly optimistic that the county’s economy is - and will remain - on an upward trajectory. At Greenberg Traurig, we are fully committed to the success of the region’s communities and businesses, which we strongly believe are the engines that power progress. single one of these endeavors fell through short of in Palm Beach County, there is also the challenge of retaining local character. That is what gives many completion.

The BDB, CareerSource, and various state and local locales in the county their charm and leaders are officials, however, are determined to keep trying. Some determined to maintain those particular features. recent promising news includes Tellus announcing “Preserving our small-town character is a priority. that it is hiring for its new 120,000-square-foot Density development along the US 1 waterfront areas factory; Passages promising to hire 225 for its new will provide financial sustainability for years to come,” rehab facility, and the remaining potential for an says Michael O’Rourke, the mayor of Town of Lake Park, inland logistics center. CareerSource’s “buy local” in an interview with Invest:. “We are enhancing the campaign generated $25 million in sales for Glades- town by creating development opportunities that fit the area businesses, and their workforce training and unique character of our town. Development to the town means preserving our character placement programs have helped while approving projects that more than 8,400 Glades residents create economic sustainability.” find jobs since 2011. Finally, the state of Florida has also promised to provide non-agricultural job Looking ahead training and education as part of Palm Beach County’s economy its initiative to build a reservoir enjoyed strong years in 2018 and near Lake Okeechobee.

2019 despite a tense period for Michael O’Rourke Another of the county’s global trade and the U.S. economy.

Mayor of the Town of Lake Park biggest challenges is the ongoing Unemployment in the county affordable housing crisis. According to a study by the reached its lowest point in decades while the tourism and Florida International University Metropolitan Center, tech sectors soared, and several workforce development the median rental price in Palm Beach County is programs focused on helping Palm Beach County unaffordable for roughly 80% of renters in the county. residents capitalize on the new, sophisticated jobs that The county is looking at the many possible causes of this growth is creating. In addition to these worker the crisis, including governmental rules that make enrichment programs, other state and local initiatives construction of new housing unreasonably expensive are helping to ensure that Palm Beach County attracts – 25% of the cost of new construction consists more and better businesses and workers to the county. of mandates and fees to the county – while also Although the challenge of creating additional affordable considering alternatives to help alleviate the shortage housing throughout the county for this influx of workers of affordable housing for the working class. remains a hurdle, there is substantial redevelopment Given the rapid pace of growth and development underway, particularly in West Palm Beach.

Density development... will provide financial stability.

www.capitalanalyticsassociates.com | 23

Real Estate: Real estate is all about location and Palm Beach County is replete with prime space and opportunity. But demand is outpacing supply, especially in the office segment, and there are a few red flags on the horizon. While few experts believe a market crash is coming, some warn that a cooling may be on the way.

www.capitalanalyticsassociates.com

| 25

Real Estate in numbers: Year

Median Sale Price

Percent Change Year-over-Year

Year-to Date

$352,000

2.0%

August 2019

$355,000

4.4%

July 2019

$355,013

1.4%

June 2019

$356,990

0.6%

May 2019

$364,900

3.1%

April 2019

$350,000

0.0%

March 2019

$350,000

0.6%

February 2019

$340,000

-1.4%

January 2019

$340,000

4.6%

December 2018

$344,700

0.9%

November 2018

$348,000

5.5%

October 2018

$347,500

6.9%

September 2018

$345,000

6.2%

August 2018

$340,000

0.0%

Median Sale Price (50% of sales were above and 50% of sales were below)

Economistsâ&#x20AC;&#x2122; note: Median Sale Price is the preferred summary statistic for price activity because, unlike Average Sale Price, Median Sale Price is not sensitive to high sale prices for small numbers of homes that may not be characteristic of the market area. Keep in mind that median price trends over time are not always solely caused by changes in the general value of local real estate. Median sale price only reflects the values of the homes that sold each month, and the mix of the types of homes that sell can change over time.

Median Sale Price: 2018

$400K

2019

$300K

$200K

$100K

$0K

A

S

O

N

D

J

F

M

A

M

J

J

A

Source: RealtorsÂŽ of the Palm Beaches and Greater Fort Lauderdale

26 | Invest: Palm Beach 2019 | REAL ESTATE

Year

Closed Sales

Percent Change Year-over-Year

Year-to Date

12,082

-1.9%

August 2019

1,566

0.6%

July 2019

1,775

15.7%

June 2019

1,692

-6.3%

May 2019

1,870

8.7%

April 2019

1,714

1.4%

March 2019

1,521

-8.9%

February 2019

1,098

-9.8%

January 2019

846

-23.3%

December 2018

1,229

-11.4%

November 2018

1,189

-4.3%

October 2018

1,459

15.7%

September 2018

1,227

12.9%

August 2018

1,576

1.7%

Closed Sales

The number of sales transactions that closed during the month Economists’ note: Closed Sales are one of the simplest—yet most important—indicators for the residential real estate market. When comparing Closed Sales across markets of different sizes, we recommend comparing the percent changes in sales rather than the number of sales. Closed Sales (and many other market metrics) are affected by seasonal cycles, so actual trends are more accurately represented by year-overyear changes (i.e. comparing a month’s sales to the amount of sales in the same month in the previous year), rather than changes from one month to the next.

Closed Sales: 2018

2,,000

2019

1,500

1,000

500

0

A

S

O

N

D

J

F

M

A

M

J

J

A

Source: Realtors® of the Palm Beaches and Greater Fort Lauderdale

www.capitalanalyticsassociates.com

| 27

Demand conundrum: Demand drives supply. In Palm Beach County, the real estate market is having trouble keeping pace. Is that a problem in the making?

The real estate market in Palm Beach County, like the rest of South Florida, is in the midst of a boom, but there are a handful of red flags. Although a shrinking unemployment rate, ballooning population, and miniscule vacancy rate are all good for the county’s real estate market, it is important to keep in mind that all this growth has a less desirable downside: reduced supply.

When there is not enough vacant property, prices tend to go up, which often prices out a large number of people who already live in the area, not to mention excluding many who may otherwise wish to move in.

Foreign investment also continues to pour into the luxury housing and condo markets, but no longer at the rapid pace of previous years, and as foreign investment in Palm Beach County cools alongside a tense global economy, talk of a housing bubble within the county is growing. However, other experts say that although the market will likely slow, it will not crash.

Residential market Overall, Palm Beach County’s real estate market had a strong 2018, and 2019, though comparatively cooler, is starting to heat up after a sluggish start. During the 28 | Invest: Palm Beach 2019 | REAL ESTATE

first few quarters of 2018, there was an extremely high volume of residential transactions with high price tags.

In the first three months of the year alone, there were 47 closings of single-family properties throughout the county, 62% more than in Q1 2017. Combined, these transactions were worth $328 million, which again represented a 28% increase over the total dollar value of transactions in Q1 2017. More than a dozen of these transactions involved single-family properties valued at more than $17 million, including a $59.5 million lakefront property. The sale of single-family homes valued between $5 million and $10 million nearly doubled, to 14 transactions, compared to the same period in 2017. 2019’s numbers are also starting to show promise of a similarly robust market, with more activity between March 1 to May 1 of 2019 than in the five months prior, and four homes ranging in value from $15 million to over $28 million under contract in Q2 2019 alone.

“Right now in Palm Beach, prices are high, and we don’t have any more land. Properties are being torn down and rebuilt, and there’s not a lot of oceanfront property available. When people find a property,

REAL ESTATE OVERVIEW

they want to buy. New construction is doing very well both in Wellington and Palm Beach. I see things just getting more desirable. We won’t be able to keep the higher end product on the market,” Carol Sollak, license partner for Engel and Volkers, told Invest:.

Russell Barnes, regional leader of Kimley-Horn and Associates, Inc., adds that opportunities exist in both the public and private sectors. “In Palm Beach County, we’ve been able to expand both in the private and public sectors. Right now, we see the private sector market opportunities in housing, commercial, and retail development. On the public side, our focus is the infrastructure that supports all the new residents moving into the county. Some of our recent projects are the multifamily projects in downtown West Palm

Beach, enhancements to some of the local malls, and expansions to several hospitals. Our services have also included upgrades at the Port of Palm Beach, many municipal streetscape improvements, upgrades to water and sewer treatment facilities, and several resiliency projects.”

Among the beneficiaries of the booming market are gated communities, that are also seeing heightened competition. “Most of the residential communities offer different memberships for their various amenities. We offer an all-”inclusive” membership which entitles our members to enjoy all and any of the amenities. The only business we’re in is providing excellent service, and that is what our residents who live here are looking for. Whatever is requested has ( )

REAL ESTATE INTERVIEW

Big changes People coming to Palm Beach County have different expectations than before in terms of the experience they want to have

Jeff Greene Investor How has the Greene School become a staple in this community?

Currently, there are 106 students enrolled in the school.

I have a personal interest in elementary education, which can be attributed to my three young kids, ages five, seven and nine. Three years ago, when they were two, four and six, they were enrolled at a local private school. It’s a perfectly fine private school, but I didn’t believe it to be a great private school. We didn’t really feel that the school was interested in changing its culture. We felt that it was content being what it was.

That’s when we said, “Let’s go out and start our own private school.” My wife and I built a 30,000-foot new building with a full basketball court, gym and all kinds of classrooms. We have no more than 16 kids per grade and two teachers per classroom, all of whom have master’s degrees.

Children have to be tested to receive admission, and once they are in they pay what they can afford.

If a child’s family can afford a full tuition, then they pay that. If they can only afford $1,000 then they pay that. This is my first experience in active philanthropy where we are actively involved and enjoying it.

Can you tell us about your project One West Palm and its expected impact on the community?

Palm Beach County, or more specifically West Palm Beach, is going through some very big changes regarding who lives here. How they act here and what they do here needs to be addressed in a significant way. Today, people come here looking for a different and better experience. They’re looking for better restaurants, better office space, better hotels, etc. What we’re building are two 30-story towers that will house over 200 class A office spaces, 327 high end apartments with amenities unsurpassed in West Palm Beach, and a luxury hotel, offering the options and amenities these new residents require.

30 | Invest: Palm Beach 2019 | REAL ESTATE

How can leaders in Palm Beach County help to reduce the income gap?

The first thing business leaders have to do is elect people who care about this issue. I 100 percent believe in capitalism. I think it is the best system and has proven itself. But in order to grow an economy, you have to have opportunities for people to go out there and create jobs.In our society, we all have different starting lines. I grew up in Worcester, Massachusetts, with nothing, but I had a great family who instilled strong values. As a society we need to make sure every child gets to the same starting line, and that, to me, is accomplished through education. We all have to recognize that we have to take care of our kids.

REAL ESTATE OVERVIEW

At a sale of more than $110 million, La Follia is the most expensive home ever sold in Palm Beach.

been anticipated or is already built in to our model,” million-dollar homes. This is something that we were said Achal Goswami, COO and executive director of not seeing a few years ago. As the Palm Beach business market grows, we are attracting younger professionals Frenchman’s Creek, Inc. However, the luxury market only tells part of the story. who are looking for their first homes and making While the roaring market for luxury homes and condos investments in beautiful properties.”

As these investments continue, the market could is good news for the county, it is not necessarily good maintain growth but at a cooler news for everyone living in, or pace. The average price of a house planning to move to, Palm Beach in Palm Beach County is 3.7 times County. Housing prices continue the average annual income, to soar as the tide of new residents whereas the 20-year average is swells and developers struggle 3.1 times. This indicates that to keep up with demand. As a homes in Palm Beach County are result, even more modest lots can overpriced, but not radically so, cost as much as $250 per square which is a reassuring indication foot. That means that if you want that Palm Beach County isn’t in to buy a 100x100 foot home in a housing bubble. For the time certain parts of the county, which being, things remain fairly stable, is on the smaller end for singlewith the median home price family detached houses, it might Jason Isaacson reaching $348,000 in November set you back $2.5 million. Those IP Capital Partners 2018, up 5.5 percent from in their prime home-buying years, millennials, generally have too much debt and November 2017, while the median time for a house to are paid wages that have not adequately kept up with sell was 92 days, compared to 101 days a year earlier.

Some of the most notable residential real home price appreciation. Even here, however, there are positive signs, Chris Heine, Jr., president of Chris estate transactions in Palm Beach County during Allen Realty, told Investy:. “We are seeing trends 2018 include the sale of all but two of the 101 surrounding millennials and young professionals here units in The Azure, a luxury condo building in the region. Young professionals in their late 20s with units ranging from 2,745 to 5,161 square and early 30s are renting luxury condos and buying feet and up to $3 million in price; the sale ( )

Over the next decade, we see Florida going in a positive direction, but there will certainly be blips along the way.

www.capitalanalyticsassociates.com

| 31

®

oundtable:

Tracking trends A good sized population and workforce, the ‘new to market’ story and Palm Beach County’s rapid growth compared to its southern neighbors are among the area’s key attributes, according to sector leaders .

Michael Feuerman

Senior Vice President Berger Commercial Realty

What were the company’s highlights from the past year?

The last year has been productive for us. We hired two new brokers, one in Broward and one in Palm Beach, and we’re continuing to add to our portfolio. Right now we have about 7.5 million square feet of commercial property under management, and roughly 6.5 million square feet listed.

What makes this region a compelling area for investment?

South Florida in general is a cosmopolitan region. In Palm Beach County we have a population close to 1.5 million. The workforce is just under half of that. That’s a good population size with a solid workforce. Palm Beach also has a substantial office market at around 55.6 million square feet and an industrial market around 62 million square feet, but our rents are lower than our neighbors to the south.

In which sectors are you seeing the most growth in Palm Beach County?

The medical industry has grown substantially in the Palm Beach area and as a result many of my clients are in the healthcare sector and looking to expand their footprint.

Another trend we’re seeing is that office users are needing more efficient spaces, or smaller office spaces that can fit the same or more people comfortably. Being that these are usually the same buildings with the same structural footprint, parking has become a challenge.

Rideshares, autonomous vehicles, public transportation and parking decks are all floated as possible solutions for this.

32 | Invest: Palm Beach 2019 | REAL ESTATE

REAL ESTATE ROUNDTABLE

Mark Pateman

Managing Principal Cushman & Wakefield

What trends are visible in Palm Beach County?

Our story is consistent with our neighbors to the south.

The urbanization trend is real: most of our demand still remains in the central business district. One of the main elements driving this trend is the fact that we haven’t had a new Class A building built since 2008. Even though we have availabilities, this is why the type of availabilities don’t necessarily meet the demand.

We do have a new-to-market story as well. There are a lot of individuals moving down here for tax reasons.

The media tends to refer to these types of clients as hedge funds, but they’re less hedge funds in the longshort traditional sense as they are proprietary traders who have had some kind of capital event. These people are looking to move down here for lifestyle reasons, but they also want to set up shop in Palm Beach. They’re not typically large space users, so they don’t move the needle in a significant way in terms of office absorption, but they are also not as rent sensitive, and they want the best space available: high floors in the best buildings with beautiful oceanfront views.

How was the market impacted by the tax bill?

Interestingly enough, we did see a significant bump in tour activity after the tax bill passed last November. My team alone has about 2.8 million square feet of landlord product at present. That’s a very strong office portfolio.

We average about 10 tours a month across that portfolio, but the week after the tax bill passed that 10 tours jumped to 30, and it stayed there through the summer. That kind of number is significant because Palm Beach is still much more seasonal than Broward and Dade counties.

Jordan Paul

CEO NAI/Merin Hunter Codman

What successes have you had in the last 12 months?

We are a full-service commercial real estate firm. We’re primarily involved with office, retail and industrial. In the last 12 months, we have expanded our roster of clients and investors. Our acquisition practice has added roughly $300 million in Class A office space. There has been strong interest in the potential of the Palm Beach office space sector. We’ve established new relationships and brought in new clients.

What is unique about Palm Beach County?

In terms of development, Palm Beach County is the newest addition to South Florida. This market has newer product and has grown rapidly relative to our neighbors to the south. I first came here in 1993, and the explosive growth that we’ve seen in the northern and western parts of Palm Beach County have been phenomenal. All of the new housing options make Palm Beach County a great place not only to work but also to live and raise a family.

What does the next year have in store?

In the near future, we’re going to continue to move forward in our investment programs, for ourselves and our institutional partners. We think that Palm Beach County still has a lot of room to grow from a demand and industrial rental income standpoint. When the recession started to trail off and we returned to prosperous economic growth in 2014, we saw a tremendous runup in our commercial rental rates in office, retail and multifamily. Barring any major macroeconomic hiccups, we anticipate that we’re going to continue to have strong rental growth for the next several years. www.capitalanalyticsassociates.com

| 33

REAL ESTATE OVERVIEW

Ryan Kratz President, Southeast Region | US Brokerage Colliers International We have not seen any signs that would lead us to believe that a downturn is near. In our industry, typically the leading indicator of a downward trend is vacant land sales. When vacant land sales start to slow down or pricing is starting to change dramatically, we will then see a follow-on decline of activity in office, industrial and retail. This is less so in apartments and medical offices, some of the more resilient areas of commercial real estate, but as of now we have continued to see land prices escalate. There are still plenty of buyers and pricing is aggressive for vacant land, but the deals are still getting done, which tells us that we are in a healthy market.

( ) of the 85-unit Alexander Living Apartments for $102.99 million to Arlington, Virginia-based Avalon Alexander LLC; BRP Senior Housing Management’s purchase of 15 acres of farmland for $9 million, which it plans to turn into a $150 million seniors housing community; and the Related Group’s acquisition of a plot of vacant land for $14.76 million, where it plans to develop a 360-unit apartment building.

Rental market The rental market in Palm Beach County, not unlike the market for homebuyers, is presently marked by a crisis of affordability. At the time of the affordable housing summit held in Palm Beach County in 2018 and attended by government officials, mortgage lenders, and real estate developers, the median gross monthly rent in the county was more than $1,900 – an amount that is beyond the financial reach of 80% of county residents. However, because the cost of buying a home has also risen steadily to outpace wages, the number of renters actually rose by 25% between 2000 and 2015. This led to the Miami real estate market, which encompasses Palm Beach County, having the highest percentage of renters spending more than 50% of their income on rent in 2017 out of all metropolitan areas with a population of more than 1 million people. This is indicative of an unsustainable affordable housing situation, where even those with stable jobs struggle to make rent.

A variety of organizations are working to address the affordable housing crisis in Florida, such as Starz Foundation and Crisis Housing Solutions, which are championing multifamily housing solutions that cost less to build as one means of providing more affordable shelter for renters. For example, Crisis 34 | Invest: Palm Beach 2019 | REAL ESTATE

Housing is a proponent of container housing, which repurposes material from recycled shipping containers into stylish housing units. Another organization that works to develop and maintain affordable housing in the region is Carrfour, which recently received approval for a development in West Palm Beach.

Commercial trends As with the residential space, the commercial real estate market in Palm Beach County is confronting difficulties with meeting the demand of incoming corporate tenants, who are flocking to the county in record numbers. This is especially true for office space. “The modern-day office is changing and adapting to accommodate four generations in the workplace,” says Mark Feltingoff, CEO of JC White.

“With a tight labor market, we see employees interviewing the employer. As corporations compete to attract and retain employees, it’s becoming evident that their spaces must also change, in order to keep employees happy at work. JC White recognizes this need and has responded to it by offering our clients technology-integrated products and wellness and workplace strategy services.” Many West Palm Beach economic development officials believe that there is an insufficient supply of Class A space in the city to accommodate all the businesses seeking to move here from Manhattan, Boston, and Connecticut, among other locales. “Over the next decade, we see Florida going in a positive direction, but there will certainly be blips along the way. From the office perspective, the demand and supply imbalance has been going on for so long that eventually we do need to add some supply or we risk seeing hyper-rent growth that is

Dionna Hall CEO Realtors of the Palm Beaches & Greater Fort Lauderdale

What are some of the unique real estate opportunities that Palm Beach County offers in comparison to other markets in South Florida?

Although I’m not a realtor selling in the marketplace, I think that in Palm Beach County we have enclaves of very diversified living. Whatever someone is looking for, whether it’s equestrian or beach-style living, suburbs or city life, Palm Beach County offers a lifestyle that has something for them. It’s a great place to raise a family, live and work in, and now that Brightline connects the Tri-County Area, the sky’s the limit.

We’re currently gauging the real estate market as we go. We know that home prices are near an all-time high, but the economy remains strong. The sales price of some homes have softened a bit, but that doesn’t seem to be deterring Realtors from getting into the market, and they’re still very optimistic.

What are some ways that technological innovation is changing the real estate market?

On the national front, there are many different business models for brokers. We have traditional brokers with brick-and-mortar offices, but we’re also seeing business models such as that of eXp Realty, which uses virtual offices. Another brokerage model has one broker for the whole state and local agents in each market.

These different models are emerging mainly because of technology – Realtors have a lot more options, whether it’s coming into the office every day, working from home or even from another country. Obviously everything centers around having an iPhone, and so what we do here in regards to technology is make sure everything’s integrated so realtors have what they need at their fingertips. We make sure that our MLS has an app that’s easily integrated on their phones, and that they have different applications that allow them to access a variety of property information.

36 | Invest: Palm Beach 2019 | REAL ESTATE

Traditional malls are finding ways to reinvent themselves with the constant pressure of e-commerce.

unsustainable. We need to see some new construction in the office sector to help with the demand,” Jason Isaacson, president of IP Capital Partners, told Invest:.

To address the supply problem, the first two new office buildings to go up in West Palm Beach in over 10 years are under construction: 360 Rosemary and One West Palm. When complete, 360 Rosemary will offer 300,000 square feet of office space in the heart of the Rosemary Square mixed-use development. “In the near term, there will be plenty of development in downtown West Palm Beach with continued efforts to develop more Class A office space. This summer, Related Companies will break ground on 360 Rosemary, a 300,000-square-foot Class A, LEED Gold office building adjacent to the (Virgin Trains USA) station. Over the next five years, Related Companies will shape the development of Rosemary Square to include a 21-story LEED Gold mixed-use tower with state-of-the-art luxury residences and commercial space, as well as a second hotel adjacent to the Hilton West Palm Beach,” noted Gopal Rajegowda, senior vice president of Related Companies. One West Palm, one of billionaire Jeff Greene’s many developments, will also be a mixed-use development consisting of Class A office space, and will also be the two tallest towers ever constructed in the county. Both projects are expected to be delivered by 2021. As demand squeezes supply, businesses are also turning to new concepts for their workspace. “We’re really starting to see businesses

CONSTRUCTION REAL ESTATE OVERVIEW

Rick Gonzalez President REG Architects

What were some highlights for REG Architects in 2018?

One of the highlights was the celebration of our 30th anniversary last spring. We have been awarded some nice projects, like the campus for the Seacoast Utility Authority in Palm Beach Gardens, and we have also been doing new residential work. Last year was probably the best year since 10 years ago, when we had the big recession, and 2019 has started very well transitioning to co-working spaces and updating these spaces with the newest technology, enabling people to work anywhere within the office,” Michele Pellico, regional manager of Florida for Property Group Partners, told Invest:.

The supply-demand story is much the same in industrial real estate. Palm Beach County has one of the country’s tightest industrial property markets, thanks to the convergence of a rapidly ballooning individual and corporate population and a yet-to-recover construction industry that is struggling to meet demand. This has kept vacancy rates for industrial space extraordinarily low, and every new transaction matters.

One such transaction in 2018 was the sale of four warehouses consisting of a total of 125,453 square feet

by SL Fairfax Industrial Park LLC to L. Fax LLC for $10.03 million, a significant gain over the $6.14 million the property sold for in 2016 that reflects just how tight the industrial real estate market is right now. Another notable development is developer TAM-CAT 45th ST LLC’s proposal to build a 23,390-square-foot addition on the south side of its existing office building at 2400 Metrocentre Boulevard, and a five-story, 90,000-squarefoot self-storage facility called Bee Safe Storage and Wine Cellar on the north side. The redeveloped site would also feature 231 parking spaces. The project is still seeking final approval. Finally, Cushman & Wakefield closed a $25.8 million deal in December 2018, further illustrating the vitality of the market.

What are some unique qualities that set REG Architects apart from other firms in the area?

Besides our longevity, our approach to design work sets us apart. We do a lot of historic preservation in our office; we like to use historic context for designing to be inspired by a historical place. For example, at Mar a Lago, we used the design of the place as inspiration.

What services are seeing the most demand in your firm today?

We have a healthy balance between commercial, residential and governmental projects. In terms of design services, we do all our work now in Revit, which is a robust architectural design and documentation software application with a 3D modeling system. Animation is now very important for clients and is seeing high demand. We are also known for our design preservation work.

Have you seen any emerging trends in design with more young professionals moving to the area?

People are picking the place first, and then they’re looking for the job. They want to come to exciting, invigorating places like Downtown West Palm Beach or Downtown Boca Raton — cities that are unique and well-positioned where they can live, work, play and study in the same area. People also want to work in interconnected open office spaces, and they want to live in smaller units with diverse community features.

www.capitalanalyticsassociates.com

| 37

REAL ESTATE OVERVIEW

William Reichel President – Reichel Realty & Investments

The real estate market in Palm Beach County will continue to grow, and I don’t see any stopping it. While there will be ebbs and flows, there’s a lot of capital and tremendous wealth in the area that is driving the market. As a broker, we get paid when the transaction is completed so we are incentivized to be engaged in the whole process, to make sure that it goes smoothly, is done properly and as timely as possible.

Mixed-use development, meaning property that combines residential, office, and retail space into a single, public transportation-adjacent package, is on the rise, and this has led to a steady uptick in the demand for retail space. This has been noticed by local business leaders like Mark Troen, senior vice president of Brookwood LLC. “We are seeing disruption and transformation in the retail market, but those uses do not just disappear. What’s happening now is that experiential retail is growing and becoming more significant, while the observed model itself changes. This in turn has transformed industrial space, with logistics and distribution uses becoming replacements for conversion of big-box retail stores and older, underutilized spaces. In fact, the amount of occupied retail space has dropped in all major cities upwards of 12 percent. That is a huge number, and as a result rents have declined.” Traditional retail malls face a similar issue in keeping up with changing times and fresh competition from nontraditional sources. “In this business there is the challenge of keeping up with the times while making sure that we meet customers’ demands. Our competition now comes in many forms, whether that is the internet or a direct competitor in the region. We always want to be projecting new and improved, and this isn’t always necessarily a challenge, but more of an opportunity.

To be successful, we have to have a team that is always thinking of what we can do next to make sure that we are staying ahead of the curve. For instance, we are adding a 1,600 square-foot recreational space called PLAY that will feature a combination of seating and interactive play elements inspired by local waterways and waterfronts. Everybody that we work with has to be on the same team and have a philosophy of approaching this shopping center as a five-star resort,” said Sal Saldana, general manager of Town Center at Boca Raton.

38 | Invest: Palm Beach 2019 | REAL ESTATE

Overall, there was more new retail space construction in Q3 2018 than there was at the same time for the past three years, and there is a total 668,250 square feet more space under construction. This construction boom coincided with a 17% increase in retail rental rates to a pre-recession high thanks to a consistently low vacancy rate. The biggest retail real estate sale of 2018 was Kroger’s acquisition of a 73,840-square-foot shopping center and bank branch from Delray for $17 million.

Opportunity Zones The 2017 Tax Cuts and Jobs Act also provided tax breaks to investors who put money into funds that invest predominantly in low-income areas, or Opportunity Zones. By incentivizing investment in these specific areas, the law is expected to redistribute existing wealth among areas that desperately need it. There are 26 Opportunity Zones in Palm Beach County, all of which are located in low-income communities. Incentivizing development in these communities could help to combat their consistently low economic performance. “Opportunity Zones are present in Palm Beach County; however, we have not seen much traction from companies looking to relocate or put a business in these zones. I believe part of the issue is the fact that the Opportunity Zones in Palm Beach County are few and far between, and they are in areas that need a lot of redevelopment.

So, while there are people looking at them, they are not really making the investment that was initially projected. Another reason for the lack of demand definitely stems from people not understanding the full extent of what this legislation means for their business and the opportunities they would generate from a tax perspective,” says Frank Compiani, partner and West Palm Beach office leader at RSM US LLP.

REAL ESTATE OVERVIEW

However, investment started to trend down in 2018 Investment Given its proximity to South Florida, it makes sense and 2019, with inflows from South America slowing as that investment in Palm Beach County has historically the spending power of investors from those countries flowed from Central and South America. The explosion decreases, while interest in South Florida among of the Chinese economy in the 21st century also makes European countries and Canada, while still strong, is the steady investment by nationals of that country also dropping.

Overall, foreign buyers accounted for 19% of home in this area predictable. Canadians are also major benefactors of the South Florida real estate market. In purchases in 2018, compared to 21% the previous year, 2017, Canadians invested $775.6 million in commercial and some of the typical major foreign purchasers of real estate, and by August 2018, had already invested homes in the region – investors from Canada and Brazil – purchased 15% fewer houses in another $389.3 million. Canadians 2018 than they did the year before. have long been interested in The tumultuous global market is buying property in South Florida most likely a contributor to this for use as winter retreats from decrease in investment, as well their nation’s bitter winters, and as political upheaval in certain their decision to make additional regions in Latin America, such investments in the region is as Venezuela. However, the 19% a natural extension of their foreign investment rate is still buying personal property here. roughly double the proportion Another important variable is the of foreign purchasers out of total emergence of Canadian banks purchasers for the country as a and businesses in South Florida, whole – 10% – which shows that such as Natbank and Desjardins Sal Saldana South Florida still remains one of Bank, Bombardier, and Apotex, as Town Center at Boca Raton the most popular destinations for the presence of familiar banks and brands helps to facilitate the willingness of Canadian foreign investment. investors to part with their capital. “When you buy real estate, it’s one of the few investments in the United Growing neighborhoods States you get to expense. When you buy a stock or bond Naturally, as Palm Beach County continues to grow you can’t expense those investments. Real estate is a overall, several of the cities within the county are wonderful investment because not only do you have an undergoing a period of change. One such city is asset that generates income and appreciates, you also Boynton Beach. The city is in the midst of identifying get to take a deduction on your taxes,” Julio Gonzalez, which of its many outdated buildings from the 1960s founder and CEO of Engineered Tax Services, told Invest:. and ‘70s are ripe for demolition and replacement

Our competition now comes in many forms, whether that is the internet or a direct competitor.

Dilip Barot Founder Creative Choice Group

How is Creative Choice Group using new technology to its advantage?

We have used our company ETech’s technology to meet the needs of many of our Fortune 50 clients. We have developed our Etech insight quality control and technology to provide our clients with relevant information. This tool helps them improve their products and meet their customers needs by integrating various communications channels. It also increases their customer loyalty and helps them stand out from their competitors.

On the wellness real estate side of the business we are developing an app which will provide a variety of tools for residents and guests. It will allow users to interact with other residences as well as with a 24/7 wellness assistant. Most people recognize that their health is more important than their wealth and we will continue to assist them in living a healthier lifestyle.

How is wellness real estate impacting the Palm Beach County community?

Wellness real estate is a whole new industry that we see growing in Palm Beach County. People are interested in living healthier, happier and longer lives, so they’re conscious about what they eat, drink, the amount of exercise they have on a daily basis and community they live in and the company they keep. Our Amrit Ocean Resort & Residences will provide a wellness lifestyle focused on mindfulness and prevention without the use of traditional medical intervention. This model will prove that Palm Beach County is ahead of the curve in providing the community a lifestyle that they are looking for. People already like to live in this region, and we are encouraging more growth by providing this option that is cutting edge and will continue to grow.

We believe that once that business model becomes more well known, Palm Beach County has great potential to become the capital for wellness real estate in America. Amrit type wealth residential community will grow like luxury golf residential communities in Palm Beach County.

40 | Invest: Palm Beach 2019 | REAL ESTATE

With more businesses than ever opening in Palm Beach County, the demand for office space has never been higher.

with modern properties geared toward attracting new residents and businesses. For instance, the Boynton Beach Art District contains affordable art studios in repurposed defunct warehouses, eyecatching murals, and regular public events. There are also five breweries in the city, and a variety of mixed-use developments are planned for the east side, including Ocean One, with 358 apartments, 12,075 square feet of commercial/retail, a 120-room hotel, and 439 parking spaces; Isram Riverwalk, with 326 apartments and 51,220 square feet of retail space; the Villages at East Ocean Avenue, 371 residential units and 15,757 square feet of commercial space; and 500 Ocean with 341 units and 20,000 square feet of commercial space.

West Palm Beach is also experiencing a rapid pace of development. The city is home to a juggernaut of an employment sector, which is attracting professionals in droves with its supply of attractive job opportunities.

To accommodate these incoming residents, the city is developing several underused plots into high-end residences and multi-use spaces. Several have been completed in recent years. For example, The Bristol offers 69 units at $1,500 to more than $2,500 per square foot. The Alexander is not far away, and has 205 luxury rental units on offer. Finally, those who can afford them can check out the 315-unit Broadstone City Center and the 290-unit Park-Line. This is only the tip of the iceberg, with a great deal of additional development taking place throughout the city. “It’s interesting to

CONSTRUCTION REAL ESTATE OVERVIEW

see how the growth and development of Palm Beach County has affected different parts of the region, particularly the island of Palm Beach. Traditionally, the clientele there were older retirees who stayed only three or four months of the year, so our focus was on developing vacation homes. Now, a younger population is moving into the area and they’re staying for most of the year. This is because of the weather, Florida’s tax benefits and some really great schools in the area,” said Daniel Kahan, principal at Smith & Moore Architects.

Boca Raton is another area that is enjoying a boom, with numerous ultra-luxurious homes, high-end retail, and a robust employment center that supplies residents with high-paying jobs. Delray Beach, right next door, is home to Atlantic Avenue, a mecca of dining and retail establishments. “Boca Raton has a certain panache that doesn’t exist elsewhere in South Florida. Downtown Delray has a great buzz to it, as well. People love Atlantic Avenue. The whole aura of the downtown area and Mizner Park in Boca Raton, as well as the Boca Hotel and Town Center Mall, are great attractions here. Our school system is also very strong with tons of safe and accessible schools to choose from for families looking to relocate to this area,” Ari Albinder, owner of Mizner Grande Realty, told Invest:.

Affordable housing With a median gross rent in Palm Beach County nearing $2,000, a decent place to live is out of reach for the vast majority of residents. To combat this problem, developers are being urged to rise to the challenge of constructing affordable, workforce-oriented housing, not simply high-end luxury homes and condos that are far beyond the reach of most in the county. It is estimated that some 150,000 affordable housing units are required to restore balance to Palm Beach County’s housing market and alleviate the affordable housing crisis that is raging throughout the county. James H. Batmasian, founder of Investments Limited, points out the opportunity that exists in building more affordable housing. “There is a lot of room for growth in the residential real estate market. Currently we have the demand without enough supply. In fact, our residential luxury apartments mostly have a wait list of potential tenants. There is also a big opportunity right now for workforce housing as there is not enough supply of it either, and lower wage earners cannot find affordable housing in this region. This is why we keep our residential portfolio so diverse with both affordable apartments that do not have as many amenities, and then we have luxury apartments that offer everything a tenant wants.”

The county does have a Workforce Program, which

Brett Forman CEO Trez Forman Capital

In which areas are you seeing the most demand?

We experience the highest demand from developers of condominiums or multifamily rental apartments.

There are a variety of financial firms pursuing these type of deals, but we offer something slightly different.

We’re competing with the banks every day, and we’re competing with more traditional mezzanine players and preferred equity investors. Therefore, we have to be creative and offer a unique one-stop shop including higher proceeds than the banks and nonrecourse options.

Palm Beach County is home to some of the most expensive residential real estate in the world. On the opposite end of the spectrum, it’s also home to some of the poorest areas. So when you talk about Palm Beach real estate, you’re talking about a very diverse asset mix.

What differentiates Trez Forman from traditional banks?

Trez Forman is more or less asset-agnostic; we lend against residential real estate, whether it’s apartment communities for rent, single family houses for rent or condominiums for sale. We don’t necessarily construct homes, but we finance the lot developers that do the horizontal development for the home builders.

It’s very easy to understand what differentiates us from the banks, since the banks are highly regulated. They have to do things according to what the regulatory agencies prescribe, and their leverage is usually much lower and typically require recourse.

What we’re offering is a much higher loan-to-cost solution. Trez Forman basically takes what the bank and the preferred equity investor would offer, and we can combine it and provide our clients a one stop solution with the surety of execution. We like to underpromise and overdeliver. We can fund a deal in 30 to 45 days, unlike a bank that may not be able to lend in that time frame. www.capitalanalyticsassociates.com

| 41

REAL ESTATE OVERVIEW

aims to provide affordable housing to those making between 60%-120% of the county’s median income, but the program has added just 500 affordable homes to the market since its inception. Although the project means well, it is not succeeding in providing the volume of affordable housing that is required to stem the tide of the present crisis. The Palm Beach County Housing Authority (PBCHA) also works to provide affordable housing through a variety of programs, such as the Public Housing Program for low-income and disabled individuals and the Housing Choice Voucher Program, also known as Section 8.

But there are many factors that are impeding the development of affordable housing, according to Joel Altman, chairman of Altman Companies. “There is an underserved portion of the populous that desires workforce and affordable housing and delivering a product that fits people’s economic needs at this level is a very difficult task today because of land prices, impact fees, permitting fees and more. There is not much land left to develop in Boca Raton, so this is going to turn into a situation where we are repurposing the land. We also have an aging population in this region, and these people want to downsize, but again the lack of land makes capitalizing on this opportunity difficult to do. What we can look for are things like failing golf courses, shopping centers and office buildings in the area, which could then be repurposed and create more available, buildable land.”

Looking ahead The outlook for Palm Beach County’s real estate market remains positive overall, but not without its caveats.

The unemployment rate continues to shrink year after year alongside a growing population of educated and high-earning millennials, and vacancy rates remain low across all property categories. However, as much as this low vacancy can be a sign of the health of the market, it can also drive up prices, leading to a crisis of affordable housing. The supply problem continues to be a tricky one to solve, especially given the ongoing shortage of skilled construction labor.

Exacerbating Palm Beach County’s real estate supply shortage is the cooling off of foreign investment in real estate development throughout the region. Although there is still quite a bit of foreign investment going into luxury condo development in the county, the volume is appreciably less than it had been in previous years.

The reduced investment is likely guided by the choppy current of global trade and fears of another domestic housing bubble. Still, the prognosis, according to many experts, is a market that will continue to grow, although more slowly.

Lee Smalley, managing director for BBG, echoed this prognosis in his positive outlook for the real estate market in Palm Beach County. “Palm Beach County is dynamic, with strong growth in fundamentals based on demographics. Palm Beach has seen momentum in healthcare and multifamily development. Office real estate has also been strong recently. There are a lot of family offices here that encompass a big employment base. And there’s still the value-add opportunities in Palm Beach County. Population growth is up here, as well as in the rest of South Florida. Secondary services and the retail sector will continue to thrive under these conditions.”

Construction & Infrastructure: The construction and infrastructure industries in Palm Beach County are key pillars for a region racing to keep up with the demand from an expanding population. Construction is firing on all cylinders, despite a shortage of skilled labor, while a nearly 4 percent increase in the 2019 capital improvement budget will underpin the infrastructure base.

www.capitalanalyticsassociates.com

| 43

Fired up: Positive signs abound for the construction sector, with a strong commercial segment, while greater spending is propping up infrastructure As people continue to flock to the region in pursuit of community parks. In fact, we’ve begun work on the gainful employment and the many other benefits the new Jupiter Police Headquarters and Emergency county has to offer, they invariably need somewhere Operation Center, and will begin three public school to live. That basic principle is underpinning a Palm renovations and a handful of new park complexes Beach County construction sector that remains in this year,” Michael I. Kaufman, CEO of Kaufman Lynn Construction, Inc., told Invest:. gear, although not at the pace of “Kaufman Lynn has been in Palm previous years, partly due to a Beach County for more than 30 lack of qualified labor. years. It is a wonderful business New construction continues to environment, and it comes as take place throughout the county no surprise. After all, we live in the residential, commercial, in paradise. Folks want to live and industrial categories, but here, and the population growth figures from Q1 2019 suggest drives all sectors of construction, that the post-recession building including infrastructure, retail, boom in South Florida has begun office, housing and rentals. to cool. Residential starts were It’s a good time to be in the down 15% and commercial starts Michael Kaufman Kaufman Lynn Construction, Inc. construction industry in south down 5% across the region in the Florida.” quarter. Still, it is too early to determine a trend and the sector remains optimistic, at least in Palm Beach County.

Sector performance “In Palm Beach County, we are seeing a fair amount of As has been the case for the past couple of years, construction activity in different sectors, particularly the construction sector in Palm Beach County, like multifamily housing, public safety, education and the rest of South Florida and the United States,( )

Folks want to live here, and the population growth drives all sectors of construction.

44 | Invest: Palm Beach 2019 | CONSTRUCTION & INFRASTRUCTURE

CONSTRUCTION & INFRASTRUCTURE INTERVIEW

Time is now Downtown West Palm Beach is ready for a state-of-the-art iconic project that delivers a unique design

Michael Neal Chief Executive Officer – Kast Construction What is KAST Construction known for?

KAST Construction is known for high-rise residential buildings, both multifamily and condominium. We are also quite active in the hospitality, senior living, educational and municipal sectors. If you were to drive up the southeast or southwest coasts of Florida, you’d see many of the iconic projects our firm is building.

How does KAST Construction contribute to commercial building in Palm Beach County?

We’re busy in Palm Beach County. At the moment, much of our business seems to be concentrated in West Palm Beach, Ft Lauderdale and Boca Raton.

We have a lot of projects under construction in these areas. KAST is well under way on One West Palm, a $300-million mixed-use project in West Palm Beach for investor Jeff Greene. This project will be the tallest building in Palm Beach County when complete. KAST has regional offices in Tampa and Miami and is also quite busy in both Miami-Dade county and Southwest Florida, including Tampa, St. Petersburg and Sarasota.

Out of all our markets, Palm Beach County seems to be experiencing a renaissance like none other. There’s so much new residential product in the Downtown core, including multifamily condos and apartments.

From the macro perspective, my concern is that we’re becoming a bit overbuilt. We need to support job growth if we’re going to keep everything else sustainable. Jeff Greene is a big advocate of the West Palm Beach Downtown urban core and is willing to take some calculated risk in moving forward with a large mixed-use project. It’s time to have an iconic project with a unique design in Downtown West Palm Beach — that’s what Jeff’s project will bring. It will be a state-of-the-art, high-end office, residential and hotel project. Ultimately, this is the type of development that will attract business and people to our area.

How are you implementing technology into building systems?

Everybody has become so adept with the internet and the technology we have at our fingertips that we have become much leaner, smarter and more efficient. KAST is using state-of-the-art technology in every aspect of our business. Great tools, such as drones, collaborative software, and 3D modeling, have changed our industry and have allowed contractors, owners and architects to collaborate with one another in ways we never would have imagined. This technology enables realtime collaboration and communication between the contractor, architects and developers, making the design and construction process more efficient, while avoiding delays and cost overruns. The building processes have become incredibly streamlined, www.capitalanalyticsassociates.com

| 45

Rex Kirby CEO Verdex Construction

What is your experience working with the city of West Palm Beach and its relationship with developers?

The city of West Palm Beach has done a great job of working with developers to encourage development in the city. They actually reached out to people in the industry, Verdex being one of them, and requested ideas on how they could improve their services. These ideas, most of which were about improving efficiency, were then taken to the Mayor at that time and she immediately implemented most of them without hesitation.

West Palm Beach is a good example of a local government that understands that projects will be canceled if they can’t start in a timely manner. The city has ramped up their staff to deal with the increased development and construction. They’ve done a really good job with that.

Unfortunately, in some other cities and counties, permitting can be a painful and grueling process that requires a large amount of time, countless meetings and is, frankly, frustrating.

What is the biggest hurdle you must contend with?

The biggest issue is that if these entitlements and permits take too long, and all of a sudden the financial environment changes in the country or even internationally, it can be the death of a project before it can even get started. People get nervous when they have to look two years out, as multiple issues can come about like, ‘What will be the interest rate if this is delayed?’ and ‘If it’s going to take me two years to get a shovel in the ground, what will the market be like?.’

In our business, time is actually money, and it’s tough to get some of these projects if you can’t guarantee the permits and entitlements in a timely manner. Finding ways to be fair and responsive to these issues are critical in our current market.

46 | Invest: Palm Beach 2019 | CONSTRUCTION & INFRASTRUCTURE

( ) continues to grapple with the frustrating problem of having plenty of work but too few workers. In fact, 70% of construction firms across the country reported difficulty with filling vacant skilled construction positions in 2017, according to Associated General Contractors of America. The shortage is further exacerbated by the ever-growing number of available specialty construction jobs in Florida, which is projected to increase by as much as 19% by the end of 2024, with growth in South Florida specifically experiencing 12-16% growth annually.

As one benchmark of the performance of Palm Beach County’s construction sector, consider the volume of new housing construction starts. There were 594 housing starts in the second quarter of 2018, a 9% increase over Q1 starts that was largely

The three major industries in Palm Beach County are tourism, construction, and agriculture.

CONSTRUCTION & INFRASTRUCTURE OVERVIEW

Donald Barnes Senior Vice President of Land Development – Toll Brothers, Inc.

The biggest benefit of doing business in this area is that everyone knows where Palm Beach County is, and if they’ve visited here, then they want to live here. When you say West Palm Beach, Jupiter or Boca Raton to someone out of the state, they’re familiar with those places and have an image of luxury living and spectacular weather.

The worse the winter is up north, the better it is for us down here. Our state, including Palm Beach County, continues to be a top destination for migration across all demographics, especially boomers taking advantage of our lifestyle and economic benefits.

attributed to the sector’s recovery from Hurricane Irma. The market for investment in industrial property is booming, with investment in multifamily properties in Palm Beach County tripling in 2018. But the number of house closings paints a picture that is less clear. In Q2 2018, that number stood at 477, which was a 3% increase over Q1 but a 12% year-over-year decrease. However, luxury property closings fared better.

Another factor affecting the construction industry in Palm Beach County – and potentially affecting it even more in the near future – is the requirement that builders pay impact fees. Impact fees have been assessed in Palm Beach County since 1998, and the proceeds are used to pay for capital improvements throughout the county, including parks, libraries, public buildings, schools, roads, and emergency responder facilities, while simultaneously offsetting the added public service costs arising as a result of the new construction. The fees are assessed on any new development that impacts public facilities based on the development’s square footage and type, and their payment is a prerequisite to the receipt of a building permit. The fees have been a boon for the county, but a proposal by the county to impose a 31% impact fee increase has local builders concerned. Under the current assessment schedule, a new 1,400- to 2,000-square-foot home would be subject to a $10,314 impact fee, whereas $13,525 would be owed under the new structure. Pushback from business leaders has delayed the higher fees from taking effect, but this will be an important issue to follow as it develops.

Financing With construction showing continued strength in Palm www.capitalanalyticsassociates.com

| 47

CONSTRUCTION & INFRASTRUCTURE OVERVIEW

Beach County, builders are having little trouble financing projects. The Kolter Group luxury condominium project 5000 North Ocean received an increase to its existing construction loan from Florida Community Bank (FCB). Kolter Groupâ&#x20AC;&#x2122;s affiliate, KT 5000 LLC, already had a $12 million mortgage with FCB, but was granted a $49.2 million increase to a total of $61.2 million.

When completed, the 19-story condo will boast 48 units situated on 4.4 ocean-front acres, with a starting price of $2 million. Half of the units are already presold, and construction should be completed by fall of 2019.

Another major Palm Beach County project to receive financing is TPA Groupâ&#x20AC;&#x2122;s construction of a 220,000-square-foot warehouse in the 1,000-acre Palm Beach Park of Commerce business park. Texas Capital Bank granted a three-year mortgage on the 18-acre site to NHT Palm Beach LLC, a TPA Group affiliate, and notice was filed with the county shortly thereafter that construction was started on the warehouse. NHT Palm Beach LLC secured an $11.5 million construction loan for the warehouse project.

Residential construction New construction of single-family homes continues to increase in Palm Beach County each year, but the rate of increase has begun to decline, and the number of closings has faltered, although the picture is slightly different for luxury properties. Although traditionally eclipsed by Miami-Dade County and Fort Lauderdale as hotspots of luxury development, Palm Beach County has made a dramatic debut as a destination for high-value construction. Over just a few months, a slew of single-family homes ranging

With record low unemployment in South Florida, the construction industry is encouraging more students to pursue trade school.

CONSTRUCTION & INFRASTRUCTURE OVERVIEW

and total rents grew by 1%. This growth is attributed to the steady influx of residents of prime working and renting age, with the number of renters in Palm Beach County aged 21-34 years expected to grow by 1.25% annually until 2022. Construction companies are working diligently to meet the demand. Since 2012, 12,600 multifamily units have been completed, another 2,100 units are under construction, and about 16,000 are in early planning. Many developers are betting on condos, with some 2,000 condominium units set to be delivered by the end of Q2 2019.

from $8-$70 million sprang up in the county. The trend isnâ&#x20AC;&#x2122;t isolated to detached single-family homes, though. Glitzy condominiums and luxury apartment buildings have also started to appear throughout the county, particularly in downtown. Examples include The Alexander, a 205-unit on Fern Street; Broadstone City Center, with 315 units on Datura Street; and The Bristol at 1515 South Flagler, the most expensive condo building built to date in the county, which will offer 69 units and an 84-unit boutique condo tower.

These luxury multifamily alternatives are enticing tenants with a slew of amenities, such as pools, fitness centers, 24-hour concierge service, and even short-notice private jet-booking services.

The robustness of the apartment market does extend somewhat beyond luxury units. Overall apartment vacancies settled at a fairly low 7.75% by Q4 2017,

Commercial trends 2018 was a banner year for commercial real estate development in South Florida, with 15 commercial transactions over $100 million taking place in the region for the second year in a row. Notably, five of these megadeals took place in Palm Beach County: Alexander Living, $102.99 million; Marbella Apartments, $112 million; The Quaye at Wellington, $120 million; Stratford Court, $130 million; and PGA National Resort and Spa, $217.96 million. Other big stories in commercial real estate development include Burlington Self-Storage obtaining a $11.5 million construction loan to build a 168,500-square-foot warehouse, and Sunrise Senior Living getting a $25.29 million loan to build a state-of-the-art senior-living community consisting of 82 units.

Experts believe the commercial real estate construction market in South Florida is likely to weather the current financial storms â&#x20AC;&#x201C; trade wars, potential interest rate hikes, and federal budget battles, to name a few. The biggest contributors to the growth of the commercial real estate market are job growth and population growth, and South Florida, including Palm Beach County, have had both in spades for the last several years. That trend is expected to continue for the foreseeable future. For instance, in June 2019, Palm Beach County added 14,900 jobs, with more job openings than job seekers for the eighth consecutive month. With this proliferation of jobs comes a steady increase in population, and experts are projecting annual population growth in the county to be 2.5% for the next five years, which would be triple the national average.

Other factors that contribute to the success of Palm Beach Countyâ&#x20AC;&#x2122;s commercial real estate market are held in common with other booming regions in Florida: favorable tax laws, foreign investment, and natural surroundings and a climate that bring tourists in year-round. Indeed, Florida consistently attracts large investments in commercial real www.capitalanalyticsassociates.com

| 49

Ramsay Bulkeley Executive Director Palm Beach County Planning, Zoning & Building

What is the landscape regarding demand for development projects?

We definitely have seen a significant uptick in demand.

There is a huge rush on development, and we are issuing around 300 building permits per day, of all types. These permits range from smaller items like air conditioners and water heaters to large commercial facilities. In FY 2019 we issued permits for over 1.6 billion dollars in new improvements. Overall, our building department is extremely busy, and we have huge projects coming down the pipeline. There are commercial manufacturing projects and thousands of homes under development.

With the increased demand for development, what is the greatest challenge facing your department?

We know that when our department starts feeling the pressure, the economy is trending positively. The biggest challenge is keeping up with the intense workload. In addition, we have new legislation that has changed the way we are required to operate, creating additional challenges to adapt to in order to maintain compliance and keep the approval process efficient and smooth.

How are you using technology to make your processes more efficient?

We are working diligently to make all of our processes run more smoothly. One way we are doing this is by building an online plan submittal system in-house.

When we implement digital reviews, every reviewer and every agency will have access to the plans at the same time. This will also allow plan examiners the ability to review digital plans wherever they are, mark up the necessary changes and then send the plan back to the architect to make the changes. It also allows for easier communication and smoother sharing between departments. We are pleased by the successful implementation of our electronic submittal and selfissuance for “no-fee”sub permits, as the first phase in this new electronic permitting process.

50 | Invest: Palm Beach 2019 | CONSTRUCTION & INFRASTRUCTURE

Palm Beach County has turned its focus to developing more affordable and workforce housing to accommodate the increased population.

estate development from China, Canada, Germany, Singapore, Saudi Arabia, and Qatar.

Finally, technology also is having an impact on the sector, as developers increasingly look to analytics to determine building decisions. “We are working to incorporate data-driven decision-making into all aspects of the business and really moving toward predictive analytics. Every construction project produces so much data but at the same time every project is so unique, which makes it challenging to harness the data produced. Our ability to harness our data as an industry will make us more predictable and at the end of the day that is what most if not all our clients want: predictable outcomes,” Ryan Romanchuk, business unit leader at DPR Construction, told Invest:.

Infrastructure From its utilities to its highways, bridges and parks, Palm Beach County is taking its improvement agenda seriously. The county’s 2019 capital improvement budget included $350.7 million in new funding, a 3.6% increase over 2018. Compared to 2018, $6.2 million in additional funds came from Ad Valorem Taxes, $4.5 million came from Enterprise Revenue, and $2.6 was from Surtax Revenues. However, there was a decrease of $1.9 million in Interest & Other Revenue,

CONSTRUCTION & INFRASTRUCTURE OVERCONSTRUCTION OVERVIEW VIEW

Angelo Bianco Managing Partner Crocker Partners

What impact does Crocker Partners have in Palm Beach County and South Florida?

In the state of Florida, we are currently the largest office landlord. In Boca Raton, we are the largest office owner. We own thirty percent of all the office space in Boca Raton. We usually buy assets that have something wrong; for example, they are often poorly occupied and haven’t been operated the way that we would at Crocker Partners. We will perform renovations, reposition the assets and find new tenants. Then we either sell or recapitalize the project to someone who wants to own more stable, secure assets. $1.6 million less in Grant Funding, and $1 million less in Impact Fee Revenue. For fiscal year 2019, the county had $1.1 billion in carryover funds that have been re-budgeted to prior unspent capital projects in the Enterprise Funds and the Five Year Road Program.

This money will go toward the $709 million list of infrastructure improvement projects approved by the county board on April 14, 2017, which will generally focus on the renewal and replacement of roadway surfaces, bridges, drainage improvements, canals, parks, and government buildings. The particular projects being pursued are outlined in the county’s fiveyear Capital Improvement Plan. As of June 2019, there were 96 active road or bridge improvement projects throughout Palm Beach County. These projects range from minor, such as placing pavement markings on Woolbright Road from Lawrence Road to Congress Avenue in Boynton Beach, to major, such as substantial road and bridge construction at Hood Road east of the Florida Turnpike and to the west of Central Boulevard in Palm Beach Gardens.

The list of improvement projects also includes the maintenance and installation of utility connections and poles, road resurfacing, rehabilitation of existing bridges, sidewalk repairs, and the installation and repair of various traffic indicators and lights.

What are some of the benefits of practicing commercial real estate in Palm Beach County?

The best part of real estate in Palm Beach County is that people want to be here. Every year, more people move here. Because of our tax policies, Florida is an attractive place for the wealthy, and they tend to gravitate towards certain areas such as Palm Beach County. It’s fantastic because whenever you’re in a place where a lot of people aspire to be, they require office buildings and homes, so in turn there’s demand for new construction.

Then the economy expands; people need to have rentals, apartments, storage and stores. It’s a great place to invest because, from one peak of the market cycle to the next, there’s always growth here.

What trends are on the horizon for commercial real estate investment and growth in the county?

Office development should be muted in the coming year.

The reason is that a good majority of those moving here are wealthier people; they don’t drive a lot of demand in office space as most of them have hedge funds or family offices that do not require a lot of space; plus it costs so much to build new office buildings. You will have some projects, but it’s not going to be like it was in the past when there would be a tremendous number of cranes in the sky. www.capitalanalyticsassociates.com

| 51

Dale Hedrick President Hedrick Brothers Construction

How is technology like virtual design and construction benefitting your clients?

We are emphasizing 3D modeling and all the technology associated with it, such as laser scanning and drone deployment, virtual reality, augmented reality and HoloLens. It has been an educational process in helping owners to understand the importance of why Hedrick Brothers Construction, as their contractor, should have a firm understanding of this technology. It has saved our clients millions of dollars. We use Virtual Design & Construction to coordinate all the team members and stakeholders in the process including structural, mechanical and electrical specialty contractors. When they understand the benefits this technology provides, allowing us to solve problems upfront, they are on board. It brings the entire team together so that we can virtually build the project and eliminate mistakes before the shovel hits the ground.

What types of projects are seeing the most demand in Palm Beach County?

Since Palm Beach County voters approved a 1% sales tax in 2017, available revenue for capital projects has increased. This is releasing pent up demand for infrastructure needs of municipalities which have been underserved for 10 years. We are working with many different stakeholders on projects that have either been delayed, neglected or opportunities they just havenâ&#x20AC;&#x2122;t been able to be addressed that are coming up in the municipal and educational markets.

We are also seeing industrial activity with companies that want to take advantage of the state level tax benefits, even though Palm Beach County taxes are still high. On a smaller scale we are seeing demand in commercial and larger projects, workforce housing and in opportunity zones. And finally, we see continued activity in luxury residential which is one of our key markets and core competencies.

52 | Invest: Palm Beach 2019 | CONSTRUCTION & INFRASTRUCTURE

Electricity Residents of the Miami-Fort Lauderdale-West Palm Beach, FL Statistical Area, which includes Palm Beach County, pay just 12.1 cents per kWh of electricity, 11% below the national average. Power in Palm Beach County, and for over 10 million customers throughout Florida, is provided by Florida Power & Light (FPL), which is taking several notable steps to improve the performance and reliability of the grid.

For instance, FPL is undertaking a comprehensive grid reliability improvement initiative, consisting of strengthening 23 power lines and the poles that support them, trimming trees growing near power lines, and installing smart grid technology.

These efforts are not only intended to ensure uninterrupted services under normal circumstances, but are especially concerned with keeping the lights on during inclement weather, such as the hurricanes that ravage the state every hurricane season. Thanks to $3 billion in investments since 2006, 95% of customers had power restored within seven days after Hurricane Irma in 2017, compared to the 15 days it took after Hurricane Wilma in 2005. One of the biggest boons has been the installation of 4.9 million smart meters and 90,000 intelligent devices, which help to detect problems and restore service faster.

Another approach that is helping prevent storminduced outages is the conversion from overhead

Palm Beach Countyâ&#x20AC;&#x2122;s unemployment rate is below 4%.

CONSTRUCTION & INFRASTRUCTURE OVERVIEW

James Fox President – Maddox Group

The sectors we’re seeing the most demand for are, first and foremost, corporate interiors. Second would be medical offices, then industrial and finally retail. The demand for medical offices seems pretty self-explanatory; retired people relocate to Florida and enjoy the weather, which ultimately increases the need for more medical services. In regards to the demand for more corporate offices, the trend seems to be going towards Palm Beach County due to the simple fact that, in comparison to Miami, there’s more land and more opportunity here now.

power lines to underground lines that are less susceptible to damage during a hurricane. FPL has already spent $10.4 million on installing underground power lines in the south end and far north end of Palm Beach County as the first phase of the project. A second phase will begin soon, covering Sloan’s Curve to Via Vizcaya. Comcast and AT&T also will transfer internet, television, and phone lines underground.

Alternative energies Another big FPL initiative is a major pivot to solar

power, a viable approach to renewable, clean energy given the abundance of sunshine in the Sunshine State.

In March 2019, FPL announced plans to construct four new solar power plants throughout Florida, including one in Palm Beach County, the FPL Hibiscus Solar Energy Center. The others are: FPL Okeechobee Solar Energy Center, Okeechobee County; FPL Echo River Solar Energy Center, Suwannee County; and FPL Southfork Solar Energy Center, Manatee County.

These new plants are an important component of FPL’s plan to install more than 30 million solar panels

www.capitalanalyticsassociates.com

| 53

CONSTRUCTION & INFRASTRUCTURE OVERVIEW

by 2030, which will not only provide customers with a steady supply of inexpensive, clean power, it will also create thousands of jobs.

Water The Palm Beach County Water Utilities Department (PBCWUD) provides water to 600,000 residents across a 1,300-square-mile service area. The county’s water system consists of 2,456 miles of linear pipe and more than 193,000 connections. Not only does PBCWUD manage this expansive network, it wins awards. In 2018, the department was honored with the Division 8 Water Distribution System Award by the Florida Section of the American Water Works Association in recognition of its status as the best large water distribution system in Florida. The recipient of the award must manage a system of at least 130,000 connections, and must distinguish itself in terms of its water quality, operational efficiency, system maintenance, professionalism, safety standards, emergency preparedness and cross-connection programs. 2018 was the first time PBCWUD had received the award since 2011. PBCWUD’s more recent

accolades include the Most Improved Class A Water Treatment Plant, earned for initiatives undertaken at Water Treatment Plant 3 that resulted in the plant running more efficiently and saving over $300,000 in electricity costs throughout 2018.

To ensure that Palm Beach County’s supply of clean water is protected and available for many years to come, a variety of entities and departments have been formed that are dedicated to water conservation. For example, the Board of County Commissioners formed the Water Resources Task Force to find cost-effective ways to protect, conserve, reuse, and reclaim water throughout the county to ensure a continued supply of clean water.

Telecommunications Palm Beach County residents are served by several local telecommunications companies, in addition to nationally-recognized providers. AT&T provides television, internet, and home phone services to residents, with coverage spanning over 96% of the county. Comcast Xfinity and DirectTV have a sizeable presence throughout Palm Beach County, with

CONSTRUCTION & INFRASTRUCTURE OVERCONSTRUCTION OVERVIEW VIEW

Hotwire also in the market. As for smaller telecom companies, satellite internet providers Viasat and HughesNet boast substantial coverage in Palm Beach County, as does fixed wireless internet provider AreYouOnline.Net. Ecosystem protection There are 18 coastal cities in Palm Beach County, thousands of acres of parks, 45.3 miles of beaches, and 17 birding and wildlife trails. This beach front land is a big part of what makes Palm Beach County a magnet for people and businesses. As such, the county is serious about the conservation of its local ecosystem.

The task of protecting the county’s beaches and waterways falls to the Department of Environmental Resources Management (ERM). Specifically, ERM focuses on ensuring that Palm Beach County has fresh drinking water, unpolluted waterways, a large tree canopy, and a well-checked mosquito population.

In addition to its direct conservation efforts, ERM also offers a range of outdoor activities, such as the Lake Worth Lagoon Fishing challenge and a guided adventure program that allows visitors to experience the natural beauty of Palm Beach County and learn something about it in the process.

“There have been so many studies conducted since the 1990s on the connection between a region’s environment and its economy. These two elements are really intrinsically linked, and communities with a vibrant and healthy economy typically have a healthy environment. In the case of Palm Beach County, we have a vibrant and environmentally dependent tourism industry. For example, without clean water and without opportunities within our natural environment, we would be really challenged to attract people to this area. Beaches in Florida have a tendency to erode because there is a consistent longshore current that goes down Florida, taking beach material and depositing it elsewhere. If our coastal cities do not have a beach anymore, then they do not have people coming to visit. This is an issue for the entire state of Florida. That is also why beaches are such an important part of the legislative agenda,” says Deborah Drum, department director at Palm Beach County Environmental Resources Management.

Looking ahead People continue to flock to Palm Beach County thanks to its favorable climate and ample job opportunities, and many pundits believe this will continue to

Kirsten Dolan CEO One Parking

How has technology changed the parking business?

Everyone is looking for ease of use when it comes to parking. People do not want to carry cash anymore, and the idea of someone collecting $3 at the parking garage entry are pretty much over. We are seeing more ‘credit card only’ garages. There are so many different payment apps or aggregators that allow people to have the ability to reserve their parking ahead of time by paying for a spot before they ever reach the site.

We also use a product called Smarking, which is data analytics for parking. It allows us to know in real time exactly what our occupancy is and how many people are at each of our locations at a certain point in time.

Out of all the services that OneParking offers, where are you seeing the most demand?

The highest demand in the past year has been for valet services. Part of the reason for that is that people need to utilize more space in less area, so tandem and stacked parking is becoming more valuable in many markets.

From a service aspect, the valet that we offer is an elevated experience than what most businesses are accustomed to. The two other services in most demand we are seeing currently would be our self-park management services as well as seasonal valet services.

What are some of the biggest challenges that you face being headquartered in Palm Beach County?

The biggest challenge for us is that Palm Beach County is not a parking metropolis, so there aren’t a lot of parking facilities here.That being said, there are a variety of people that could still use our services to improve service levels or optimize income opportunities. The issue we face is that most people do not usually think about parking as part of their real estate assets. Educating people about looking at parking as part of the real estate assets and the value it can add to their locations is a little bit more challenging in this market because it’s not a New York City, Washington DC or even a Miami where clients have a higher understanding of parking value. www.capitalanalyticsassociates.com

| 55

CONSTRUCTION & INFRASTRUCTURE OVERVIEW

PBCWUD provides water to 600,000 residents across a 1,300-square-mile service area.

underpin the industry. “The best part of real estate in Palm Beach County is that people want to be here.

Every year, more people move here. Because of our tax policies, Florida is an attractive place for the wealthy, and they tend to gravitate towards certain areas such as Palm Beach County. It’s fantastic because whenever you’re in a place where a lot of people aspire to be, they require office buildings and homes, so in turn there’s demand for new construction. Then the economy expands; people need to have rentals, apartments, storage and stores. It’s a great place to invest because, from one peak of the market cycle to the next, there’s always growth here,” says Angelo Bianco, managing partner at Crocker Partners.

But there are some signs of a slowing market.

Although plenty of new properties were delivered

South Florida saw 15 commercial transactions over $100 million in 2018.

throughout Palm Beach in 2018, the rate of delivery was far more modest than it had been during the height of the post-recession building boom, and if Palm Beach County follows the trend in the rest of South Florida, things may continue to get slower in the coming year.

On the infrastructure side, governments and organizations in Palm Beach County have demonstrated their commitment to environmental responsibility with the establishment of the Water Resources Task Force and FPL’s commitment to increasing its reliance on solar energy and providing greater hurricane resilience by burying power lines.

Transportation & Logistics: Palm Beach County is actively engaged in elevating its transportation infrastructure and logistics capabilities to address the needs of an expanding economy. It is deploying significant investment across its transportation backbone, while capitalizing on its growing stature to become a major logistics hub centered on Port of Palm Beach and PBI.

www.capitalanalyticsassociates.com

| 57

Strong backbone: Plans are already afoot to bolster the county’s transportation systems, from buses to planes, and solidify its position as a logistics hub Transportation infrastructure is the backbone of any region, and the key to sustaining the ambition to solidify as a logistics hub. How people and goods are moved around can make or break the expansion of a local economy. In Palm Beach County, planning calls for millions of dollars of investment that will ensure the required updates and improvements necessary to maintain the area’s growth momentum.

Throughout, emerging technologies will play a major role in accommodating user demand and addressing environmental needs. From wider access to Wi-Fi on buses to employing technologies like solar power at the airport, the county’s transportation system is well on its way to being more user-friendly.

The investment stage is underway with the Palm Beach Transportation Planning Agency (TPA) and its Transportation Improvement Program (TIP). The TIP encompasses a wide range of projects, including highway, bus, rail, port, bike/pedestrian, and beautification projects of various magnitudes. Multiple entities are involved in making the TIP a reality, such as the Florida Department of Transportation (FDOT), the South Florida Regional Transportation Authority, and the many municipalities within the county.

58 | Invest: Palm Beach 2019 | TRANSPORTATION & LOGISTICS

As of June 2019, there were 96 active infrastructure projects throughout Palm Beach County, covering multiple municipalities and categories. For example, FDOT is in the midst of a $7.5 million lane expansion project to ease traffic on Southern Boulevard and Lyons Road. There are eight projects either in progress or in the planning stages in Boca Raton, including renovations to the Camino Gardens Bridge and the Camino Real Intracoastal Waterway Bridge; expansion and maintenance work on two bridges on Palmetto Park Road, Palmetto Park Road El Rio Canal Bridge and Palmetto Park Road Intracoastal Waterway Bridge; and a 6.279-mile shared pathway improvements project on Palmetto Park Road from State Road 7 to NW 2nd Avenue. FDOT is also making a series of major improvements to I-95, including resurfacing.

Palm Beach TPA 2018 Through the TIP, TPA seeks to further its vision of a safe, efficient, and connected multimodal transportation system throughout Palm Beach County by planning, prioritizing, and funding various forms of transportation and transportation projects. It has six goals: engage the public, plan ( )

TRANSPORTATION & LOGISTICS INTERVIEW

Cruise benefits Daily cruise ship arrivals and an expanded number of berths provide flexibilty for growth at Port of Palm Beach

Manuel Almira Director – Port of Palm Beach What were some highlights for the Port of Palm Beach over the last year?

We are now benefiting from two cruise ships, which means that every day of the week we have a cruise ship coming in. The cruise ships go directly to Freeport, Bahamas. One is called Grand Celebration, and the second ship, which arrived on April 13, 2017, is called Grand Classica. The other highlight is that in early January 2018, we inaugurated a new berth. We now have 17 berths at the Port of Palm Beach. This new berth cost approximately $15 million to build and is just for cargo vessels. We experienced a little delay in having it completed, but it’s now functioning perfectly. It has done exactly what we projected it would do: it allows us to shift over smaller-sized vessels to utilize that berth, thereby allowing bigger ships to dock at the regular berth.

In mid-2018, we embarked on a land expansion. There was an office building occupying approximately three to four acres, and we contracted with our largest tenant, Tropical Shipping, to demolish the building, remove all the debris and utilize that footprint so that Tropical can expand its refrigerated cargo. Tropical Shipping has been here since the early 1970s and specializes in shipping foodstuffs to the Bahamas.

How is sustainability impacting your strategic plan?

From the very beginning, ports are very capital intensive. There’s an old joke that if you want to make $1 million in a port, you better start with $2 million. In the state of Florida, we are assisted by the state government under a program called Florida State Transportation Economic Development (FSTED). Every year, state legislators put aside $25 million in a pool of monies. All 14 deep-water seaports in the state of Florida can request a portion of that in order to maintain the infrastructure that ultimately allows ports to have sustainability. That covers not only cargo but also crews.

What is your vision for the future of the Port of Palm Beach?

I see the port’s future as having an essential rail operation. We have a rail operation today that is transferred right outside of the Port of Palm Beach.

Then our own shortline rail goes out to get the containers and bring them in. In the afternoon, this process is reversed. What I’d like to see over the next five years is an improvement in our ability to transport cargo from anywhere in the United States through the Port of Palm Beach and vice versa. Our train can transport any type of commodity, whether it’s loose, bulk or neo-bulk (i.e. steel rebar). We’re the only port in South Florida that’s able to do that. Continuing to expand our capacity is critical. www.capitalanalyticsassociates.com

| 59

TRANSPORTATION & LOGISTICS OVERVIEW

Palm Beach International Airport currently has 28 aircraft gates.

( ) the system, prioritize funding, implement projects, collaborate with partners, and administer the agency.

TPA also wants to ensure that stakeholders within the community are involved in the process.

TPA periodically releases a list of the highest priority projects in the TIP. The latest list is for the years 2020-2024, and it consists of the three broad project categories of descending priority: Major TPA Projects, Local Initiatives, and Transportation Alternatives.

Investments In total, the TIP received $890,610,131 in federal, state, and local funding for 2019 (thatâ&#x20AC;&#x2122;s $115,329,634; $515,642,654; and $259,637,843, respectively). Of the federal funding, $22,738,786 is from Federal Transit

Urban and Rural Area Formula Funds, another $16,160,816 is from STP Palm Beach MPO, and $48,817,649 comes out of Advanced Construction National Highway Funds. The state of Florida has provided $246,533,758 for turnpike improvements, renewals, and replacements; $99,708,111 for the construction and maintenance of I-95 express lanes; and $25,867,437 in district dedicated revenue. Notable local funding sources include $53,010,068 raised by the ad valorem tax, $70,106,000 from the local option gas tax, and $65,535,000 from impact fees.

Major TPA projects have been allotted $81.6 million of this funding, such as extending commuter rail service to the FEC corridor via the Northwood Crossover, widening Atlantic Avenue from State Road 7 to Lyons road from two lanes to four, and establishing express bus service from Camino Real Road to Indiantown Road. Other major improvements include adding street lighting, widening or constructing additional roads, and constructing administrative facilities.

Another $118 million in funding is going to local initiatives. For example, pedestrian scale lighting is being installed along Australian Avenue, designated bike lanes and pedestrian bridges are being installed on Lowson Boulevard, and there are also several sidewalk installation and repair projects slated throughout the county.

There are also Transportation Alternatives, which will receive $18.6 million in funding. Many of these projects deal with constructing or improving sidewalks, bike lanes, and traffic lights and indicators. However, the Transportation Alternatives Program will also cover resurfacing and multimodal improvements on Lake Worth Road.

TRANSPORTATION & LOGISTICS OVERVIEW

Nick Uhren Executive Director – Palm Beach Transportation Planning Agency

In today’s day and age, long-range transportation plans that encompass the next 25 years don’t make a lot of sense. Some of the people that we talk to in Palm Beach say, ‘I may not be here in 25 years. Tell me what you’re doing now; I need better transportation options today!’ Frankly, that’s a message we hear on a consistent basis, so we’re trying a different approach this year by developing a 10-year plan. We need to load our projects into the pipeline now in order to achieve quicker results. We need to decide today what we want to see built in 10 years; it takes that long to go from concept to construction.

Bus and rail To make buses an option for more residents, Palm Tran, the county’s public bus operator, introduced the Route Performance Maximization (RPM) project in September 2018. The RPM adjusted existing routes to improve coverage and frequency, with a trial run from Sept. 30 through Oct. 3, during which all fares were free. The RPM discontinued express service from the Mall at Wellington Green to the Intermodal Transit Center in West Palm Beach outside of peak weekday hours, and extended Route 52 to include a stop at Palms West Hospital and the new Palm Beach State College campus. The RPM also comes with technological upgrades, including free Wi-Fi on all buses and USB charging ports for phones and other devices on the newly rolled-out 1700 series buses.

“One of our challenges in Palm Beach County is that we do not have the density to support transit choices,” says David Ricks, a county engineer at the Engineering & Public Works Dept. “For the options we do have, we need to work on improving those so more people choose to use them instead of single-occupancy vehicles. For example, instead of having buses run every 30 minutes, we should be running every 15 minutes or under so these mass transit options remain viable. We need people to consider other means of transportation, as this will help us address the overall transportation challenges in this region.”

In addition to buses, Palm Beach County is served

by Tri-Rail, a commuter rail line spanning 72 miles of track connecting Palm Beach, Broward, and MiamiDade counties. Of 18 total stops, six are in Palm Beach County. In FY 2018, Tri-Rail carried a daily average of 15,000 commuters on weekdays; the total ridership

for FY 2018 was 4,325,856. Fares range from $1.25$11.55 one way; however, Tri-Rail recently launched a program offering $5 all-day passes on weekends.

The other big rail operator in the region is Virgin Trains USA, formerly known as Brightline. Brightline service was already up and running between stations in Miami-Dade, Fort Lauderdale, and West Palm Beach when Virgin Group’s Richard Branson purchased a stake in the company. Expansion plans that predated the merger are expected to move forward, including expanding service to Orlando International Airport via a line running westward from Cocoa that is set to open in 2021, as well as stretching service into Tampa along the I-4 corridor. The company is also looking at other potential stops in South Florida to add to its service, with Boca Raton in the running.

Aviation growth Palm Beach International Airport (PBI) is the county’s main international airport. A slate of new flights to attractive locations out of PBI were announced in late 2018, including seasonal flights to Denver with United Airlines from March 10 to March 31 and nonstop, yearround service to Providence, Rhode Island with JetBlue.

One of the biggest airlines at PBI, Southwest Airlines, is also adding more flights during peak times. “In regards to Palm Beach County, Southwest is not seeing any rapid growth in the next 12 months. What we are doing to help with the influx of people who are coming here is trying to attract the bigger aircraft so we can have more capacity. While we’re not making any major changes to our flight schedule, during the peak times we will be adding more flights,” Jose Lazo, Station Manager for Southwest Airlines at PBI told Invest:. www.capitalanalyticsassociates.com

| 61

Scott Kohut Airport Deputy Director Boca Raton Airport Authority

What has been the impact of your new customs facility?

Opening up the customs facility has been an incredible success. We were expecting between 600 and 700 aircraft clearing in the first year. When I totaled up the data from the past year, we had just over 1200 aircraft, so we’re seeing almost twice the traffic we were anticipating. Previously, when airport tenants wanted to fly in from outside of the country, they had to stop either at Fort Lauderdale/Hollywood International Airport or Palm Beach International Airport. They would then have to clear at that airport, start the engines back up, get everyone back on board and fly into Boca. It’s very expensive for the operators, and the jet fuel isn’t cheap. Now they can just fly straight home and it’s safer for the pilots because there’s less fatigue and they’re saving the engine cycles and the fuel burn.

What are some unique opportunities for the airport in Palm Beach County?

There are a couple of opportunities in Palm Beach County that make the Boca Raton airport more attractive. One of the reasons why we’re an asset to the local community is that the vast majority of corporate headquarters in Florida are located in Palm Beach County, and the majority of those are located in Boca Raton. It’s very attractive to businesses to relocate their corporate headquarters to South Florida, particularly in Boca Raton, one of the reasons being that they have access to not only a commercial airports such as Fort Lauderdale International or Palm Beach International, but also corporate facilities like Boca Raton Airport. This provides them with a way to fly their executive teams around, and get from point to point much quicker. It’s a much more efficient use of their time. There are also quite a few aviation schools in the area such as Lynn University in Boca, which has a flight program based here at the airport and various airport management and aeronautical science degrees.

62 | Invest: Palm Beach 2019 | TRANSPORTATION & LOGISTICS

A big change that came at the end of 2018 was Bruce V. Pelly retiring from his position as PBI’s airport director after 32 years. Laura Beebe was announced as Pelly’s replacement, which was viewed as a good fit given Beebe’s service as Deputy Director of Airports Business Affairs at PBI since 2007.

Under Beebe, PBI has announced its participation in the SolarNow program by Florida Power and Light (FPL). PBI has already installed three solar trees, and will soon construct a solar canopy that will simultaneously capture solar energy and shade 10 parking spaces in the Travel Plaza parking lot.

Combined, these additions consist of 230 solar panels and will produce 65 kilowatts of solar power.

Boca Raton Airport (BRA) is also making news. One of the biggest updates in 2018-19 was the opening of a U.S. Customs and Border Protection Facility, which has now officially been in operation for more than a year. The presence of the facility has brought a number of benefits to aviators, particularly international aviators, who fly into BRA. Chief among those is that these planes no longer need to first land at PBI or Fort Lauderdale Executive airports to clear customs, which carries a key ancillary benefit: the decreased number of takeoffs and landings in the region significantly reduces the likelihood of accidents, noise from planes, and pollution caused by fuel consumption.

Public-private partnerships Palm Beach County Administration has included a commitment to public-private partnerships among its organizational values, pledging to engage in creative leadership by being “resourceful, exploring publicprivate partnerships and cultivating community involvement.” In other words, the county is focused on promoting cooperation between entities in the public and private sectors to entice more businesses, people, and money into Palm Beach County. Public and private institutions in Palm Beach County have displayed their commitment to these values in the transportation sphere time and again, such as with the Brightline (now Virgin Trains USA), which was a private venture helping passengers reach various public facilities throughout the county.

In addition to being an exciting public-private partnership, Virgin Trains USA is also an example of what is called transit-oriented development (TOD).

Along with the Virgin Trains USA line, the Tri-Rail Coastal Line is drawing a massive influx of investment in housing developments in the areas immediately bordering its tracks, including Mike Masonoff’s 1.1-million-square-foot Transit Village, which will

TRANSPORTATION & LOGISTICS OVERVIEW

Russell Moore Senior Director of Operations – Belcan It has been a very successful time for us, and our success has been diversified across many disciplines around the state. In Palm Beach County, we’ve been able to expand both in the private and public sectors. Right now, we see the private sector market opportunities in housing, commercial, and retail development. On the public side, some of our recent projects are the multifamily projects in Downtown West Palm Beach, enhancements to some of the local malls, and expansions to several hospitals.

consist of more than 400 apartments, 300,000 square feet of Class A office space, 33,000 square feet of retail space, a 300-room hotel, 2,000 parking spaces, and a rooftop entertainment space right on the Tri-Rail. Just two blocks away, 275 residential units, 13,472 square feet of ground-floor retail/restaurants, 3,668 square feet of office, and an 800-space parking garage are planned to complement the Virgin Trains USA station.

This is because more residents are interested in living close to where they work, shop, and dine. Another example of TOD in Palm Beach County is Transit Village in West Palm Beach, with its 1.1 million square feet of apartments, 300,000 square feet of office space, 300-room hotel, 33,000 square feet of retail, 2,000 parking spaces, and a rooftop entertainment space.

Technology Another sector that is helping advance the county’s transportation plan is technology. Palm Tran, the public transit agency, has upgraded its fleet of buses with Wi-Fi and phone chargers as part of its RPM program. Prior to these upgrades, Palm Tran’s addition of GILLIG Low Floor Bus Rapid Transit (BRT) model buses to its fleet helped bring the agency into the future of environmentally-friendly public transportation, since the BRT buses are clean diesel vehicles. Palm Tran also supports the iGO app, which allows riders to track the locations of buses in real time so they know exactly when their ride will arrive. Finally, Palm Tran’s fare system has been upgraded to accept not only cash and tickets, but also credit cards, smart cards, and mobile ticketing.

Ride-sharing, the app-based, peer-to-peer service, has also become a common feature of regular transportation thanks to apps like Uber and Lyft. Uber and Lyft were greenlit to continue operating in Palm Beach County in 2016 despite the various controversies that continue to

swirl around ride-sharing. Since then, more innovations have taken root that make transportation, and traffic, a little better throughout the county. One example is the fact that Uber and Lyft are permitted to pick up and drop off passengers at PBI along with traditional taxis, expanding customer options and the pool of available pickup drivers.

Several senior care facilities throughout the county have also partnered with Lyft to offer special senior transport services. This option allows seniors to take their transportation back into their own hands by scheduling rides themselves whenever they need them through facility staff. As part of the program, drivers are available with vehicles that can accommodate various accessibility needs, such as wheelchairs.

Logistics With one of the fastest-growing ports in the country in terms of U.S. exports and an international airport that sees massive annual air cargo volume, Palm Beach County is quickly becoming a logistics hub. As the segment continues to develop as an industry, also aided by the e-commerce revolution, Palm Beach County is cementing its place at the center of this growth by attracting a plethora of logistics-oriented startups.

But it all starts with trade.

The hottest topic on that front remains the intense trade war between America and China. In 2018, China’s trade surplus with the United States peaked at a record $323.3 billion, despite initial punitive tariffs on Chinese imports already being in place. However, when the lagging impact of the tariffs finally manifested, it was acutely felt. In December of 2018, for example, Chinese exports to the United States, which had up to that point remained strong, fell 3.5% to $40.3 billion compared to the same period in 2017. Talks to end the www.capitalanalyticsassociates.com

| 63

Steven Abrams Executive Director South Florida Regional Transportation Authority/Tri-Rail

How is Tri-Rail working to improve its offerings to the community?

Our biggest challenge is increasing revenues. We are dependent on funding from the state and the three counties that we serve, so we are trying to cut costs and increase funding. Beyond that, our second-biggest priority is an overhaul of our trains and rails to ensure a state of good repair along the corridor. During the last fiscal year, we had our highest on-time performance since 2001, so doing this overhaul will continue to increase our on-time performance.

How are you working with Brightline to improve rail transportation in the community?

We have a collaborative relationship with Brightline.

Brightline is geared more toward the tourism population, whereas Tri-Rail transports 15,000 riders a day to work and school. It is a different market than Brightline, but we work very closely together. We are far along on plans to enter Brightline’s downtown Miami station. The platform has been constructed, and now we are just waiting on the approval for its Positive Train Control system. Positive Train Control is a safety system that was mandated by the federal government for all railroads in the country. Once Brightline’s system has been certified, we can apply to be a tenant on its system and continue our existing service and extend up to about half of our trains into downtown Miami.

What factors are behind the steady increase in Tri-Rail’s ridership?

There are three reasons and two are, in a way, related.

South Florida is a tourist and service-related economy, and these individuals, like waiters or construction workers, cannot work from their homes. We have people coming from all over the world who are used to rail transportation in their countries, and they are feeding into our system. Our roads are also just becoming so congested.

64 | Invest: Palm Beach 2019 | TRANSPORTATION & LOGISTICS

stalemate have ebbed and flowed with the most recent discussions in late July producing only what the China Morning Post called “all talk, no substance.”

The trade war has been particularly impactful in South Florida, since China is the second-largest trading partner behind Brazil of the Miami Customs District, of which Palm Beach County is a part. The district did more than $7 billion in business with China, or 7% of its total global trade, in 2017 alone. By jeopardizing this multibillion-dollar trading relationship, the trade war also threatens the jobs of thousands of South Floridians. More than 93,000 South Florida residents held manufacturing jobs as of February 2018 and earned a collective $1 billion in wages, and Palm Beach County is actually eighth out of all Florida counties when it comes to the number of manufacturing jobs.

American tariffs on Chinese steel and aluminum have made it difficult for manufacturers in the region to source affordable materials in sufficient quantities to meet production goals, which results in a great deal of uncertainty for their employees.

Jobs growth The area’s strong logistics sector requires a strong labor force and the county’s educators are already implementing plans to address demand. In 2017, Palm Beach State College began to offer an associate degree program in Supply Chain Management. The program was established as the result of direct demands from logistics employers, who bemoaned the shortage of a skilled supply chain workforce in a state that moves 762 million tons of freight each year. This impressive volume is thanks in no small part to the Port of Palm Beach, which has been the second-fastest growing port for U.S. exports for the last few years as global trade continued to expand, and the county is already home to 14 large distribution centers covering a total of 3.3 million square feet.

The school program is among the initiatives to promote logistics within Palm Beach County that have already begun to bear fruit. Countywide unemployment is at its lowest level in 29 years – 2.9% – and job openings in the county outnumbered residents 31,087 to 21,099 as of April 2019. Logistics is a winner in this period of unprecedented growth, with 200 more open “trade/transportation/utilities” jobs in the county than there were at the same time last year.

Port of Palm Beach The Port of Palm Beach is one of the fastest-growing ports in the country. The port conducted a total of $2.53 billion in trade throughout the course of 2018,

TRANSPORTATION & LOGISTICS OVERVIEW

and has already done $880.13 million as of April 2019.

The port’s chief exports include motorboats and yachts ($68.38 million), gasoline and fuels ($25.98 million), and chicken and poultry ($21.05 million). However, the port’s total global trade actually fell 1.33% through April compared to the same period last year, possibly due to the ongoing trade war with China.

Still, there was positive growth with several key partners, including a 9.56% increase to $286.68 million in total trade with the Bahamas (notably, the Port of Palm Beach is the Bahamas’ No. 1 overall U.S. trading port). The port also enjoyed massive increases in trade with its other major partners: trade with the Cayman Islands increased 81.66% to $29.9 million, trade with Italy grew by 90% to $55.76 million, trade with the British Virgin Islands rose 33.51% to $49.87 million, and trade with the UK exploded by 184.95% to $44.62 million. Overall, these five partners accounted for 58.43% of the port’s total global trade.

Palm Beach International Airport Palm Beach International Airport (PBI) also does a fair amount of trade thanks to its state-of-the-art facility and central location. PBI is not only perfectly situated to serve the Palm Beach County air trade area, it supports the air trade of four other counties, as well. Moreover, because PBI is adjacent to I-95, it is a convenient hub for ground cargo transport all along the East Coast. PBI is also home to a large Customs and Immigration facility equipped to handle international air cargo. Thanks to all these features, PBI averages 113,500 general aviation, freight, and other flights every year, amounting to roughly 19,000 tons of cargo.

Industrial real estate As logistics continues to become an increasingly larger part of Palm Beach County’s economy, it is only natural that the industrial real estate market should grow, as well. In the first quarter of 2019, the vacancy rate at industrial properties remained at a low 3.5%.

In response to demand for industrial space, new development continues to skyrocket, with 489,000 square feet of warehouse and industrial space under construction as of the close of Q1 2019, compared to 146,000 in Q1 2018. Asking rents per square footage came in at $10.01 per square feet, down a little from Q1 2018, but expected to climb.

Innovation Palm Beach County is already beginning to attract startups and other innovators in the trade and logistics

The Tri-Rail provides daily transportation to residents in the tricounty area: Miami-Dade, Broward and Palm Beach County.

field. For example, the global drone trade and logistics market is estimated at more than $4.98 billion per year, and is forecast to climb to $24.01 billion by 2026. Since the United States is expected to occupy the largest chunk of that market by far, Palm Beach County and the rest of the Southeast stand poised to cash in thanks to the presence of some of the country’s busiest ports.

Looking ahead Palm Beach County is doing everything it needs to do to be a major competitor in the realm of global logistics. Local institutions are dedicating resources to the workforce development of students and employees in the field, developers are working to satisfy the limitless demand for warehouse space, and the Port of Palm Beach and PBI continue to grow their global and domestic cargo trades. As e-commerce continues to increase the importance of logistics, emerging hubs like Palm Beach County will continue to benefit.

To be a true logistics hub, however, transportation is key. Palm Tran is outfitting its fleet with cuttingedge features, and Tri-Rail and Virgin Trains USA are expanding their service to facilitate the TOD revolution.

All of these initiatives, along with the TPI, are an essential component of not only accommodating the needs of its population but also in strengthening the backbone of the county’s economy. www.capitalanalyticsassociates.com

| 65

TRANSPORTATION & LOGISTICS INTERVIEW

Right track Plans and funding in place to stretch rail line from Miami to Orlando International Airport over three years

Patrick Goddard President – Virgin Trains USA

How do you expect to capitalize on Virgin Train USA’s success in the last year?

We raised $1.5 billion to construct the infrastructure needed between West Palm Beach and Orlando, and complete our 235 miles of track between Miami and Orlando International Airport. This three-year construction project will be one of the largest, privately funded infrastructure projects in the country. We are looking also at the communities of Aventura and Boca Raton for stations. Those two cities are really the bedroom communities for Miami, Fort Lauderdale, and West Palm Beach. Virgin Trains USA is one of the first private passenger rail systems in the country in the last 100 years, and ridership continues to ramp up in South Florida. We expect to potentially triple ridership between this year and the end of 2020.

66 | Invest: Palm Beach 2019 | TRANSPORTATION & LOGISTICS

What trends are having a direct effect on the transportation sector?

Instead of more people moving out to the suburbs and needing to use cars to get to their offices in downtown areas, there is a phenomenal opportunity in South Florida to look at more urbanization and create livework-play environments that have mobility options attached to them. There are also more people who are retiring and downsizing, and rather than living out in the suburbs, they want to live in live-work-play environments. Eighty-four percent of the United States is urbanized, and as we move into the future there will be a movement to urbanize more around transit options. The world is changing, and there are a lot of macro trends that are contributing to that. The average person is spending five to 10 hours a day on their phone, fewer 16 to 21 year olds are getting their driver’s licenses, people want to get out of single-vehicle occupancy and the burden of car ownership, and public transit is 90% safer than being in a car. All these trends have a direct impact on the transportation sector, and will ultimately benefit transit options like Virgin Trains USA. How is Virgin Trains USA a catalyst for transit change in South Florida?

We are reinventing train travel in America, so there are always going to be challenges, but none that we have not been able to overcome so far. The advent of this project has awakened a desire and a curiosity within the municipalities to recognize the full potential for mass transit in South Florida. We are solving the challenge in Florida of medium-haul travel. Airlines take care of long trips, while rideshare, motorized scooters and buses take care of short ones. There has always been this gap with the 200- to 300-mile distances that are too short to fly and too long to drive. By introducing an option like this, it encourages people to leave their cars at home.

Banking & Finance: Consolidation and technology are reshaping the banking landscape in Palm Beach County, where the size and number of small business and consumer loans, total bank deposits, and wealth management activity remain robust. The success of the sector has some referring to the countyâ&#x20AC;&#x2122;s key financial district as the â&#x20AC;&#x153;Wall Street of the South.â&#x20AC;?

www.capitalanalyticsassociates.com

| 67

Wall Street South: With a burgeoning reputation as a financial center on par with its northern counterparts, Palm Beach County’s star is on the rise Palm Beach County’s resounding success as a financial center can be attributed to its strategic location in the Sunshine State, its business-friendly tax landscape, and its strong and evolving regulatory environment.

The sector is gaining so much ground that some pundits now refer to it as the “Wall Street of the South,” and with good reason.

The county has long been a major banking center, particularly the city of West Palm Beach with its Flagler Financial District, the new “Wall Street.” The county’s banking sector supports 75 banks and 20 credit unions as of 2018, as well as 233 financial services firms. Some of the biggest financial players in Palm Beach are Wells Fargo, Bank of America, Chase, PNC, and Citibank.

An interesting side effect of South Florida’s diverse appeal is that it is tending to make the banking market less diverse overall as larger out-of-state institutions buy up smaller local banks to gain a toe-hold in the lucrative South Florida market. For instance, consider that, in the third quarter of 2018, there were only 118 distinct banks in Florida, down from 135 banks just one year earlier and from a pre-recession high of 276 in 2007.

Some high-profile mergers from recent years include the 2017 acquisition of both NorthStar Bank and Palm 68 | Invest: Palm Beach 2019 | BANKING & FINANCE

Beach County Bank by Seacoast National Bank, as well as the merger of BB&T and SunTrust Bank.

Sector performance The performance of a particular region’s banking and finance sector can be measured using a variety of metrics, including the size and number of small business and consumer loans, total bank deposits, and wealth management activity. In Palm Beach County, these metrics point to a robust banking and finance sector that is poised to weather present and future challenges that individuals and businesses face in the county. For instance, Palm Beach County is home to some of the best cities for small businesses as measured by the availability of SBA loans, among other factors. Specifically, Palm Beach Gardens and Jupiter ranked 16th and 21st on Go Verizon’s list of the Best Small Cities for Small Businesses for 2019, thanks in part to the easy access to SBA loans there. Additional financial help for small businesses is available in the form of the Florida Small Business Emergency Bridge Loan Program, which is designed to help small businesses in several counties, including Palm Beach, that are impacted by a disaster. Under the( )

BANKING & FINANCE INTERVIEW

Interesting times Optimism among small-business owners is up and mortgage lending is positive, creating an aura of opportunity

David Williams Community Banking Gold Coast Region Bank President â&#x20AC;&#x201C; Wells Fargo How is the landscape of lending and asset management changing?

It is an interesting time. In lending, we are seeing a lot of optimism, especially when it comes to small businesses.

The recent survey results of a Wells Fargo/Gallup Small Business Index shows small business cash flows are up, revenues are up and small-business owners are feeling better about their ability to borrow. Using this data, we can help small-business owners and their needs.

Here in Palm Beach, weâ&#x20AC;&#x2122;ve seen an increase of interest around equipment lending opportunities.

The mortgage rate environment is also interesting.

People who thought they wouldnâ&#x20AC;&#x2122;t be able to refinance for quite some time, are now doing so. It is a great opportunity to get into new housing at a lower payment than what was expected. We are working closely with our mortgage group to help our customers make the right decisions around their mortgage needs.

What are the notable challenges for banking and investing in Palm Beach County?

The volatility in the market is definitely a challenge. To navigate this, we have to help our customers make the best decisions, and we are doing so by continuing to provide financial education. We have a continued focus on helping customers with their basic banking needs and having overall, better financial health. Our personal bankers and affluent bankers are constantly making themselves available to understand the needs of our customers.

They then take the time to educate our customers so that they can make the best-informed decisions on what to do with their assets. We also take the time to provide financial education to the community. If we can help local communities through financial education, it benefits us all, whether local residents do business with us or not. If our community succeeds, so do we.

How does a national bank like Wells Fargo maintain a high quality of customer service?

We are a national bank, but we strive to be communityfocused in everything we do. One of the changes we have implemented as a company to continue to build a better bank is to eliminate a layer of management in the Community Bank in order to bring senior management closer to our customers. That is why I am so excited to be the new leader here for our Gold Coast Region, which includes Palm Beach. Our new structure better allows me to be focused strictly on this area, stay better connected with my district managers and team members, and spend time at our branches to hear directly from our customers. I am excited for the Gold Coast region and the great things to come! www.capitalanalyticsassociates.com

| 69

BANKING & FINANCE OVERVIEW

( ) program, companies with two to 100 employees and a place of business in Florida can apply for up to $50,000 in interest-free loans. The Bridge Loan Program, which was first employed to help small businesses recover from Hurricane Andrew in 1992, and then again in the wake of 24 subsequent disasters, was last activated in January 2019 to deal with the fallout from Hurricane Michael. Overall, the program has aided 4,160 small businesses with $123.1 million in financial assistance.

Wealth management, another significant facet of the financial services sector, is also performing well in Palm Beach County. In fact, There are more than 233 financial services firms incorporated just in West Palm Beach, which is home to the Flagler Financial District, an urban corporate zone dedicated to business and financial enterprises that offers unprecedented access to global wealth and markets. Palm Beach County also benefits from Floridaâ&#x20AC;&#x2122;s attractive tax landscape, including no state personal income, estate, or property tax.

Of course, one of the clearest ways to measure how the banking industry is doing is to look at how the banks themselves are doing, and in this regard, the figures suggest the countyâ&#x20AC;&#x2122;s banks are doing well. Local

Palm Beach County is home to some of the richest individuals in the country.

BANKING & FINANCE OVERVIEW

bank deposits in Palm Beach County are at a record high, although mergers and technological advances in recent years have reduced the number of branches.

Total countywide deposits as of June 2018 stood at nearly $53 billion, well over the $24 billion in deposits in 2002 and representing a 9% share of the Florida state market. The number of branches, however, is on a downward slope thanks largely to an increase in mobile banking and other payment solutions, such as PayPal, Apple Pay, and mobile deposits, that reduce the need for people to visit brick-and-mortar branches.

The steady pace of bank mergers over the last few years, including Seacoast National Bank’s takeover of NorthStar Bank and Palm Beach Country Bank (PBCB), also played a part.

Competitive landscape Bank consolidation has been occurring at an unprecedented pace in Palm Beach County, which has made an already sharply competitive landscape even more so. In 2017, Seacoast acquired both NorthStar and PBCB. The acquisition considerably strengthened Seacoast’s position in Florida by expanding its footprint in the vibrant South Florida financial market. NorthStar had deposits totaling $168 million and $137 million in loans at the time of the transaction, while PBCB had deposits of $281 million and loans of $290 million.

Another major transaction that will impact Palm Beach County’s financial market is the merger of BB&T Bank and SunTrust Bank, based in Winston-Salem, North Carolina, and Atlanta, Georgia, respectively.

The banks announced plans to merge into a new superbank worth roughly $66 billion. The new entity, called Truist Bank, will have $442 billion in assets, $301 billion in loans, $324 billion in deposits, and will serve some 10 million households throughout the Southeast, sending ripples throughout the market that will no doubt impact Palm Beach County, as well.

The merger is expected to close in the third or fourth quarter of 2019.

Banks in the region are also taking internal steps to better position themselves in the market. Pittsburgh banking powerhouse PNC Bank is moving its Southeast Florida regional headquarters from one Palm Beach County city to another, leaving West Palm Beach for Palm Beach Gardens. PNC recently signed a lease for 22,000 square feet of space in Palm Beach Gardens. The new office will house 100 employees and include a training center for new retail associates. PNC held $3.69 billion in deposits in Palm Beach County as of the summer of 2018, and the move is indicative of the bank’s desire to focus on even more collaboration within Palm Beach Gardens.

FineMark National Bank and Trust also recognized the strong growth in Palm Beach County, adding a wealth advisory team of seasoned industry veterans to its roster here in mid-2018. The team consists of Paul Blatz, Dean Borland, and Kim Bagatell, who each have more than a decade of experience managing the assets of ultra-wealthy clients. Another financial services firm, Rehmann, also expanded in Palm Beach County with a second location in Jupiter that was opened as part of a merger with Lamn, Krielow, Dytrych & Co. Growth drivers Several factors are in play when it comes to the growth of the banking and financial services market in Palm Beach County. State-level advantages, such as tax breaks, make Florida an attractive destination for banks and financial services firms, compared to traditional financial meccas. “The new tax code has really changed people’s lives, and we are now seeing certain individuals immigrating to Florida because of the business opportunities that the state offers and quality of life. High income tax states include New York, California, Massachusetts and those are the people coming here. The thing is that in order to qualify for Florida’s tax benefits you must be a legal resident here, which means six months and one day www.capitalanalyticsassociates.com

| 71

BANKING & FINANCE OVERVIEW

of residency. Under the new tax laws, individuals are significant tax savings if they planned right. Second, capped out at $10,000 as a deduction for their state it affected income taxes. Itemized deductions for income taxes, personal property taxes and their sales a number of state taxes are gone now, or are very tax. In addition, if they have a large mortgage on their insignificant, for these wealthy people. If you come from house the new tax code only allows them to deduct a very high-taxed state, it has had a negative impact on interest up to $750,000,” Roxana Scaffidi, CEO and people whose adjusted gross incomes are $10 million owner of Florida Accounting and Advisers, told Invest:. and up. A lot of our clients have income sources from The flight from Wall Street to Florida was accelerated states that have very high state taxes.” The creation of in 2017 when the Trump administration’s Tax Cuts and Opportunity Zones are another positive from the TCJA Jobs Act (TCJA) changed the rules around the State that will benefit South Florida, according to President and Local Tax (SALT) Deduction. The SALT Deduction and CEO of Palm Beach Tax Group Roland Manuel. previously allowed residents of states with high state “The Tax Cuts and Jobs Act will eventually turn out income taxes to deduct these on their federal tax returns to be a good thing. It is going to provide numerous opportunities for investors due without limitation. However, the to the opportunity zones that are TCJA instituted a cap of $10,000 being created, especially in South on SALT Deductions. This cap Florida. In addition, we have is far too low to be of any real new depreciation rules, which benefit to many extremely highare convenient for investors. earning individuals; however, the We are going to see an influx of new cap is irrelevant for residents development and investments. of Florida, where there is no state Roland Manuel With the lower tax rates we income tax at all. As a result, Palm Beach Tax Group expect to see more corporations investment firms and wealthy individuals are fleeing high-tax states like New York coming into Palm Beach County, and that will create and California and resettling in Florida destinations, new employment opportunities.”

Another factor contributing to the influx of in particular Palm Beach County with its established financial market. Richard Rampell, managing financial firms and professionals is Florida’s weather. principal at Rampell Division of MBAF, highlighted the Convergence Investment Partners President Dave impact of the legislation: “We’ve also seen a significant Abitz, for example, noted that his firm’s decision to increase in tax planning for our high-net-worth and move to Palm Beach Gardens in 2018 was motivated ultra-high-net worth clients following the big tax law in large part by his team’s desire to move from change in 2017. That legislation affected two things. the “frozen tundra” of Wisconsin to the “endless First, it affected the estate tax. Individuals and married summer” of Florida. With perpetual sunshine comes couples who have wealth up to or over $22 million had the ability to enjoy a lifestyle of year-round outdoor

(TCJA) is going to provide numerous opportunities.

BANKING CONSTRUCTION & FINANCE OVERVIEW

Dennis Bedley Chairman & CEO Legacy Bank of Florida

The smaller size of community banks allows them to offer a personal touch, not usually found at their larger, national competitors.

activity and recreation. Yet another key contributor is Floridaâ&#x20AC;&#x2122;s convenient access to the Latin American and Caribbean markets, and their offshore accounts.

Finally, the trend is self-perpetuating, with many financial institutions citing the presence of other such firms in Palm Beach â&#x20AC;&#x201C; the more banks and financial firms move to the county, the more other institutions will want to move here, too.

Insurance One of the unfortunate realities of life in Florida is hurricane season. Given the fact that the last few years have been particularly active, property owners in Florida are more aware than ever of the need to purchase insurance. As a result, there are several highly-ranked insurance companies, each doing more than $100 million in premium business throughout Florida, including Auto Club Insurance Co. of Florida, USAA Property and Casualty Insurance Group, and Citizens Property Insurance Corporation. Citizens, in particular, is doing a lot of business, given that it is run by the state of Florida as the official insurer of last resort. In 2018 alone, its premium business totaled $894.1 million. Citizens is obligated by state law to insure those whom the private market will not insure, and whether the private market will insure someone is a factor of prevailing conditions in the insurance market

What are the unique characteristics of the market for personal and commercial banking?

We are blessed to be in a great market that is continuing to grow. After President Trump signed the December 2017 tax reform act, which limited the deductibility of state and local income taxes, we have seen a large migration of people moving from the Northeast and the Midwest into Florida. Palm Beach County is the largest county east of the Mississippi, so it will be the recipient of many of these people moving to the area. Along with this increased influx of population comes an increase in small businesses, residential mortgages, home equity loans and deposit accounts that translate nicely into many opportunities for Legacy Bank of Florida.

How is the evolving tech landscape changing banking and financial services in general?

It is a challenge for us because we are sort of between a rock and a hard place, as are all the banks. On one side we have technology trying to grow and expedite banking, but at the same time we are in a regulated business, which slows our pace forward and limits our growth. For example, marijuana is medically approved in the state of Florida, but it is still against the law on the federal level.

We are not allowed to take in a deposit account for any marijuana dispensary company in the state because our deposits are insured by the FDIC. As a bank, we are in the middle of this quandary. Technology and the citizens of Florida are pushing us to do marijuana-type business, but the government is telling us to slow down until it gets approved at the federal level.

What is your outlook for the financial services industry in Palm Beach over the next 12 months?

I donâ&#x20AC;&#x2122;t think that we are going off a financial cliff anytime soon. Part of the reason is because of the migration we are seeing into the area. The other reason is that banks are much more capitalized now than they were in 2008.

We are going to see strong bank earnings going forward. www.capitalanalyticsassociates.com

| 73

BANKING & FINANCE OVERVIEW

There are roughly 75 banks and 20 credit unions throughout Palm Beach County,

at the time. When there are relatively few disasters, insurance companies make a tidy profit by collecting premiums and paying out minimally on policies, and under these conditions they are more willing to take on new insured. As a result, during such periods Citizens experiences “depopulation,” or a decline in the number of people it covers. However, when the market has sustained the burden of successive severe hurricane seasons, the private insurance market may be reluctant to open many new policies for fear of yet another season of costly payouts. During such times, Citizens tends to experience a large influx of insured.

This is why some 60,000 new policyholders were expected by Citizens’ leadership for 2018.

Citizens is also impacted by the Florida insurance market’s assignment of benefits (AOB) abuse. Many private insurers refuse to provide coverage in areas where AOB abuse is prevalent. When this happens, Citizens is forced to provide the coverage at risk to itself. An increase of $17 million spent on AOB abuse litigation costs was anticipated in 2018. AOB reform is a major priority of Citizens and other insurers, but so far no bill has been able to gain sufficient traction among state lawmakers. The number of natural disasters over the last few years is another factor altered insurer appetite, as insurers change tack when it comes to risk. “Carrier appetite has changed due to the multiple natural disasters we continue to encounter year over year. It’s not just Florida. The wildfires in California and in the western states, the continued flooding in states like Texas, Iowa and the Midwest have all contributed, 74 | Invest: Palm Beach 2019 | BANKING & FINANCE

in their own destructive way, to the current state of the insurance marketplace. Carriers, which grew their market share aggressively over the past 15 to 20 years, are now retrenching. Their appetite for risk has changed. Our challenge is to consistently find ways to be more creative and thoughtful than our competition.

There has never been a better time to listen to your clients, lead with education and provide sound counsel.

I am certain that authenticity or being true to who you are will never go out of vogue,” says Jamie Gordon, vice president of Crystal Alliant Private Client.

Private equity has also entered the insurance landscape Florida, which provides a financial buffer when a disaster strikes. “Private equity has gotten into the insurance business. The good news is that when a hurricane hits, there’s plenty of money backing these policies so that rates don’t skyrocket,” says Tom Lynch, CEO of Plastridge Insurance. “This market has constantly fluctuated over the years, but it seems to have stabilized with private equity in the market and the re-insurance industry. I therefore believe it is prepared as Palm Beach County continues to grow.”

Top banks There are roughly 75 banks and 20 credit unions throughout Palm Beach County, each operating numerous branches. The Palm Beach County banking market is, for the most part, dominated by national and international institutions with names that are immediately recognizable. Measured by deposits, Wells Fargo was the largest bank in the county in 2018 at

BANKING & FINANCE OVERVIEW

Wells Fargo was the county’s largest bank in 2018 with an 18.9% share. $9,958,667 and an 18.9% market share; Bank of America placed second with $9,204,155 in deposits and 17.5% market share; Chase boasted $5,619,788 in deposits and 10.7% market share; while PNC had deposits of $3,883,572 and 7.4% market share. Other large banks occupying leading positions in Palm Beach County are TD, SunTrust, Citibank, BB&T, Bank United, and Florida Community Bank.

Palm Beach County is also home to more than a few regional and community bank headquarters, including those of Seacoast National Bank, Harbor Community Bank, IBM Southeast Employees’ Credit Union, Palm Beach Community Bank and First Choice Credit Union. These smaller banks have several advantages that make them especially attractive to customers, including a more personal touch than many of their international counterparts, quicker loan decisions, and a menu of services that is typically every bit as robust as that of a big bank. There is a lot of variety in terms of the size and assets of these institutions, with many holding assets valued at below $1 billion and several with assets

in excess of $10 billion. All of Florida’s community banks, regardless of size, are insured by the FDIC, meaning customers’ money is just as safe as it would be with a large national or international bank.

Regulations 2018 and 2019 were both big years for updates to domestic and international regulations that have direct or indirect impacts on the banking and finance industry. Domestically, 2018 saw some significant rollbacks to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Dodd-Frank was passed in 2010 in response to the banking sector’s perceived role in bringing about the Great Recession of 2008. Although there has been a great deal of rhetoric about the 2018 rollback having “repealed” or “gutted” Dodd-Frank, it in fact does neither. The regulatory core of the act remains in full force and effect, with tough regulation of bigger banks, a more substantial and hands-on role for the Federal Reserve, and the continued authority of the Consumer Financial Protection Bureau. One of the key changes cited as indicating a “gutting” of Dodd-Frank is the ratcheting up of the “Bank SIFI” threshold, which establishes the size at which a bank falls under mandatory increased Federal Reserve regulation, from $50 billion to $250 billion. However, there is a crucial caveat to this change: although $250 billion is the new mandatory threshold, the Fed retains discretion to apply stricter scrutiny to any bank over $100 billion if it sees fit. Thus, the actual minimum threshold has only been slightly raised, the Fed’s discretion has actually been increased, and the core framework of Dodd-Frank once increased Fed oversight is applied remains unchanged.

BANKING & FINANCE OVERVIEW

Technology like mobile banking has caused many banks to rethink their strategy when it comes to opening more brick and mortar locations.

From an international perspective, a couple of important regulations passed by the EU will come into full effect and enforcement in 2019, and they both have to do with individuals’ personal banking data. The first regulation is the Payment Service Directive 2 (PSD2).

Ostensibly, PSD2 is intended to further harmonize cross-border money transactions within the EU, in keeping with the European Economic Area’s rationale of freer trade and more permeable borders within the EU. There is an interesting facet to the PSD2 that is worth closer examination from a data privacy perspective, though. Under the new framework, certain third-party providers of payment and account information services will be able to access the bank account information of EU citizens directly, thereby viewing account balances and spending habits to an extent far more invasive than ever before. This could potentially lead to even more sophisticated targeted advertising of financial products and services, and even the selling of this sensitive data.

However, there are some important qualifying factors that make this new regulation considerably less dystopian than it sounds at first blush. First, third-party providers must undergo an application and approval process to become registered as Account Information Service Providers (AISP) before they can go snooping around your private account data. Still, registration need only be completed in the institution’s home country, and the institution may then freely operate as an AISP throughout the entire EU on the basis of an EU passport. Thus, registration in a more lenient country may allow less reputable AISPs to legally access account information anywhere in the EU. Still, this is a decent check on the ability of third-party financial service providers to access personal financial data. Another check is the simple fact that each AISP must obtain an individual’s consent before accessing their data. PSD2 goes into effect on Sept. 14, 2019.

76 | Invest: Palm Beach 2019 | BANKING & FINANCE

Another EU regulation of individuals’ data that is far more user-friendly and focused on data protection than the PSD2 is the General Data Protection Regulation (GDPR). The GDPR actually went into effect in 2018, but it is in 2019 that its violators have really begun to feel its bite. In the U.K., the Information Commissioner’s Office (ICO), the office that handles data protection in the country, levied massive fines in July 2019 against British Airways and Marriott International for failing to prevent breaches of confidential customer data.

British Airways was hit with a $228 million penalty for leaking the information of 500,000 of its customers, while Marriott suffered a $124 million fine for exposing 339 million guest records. Although these fines are well below the maximum penalty permitted by the GDPR, they clearly communicate that the ICO has teeth and is not shy about biting when companies fail to adequately protect user data. Given the heightened sensitivity of financial information, it is expected that ICO and its sister agencies in other EU member states will be equally as stringent, if not more so.

Looking ahead The trend of consolidation within the banking and finance industry is almost certainly going to continue in Palm Beach County as larger regional banks continue to acquire local community and regional banks to expand their footprint in the area. This will add to the challenge of operating as an independent community bank in the area, as the more successful you are the more likely you are to be acquired; as such, these smaller institutions need to find creative ways to grow their business while fending off – or at least adequately preparing for – the threat of acquisition. This trend will also increase the volume of large regional and national institutions in Palm Beach County while simultaneously decreasing the overall number of institutions, which will directly impact customers’ banking options.

However, at the same time, Palm Beach County continues to grow thanks to an influx of new residents and the continued inflow of foreign and domestic capital to the region. Latin America, China, and Canada all remain meaningful sources of investment capital, particularly in real estate such as luxury condos. The developers building luxury and commercial real estate are also a source of business for banks through construction loans, which continue to be a growing business for lenders in Palm Beach County. All of this business is causing deposits to reach record highs in the county, even while the number of branches contract thanks to the consolidation trend and the emergence of new banking technologies that make brick-and-mortar banking obsolete.

BANKING & FINANCE INTERVIEW

Multiple lines Collaboration and a focus on multiple lines of business prove a recipe for success in Palm Beach County.

Cressman D. Bronson EVP, Regional President of Southeast Florida – PNC Bank What are some of the unique strengths and characteristics of the Palm Beach market in comparison to other markets in South Florida?

The focus in the Miami market is corporate lending for middle market-sized companies and larger; while in Palm Beach County, the focus is on multiple lines of business. So it’s not only corporate lending but also retail and wealth management. We actually recently moved our Regional Headquarters to Palm Beach Gardens to create more of a collaborative work environment to better serve all our markets, but especially the Palm Beach County market. We found that we’re successful when our corporate bankers work with our wealth management advisors internally to help provide additional value to the relationships they have. Having a work environment that promotes collaboration has had positive results in employee engagement as well as providing additional services and solutions to the clients, namely the ones in Palm Beach County.

How has the landscape of personal and commercial banking and lending changed in Palm Beach?

We’ve seen an increase in corporate banking within the scope of loans and treasury management. We have good working relationships with private equity groups, which has helped because it has been a very active market in Palm Beach County. We have 1000 people a day move to the state of Florida, and a good portion of them are moving to the tri-county area.

So we’re seeing a lot of activity in loan growth, loan requests and people moving into the community from a business perspective. We’ve seen an increase in our retail branch activity in regards to new checking accounts, home mortgages and car loans. It has been growing steadily for the last five years, and has been more active in the last year or two than we’ve ever seen.

What’s your outlook for PNC Bank and South Florida’s financial services sector in 2019?

Because of the amount of activity that we’re seeing from the people moving to Florida, and the desirable weather and tax advantages from living in this great state, we expect another strong year. We see a lot of interest in Palm Beach County, specifically as the growth for our region continues. We’re very active from a community perspective, and are seeing continuing interest from companies and individuals moving to Palm Beach County. It’s an exciting time to be a part of the business and philanthropic community as we continue to service our customers and our neighbors. At PNC, we find that it’s important to give back to the community and will continue to do so in 2019. www.capitalanalyticsassociates.com

| 77

®

oundtable:

Shifting landscape Banking leaders in Palm Beach County discuss their growth, both organic and through M&A, while also touching on relationships with clients and the community. Technology is a driving force in the ever-changing landscape as client expectations shift. And as emerging trends reshape the banking experience, getting the right people in place is becoming paramount.

Jesse Flowers

Community President CenterState Bank

How would you define your growth?

We continue to grow, hire more people and expand our client base. We are always looking for acquisitions and good partnerships. We have acquired five banks over the last six years in South Florida, and all of them have been a strong fit. We want to make sure that our culture fits with the companies we acquire. We still run like a small bank, and all of our decisions are made locally.

We stick to our fundamentals. We make sure that all the loans that we provide are for good, qualified borrowers that can withstand a recession. On the commercial lending side, most demand is driven by real estate and we are paying close attention to where we are in that cycle.

What trends stand out in the banking sector?

Banking is always changing. One of the trends that we have seen over the last five years is people using alternative lenders. Whether it be hedge funds, internet lenders or hard-equity lenders, a high number of those lenders have stepped into the market, more than they used to in the past. That might continue to be a trend because they are often able to be more flexible on the terms and conditions of their loans due to less regulation.

People are more focused on technology. We have to focus on the services that people do want, like better and easier online technology. Those are the services that are expanding with people using phone and online banking. CenterState has invested in technology over the last several years because we know how important it is. Now, with open source platforms, access is getting cheaper, and we have hired in-house programming professionals to develop software for us.

78 | Invest: Palm Beach 2019 | BANKING & FINANCE

Carlos Alvarez City President BBVA

What changes have you seen in the banking segement?

Over the past two decades, Palm Beach County’s banking community has grown in unison with the area’s population and job growth explosion. The county’s economic and tourism partnerships led to tremendous national marketing success, helping drive companies to relocate and visitors to call the area home. It’s this reason why BBVA Compass chose to expand its domestic footprint this past year with the opening of our newest commercial banking office (CBO).

How is BBVA adopting technology in its services?

BBVA is committed to a digital transformation and to converting an efficient and profitable analog banking operation into a digital, knowledge services business.

Our goal is to be a formidable digital challenger; to disrupt the industry from within with the aim of achieving excellent customer service that provides the most seamless, transparent and intuitive experience possible.

This transformation can and will be accomplished by leveraging Big Data, artificial intelligence, blockchain technology and the cloud.

What key hurdles do you face?

Financial regulation has become too complex and burdensome. We support efforts to modify regulation to support job growth, increased lending and capital creation. Following the passage of significant regulatory recalibration legislation in 2018 our focus will now be on ensuring that the Federal Reserve Board fully implements the new changes required by Congress.

BANKING & FINANCE ROUNDTABLE

Daniel Sheehan

Executive Chairman of the Board Professional Bank

What is behind your growth in the region?

This past year the bank had more relative and absolute growth in Palm Beach County than Miami-Dade County and there are a couple of reasons for that. First, there are fewer small banks in Palm Beach County, and when someone is buying a home or office for their small business, they’ll typically prefer a more intimate experience with their smaller bank. Second, there is an increasingly larger difference in small bank versus big bank experiences. Big banks, due to their scale, are increasingly relying on formulaic and algorithmic decision-making for handling certain client situations.

Small banks, on the other hand, enjoy a competitive advantage because the client is typically dealing with professionals that have some discretion and that live and work in their same neighborhood.

How are you meeting the challenge of technology?

Notwithstanding the importance of a great client experience in the traditional bank setting, it’s hard to ignore the shift in certain client expectations relating to digital services and products. We’ve made a big investment building out a digital team so we can have the ability to compete digitally with the big banks. Building a digital footprint may be a bit ambitious today, but it’s better that we constructively disrupt ourselves now, then have someone else destructively disrupt us later. One of the biggest keys to our success is that we’ve done a good job hiring people who have great networks and bandwidth in the various South Florida communities. It’s because of those relationships that we’ve been able to attract an abundance of great clients.

Kevin Rogers

South Florida President Seaside Bank

How are you protecting your clients in regards to cybersecurity?

Cybersecurity is a huge topic, not only in our bank, but also across the financial services industry. We tell our people all the time that we’re a small bank, and if we took a $2 to $3 million hit it would substantially hurt us. Our people are on guard every minute. We have an incredible on-boarding process, and we not only know who we’re banking with, but we also know who are clients are dealing with as well. If you ask what keeps me up at night more so than hitting balance sheet goals, it’s cybersecurity and being hit with a loss. The amount of money that the bank spends on cybersecurity is incredible, but you have to stay ahead of the game. We conduct a lot of training on the subject.

What is the biggest challenge in the market for a small to midsize bank like Seaside, and how do you overcome it?

I think the biggest challenge is always going to be the competition. Banks of our size do not have the brand recognition that a Bank of America does, so the question is how do we sell Seaside Bank? We have to go out and talk to our clients about who we are and what we specialize in. We drive home the fact that we are able to provide the same products and services that the big banks do but in a community bank setting.

We’ve taken a lot of clients away from these big banks. If you look at what’s going on in the big banks right now, it’s all about sales process management and managing their people to numbers that, a lot of the time, mean selling products and services that the clients really don’t need. www.capitalanalyticsassociates.com

| 79

Market voices: Talent Factor

Chuck Cross

EVP/Commercial Market Executive Seacoast Bank

Palm Beach County has really grown over the past decade. Dense population provides great opportunities for banks. Palm Beach is growing like the whole state of Florida is growing. Everyone wants to move to Florida either for the weather or for some of the changes in tax reform, and people have always wanted to retire here. Palm Beach also has great infrastructure in terms of education. In addition, there’s a lot of oceanfront property that attracts high-net-worth individuals, which in turn attracts retail, recreation and service jobs.

We are seeing individuals with companies in other parts of the United States move their headquarters to Florida for tax and economic reasons.

We are seeing CEOs move executive offices to Florida so they can enjoy the lifestyle and personal financial advantages. Wilmington Trust and M&T Bank have geared planning and wealth strategy services to assist individuals or companies with such a transition.

Diane Peterson McNeal

Regional Managing Director, Private Banking Wilmington Trust

Michael Daszkal

CPA Managing Partner Daszkal Bolton LLP

Here at Daszkal Bolton, LLP, we were talking about work-life-balance issues more than 15 years ago — before it was a buzzword. We pride ourselves on being a relatively low-turnover firm, especially when compared to our larger competitors. We take the time to go through our employees’ workloads to make sure that they aren’t overloaded. We provide tons of training; work-athome policies; even meals, three or four nights a week. Basically, we spend a lot of money making sure our employees are comfortable. It’s very hard to find qualified CPAs in Palm Beach County, so keeping our employees happy is extremely important. We’re also always talking to recruiters, and we‘re heavily involved with Florida Atlantic University.

80 | Invest: Palm Beach 2019 | BANKING & FINANCE

Healthcare: National and local trends are shaping the health sector in Palm Beach County, including federal and state public policies, the opioid epidemic and the debate over access to marijuana. A strong insurance market and the battle for hospital infrastructure are among the highlights of an industry that relies first and foremost on people.

www.capitalanalyticsassociates.com

| 81

Good medicine: Challenges abound for Palm Beach County’s health sector but all signs point to strength and further growth ahead People depend on healthcare and the healthcare industry depends on people. It’s a symbiotic relationship and in Palm Beach County, it is fueling growth. From hospitals to insurance, there is action to maintain the sector’s momentum, backed in part by a baby boomer generation that refuses to go quietly into retirement. Challenges abound, especially on the policy front, but all signs point to strength.

Health starts with people and Palm Beach County has just under 1.5 million residents, 74.8% of whom are white, 22.9% Hispanic, 19.7% African American, 2.9% Asian, and 0.6% American Indians (1.8% of individuals identify as a mixture of two or more ethnicities).

Healthcare providers are treating a variety of ailments and conditions among this diverse population, including HIV/AIDS and opioid addiction.

The sector is also providing a wealth of jobs. Hospitals in the state create well over 900,000 jobs and generate $128.37 billion in economic impact every year. At the county level, per capita healthcare spending was $8,076 in 2014, the latest year for which data is available, and is likely considerably higher today. Just over 84% of the county population is covered by some form of medical insurance, which gives Palm Beach 82 | Invest: Palm Beach 2019 | HEALTHCARE

County the second-highest health insurance coverage in the region. Only Martin County has a slightly higher rate of coverage at 86% coverage.

Performance indicators There are several indicators of the strength of a region’s healthcare sector, including the number of new facilities being built, the volume of hospital mergers and acquisitions, and the job market for healthcare professionals. In Palm Beach County, these indicators point to a strong and sustainable sector. For instance, job market growth in the county is steady, with a 3.3% increase in the number of “education and health services” jobs in the region between May 2018 and May 2019, according to one study. One factor enticing healthcare providers to Palm Beach County is, not surprisingly, people. Providers are anticipating a surge of baby boomers retiring to Florida by 2030, and they want to be established in the area well before then to seize the opportunity. Palm Beach County is also expecting approximately 200,000 non-retirees to move to the county by then, and they will bring with them their own host of unique healthcare needs, meaning there will be plenty of demand for providers.( )

HEALTHCARE INTERVIEW

Science matters How Florida’s push to be more than a tourist destination landed a world-class scientific organization

David Fitzpatrick CEO & Scientific Director – Max Planck Florida Institute What brought the Max Planck Institute to Florida?

The Max Planck Institute is a highly regarded international scientific organization that started in Germany. We now have 84 separate institutions that cover the full range of the sciences and extend into the humanities. All of the institutes are in Germany or surrounding European countries, except for the institution here in Florida. We were brought here by an initiative launched by Jeb Bush, who wanted to make Florida more than just a tourist destination. He understood that an investment in science and education in Florida could really impact the culture here. We are right across the street from the Florida Atlantic University Jupiter campus, so there is quite literally a science and education community right here that is producing world-class science.

Part of the reason we ended up in Florida, and specifically Palm Beach County, is the resources we were offered here. In Germany, all of the institutions are affiliated with a nearby university. FAU was very excited about building partnerships with us, so that fit with the model we have in Europe. We could have gone to Cambridge, Massachusetts, or another location like that, but we believe that we have the ability to have a greater impact on the community here. There is a lot of opportunity for us in Palm Beach County.

How do you plan to expand the institute’s footprint in Palm Beach County?

We work synergistically with Florida Atlantic University. We recently announced that we will be launching a one-of-a-kind data science high school called the FAU Max Planck Academy, which will open in 2020. The high school will give top students the opportunity to work with Max Planck scientists while

earning their associates degree, tuition free, while still in high school. We believe that this educational partnership will have a big impact on the community here. There is also a growing tech scene here in Palm Beach County, and the science we do at Max Planck is on the cutting edge. We are, in a sense, creating technologies that are allowing us to learn about the fine details of brain structure and function at a level that we have not been able to appreciate in the past.

Scientists are coming here from all over the world to attend our imaging courses to learn the technologies that we have created here. We have created a technology that allows us to look at a living brain with far more accuracy than an MRI. We are very excited about the science that is coming out of our Florida institute. www.capitalanalyticsassociates.com

| 83

HEALTHCARE INTERVIEW

Unique fit Robust pipeline of discoveries is ready to make the leap to becoming medicines, with more in early-stage design

Douglas Bingham Executive Vice President – Scripps Research We currently have three drugs that are in front of the FDA. We have three drugs that are still generating royalties for us, and we have another 10 that are in the early stages of either design or beginning ID-enabling studies.

In terms of a classic academic research operation, we’re unique from that perspective. You won’t find that kind of pipeline at another university or research institute. We also have a top-10-rated graduate school, accepting about 40 to 50 students a year into the program, with a steady number of around 300.

What effect has Scripps had on the local community?

When we first came here to Palm Beach County, there was no medical school. We were early supporters of FAU and their drive to open a medical school. That’s really raised the bar in terms of quality of healthcare, at least in certain parts of the county. You have the residency programs and the intern program from the medical school practicing what they teach, which is the latest and greatest in medicine, and that has really helped the quality of life for many people in this county.

What distinguishes Scripps Research from other scientific institutes?

As an organization, our focus is basic biomedical research, which is all about discovering how nature works, what a healthy cell looks like, what a healthy body looks like, what a healthy biochemical pathway looks like and discovering what goes wrong to cause disease or disorder. That involves what is called translational science — going from the basic discovery to the treatment. We also focus on precision medicine and digital medicine of the future.

We now have a very robust pipeline of discoveries that are being moved along to becoming medicines.

84 | Invest: Palm Beach 2019 | HEALTHCARE

Can you talk about the recent National Institutes of Health grants to develop alternatives to narcotic pain medication?

There has been recent evidence of the ability to design a drug that modulates pain but doesn’t create the same side effects. It’s called a biased agonist. It doesn’t produce the full range of classic opioid side-effects.

If you can create an opioid that doesn’t suppress breathing, which eventually results in death, but still kills pain and has reduced addictive properties, then we could substitute that for the current type of opioid drugs we use. That would be potentially very helpful to the current opioid crisis.

HEALTHCARE OVERVIEW

( ) Another factor is the county’s high percentage of insured residents, 84%, which signals to healthcare providers that they won’t have trouble getting paid if they set up shop in Palm Beach County. Finally, the county’s wealthier residents have a reputation for generosity, particularly toward medical treatment and research centers, and this too factors into the decision to join Palm Beach County’s healthcare sector. Thanks to all these incentives, healthcare providers’ activity in the county has been intense.

“Southeast Florida, and more specifically Palm Beach County, is going to continue to see its healthcare system evolving. There will be more system consolidation and that will improve the quality of healthcare for Palm Beach County residents. As physician groups come together, there will be more connectivity between patients, physicians and hospitals,” Andrew Rubin, vice president of Clinical Affairs and Ambulatory Care for NYU Langone, told Invest:. M&A action in the area has been led by Baptist Health South Florida, which closed its merger with Bethesda Health in October of 2017, giving Baptist its first foothold in Palm Beach County with two hospitals. Most recently, in July 2019, Baptist finalized its acquisition of the 400-bed Boca Raton Regional Hospital. This acquisition is the latest step in Baptist’s plan to increase its presence in Palm Beach County and makes it the largest single healthcare provider in South Florida. Following the Boca Raton acquisition, Baptist now has more than 23,000 employees and 4,000 affiliated physicians under its employ, owns more than $5 billion in assets, and operates 11 hospitals, 40 physician practices, and 100 outpatient facilities of various kinds throughout the region. Other Palm Beach County hospitals acquired

by Baptist include the 401-bed Bethesda Hospital East in Boynton Beach and the 80-bed Bethesda Hospital West to the west of the city, which together employ 675 physicians and 2,500 other employees.

Cleveland-based healthcare giant Cleveland Clinic is also expanding its foothold in the South Florida region. The provider was a finalist for the Boca Raton Regional Hospital acquisition, but was narrowly beaten out by Baptist. In the wake of that result, the ambitious clinic has undertaken several other sizeable acquisitions in the area, and recently won approval to build its own major medical center along Lake Worth Road near Wellington. The clinic already has a hospital in Weston, as well as facilities in Coral Springs, Palm Beach Gardens, Parkland, West Palm Beach, and Wellington; a regulatory review and approval was also completed in January 2019 to add Martin Health System and Indian River Medical

Over 23% of the population in Palm Beach County is aged 65 or older.

Center to Cleveland Clinic’s roster, which expanded its footprint in the region by four hospitals. As for the campus on Lake Worth Road, Cleveland Clinic recently won its application for 350,000 square feet of land to be rezoned for medical use. The first construction planned on the campus is a three-story, 69,000 squarefoot medical office building some time over the next three to five years. At a later date, two other buildings will be built, one at 182,400 square feet and the other at 86,400 square feet. Any plans for a hospital on the site would likely unfold several years in the future and would require additional approval from the county zoning commission.

Finally, there has been a dramatic expansion of urgent care facilities throughout South Florida, including Palm Beach County, in recent years, as the number of inpatient procedures has steadily fallen since 2008 and more people aged 22-55 without a regular relationship with a doctor are favoring these types of facilities over traditional hospitals, due to generally lower costs and more expedient care. Baptist Health, which already operates 18 urgent care centers in South Florida, has another three opening soon. In addition to its endeavors with urgent care, Baptist also has plans to open nine more traditional healthcare facilities in the near future, including one in Palm Beach Gardens. The University of Miami’s UHealth also expanded into this market by taking over the clinics at 17 Walgreens locations, three of which were located in Palm Beach. Tenet, meanwhile, operates www.capitalanalyticsassociates.com

| 85

Richard Rendina CEO & Chairman Rendina Healthcare Real Estate

What trends are emerging in your sector?

Healthcare providers are seeking new locations for outpatient clinics and wellness facilities to serve Palm Beach County’s growing population. As a result, we have seen a great deal of off-campus expansion in recent years. Another prevalent trend has been health systems looking to third-party developers, such as Rendina, to leverage their expertise and capital as they work to implement their ambulatory and growth strategies.

Working with experienced developers can also help health systems mitigate the risk of rising construction costs. Most health systems we work with have aggressive ambulatory expansion plans and speed to market is a priority for them in many of the areas they are targeting. Rendina has developed 115 facilities totaling more than 7.75 million square feet and boasts that 114 of those 115 projects have been completed on time and within budget.

How are you working to meet demand in the health sector?

As patient demand for convenience continues to grow in importance many providers are looking to us to help them identify optimal outpatient locations to meet that demand. One of the ways we have accomplished this has been working in tandem with large mall owners looking to convert typical shopping malls into mixeduse lifestyle centers. Having a hospital or outpatient use as an anchor tenant in these centers is in high demand. Access to quality healthcare in the outpatient setting provides a great amenity to the project and the community, while also giving healthcare providers the “retail-like” visibility many of them are seeking today.

Rendina has a nationwide presence but is headquartered in Palm Beach County, where we recently completed a 30,000-square-foot breast cancer center for Jupiter Medical Center.

86 | Invest: Palm Beach 2019 | HEALTHCARE

two urgent care centers in Palm Beach County and more elsewhere, and will be opening an orthopedic care facility in West Palm Beach soon.

Policy battles It has been an eventful couple of years when it comes to healthcare policy, and the biggest story remains the ongoing battle over the Affordable Care Act (ACA), also known as Obamacare. One of the cornerstones of the Republican Party platform in 2016, including that of then-candidate Donald Trump, was the complete repeal and replacement of the ACA. However, the Trump administration and Congressional Republicans failed to obtain approval of their party’s repeal and replace legislation from both houses of Congress in 2017. Many piecemeal changes to the ACA were passed which, while not effectuating a wholesale repeal, considerably undermined the act. Perhaps the most salient change to the ACA was the elimination of the individual mandate, which would have applied a monetary penalty to individual taxpayers who remained uninsured at the end of a given year. Now that this penalty has been removed, more than 4 million Americans have elected to forgo medical insurance coverage in 2019.

The Trump administration also changed the rules to expand the allowable term for short-term/limited duration insurance, which was not protected under the original ACA. This new policy is generally expected to allow more people to obtain coverage under these alternative policies, with an additional 600,000 buying short-term plans in 2019, and 4 million more people being insured under association plans by 2023. A final major move by lawmakers is the blocking of a series of taxes under the ACA, such as the excise tax on nonretail medical devices, the fee on health insurance providers and the excise tax on so-called “Cadillac” employer-sponsored health plans. Had they gone into effect, these taxes would have raised the front-end cost of these services and plans, but would also have raised $14.6 billion in tax revenue in 2019.

A notable development in state-level healthcare policy in Florida is the legislative push to address the epidemic of uninsured children in the state. The latest estimate puts the number of uninsured children in Florida at 325,000, and state legislators have resolved to provide more funding to Florida Healthy Kids Corp., a public-private partnership that provides coverage for children in low- and middle-income families.

Health insurance In addition to the policy implications that the ACA is sure to have throughout the 2020 presidential

HEALTHCARE OVERVIEW

ACA enrollment rose 2.2% to 1.02 million Florida residents at deadline for 2019.

campaign, the act also continues to have a practical impact on the health insurance market in Florida. The state has consistently led the nation in the number of residents who choose healthcare coverage under the ACA, and while the number of residents nationwide signing up for Obamacare is smaller than it was last year, due mostly likely to the major changes to the legislation implemented by the Trump administration, many in Florida continue to take advantage of the plan; the state continues to have the most ACAinsured residents nationwide. By Dec. 8, 2018, just one week before the open enrollment deadline for 2019 coverage, 1.02 million Florida residents had signed up for ACA coverage. This is compared to 999,045 new subscriptions by the same date in 2017, an increase of more than 22,000 residents or 2.2%.

At the local level, Palm Beach County residents in need of quality, affordable healthcare have a powerful ally. The Health Care District of Palm Beach County works as a safety net for those residents who might otherwise fall through the gaps in the healthcare

and health insurance systems. Rather than duplicate existing state and federal programs, it responds to needs that these other programs fail to adequately address. The Health Care District helps residents in need to obtain coverage through the ACA marketplace and also operates four Medicaid plans that serve county residents. A major gap the Health Care District seeks to fill is that arising from Florida’s decision not to expand Medicaid under the ACA, which resulted in 52,000 Palm Beach County residents being left without quality health insurance. The District Cares Program provides a solution to this serious problem by providing healthcare benefits to certain lowincome residents who cannot get or afford coverage elsewhere. Finally, the district ensures that expectant mothers in need are provided with pre- and postnatal care. Access to healthcare and services is also a priority of the Palm Beach County Advisory Council’s Community Health Improvement Plan (CHIP), which went into effect in 2017.

Research institutes The thriving life sciences research community in Palm Beach County is the fruit of more than 20 years of effort and investment. The Business Development Board of Palm Beach County and various county stakeholders worked to bring the Max Planck Society and Scripps Research to Palm Beach County, and their success has resulted in the county now being home to what Nature Index calls the world’s best research institutions. In fact, Florida Atlantic University’s Jupiter campus, where the two institutions are located, is the only place in the world where two institutions of such prestige are co-located. In addition to the abstract value of

HEALTHCARE OVERVIEW

Palm Beach County is home to what Nature Index calls the world’s best research institutions.

having such institutions in the county, there is also the tangible benefit of the more than 700 companies that their presence has attracted, which primarily focuses on the R&D or manufacture of biotechnologies, medical devices, pharmaceuticals, and environmental and biological sciences. Algafeed, Alphazyme, Cytonics, Detraxi, Expansion Therapeutics, and Beacon Pharmaceutical all relocated to Palm Beach County between 2018 and 2019; combined, these companies will add 330 jobs, occupy over 250,000 square feet of space, and invest over $100 million into the local economy, which will help to further invigorate the entire county.

The research institutes themselves continue to expand within the county, as well. For instance, the Max Planck Institute recently received a $1 million donation from West Palm Beach residents and philanthropists Alexander and Renate Dreyfoos. The donation will go to the Max Planck Florida Institute for Neuroscience in Jupiter. Alexander Dreyfoos said the donation was made out of the firm belief that the scientists at the institute are doing important work in neuroscience that is inching closer to cures for neurological disorders like Alzheimer’s, Parkinson’s, and autism.

Scripps’ influence is also felt through the expansion of its largest spinoff company, Expansion Therapeutics.

The biotech company recently moved to a new 5,000-square-foot facility and plans to fill all that new space by hiring several additional employees.

Expansion is focused on developing drugs for diseases without any competitive treatments, a goal it pursues through its worldwide exclusive rights to research and intellectual property from the Disney Lab at Scripps.

88 | Invest: Palm Beach 2019 | HEALTHCARE

Public health There is a great deal going on in Palm Beach County from a public health perspective. One development is related to the constantly-evolving and expanding landscape of medical marijuana in the United States: Palm Beach County continues to experience an explosion of medical marijuana dispensaries since the state began allowing the dispensing of medical marijuana in 2017. In 2018, Trulieve, which has a massive presence throughout Florida, opened a location not far from Palm Beach International Airport. The company also has a location in Boynton Beach, and operates 49 dispensaries statewide, a number that required the company to successfully challenge the previous cap of 35 dispensaries under Florida law. Another major competitor in the medical marijuana market, Liberty Medical Sciences, also opened a Palm Beach County location in 2019. The dispensary, located in Boca Raton, is Liberty Medical’s 15th in the state. Curaleaf and Surterra Wellness also have locations in the county.

There are already more than 240,000 medical marijuana cardholders statewide, with 10,000 more signing up every week. The number of cardholders and dispensaries is likely to increase swiftly in the future in the wake of a recent ruling by the 1st District Court of Appeals in Tallahassee on July 9, 2019. In short, the ruling affirmed a lower court decision that found the caps on the number of dispensaries and other operational requirements imposed on the medical marijuana industry by the state are unconstitutional under the voter-approved 2016 constitutional amendment that legalized medical marijuana. If the ruling stands and the cap is overturned generally, it could open the floodgates for new dispensaries to open in Palm Beach.

Opioid addiction is another issue high on the public sector agenda. Since its emergence, the opioid epidemic has raged with particular ferocity in Palm Beach County, with 558 overdose fatalities in 2017 alone. However, the county has teamed with healthcare providers to address the epidemic, and is already encountering a highlyencouraging degree of success: opioid-related deaths decreased by 41% to 326 in 2018. State Attorney Dave Aronberg cites three main factors for this progress, the first of which is the State Attorney’s Office’s Sober Homes Task Force, which has the unique and challenging goal of cracking down on corrupt drug treatment centers.

The task force has made 68 arrests since October 2016, and is a powerful motivator for sober homes and drug treatment centers to stay honest in their mission to help opioid addicts. Another factor leading to the reduction of opioid fatalities is the proliferation of Narcan, the popular and effective overdose antidote. Narcan is now over-

HEALTHCARE OVERVIEW

the-counter and is being widely distributed and carried throughout the county, which makes it more likely that someone in the proximity of an overdose will have the antidote available to revive the individual. This directly reduces the number of overdose fatalities. Finally, there are a series of pilot programs, particularly in Delray Beach where the opioid crisis has historically been the most intense, wherein overdose patients are kept in the hospital for follow-up care, rather than released immediately. The program in Delray Beach included hiring a community service aide to assess overdose patients on an individual basis to determine whether they are at further risk and to ensure they receive the personalized care they need. Another positive step is the County Commissionâ&#x20AC;&#x2122;s approval in January 2019 of a new Addiction Stabilization Center at JFK Medical Center in West Palm Beach, where overdose patients will be able to receive therapy, rehab, and other outpatient services, as well as 10 dedicated beds. For those patients who have insurance, their insurance provider will be billed for services at the center, but the county has also set aside $1 million to cover the bills of the uninsured.

Another epidemic in Florida has been raging far longer than the opioid crisis. According to the CDC, Florida had more new diagnoses of HIV/AIDS in 2015 than any other state, and South Florida in particular has an alarmingly high incidence rate. In response, the AIDS Healthcare Foundation (AHF) opened a brand new HIV/AIDS Healthcare Center in 2018 in Delray Beach, an area with a particularly serious need for this kind of care. The center will provide medical treatment and other services for patients diagnosed with HIV/ AIDS, regardless of whether they have insurance or even the ability to pay.

Looking ahead Healthcare in Palm Beach County continues to be shaped by state and national trends, such as the ongoing battle over the ACA, the opioid epidemic, medical marijuana legalization, and HIV/AIDS. Of course, each problem impacts Palm Beach County in a unique way based on its needs and characteristics.

For the most part, the county and various entities operating within it have done a good job of managing each healthcare-related challenge. The county is at the forefront of the evolving medical marijuana landscape, with all of Floridaâ&#x20AC;&#x2122;s biggest players in the market operating multiple dispensaries within county lines. The county takes the opioid epidemic seriously, and has earmarked $3 million to solving the problem by opening an opioid overdose-focused emergency room. Palm Beach County residents diagnosed with HIV/AIDS can visit the AHF Healthcare Center in Delray Beach to receive the care they need, even if they are uninsured or canâ&#x20AC;&#x2122;t pay. Finally, Florida continues to lead the nation in residents insured through the ACA marketplace, which could pose a unique challenge for these residents as the constitutionality of the act remains at the center of a nationwide legal battle.

Palm Beach County is taking active steps to address the healthcare needs of its residents by providing the facilities they need according to present circumstances, and the county adroitly adapts as those circumstances change. Given the rapid pace at which healthcare policy is changing in America, and the rate at which new crises seem to develop, Palm Beach County may have a lot more adapting to do in the near future.

®

oundtable:

Adapt and deliver The CEOs of the region’s leading healthcare providers discuss their efforts to improve the system and deliver better results, whether through mergers, higher technology or smarter innovation.

Lincoln Mendez

CEO Boca Raton Regional Hospital

Pamela Tahan

CEO Wellington Regional Medical Center

What has been the impact of your merger with Baptist Health South Florida?

Our hospital is no longer stand alone. Instead, we are part of a larger health system that will provide improvements in areas such as employee benefits and opportunities. Also, Baptist Health South Florida will provide the resources to carry out the master facility plan, which is very important for this institution. Our campaign, Keeping the Promise …

The Campaign for Boca Raton Regional Hospital, began with a need to increase bed capacity at the hospital. The big challenge now is that probably 60% of our rooms are semi-private and we need to implement a private room model. The master facility plan addresses that by building a new, nine-story patient tower with a capacity of 190 private rooms. The more important factor is providing a better environment for patient care. This is a facility that was built in 1967, so you can imagine there are many challenges, especially related to technology. We are going to build 16 new operating suites that can handle new technology and larger equipment, such as robotic surgery devices.

How is technology changing the way you deliver services?

We try to use the newest technology in everything we do. For example, in the level 3 Neonatal Intensive Care Unit, we use a device called NicView, which is a camera that goes over the crib. This is important technology since babies can be there for three months or longer, and at some point mom and dad have to go back to work or back home to take care of their other children.

The NicView allows parents and loved ones to see their baby when they’re not here, and that means the world to them.

We also offer telemedicine services, particularly with our stroke care. The first person that needs to see these patients in the emergency department, besides the ER doctor, is a neurologist. Using teleneurology is often the best, and fastest, way to make this happen because it provides easy access to a doctor, rather than having to wait for him or her to arrive. Telemedicine is a key technology for us, and we plan on using it much more.

How is the hospital encouraging public health and wellness programs?

Baptist Health has a robust wellness program and we will carry out some of those programs here in the community. We are already doing some of that, and it’s going to grow. One example is our Kathryn Krickstein Pressel MammoVan that travels throughout South Florida to provide early detection services for breast cancer. We take the van to community wellness fairs and to small businesses to make it more convenient for people to access healthcare.

What is Wellington Regional Medical Center’s main objective?

Even though we’re in the business of taking care of people when they’re staying in our facility, our goal is to get and keep people healthy — and living their life.

When you leave, we jokingly say, “we don’t want to see you again.” If you return, of course we’re going to provide you with excellent healthcare, but that’s not our ultimate goal. We’re doing everything possible to keep the population healthy, while making ourselves as highly reliable as possible.

90 | Invest: Palm Beach 2019 | HEALTHCARE

HEALTHCARE ROUNDTABLE

Darcy Davis

CEO Healthcare District of Palm Beach County

How is the Health Care District helping to combat the opioid epidemic?

Palm Beach County is one of the epicenters of the opioid crisis. We partnered with Palm Beach County Fire Rescue and JFK Medical Center, which is operated by HCA, to run a pilot to make sure that our response was evidence-based. We launched a medication-assisted treatment outpatient clinic that incorporates counseling and allows the individual to start getting to the root cause of their addiction. We have seen about a 60 percent success rate since the program started in 2017.

It’s a phenomenal success rate when you consider that abstinence-only methodologies are about 10 percent successful. It’s the difference between helping one out of two people versus one out of 10.

How are you connecting to underserved communities?

One of our major accomplishments is that we rolled out a mobile health clinic targeted to provide healthcare to our homeless population. It looks very similar to a blood mobile and has two exam rooms and a nurse and social worker on board. The driver doubles as our registration specialist.

We’re partnering with local community outreach agencies like churches, soup kitchens and Palm Beach County. We park where we know the homeless congregate so that we can establish trust with those individuals to get them into our clinics. We’ll give them physicals on the vehicle and then try to connect them with our clinics, which are the entry points to our healthcare system. Getting out there in the community has added a lot of visibility to who we are, but we’re also touching an underserved population that we really have not been able to connect with in the past.

Alice Taylor

CEO Broward Health North

How is Broward Health North working to improve the service it offers the community?

In South Florida, healthcare is a competitive marketplace and what I like to emphasize is that at Broward Health North we are high tech and high touch. Two years ago we completed a $78 million renovation and expansion project to bring the next level of healthcare to our community. One of our key investments was a new, state-of-the-art 36,000 sq. ft. Emergency Department featuring 53 private suites and three fully-equipped trauma bays. We expanded our surgical services with six new operating suites encompassing 15,000 square feet. dedicated to trauma, orthopedic, and general surgery. We updated our exterior façade, renovated the outpatient center with a private entrance and modernized the hospital’s main lobby which now includes a full-service retail pharmacy.

What technological innovations are you implementing?

We have made investments in cutting-edge robotic operating equipment such as the MAKO RoboticArm and the da Vinci Surgical System, which provides our surgeons with greater precision, flexibility, and control which ultimately leads to better outcomes for our patients. Our Joint Replacement Center, which has been certified by the Joint Commission, became only the second joint program in the entire state of Florida to earn advanced certification for hip and knee replacements Our latest investment in high tech is our 3T MRI. It is designed to provide more efficient results with a higher level of diagnostic accuracy. www.capitalanalyticsassociates.com

| 91

HEALTHCARE INTERVIEW

Home run Combination of technology and a skilled team ensures children receive the high level of care they need.

Caitlin Beck Stella CEO – Joe DiMaggio Children’s Hospital children a high level of care to address all their complex needs. For example, in the state of Florida there are only two operational programs doing heart transplants, and we are one of them. We are like the southern hub for complex care. We have a growing population of children, and of babies being born with complex diseases that could last a lifetime, so we are looking at what kind of technology, equipment and experience we need to have to help produce positive health outcomes for these children.

How are you improving your facilities and services to best meet the growing needs of South Florida?

We are now permanent residents of Palm Beach County with the completion and opening of Joe DiMaggio Children’s Health Specialty Center. We are not only investing in that community and hiring local staff, we are also hiring physicians who live there and are part of the community. One of our big initiatives in Broward County is the addition of four stories to Joe DiMaggio Children’s Hospital. It is a complex construction project, because building a new hospital from the ground up is easier compared to adding four stories to an existing operational hospital. We are expanding our facility to address increasing needs in the community, while also incorporating technology that together with a highly skilled team of medical professional can provide 92 | Invest: Palm Beach 2019 | HEALTHCARE

How does the pediatric healthcare system in Broward County compare to that of Palm Beach County?

Families in Broward County have access to great pediatric specialists for their children. As families in Palm Beach County seek similar, highly specialized, pediatric care, we have seen an increase in the number of children seeking care at Joe DiMaggio Children’s Hospital. They are coming from Palm Beach and all over South Florida. As we were planning our Wellington facility, we were already seeing over 2,000 patients per year at our Broward campus. We knew once we opened Wellington that the number would increase. When we started seeing that increase, this told us that we are in the right place.

What is your outlook for the healthcare industry in South Florida for the next few years?

We are going to stay on our path of growth, and we will continue growing in a variety of different ways. This growth will be into new markets, the four-story addition to the hospital, our capacity, our depth of specialty care and our ability to educate the future workforce in pediatrics, nursing and more. The healthcare industry in Florida is a complex environment right now. With some of the changes that have happened at the state level, it is hard for anyone to predict exactly what is coming.

Education: The Palm Beach County education system has much to celebrate, including positive recognition for efforts to improve education and innovate in the sector. Technology is reshaping how education is delivered, and digital platforms increasingly are playing an important role, as is the business community that is demanding new skills.

www.capitalanalyticsassociates.com

| 93

Class act: Education in Palm Beach County is enjoying positive recognition but also suffering teacher shortages and budget inequality

National honors and praise, generous donations, innovative planning and expanded curriculums -there is much to cheer about in the Palm Beach County school district. At the same time, there are hurdles to overcome, chief among them a shortage of qualified teachers that has left the district with numerous open positions that it is struggling to fill.

On the other hand, a series of partnerships with various businesses, nonprofits, and other programs help to ensure that students in Palm Beach County receive a robust and varied education that provides them with the skills and opportunities necessary to succeed in today’s ever-evolving workplace.

Thanks to a boost in donations, higher education institutions in Palm Beach are also expanding academic programs and constructing new, cuttingedge facilities, even as state colleges continue to grapple with a budget that seems to favor universities at their expense. However, a new proposal to authorize state colleges under the Florida constitution may provide a road to more equality in the treatment of state colleges and universities.

94 | Invest: Palm Beach 2019 | EDUCATION

Landscape Palm Beach County was home to three of Florida’s Top 15 private high schools in 2017: Saint Andrew’s School, American Heritage School, and The Benjamin School.

All three are nationally-renowned for their students’ college acceptance rates and performance in a variety of academic competitions. Palm Beach is also home to award-winning public schools, two of which made U.S. News and World Report’s list of the nation’s Top 100 schools, and 12 of which landed among the top 2,000 schools. A similar Washington Post ranking of the Top 100 schools also included three public schools in Palm Beach County. Ninety-two percent of graduates from Palm Beach County public schools pursue some form of higher education. A few of these top public schools include: Suncoast High School, Boca Raton High School, and Alexander W. Dreyfoos School of the Arts.

Part of what makes these schools special is their recognition of the importance of career readiness.

County public schools offer students the opportunity to learn several foreign languages, including Chinese, French, Italian, Latin, Spanish, Haitian Creole, and( )

EDUCATION INTERVIEW

Dual approach From the traditional classroom to online learning, a high-quality educational experience now comes in many forms

William Fleming President – Palm Beach Atlantic University How is Palm Beach Atlantic University adapting to the ever-changing landscape of online education?

Palm Beach Atlantic offers several programs that are completely online, as well as others that are hybrid courses. And we have integrated online features into all our undergraduate and graduate programs. Each of our professors has a dual approach, working both in the classroom as well as online. While the online only student population is not large, all students who receive some instruction online experience greater flexibility, therefore maximizing digital learning, If somebody’s a student here, we want to make sure they persist and graduate. It’s critical to encourage the use of any tool that can help accomplish that goal, whether that’s classroom or online learning, flipped classrooms, tutoring or improved study skills. We have a very active, growing department that works with the faculty to make sure students are getting this type of high-quality classroom experience on the ground, online and in hybrid fashion. We want to make sure that online students are receiving a value-added experience, not simply a Sunpass to the next class.

What are some of the biggest challenges facing higher education universities across Palm Beach County?

Let me preface this by saying that I currently serve as the chairman of the Independent Colleges and Universities of Florida. These are whitewater times for higher education, especially private higher education, where there’s a great deal of turbulence. Much of that turbulence is coming about as a result of the onslaught of new technologies, as well as the rapid rise of costs without higher education’s ability to pass along those cost to students. You want to make sure, as we do now, that the Palm Beach Atlantic University experience is affordable. Almost a 100% of our students are on some form of financial aid, but even with that, it’s very difficult

to keep up with the endless growth in fixed costs within higher education. This reality has increased our focus on fundraising for student scholarships, new academic programs and endowments to maintain our buildings and physical plant.

What is your outlook for Palm Beach Atlantic University and higher education in the county?

I’m exceedingly bullish on Palm Beach Atlantic University and the pivotal role that we play in this community. What we provide are elite leaders who understand how to think for themselves and write for others. They are sought after because they’re responsive and resilient. Palm Beach Atlantic University is in the midst of a great period, and we’re seeing that displayed on a daily basis by our faculty and the work accomplished by our students. www.capitalanalyticsassociates.com

| 95

EDUCATION INTERVIEW

Record numbers Palm Beach State sees highest fall semester enrollment in its history but additional resources are needed to maintain momentum

Ava Parker President â&#x20AC;&#x201C; Palm Beach State College veterans and speak with people who are empathetic to their concerns. This designation is something we are excited about and that we think will be important as we grow and serve those who have made sacrifices for our country.

How is Palm Beach State College seeing growth?

Over the last year we have seen significant enrollment growth, which we are very proud of. For the fall 2018 semester, we had our highest enrollment for a fall semester in the history of the college. As 75 percent of our students are part time and work as well as going to school, this is a big accomplishment for us. When the economy is faring well, we see a lot of our working students choose work over school. The fact that our numbers are growing, and 25 percent of our students are full time, is something we are excited about.

We have been designated a Veteran Friendly College, which is something we are proud of. We recently opened our Veterans Success Center at our Lake Worth Campus. The Veterans Success Center allows veterans to go and receive resources and help from other 96 | Invest: Palm Beach 2019 | EDUCATION

How did the passing of Amendment 7 affect Palm Beach State College?

We were very pleased with the passing of Amendment 7 as an amendment to the Florida Constitution. For us this was important because the Florida College System is now represented with K-12 education and the state university system. Including the Florida College System in the constitution ensures all students have access to higher education. It also protects a program that offers open access. That accessibility is so important. We are now able to work with students who might not otherwise consider higher education as an option and build programs for them to help them succeed. We still have testing requirements for limitedaccess programs like nursing and other programs that require certain criteria, but this really opens the door for more students.

What challenges are colleges facing in the region?

Our operating budget is approximately $120 million.

Fifty percent of our budget comes from tuition and fees and 50 percent comes from the state. However, we have maintained affordability, and we have not raised tuition in eight years, while our allocation from the state was reduced. It is imperative that we receive additional resources to protect the quality of the academic experience for our students. Additionally, we need resources to maintain and repair existing facilities and build new facilities to meet growing demand.

EDUCATION OVERVIEW

Palm Beach Atlantic University is a Christian-based four-year liberal arts school in downtown West Palm Beach.

( ) American Sign Language. In addition, students’ 51st best online MBA program, 43rd best online practical skills are honed through partnerships with non-MBA business programs and 77th best online 1,284 local business leaders in a variety of industries. education program. The university’s online education Many of the county’s private institutions offer similar program evinced dramatic improvement, given that partnerships and opportunities, including annual trips the program ranked 83rd in 2018 and 193rd in 2017.

FAU also has a new athletic director at the to foreign countries and extra-curricular activities. helm, Brian White, and a One of the key metrics driving 96,000-square-foot, $40-million the success and reputation of training facility in the works. The Palm Beach County schools is hope is that these changes will their graduation rates. At 82.3%, help the Conference USA school the county outperforms all other compete on the level of the large urban areas in Florida, Power Five leagues. According and this includes consistently to White, the new facility, which growing rates of graduation is being called the Schmidt among black and Hispanic Family Complex for Academic students. and Athletic Excellence, will In addition to its award-winning boast “new locker rooms, new primary and secondary schools, Andrew Duffell coaches’ offices, new recruiting Palm Beach County also boasts President, Research Park at FAU areas, and a new strength and several renowned institutions of higher education. To maintain their momentum, conditioning sports performance center that looks these schools are investing in nationally-recognized onto the new practice field.” The facility is unique in that it also contains study and lecture space for FAU’s programs and expanding state-of-the-art facilities.

MBA Sports Management program, bringing athletics and academics together under one roof.

Florida Atlantic University FAU also has taken steps to solidify its relationship Florida Atlantic University (FAU) recently landed top spots on US News and World Report’s list of the with the business community, including its “2019 Best Online Graduate Programs” in the country, development of a research park. “The most important including 23rd best online graduate nursing program, attribute for any research park is access and proximity

We have 30,000 young, motivated and highly intelligent students who are looking to start their careers.

www.capitalanalyticsassociates.com

| 97

EDUCATION OVERVIEW

Palm Beach State College has five campus locations within the county with over 48,000 students enrolled.

to a university. Here at FAU we have 30,000 young, motivated and highly intelligent students who are looking to start their careers. It’s a great opportunity for any company to have access to these students and interview them on an informal basis. The second most important attribute is the growth of FAU’s research portfolio. We have world-renowned researchers in multiple fields with whom companies want to work.

The Research Park has a perfect location at the geographic center of South Florida; anyone who wants to reach the more southern regions or more northern regions should want to do business in Boca Raton.” says Andrew Duffell, president of FAU’s Research Park.

The university also has a new program that allows employees of certain companies that partner with FAU to take as many classes as they’d like with no upfront payment required. JM Family Enterprises, the $16.3 billion automotive giant, is the first company to sign up for the new program, but its participation is expected to set a trend. One important caveat is that only those courses that align with JM Family’s business needs qualify under the program. However, this turns out to be a fairly broad definition, with eligible coursework including undergraduate degrees in accounting, marketing, management, and computer science, while 98 | Invest: Palm Beach 2019 | EDUCATION

employees can pursue online graduate programs that include a Master of Business Administration, Master of Accounting or Tax, and certifications in Big Data analytics.

Lynn University Lynn University is another institution in Palm Beach County that plans to expand its prominence by 2025.

One of the latest signs of its growth is the opening of the state-of-the-art Christine E. Lynn University Center on Feb. 8, 2019. As a place where students can study, eat, and hang out at any time of the day, the new University Center at the heart of the university’s campus is easily accessed from student housing, academic buildings, and any campus entrance.

Lynn’s Donald E. and Helen L. Ross College of Education was included in the US News and World Report’s list of best graduate schools in 2019, the first Lynn University school to receive this honor. Lynn was also recognized for having the most international students of any school in the South. To keep the accolades coming, Lynn University has ambitious plans to offer continually improving academic programs, including a new B.F.A. in drama that was launched in 2018; new programs in cybersecurity, data analytics,

EDUCATION OVERVIEW

notably, the university launched a fundraising drive called Realizing Potential, with a goal of raising $250 million by 2020. The donation drive, launched at the beginning of 2016, was met before the end of 2017.

Some of the largest contributions came from the Drs. Kiran and Pallavi Patel Family Foundation, Inc., as well as the Chairman of the NSU Board of Trustees, Ronald Assaf, and his wife, Kathy. Realizing Potential was the first fundraising initiative in NSU’s history. The projects being funded by the donations are expected to increase the university’s economic impact from $3.5 billion annually to over $5 billion by 2020.

$80 million: the cost of NSU’s new residence hall.

healthcare management and social entrepreneurship; and a collaboration with Code Institute that will provide students, alumni and employees with access to online software development training.

Nova Southeastern University Nova Southeastern University (NSU) broke ground on an $80 million residence hall in 2018, which will contain 500-600 additional units. NSU is doing more than simply making a statement by constructing the new residence hall: the university welcomed its largest class yet in 2017, and the additional space was deemed necessary to accommodate an ever-growing student body. NSU also plans to construct a 1,300-space parking garage next to the new residence hall. The university has hinted that additional residential facilities may be built in the near future.

NSU has grown considerably over the past few years thanks to a series of philanthropic contributions. Most

Palm Beach State College Palm Beach State College (PBSC) recently received a $2 million award from the Florida Job Growth Grant Fund to establish a new Center for Excellence in Engineering Technology. The new center will allow PBSC to offer a more collaborative and multidisciplinary approach to educating students who aspire to work in the aerospace, manufacturing, clean technology, and defense industries. The expanded engineering program includes a new concentration in advanced manufacturing under the school’s Engineering Technology Associate in Science degree; three additional college credit certificates in industrial technician, automation, and lean manufacturing; and five new employees. PBSC will also strengthen its relationship with FAU and 15 local companies to ease students’ transitions into bachelor programs and the workforce. The expanded program is expected to lead to the enrollment of an additional 2,000 students at PBSC by 2023.

Budget battles Despite such funding wins, PBSC is also facing state budgetary challenges along with other state colleges.

Lawmakers cut $30 million from the state college system’s budget for the 2017-2018 academic year (of the system’s total budget of just over $2 billion).

The legislature did restore $6.7 million of previously cut funds to the 2018-2019 budget, but the system still faces difficulty when appealing to the state for budget expansions. For example, lawmakers panned the system’s request for $75 million to fund a push for more workforce degrees and certificates that would support the needs of the region’s economy, a $50 million faculty retention plan, a requested $67 million for counseling services to facilitate students’ academic and personal success, and a $10 million increase in state performance funding to a total of $40 million. State budget increases were provided to the www.capitalanalyticsassociates.com

| 99

EDUCATION OVERVIEW

university system, however, including a $20 million performance funding increase and $91 million for faculty recruitment efforts, bringing the university system’s total budget to $5 billion. PBSC President Ava Parker firmly supports increases in funding for universities, but worries that, because many state college students enroll in universities, failing to care for the state college system will harm the university system, as well.

To combat this inequality between the two systems, college presidents are actively supporting Proposal 83, which would endow the state college system with constitutional authority. Many college presidents, including PBSC’s Parker, believe that putting the Florida state Constitution behind state colleges would help bring them into parity with universities, as the latter are already authorized under the Constitution.

Other schools Palm Beach Atlantic University (PBAU) has added a new Project Management concentration to its MBA program, the first school in South Florida to add such a concentration. The new program aims to help PBAU students enter a field with enormous growth potential: some 90 million project management roles will exist by 2027. PBAU also has plans to build an eight-story, 161,872-square-foot residential facility that would house 516 students.

Another local institution, Keiser University, jumped into the burgeoning esports arena by launching an official esports club and athletics program in 2019. A gaming area will be built to accommodate the club on Keiser’s flagship campus in West Palm Beach, where practices and matches will take place.

K-12 By the end of 2018, Palm Beach County was home to 179 schools, which served 174,000 students and employed 22,340 people (including 12,900 teachers). Palm Beach County is the fifth-largest school district in Florida and the 10th-largest nationwide. Despite its immense size, however, Palm Beach County was not spared from the persistent and ever-growing state and nationwide trend of teacher shortages. On the first day of the 20182019 academic year, Palm Beach County reported 242 vacant teaching positions; by the middle of the school year, 157 positions remained open. Florida’s notoriously low teacher salaries coupled with its high cost of living have exacerbated the issue.

Accessibility is another issue, schools face. This, says Head of School at Oxbridge Academy Ralph Maurer, takes resources.” Great education is expensive, and 100 | Invest: Palm Beach 2019 | EDUCATION

The Palm Beach County school district is the 10th largest in the nation.

to keep it great but also accessible, we must commit substantial resources to financial aid. The important number we usually look at is what is called the yield number, which is the average tuition paid. At Oxbridge our full tuition is in the mid $30,000’s, but the average tuition paid, or yield, is about 70% of that. This is the most meaningful number because, while 40 to 50% of our students are on financial aid, their families range from those with very high financial need to those who need a much smaller amount of assistance to afford Oxbridge. We also use a very transparent process for deciding what a financial aid package is for a family, and we will not give financial aid packages to a family unless it meets their full need because we do not want a family stressing out of their minds paying tuition.”

On the bright side, Palm Beach County teachers received an approximately 3% pay increase in 2018.

Teachers rated “highly effective” received a 3.5% raise, and those rated “effective” got 2.75%. Although the starting salary for teachers in Palm Beach County remains stagnant at $41,000, the maximum salary has inched up to $84,246.

The employee shortage extends beyond teachers.

Forty-five percent of HR managers surveyed have highlighted a critical lack of qualified talent across

EDUCATION OVERVIEW

numerous industries. Palm Beach County vocational schools are addressing this problem by partnering with businesses to ensure that students gain the skills and experience necessary for success on the job. There were 1,284 such partnerships in place by the end of 2018 in banking, engineering, medical, construction, biotech, hospitality, and communication.

Innovation in education In another development, the University of Chicago’s TMW Center for Early Learning and Public Health has partnered with the Children’s Services Council of Palm Beach County. The TMW Center plans to introduce its suite of evidence-based techniques to the county’s existing health, education, and social systems, with the goal of disseminating information about brain development and early learning to the families of 60% of Palm Beach County children from birth to age three, particularly among lower-income families.

Another promising initiative is the pairing of TechGarage with 12 after-school programs in the Palm Beach County area. TechGarage gives students at low-performing schools the opportunity to engage in college-level work, including building robots, getting hands-on with cutting-edge tech,

and engaging in friendly competition with peers.

Former Florida participants in TechGarage have gone on to win numerous awards and competitions, including Emerge America, the Code for Good hackathon, and the FIRST Tech Challenge robotics world championship; moreover, six students were accepted to Stanford University and nine interned at the Max Planck Institute for Neuroscience. The Palm Beach County after-school programs that will be participating include the Milagro Center, Achievement Centers for Children & Families, Pearl City C.A.T.S. Robotics Program, PBSO PAL WestGate, Royal Palm Beach Community High School, West Palm Beach PAL, and Boys & Girls Clubs in Delray Beach and Riviera Beach.

Finally, to ensure that students graduate with the skills necessary to succeed in today’s job market and to attract more business to Palm Beach County, the Business Development Board and the School District of Palm Beach County have again come together to host high-school students at the “Claim Your Future Showcase.” At the event, which has been held since 2015, students have the opportunity to network with major regional employers, such as Aerojet Rocketdyne, LexisNexis, Biotest Pharmaceuticals, Florida Crystals, Pratt & Whitney, and Florida Power & Light. At the latest showcase on Feb. 12, 2019, more than 50 companies representing diverse industries met with students and hosted information panels. There were also a series of breakout and educational sessions in which students could learn the soft skills necessary to navigate the professional world.

Looking ahead Two of the key trends facing education in Palm Beach County are the ongoing shortage of teachers and the pivot to trade and vocational programs. As teacher salaries in Florida remain among the lowest in the country, the shortage doesn’t show signs of ending any time soon. On the brighter side, many local schools, from K-12 to college, are meeting the challenge of providing students with the practical skills that employers are calling for.

Colleges and Universities in Palm Beach County all appear to be growing quickly, with most receiving generous funding and expanding their physical footprints and academic offerings. One of the nagging issues is the inequality of state funding between the university and state college systems, but college presidents hope to rectify this by embedding the state college system in the Florida Constitution, an honor already belonging to universities. www.capitalanalyticsassociates.com

| 101

Tourism, Arts & Culture: Tourism is a key factor in Palm Beach Countyâ&#x20AC;&#x2122;s economy, wrapping up a decadeâ&#x20AC;&#x2122;s worth of record numbers in 2018. All signs point to continued growth and the main question is how the hotel sector will keep up with demand. A potential defunding of VISIT FLORIDA is another cloud on the horizon that threatens to rain on the vibrant sector but expectations remain high and positive.

www.capitalanalyticsassociates.com

| 103

Boom town: Record numbers of tourists are flocking to Palm Beach County and taking in all its attractions. One potential hiccup: keeping up Another year, another tourism record. Palm Beach County’s attractiveness as a top destination remains an untarnished constant, with the county chalking up a 10th-straight record year for visitors in 2018. Tourists are flocking to the county’s beaches, events, and other attractions from across the country and the world, and another hot year is likely on the books.

Underpinning the numbers is an aggressive tourism marketing strategy by local and statewide agencies like Discover the Palm Beaches (DTPB) and VISIT FLORIDA, as well as the ever-expanding roster of cultural events and institutions that help make Palm Beach a place to be.

But a familiar refrain continues to ring across the industry, particularly when it comes to hotels: so much demand, not enough supply. As more visitors arrive, demand for hotel rooms climbs and the sector is playing catch-up. Meanwhile, a key plank in the county’s marketing campaigns, VISIT FLORIDA, is facing defunding, which could be a blow not only to Palm Beach County but for the state.

104 | Invest: Palm Beach 2019 | TOURISM, ARTS & CULTURE

Performance, trends Palm Beach County continues to shatter tourism records, with 2018 marking a decade of annual visitor highs. According to DTPB, the county’s official tourism marketing entity, some 8.02 million visitors stayed overnight at county hotels in 2018. This figure is up 1.7% over the number of total visitors in 2017. When focusing on key parts of the year by themselves, such as the summer tourism season, 2018 saw 4.5% more visitors than in 2017.

The proportion of international visitors to Palm Beach County saw market growth totaling approximately 0.5% over 2017. The biggest increase in visitors was from the UK, Brazil, and Colombia.

Domestic tourism also enjoyed growth, with 1.2% more visitors from states other than Florida, and 2.8% more visitors from other counties in Florida, many of those coming from Orlando.

In total, this mammoth year for tourism contributed roughly $7.4 billion in economic impact, and supported 70,000 hospitality jobs. $584 million in ( )

TOURISM, ARTS & CULTURE INTERVIEW

Playground The Palm Beaches rebranding defines a push to expand tourism to the county, hyping the area’s distinct aura

Jorge Pesquera President & CEO – Discover The Palm Beaches How has the rebranding of Palm Beach County helped to expand the tourism industry?

Emulative of its moniker America’s First Resort Destination, The Palm Beaches have been a leisure traveler’s playground for more than 120 years. There’s a distinct aura and brand of Palm Beach County, which we rebranded The Palm Beaches after a comprehensive brand assessment.

The new name is an invitation for everyone to come and discover The Palm Beaches and its 39 cities and towns, of which 11 have evolved into tourism hubs, each with its own history, culture and natural beauty. By doing so, we broadened the appeal of the destination to not only the traditional affluent market but also a wider audience with different tastes, desires and budgets.

What are the top drivers of tourism in The Palm Beaches?

Leisure remains the most crucial tourism driver for The Palm Beaches, with meetings and conventions continuing to gain momentum. Within the leisure tourism market, our beaches are the biggest draw for not only those seeking to relax and rejuvenate, but also those interested in activities such as boating, fishing, scuba diving, kayaking and paddleboarding.

We see visitors who embrace various styles and personalities, including the cultural traveler, who comes to explore our array of museums, musical and theater attractions, and historic landmarks; the eco traveler, who enjoys everything from natural walks through botanical gardens to getting up close and personal with marinelife at our award-winning snorkeling and scubadiving sites; and the foodie, who has an appreciation for locally sourced ingredients thanks to our emphasis on farm-to-table dining. Sports are also a significant driver of tourism to The Palm Beaches, the most sought-after being polo, golf and baseball’s Spring Training.

On the meetings front, we’ve seen a 567-percent

increase over the last several years in groups booked at the Palm Beach County Convention Center.

How will Brightline’s rebranding impact The Palm Beaches?

Brightline’s transformation into Virgin Trains USA is a huge game changer. With the high-speed train system connecting all three South Florida destinations, travelers from near and far have a greater incentive to create an itinerary that includes a hotel stay and sightseeing in The Palm Beaches. The company’s new Virgin Voyages product also provides more opportunities for cruisers to extend their vacations with pre- or post-cruise land packages in our destination. All this combined is a huge deal for us. It adds to the evolution of accessibility that is taking place throughout The Palm Beaches. www.capitalanalyticsassociates.com

| 105

Judith Mitchell CEO Kravis Center

What impact did record-high toursim last year have on the Kravis Center?

The Kravis center is truly a magnet for tourists who are seeking cultural experiences during their visit to Palm Beach County. Whether they are coming for a convention, golf, boating or fishing, they also want to take part in the arts and culture that is unique to the community. Our strong programming and marketing teams ensure that we continue to bring the best of Broadway and other diverse performances that attract audiences from outside the state and from cities north and south of the Center. In 2018-2019, the Center saw an increase in out-of-county audience members by nearly 50%. This also makes a positive economic impact on the surrounding hotels, restaurants and shops.

Overall, our show sales last year were strong, including a record-breaking number of our Kravis On Broadway subscriptions. We have a large resident base that continually supports us, not just as ticket-buyers but as donors, which is of utmost importance because we are a not-for-profit organization.

How important is bettering the surrounding community to the Kravis Center?

The Kravis Center was founded with the mission to enhance the quality of life for those who live, work and play in Palm Beach County so this is extremely important. In addition to providing an array of national and international artists that appeal to audiences of all ages and interests, we also provide a home to our local and regional arts organizations where they can showcase their work. Each year our education programs provide a multitude of opportunities for students, teachers and the public to experience the arts and expand their knowledge through arts education.

As of 2019, more than 2.5 million students have attended our STAR (Students & Teachers Arts Resources) series, which brings classroom curricula to life with top-quality programming.

106 | Invest: Palm Beach 2019 | TOURISM, ARTS & CULTURE

There are more than 66,000 tourism related jobs in Palm Beach County.

( ) spending came from tourists who visited the county for arts and cultural events. Maritime tourism is another major component of Palm Beach Countyâ&#x20AC;&#x2122;s tourism revenue, particularly cruises and boat shows.

In fact, the Palm Beach International Boat Show is one of the Top 5 boat shows in the country, and in 2019 featured an impressive $1.2 billion in inventory, including a $31.5 million superyacht. The show draws hardcore maritime enthusiasts and the casually curious from all over the world. It is also representative of another important sector, conventions and events, which are credited with much of the continued growth in tourism during 2018.

Initiatives, strategies To entice the greatest possible number of visitors to Palm Beach County and thereby realize maximum tourism revenue, DTPB worked with an independent consulting firm to develop a 2018-2020 strategic plan. DTPB recognized the importance of involving stakeholders in the planning process, and conducted preliminary interviews with 45 leaders from both the tourism industry and the community at large to learn their perception of the factors influencing the present and future of tourism throughout the county.

These leaders identified a variety of factors, including the strong existing base of positive expectations

CONSTRUCTION TOURISM OVERVIEW

about tourism in Palm Beach, the importance of seasonality, the need for funding, the evolving impact of the sharing economy, the need to improve interagency and regional collaboration, and the value of community support and engagement.

With these and other factors in mind, a DTPB strategic plan was developed for 2018-2020, which consisted of five strategic goals: Strengthen Brand Awareness and Marketing, Expand Meetings and Events, Energize Destination Development, Ensure Organizational Sustainability, and Improve Alignment and Community Engagement. Each of these goals contains a detailed list of objectives and performance indicators, as well as specific strategies to achieve them. For example, a few of the objectives and corresponding strategies for the first strategic objective include strengthening brand awareness and marketing to increase interest in visiting as a vacation/leisure destination to 40%, increasing interest in visiting as a vacation/leisure destination among millennials to 55%, and reaching 4.8 million annual hotel room nights sold through marketing efforts and collaboration with the Palm Beach County Tourism Development Council, sister agencies and stakeholders through actions such as “leverage[ing] the diversity of content through community engagement to differentiate and capitalize on the unique experiences of the destination,” and “ensur[ing] the millennial footprint is leveraged and developed within destination marketing and product offerings.” The ultimate goal of the 2018-2020 strategic plan is to achieve the DTPB’s stated vision of positioning Palm Beach County as Florida’s premier tourism destination.

As the strategic plan bears fruit and a record number of tourists visit Palm Beach year after year, DTPB has also begun to stress the need to expand the Palm Beach County Convention Center (PBCCC) and build a new hotel in the Convention Center District. To this end, DTPB issued a request for proposals from consulting firms specializing in convention center expansion in April 2019. The expanded PBCCC and the additional hotel rooms would allow Palm Beach County to accommodate large groups and conventions of up to 1,500 attendees, and would make the county competitive with other major convention destinations.

However, there is some concern about how Palm Beach County might be impacted by statelevel tourism strategy. Florida’s statewide tourism marketing agency VISIT FLORIDA is at risk of being shut down by the state legislature. In spite of the state bringing in a record 126.1 million visitors in 2018 when the agency’s funding was increased to $76 million, its

Tricia Taylor Executive Vice President & General Manager The Breakers Palm Beach

What is the type of tourism The Breakers attracts, and has that changed over the years?

The Breakers has always attracted multiple generations of families: grandparents who grew up coming here and who want to continue the tradition with their own children and grandchildren. Our core market of travelers is from the northeast, with Palm Beach’s incredible weather and oceanfront location being the main draw. Overall, our clientele is a mix of leisure guests and business professionals, primarily from the United States; however, there also is a significant presence of global visitors. The Breakers is not only a unique worldwide resort destination, but it also draws numerous conferences and special events, with over 350 corporate meetings and 100 social gatherings each year, on average.

What is the outlook for The Breakers and for the hospitality industry in Palm Beach in 2019?

The outlook for 2019 is positive, demand is at an all-time high and growing, especially within the leisure market. As The Breakers improves performance year over year, based on the core metrics of occupancy, average daily rate and revenue-per-available-room, hotels throughout the county continue to grow as well, according to our data analysis and the increased volume of incoming tourism.

How has technology changed the hospitality industry?

True luxury is about choice, and technology should serve that mission. Each customer is entitled to control their experience and how it is delivered. This perspective reflects my philosophy on technology in the hospitality industry, especially in the luxury segment. I believe guests can determine how much or how little technology they wish to use during their stay. Technology should enhance personal service, not replace it. We have a variety of visitors from different generations who prefer different levels of engagement; some are happy with self-service while others require heightened attention. www.capitalanalyticsassociates.com

| 107

TOURISM, ARTS & CULTURE OVERVIEW

In 2018, Palm Beach County had over 8 million visitors.

funding is set to expire on Oct. 1, 2019. State House leaders are no longer as confident about funding tourism as they once were and have so far ignored a bill passed earlier by the state Senate that would keep the agency alive past that date and give it a cash infusion of $50 million. Community and tourism industry leaders worry about the impact on the county’s economy and employment numbers if the bill is not passed. Glenn Jergensen, Executive Director of Palm Beach County Tourism Council, is among the local leaders who have expressed how VISIT FLORIDA’s initiatives have spurred tourism in Palm Beach, and how defunding it will have a real and negative impact on people in the county. “We have over 2,000 rooms right now being built in Palm Beach County,” Jergensen told WPTV in a report posted online on April 25. “New hotels that are going into play. We’ve built stadiums in Palm Beach County with tourism development taxes. We wouldn’t (have) been doing that and creating those construction jobs without tourists,” he added. “This is all about jobs, this is your neighbors, my neighbors, people that work in this industry not only in the tourism industry but in the construction industry.”

Cruising Miami may be the cruise capital of the world, but Palm Beach County also enjoys a considerable amount of revenue from cruise tourism. Cruise traffic at the Port of Palm Beach has been growing steadily, with 480,000 multiday passengers in fiscal year 2017. This number 108 | Invest: Palm Beach 2019 | TOURISM, ARTS & CULTURE

is actually far lower than it otherwise could have been had it not been for Hurricane Irma, which rocked the region in 2017 and put a damper on the cruise industry.

The 1,900-passenger Grand Celebration, which is homeported in Palm Beach and operated by Bahamas Paradise Cruise Line, was actually chartered to FEMA in the wake of Irma and only returned to its regular cruise business at the end of 2017.

Bahamas Paradise’s regular cruise business at the Port of Palm Beach, itself, is expected to nearly double its operations at the port under a new 10-year agreement between the two parties. Part of this agreement is the introduction of Bahamas Paradise’s new ship, Grand Classica, which along with Grand Celebration will offer two-night cruises to the Bahamas. Together, the ships have an annual capacity of approximately 1.2 million passengers. To accommodate the expected uptick in business, passenger facilities at the Port of Palm Beach’s Berth 2 were upgraded with new HVAC equipment, a refurbished escalator, new carpeting and flooring, touched-up paint, and an awning at the entrance of the porte-cochere and terminal.

Cultural center A major source of tourism for Palm Beach County is its arts and culture scene, amounting to more than $500 million annually. It’s an industry the county takes seriously.”Palm Beach County truly embraces arts and culture as an important part of the tourism engine, which is something not always seen in other

TOURISM, ARTS & CULTURE OVERVIEW

communities. Palm Beach County is called Florida’s main lobby in Dreyfoos Hall; adding a landscaped, cultural capital because of the number of cultural pedestrian-friendly plaza; constructing a valet garage institutions that are here. The quality of work within on Sapodilla Avenue with its own designated drop-off the arts is astounding, and the variety of cultural area; a special drop-off and entrance for artists and experiences that people can have here has really helped performers; and providing an increased amount of to bake arts and culture into the tourism strategy for the signage so that the center is identifiable at a distance county. There’s always room for additional funding, from all directions, which will include a large marquee facing Okeechobee Avenue and but we are very fortunate to Tamarind Avenue. To raise the have dedicated bed tax dollars to money for the renovations, the support cultural activity,” Dave center has initiated the Kravis Lawrence, president and CEO 2020: The Future is Now capital of the Cultural Council of Palm campaign, which hopes to raise Beach County, told Invest:. the full $40 million required, One of the top cultural draws plus an extra $10 million for in the county is the Kravis future improvements. As of May Center for the Performing 2019, it had raised about $18.5 Arts in West Palm Beach. The Dave Lawrence million through the campaign, Kravis Center has hosted a wide Cultural Council of Palm Beach County and had sold an additional $21 variety of live performances for million in bonds to finance the over 26 years, and is now in the middle of major renovations to further enrich the project. Dreyfoos Hall and the Center’s Okeechobee customer experience and traffic flow into, out of, Boulevard entrance had been closed since May 20, and around the center. In total, the renovations will 2019 to allow construction crews to complete the cost $40 million and will consist of expanding the necessary work. It reopened on Nov. 4, 2019.

We are very fortunate to have dedicated bed tax dollars to support cultural activity.

Market voices: Milestones

Shelly Pappas

The profile of our typical visitor has changed significantly over the years.

West Palm Beach was a hub between Orlando and Miami, so we were a stopping point for business travelers that needed to cover both Palm Beach and Broward. Now we are a destination point. People come to Palm Beach for business and leisure. There is so much culture here, and people want to come and experience that.

General Manager West Palm Beach Marriott

We have a very strong corporate clientele. Local businesses book business-transient rates with us, and that combined with group bookings is about a 50/50 split. Sometimes people come for conventions and meetings; other times people book with us because they are with a consulting group that is doing work locally and will be returning home for the weekend.

Ron Wichowski General Manager Boca Raton Marriott at Boca Center

Fletcher Mayes

We have been pleasantly surprised that business over the last 18 months has been good. Palm Beach County is, on average, a great and cheaper alternative to places like Miami. We are benefiting from our proximity to the recently opened United Technologies Center for Intelligent Buildings. It also helps that Florida Power and Light continues to grow and build, with plans for a facility here in Palm Beach Gardens.

General Manager Marriott Palm Beach Gardens

Over the last year we saw a significant increase in our business levels that we did not plan for. 2018 ended up being a record-breaking year for us. This was partially due to compression from the hurricanes that took place in 2017.

Unfortunately, they caused a lot of devastation farther south, all the way down to Puerto Rico, which pushed the business up to us. We saw many weddings and conventions relocate here.

Roger Amidon

General Manager Marriott Resort Palm Beach Single Island

110 | Invest: Palm Beach 2019 | TOURISM, ARTS & CULTURE

TOURISM, ARTS & CULTURE OVERVIEW

Another big cultural attraction in Palm Beach County is the Norton Museum of Art, which is having a very big year. On Feb. 9, 2019, the museum hosted its grand opening after the completion of a $100 million expansion, which increased exhibition space by 35% to over 50,000 square feet. In addition, the overhaul improved gallery connections, added a sculpture colonnade and garden, significantly enhanced natural lighting throughout the museum, boosted education space by 50%, and added a new entrance flanked by an 80-year-old banyan tree and Claes Oldenburg’s and Coosje van Bruggen’s 19-foot “Typewriter Eraser.”

There is even a new Great Hall with ample seating and a coffee bar, where visitors can hang out without having to pay a museum admission. The new building was designed by the architects at Foster + Partners under the direct guidance of Lord Norman Foster, and has received international acclaim, which is having a clear impact on the museum’s attendance.

In February and March 2019, following the grand opening, approximately 67,000 people visited the museum, which is more than double the 30,000 who attended during the same months in 2015, the last full year of uninterrupted operation prior to the beginning of construction. This massive uptick is evidence of the museum’s elevation from an undervalued regional institution to a world-class cultural attraction. In addition to its breathtaking new space, the museum has received more than 350 donations of art with which to fill the new building. Elliot Bostwick Davis, who was brought in as the museum’s new executive director in 2018, has expressed immense gratitude for the generosity of these donations, as well as excitement for the museum’s promising future.

The Kravis Center and the Norton Museum are only two of the many institutions that make Palm Beach County a renowned cultural center. There is also the Flagler Museum, a massive Gilded Age mansion that was once home to Henry Morrison Flagler and his family; the Palm Beach Zoo, which is home to more than 500 animals; and countless other parks and cultural institutions.

Events and festivals In addition to the massive and continually expanding turnout at the Palm Beach International Boat Show, there are several other big events that take place in Palm Beach and generate tremendous economic impact. For example, the South Florida Fairgrounds generated $102.7 million in economic impact during fiscal year 2016, the latest year examined in an independent audit conducted in 2018, and the fair itself

The Kravis Center is one of the preeminent arts and culture destinations in the county

creates about 100 jobs. The Coral Sky Amphitheater had an economic impact of $59 million on its own, and the fairgrounds as a whole contributed $592,000 to the county through the lodging tax. This productive fiscal year followed the development of the Expo East Exhibit Hall, the enhancement of Yesteryear Village, the major marketing campaign to promote Expo Center exhibit floor space, and the new Agriplex complex. These additions and improvements are part of a more than 30-year, $35 million commitment to investment in capital improvements, and another $30 million in improvements are planned over the course of the next decade.

In 2018, the Florida Grapefruit league – a 15-team league that plays during MLB Spring Training each year – also proved to be a big attraction and a big earner, with a total economic impact of $687.1 million. This amounts to a 61% increase over the last time the league’s impact was measured in 2009. Much of this economic impact comes from fan spending, which totals $584 million.

In addition to the money, Spring Training creates 7,152 jobs. As the event continues to receive an average rating of 9.3 out of 10 for guest satisfaction, its economic impact is likely to continue growing.

The Winter Equestrian Festival is another booming tourist attraction and a tradition that has now been around for 40 seasons. The festival lasts 12 weeks each winter and features hunter, jumper and equitation competitions, as well as competition among premier dressage riders from around the country and the world. www.capitalanalyticsassociates.com

| 111

TOURISM, ARTS & CULTURE OVERVIEW

Arts and culture attract more than $500 million annually to Palm Beach County.

Nearly $90 million is spent on horse-related purchases during the course of the festival each year, and with that money comes 1,600 jobs. Secondary economic impact is also created through area hotels and other entertainment, with 130,000 room nights generated by the festival in 2018. $20 million was spent on stabling for the horses themselves. Perhaps the biggest draw to the festival: admission is free.

Not far from where the Winter Equestrian Festival is held, at the International Polo Club in Wellington, the National Hockey Festival was hosted by USA Field Hockey and the Palm Beach County Sports Commission during Thanksgiving weekend 2018, marking the third consecutive year the event was held in Palm Beach, with 150 teams competing. The tournament consists of 500 games in boys, girls, co-ed, and adult divisions and draws 7,000 spectators from around the world.

The event contributes $8 million in direct economic impact and over 10,000 hotel room nights.

Hotel performance The hotel market in Palm Beach County has been a bit of a roller coaster over the past few years. During 2015 and 2016, hotel supply grew so rapidly as demand declined and the dollar strengthened, that in 2016 there was a 1% decline in Revenue Per Available Room (RevPAR), one of the key indicators of hotel market performance. However, this slump didn’t last, and in 2018 RevPAR jumped by 5.9%. Moreover, the reduced supply growth in 2017 and 2018 resulted in a record 112 | Invest: Palm Beach 2019 | TOURISM, ARTS & CULTURE

occupancy rate of more than 74%, along with a 6.3% increase in Average Daily Rates (ADR), another key performance metric. As of January 2019, ADR in Palm Beach County was $225 – the highest January ADR for any year since 2011.

However, this growth is not expected to continue indefinitely, with several factors contributing to the normalization of the hotel market. First, the hotel market in Palm Beach County experienced a decrease in market supply throughout 2018, although construction of new hotels will continue in 2019 and 2020. Seven new hotels already opened in 2018, adding some 1,052 rooms to the market, and more major hotels under construction include the Autograph Collection West Palm Beach Downtown (204 rooms) and the Mandarin Oriental Boca Raton (158 rooms), both of which are scheduled to open in 2019. In spite of all the new construction, supply will gradually shrink, and RevPAR growth is expected to even out back to about 1.1% per year from 2019 to 2021. But John C. Tolbert, president of the Boca Raton Resort and Club, says growth will continue in the region. “Boca Raton Resort & Club is really a reflection of all of South Florida. In 1926, we were the original destination resort. Since then and in more recent years, we have seen tremendous growth not only at or resort but in the Boca Raton community.

This market is home to the fastest-growing offices in the state, two of the fastest-growing universities and an increasingly active live, work and play environment.

We are seeing a tremendous influx of people from the Northeast make permanent residence here as well. This is a great time to be in this region, and we are excited to be a part of its growth.”

Looking ahead As Palm Beach County continues to bring in record numbers of tourists, there is little doubt that the industry will continue to prosper for the foreseeable future. Expansions to cruise offerings at the Port of Palm Beach add another fun way to get to the county, and there’s no shortage of cultural events and places to visit. However, there are a few potential challenges to the county’s tourism industry on the horizon. First, the hotel market is having some difficulty keeping up with demand for rooms; the occupancy rate is high, and while new hotels continue to be built, the demand for rooms shows no sign of slowing down.

Moreover, there is the possibility that VISIT FLORIDA will be defunded, which would be a serious blow to tourism marketing throughout the state. Despite the challenges, tourism is expected to continue being a key driver in the county’s economic makeup.