Palm Beach Old Guard Revolts Over First New Luxury Condos in Decades

(Bloomberg) — Just a few miles down the road from Palm Beach’s multimillion-dollar beachfront estates, there’s a palpable shift on the Florida island. Opulence and glamor give way to a sleepy boulevard with mid-century condos housing retirees and snowbirds.

There lies the Ambassador Hotel, a three-star property with AC units hanging out of the windows and a musty smell in the elevators. In one of the nation’s wealthiest towns, it’s taken a broader role as a center of tension between longtime locals and the new money arriving to accommodate affluent transplants who have poured into the area since the pandemic.

Developers want to demolish the Ambassador and a nearby apartment building to construct the island’s first new luxury condo complex in almost two decades — touted by their lawyer as “the most ultra-luxury multifamily project likely that the town will ever see.”

But their first plan caused an uproar with neighbors, who lodged complaints about everything from balconies to swimming pools. They aren’t against the demolition of the hotel, just the prospect of a new, sprawling modern complex, and changing zoning laws to accommodate to it.

In the words of one resident at a meeting where locals aired their grievances, they’re fighting to “preserve the character of all of Palm Beach.”

Palm Beach Old Guard Revolts Over First New Luxury Condos in Decades

What’s at stake, more than the fortunes of one hotel, is a larger contest to unlock prime waterfront land for extravagant buildings for wealthy newcomers from the Northeast, Midwest and California. If the deal succeeds and units fetch top dollar, many more developers are waiting with mountains of cash to buy out other aging properties, particularly in the wake of new state safety regulations that may make it compelling for people to sell rather than pay for costly upgrades. For Palm Beach’s affluent but not uber-wealthy residents, that means potential displacement.

“This is the first stress test for a potential wave of development, and it’s not going to be the last,” said Guy Clark, a real estate agent and interior designer who works in the more mid-scale area of the island, known as South End. “Palm Beach has become the Monaco of the United States. It’s where everyone wants to be and be seen.”

Wealth Haven

The pandemic only supercharged Palm Beach’s longtime status as a magnet for wealth. Superyachts glitter in the marinas and flashy Lamborghinis and Rolls Royces are spotted all over town. A drive down the main road on the ocean affords a view of Donald Trump’s Mar-a-Lago, and less than a mile down the way is Paul Tudor Jones’ sprawling mansion, just past the construction site for Ken Griffin’s massive oceanfront compound.

The island — 18 miles (29 kilometers) long but less than a mile wide — has long been resistant to the types of development seen in other parts of South Florida. Developers are hindered not just by finicky residents but also by strict building codes that are nearly 50 years old.

That’s left a shortage of properties for the new arrivals to Palm Beach, where average home values have doubled since 2019, according to Zillow. On the South End of the island, dated apartments with carpeted floors and linoleum kitchens can fetch $700,000 — more than double the median price of a condo in the state, but well below the island’s median single-family home price of $8.75 million at the end of last year.

Developers Cain International and OKO Group, which develops luxury hotels for Aman Resorts, purchased the Ambassador and an apartment building across the street for $147 million in 2022. They initially planned three buildings that would each be five stories high, with 49 units total. After failing to change some of the area’s zoning requirements, they’re attempting to proceed by altering their plan and asking for individual exceptions from the Palm Beach Town Council.

“Our team will follow the council’s input in determining the right path forward as we further develop our plans,” the developers said in a statement, adding that their updated plans have been “well received by local constituents.”

The homeowner’s association in the building next door to the proposed developments is against the increased square footage and the “intensity” of modern, luxury amenities at the complex, where renderings showed rooftop decks, fountains and at least 10 swimming pools. One nearby apartment owner, speaking at a community meeting, said residents “don’t want to become West Palm Beach,” the city just across the causeway that’s been transformed in a matter of years by new sleek towers for offices and luxury condos. Another complained about the prospect of rooftop pools, saying she didn’t want to see “dancing girls on bars.”

Bobbie Lindsay, the town council president, said most people living in the area “could never afford to buy a unit like this, not even remotely.” She told the developers they should have more involvement with the local community.

“Getting things through the pipeline here — you’re going to have lots of people who will argue with you about everything,” said Paul Holland, a former bond trader at Merrill Lynch who has owned a condo next door to the Ambassador for 15 years. He mostly supports the project. “The Ambassador is not an attractive place, so it can only get better,” he said on a recent Thursday while walking his dog.

Holland noted that the new project could raise his condo’s value, but pointed out that if the neighborhood becomes a haven for billionaires, like the rest of the island, he would “have to move out.”

New Regulations

Change, however, may be inevitable in the South End. All Florida condo buildings that are taller than three stories and more than 30 years old are facing assessments by the end of the year that may force costly repairs. It’s part of a law passed by the state legislature in the wake of the 2021 Surfside disaster, when a beachfront building caved in at the pool deck and brought much of the structure down in seconds, killing 98 people.

For some condo associations, the cost of updating decades-old properties may not add up. A member of the Citizens’ Association of Palm Beach said there are at least five buildings in the area that have been in talks with developers to be bought out because of the assessments.

“It’s already starting to percolate through the market that this is going to be an issue,” Joe Hernandez, a real estate lawyer with Bilzin Sumberg, said of the new law, which has a Dec. 31 deadline for buildings to undergo structural assessments. “Going forward, homeowners’ association fees are going to be way higher and some of these older projects are going to have to make a decision whether it’s worth it.”

The Ambassador was built in 1947. Within one mile in both directions from the property, all the condo buildings are at least 30 years old. Most are older — the strip of mostly 60s and 70s architecture are a relic of Florida as a retiree destination, with residents in sun hats on walks and loading golf clubs into the trunk on a Thursday morning.

Harvey Oyer, a lawyer representing the Ambassador developers, argues such properties will inevitably sell to developers — a process called “condo termination” — and will be revamped into modern, luxury residences like the one they’re proposing.

“The world is different in the post-Surfside world,” Oyer said at a public meeting, also noting the skyrocketing price of insurance for beach property in Florida as another factor that will price out current residents. “There’s also the fact that we’re at the greatest demand for waterfront real estate in the history of Florida in this post-Covid real estate boom.”

–With assistance from Amanda L Gordon.

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