We know this will go down hard with both the West Coast and Wall Street elites, but we believe the future is here and it’s Florida. Like it or not folks, it’s our opinion that the Sunshine State is out governing other large states and it’s really beginning to show from an economic standpoint.
Once know as the “sixth borough of New York” it’s increasingly referred to as “Wall Street South.” Consider the fact that Carl Icahn, born, bred and enriched in NYC recently moved both of his Icahn Enterprises L.P. offices from the General Motors building in NYC to Miami.
This, however, is just the tip of the iceberg. In December, Bloomberg reported that Goldman Sachs was considering moving its asset management business to Florida. “Executives have been scouting office locations in South Florida, speaking with local officials and exploring tax advantages as they consider creating a base there for its asset management arm, according to people with knowledge of the matter. The bank’s success in operating remotely during the pandemic has persuaded members of the leadership team that they can move more roles out of the New York area to save money.”
Before you dismiss this as just the asset management group, consider that it has accounted for about a quarter of the firm’s revenue in recent years. Note to Governor Cuomo – capital can move faster than you can tax it.
Citadel Securities, Elliot Management and Blackstone have already made the move. JP Morgan, Chase and Deutsche Bank are considering it. If Albany lawmakers get their way and impose a transfer tax on stock sales the NYSE may even decamp for Miami.
But that’s not all. There are a surprising number of Silicon Valley founders and investors in residence as well. Peter Thiel and Eric Schmidt are in and around Miami. Microsoft is in talks with Miami Mayor Frances Suarez about opening office space. So, money and high tech seem to be deserting California and NYC faster than you can say ‘mo taxes!’
It would appear that from both a business and lifestyle standpoint Florida is the future people increasingly want. How did this come to be you ask? First and foremost, less government. This is only logical as “The best government is that which governs least” (John O’Sullivan, United States magazine and Democratic Review).
It’s our assessment that government overreach and concomitant taxation and regulatory sprawl have left both the New York and California economies in ruins. This was hugely exacerbated by the pandemic and accompanying lockdowns. Both Andrew Cuomo and Gavin Newsome raised the “Closed for Business” flags from the battlements of Albany and Sacramento and won’t give an inch.
On the other hand, Florida Governor Ron DeSantis has stated “We will categorically not allow any local government to lock people down and we will not let any local government kick anybody out of their job.” His counterparts in the Empire and Golden States are working overtime to do the opposite.
Unsurprisingly, Miami and South Florida isn’t the only destination for all these new businesses and lifestyle migrants. Strong real estate markets, both commercial and residential, extend onto the West Coast (Naples) and north to Orlando and Tampa. For all you non-Floridians out there, that’s most of the state, sans the panhandle. New York and California should be so lucky.
Speaking of California, conservative commentator Ben Shapiro recently abandoned the Golden State for the Sunshine State saying, “Florida is a fantastic location, a state that still protects core freedoms, (and) provides a friendly tax environment… California drove us out, Florida took us in.”
With remote ownership available to income property investors via DST, there is no reason why they can’t consider participating in this future as well. As savvy commercial real estate operators, DST syndicators saw this handwriting on the wall long ago. Before the word pandemic became part of the popular lexicon, property offerings in the DST space were already heavily skewed in favor of the sunbelt.
As our blog history has emphasized for quite some time through articles such as Arthur Laffer and Stephen Moore’s So Long, California. Sayonara, New York (WSJ April 24, 2018), the movement of people, business and money from high-tax blue states to low tax red states has been going on for a while. This trickle turned into a stream which has now become a flood.
In hindsight, the multiple Florida property offerings from DST syndicators, particularly multifamily, appear prescient. Don’t look for this to change anytime soon.
It isn’t just the weather. It isn’t just taxes and it isn’t Covid-19. It is our belief that this is an on-going respect for core American values and freedoms. These latter two being the most significant casualties of bi-coastal progressive governance and their endless cycle of policy failure and scapegoating. Don’t let your hard earned sweat equity become the next casualty to their hubris and arrogance.
