EFTA02579997.pdf

From: Sent: Tuesday, January 21, 2014 10:51 PM To: [email protected] Subject: Fwd: Why Palm Beach, Florida Is The 'New Greenwich' For Wall Streeters Original Message From: BRYAN SUBOT To: Subotnick Anita Subotnick Stuart rosperi Paul Sent: Tue, Jan 21, 2014 4:35 pm Subject: Why Palm Beach, Florida Is The 'New Greenwich' For Wall Streeters FINANCE Why Palm Beach, Florida Is The 'New Greenwich' For Wall Streeters JACQUELINE DETWILER, DUJOUR JAN. 21, 2014, 1:18 PM Neilson Barnard/Getty Images The Palm Beach finance crowd can paddleboard whenever they please. Behind a semicircular brick drive and a lawn as manicured as a putting gree= sits a 30,000-square-foot masterpiece of Italian Renaissance architecture=called Casa Nana. John Porter, a real estate associate for Corcoran who oversees some of the =argest sales in Palm Beach County, Florida, points out the spiral staircas=, built by famed 1920s architect Addison Mizner for the founder of the Nat=onal Tea EFTA_R1_01755074 EFTA02579997 Company. "This home went for $30.2 million in 2003; today-that sum wouldn't be in the top 25 highest prices" of hous=s for sale in this area, Porter says. "Palm Beach real estate has =one from nothing going on to nothing left to sell." Porter is giving me a tour of the so-called Billionaire's Row, a st=etch of South Ocean Boulevard on the island of Palm Beach that is bordered=by some of the highest hedges I've ever seen. Through gaps in the =reenery appear stone fountains, elephant statues, pools the size of tennis=complexes (next to actual tennis complexes), and more clay roofs than one =ould count. It's a monumental display of wealth, and it is rapidly=expanding, not just here but in Delray Beach, Jupiter, Palm Beach Gardens =nd Boca Raton, as money pours out of the Northeast (and in some cases, fro= as far as London and Singapore) and into this already wealthy section of =outheast Florida. Approximately 70 hedge and private equity funds are now =eadquartered here, many of which have set up shop in the last two years, j=cking up home prices and spurring a countywide initiative to become, as so=e have said, "the new Greenwich." For hedge fund managers who might normally be inclined toward Westchester o= Connecticut, the allure of South Florida is as plain as grits on toast. T=e homes are sprawling; the Intracoastal Waterway is a yachter's pa=adise. It has a glittering social scene. During high season—October through March—there might be several fundraisers on any given nig=t. Perhaps the key factor, however: In Florida, there are no individual inrome taxes, no estate taxes and no capital gains taxes. A hedge fund manage= reporting $1 million in income can expect to pay only the federal governm=nt, whereas his counterpart living in Connecticut pays that plus an extra =67,000. And if the poor schmuck were still in New York City? He'd =etter be ready to fork over $104,300. As for why all of this is happening now, when Florida has long been a sunny=tax haven, so to speak, financiers point to the upcoming application of Se=tion 457A of the Internal Revenue Code. Before 457A was enacted, certain f=es and related earnings could grow tax deferred in offshore accounts for u= to ten years. But now, according to the section, hedge fund managers will=need to funnel all of the fees that were deferred before 2009 and their re=ated earnings back into the U.S. by 2017. If a manager lives in Florida wh=n this happens, he's much less likely to pay exorbitant state taxe= on the whole amount. If he still lived in New York City? Fuggedaboudit. It's the job of Kelly Smallridge, president and CEO of the Palm Bea=h Business Development Board, to ensure that hedge fund and private equity=managers are informed of these benefits, in the hopes that they, and their=firms, will become Palm Beach County's newest residents. She*=99s developed a red-carpet tour that goes beyond looking at office space a=d real estate to include meeting headmasters at private schools, the schoo=-district superintendent and the mayor and speaking with the governor40=80.s staff and CEOs who have moved their operations here. Plus, of cours=, a few nights on the town. In the winter, when the well-to-do from all over the Northeast visit Florid= for charity balls, the board hosts dinners and parties for prospective re=ocators and local captains of industry. Last year, Smallridge and company =ponsored a soiree aboard a $70 million yacht that featured Veuve Clicquot,=caviar and live jazz. Guests—who included the CEOs of a national 1= company, a major finance company and a land developer, venture capitalist=, hedge fund managers and the creator of Goldman Sachs' prime brok=rage division—took private tours with the captain of the yacht. Smallridge is also working with former hedge fund CIO Dr. Rainford Knight t= develop a club for local investment managers called SocialAlpha that enco=rages bankers in Palm Beach County's ritzy social scene to get to =now each other. Even Florida governor Rick Scott has gotten involved, send=ng personal letters to friends and prospects from the Northeast (the gover=or is a former Greenwich resident and businessman) to convince them of Flo=ida's merits. Smallridge and Governor Scott are hoping to induce a snowball effect, and s= far, it seems to be working. Every financier who moves south chips away a= the primary reason to remain near New York City—the fact that eve=yone else is there. That's not to say it's been easy. Flor=da is still Florida, and popular opinion has not been kind. Even Palm Beac=, which has for the most part dodged the insults hurled at the rest of the=state, is known for its residents' apocalyptically bad driving and=worse Hawaiian shirts. "There was a fair amount of trepidation," says Al Rabil III= managing partner and CEO of Kayne Anderson Real Estate Advisors, who made=the move from Armonk, New York, with 20 coworkers this summer. "Bu= once everybody got past the stereotypes and actually came and looked, tha= changed." He says most of his employees weren't looking f=r bottle service and models anyway. The majority of those who have reached=the upper echelons of financial management are married with children, and =he appeal of a semi-tropical paradise with luxury restaurants, year-round =ecreation, and sophisticated socializing in a community far more tight-kni= than Manhattan (yes, that'sDonald Trump over there) is not lost o= them. Porter's tour of Billionaire's Row was part of a modified v=rsion of one of the Business Development Board's red-carpet tours =hat I took as part of researching this story. I ate breakfast at the clubb= Top of the Point restaurant with some of 2 EFTA_R1_01755075 EFTA02579998 the area's prominent fin=nciers. A waiter in a captain's outfit served lobster rolls while = CPA, a lawyer and the executive director of the Palm Beach County Educati=n Commission touted the area's benefits. I surveyed real estate an= office space surrounded by miles of water without once having my foot ste=ped on by a tourist. You can see how all this might sway someone who4)=99s on the fence. Exploring the sugary beaches of South Florida, one starts to wonder why Wal= Streeters would be on the fence at all. Between the smiling locals and th= shopping on Worth Avenue, the Hiaasen-esque stereotypes recede. What rema=ns are the facts: Take-home pay is higher, commutes are shorter, and it*=804>s just as fabulous as Manhattan, at least for four months of the year= Meanwhile, no one in Florida even owns an ice scraper. With the Internet =flowing more and more money managers to perform their work from nearly any=here, there are few reasons not to make the move. "Initially, it was a way to play golf and keep the wife and kids ha=py," says Brett Langbert, managing director and head of sales at l=A. Englander & Co. "But once we moved down, it became a quality-of=life issue. There are unlimited things the kids can do outside. I have to =ell you, my wife and I are so happy we haven't had to go to one of=those indoor bouncy- castle places since we got here." 3 EFTA_R1_01755076 EFTA02579999