As Miami office buildings sell, more big deals on horizon
By Yudislaidy Fernandez
While Miami's office market remains slow on the leasing side as more space is available than tenant demand, the sales side is more active than last year, with significant deals closed — and more on the horizon, office experts say.
So far this year, major international players have acquired office buildings in Miami's urban core, but for the value of the land — not the buildings — as they plan to build mixed-use projects.
First, Swire Properties bought the Eastern National Bank's headquarters building at 799 Brickell Plaza for $13.1 million in April, with plans to replace the structure with a new office building as part of its Brickell CitiCentre, a 4.6 million-square-foot project to also include retail, hotel and residential.
Then, condo developer Jorge Perez made his return to Miami's development scene with the acquisition of the struggling Omni Center.
Mr. Perez's The Related Group, in partnership with Tate Capital Real Estate Solutions, acquired its $160.8 million non-performing loan for $100 million in May. The long-neglected property on Biscayne Boulevard consists of 1.5 million square feet of office, retail and a Hilton-branded hotel.
But the biggest office deal so far this year, also announced in May, was the coveted 14-acre waterfront site home to the Miami Herald's headquarters that McClatchy Co., the newspaper's owner, sold to resort developer Genting Malaysia Berhad for $236 million.
"When you have two major office buildings traded, Eastern National and the Miami Herald, some are part of future developments, but Miami Tower traded and SunTrust International Center is going to trade. There's a belief in the fundamental long-term growth of downtown Miami," said Jay Caplin, managing principal of Steelbridge Capital, a commercial realty investment firm.
The 31-story office tower SunTrust International Center in downtown Miami, on the market since earlier this year, is expected to close soon, the office experts said.
The Jones Lang LaSalle team marketing the property didn't return calls, but have told Miami Today they estimated offers coming in north of $80 million.
Completion of several major sales this year indicates that the office market is active with deep-pocketed buyers.
"There's been more activity this year in office building sales than last year. There's capital out there," said Alex Zylberglait, Marcus & Millichap's associate director of the national office and industrial property group. "A lot of players don't want to get to the market yet, but strong operators are picking up some assets right now."
Office sales activity began to pick up late in 2010.
The year closed with the December sale of Miami Tower, the iconic, color-changing office building in downtown Miami that sold for $105.5 million.
In October, the 281,000-square-foot One Park Square at Doral was acquired by New Boston Fund. The group recapitalized the asset in partnership with previous owner, Park Square Commercial — F1 Building, an affiliate of Miami-based Shoma Development Corp. and Shoma Homes.
With more domestic institutional investors as well as foreign capital chasing office investments, particularly in primary submarkets throughout Southeast Florida, expect more sales, Mr. Caplin said.
"I think we will continue to see more trade," he said. "Don't know if more this year, but there is demand."
The financing environment is still challenging, Mr. Zylberglait pointed out, which, as in other real estate segments, is pushing through more cash deals.
Buyers looking to acquire older buildings in particular are less likely to get financing.
"Banks are gravitating towards the quality assets," he said. "The lower-quality assets require higher down payments to get financing."
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