Institutional Investors Discover Coral Gables as Vacancy Shrinks

March 23, 2016
Coral Gables led the region in office transactions during the final months of 2015, with three major trades bringing an eye-catching $236 million. The city long known for its Mediterranean architecture and bridal shops has hit the investor radar screen, luring financial giants from around the globe.

“You’ve got institutional investors coming in and buying Class A and B office buildings, looking to invest in them to reposition them,” said Diana Parker, senior vice president at CBRE Inc. in Miami. “Within the last 14 months, 800,000 square feet has traded.”

That’s more than a tenth of the city’s 7 million square feet of office space. South Florida’s largest office transaction was in Coral Gables last quarter, CBRE reported. The market kicked off a flurry of activity at year’s end with the $119 million sale of Alhambra, a downtown Class A office complex. A Chicago- based fund tied to Deutsche Asset & Wealth Management paid about $363 per square foot for the dual office tower property.

The seller was an affiliate of USAA Real Estate Co., which purchased the Alhambra for $72.3 million in 2004, a 65 percent gain by the time of the December sale.

Less than two weeks later, Spanish investment group MDR Americana LLC pocketed the Alhambra International Center down the street at 2 Alhambra Plaza for $34 million, or about $164 per square foot. The 13-floor office building sold for half that in 2004.

Investors didn’t stop there.

In a third deal, Atlanta-based Prudential Real Estate Investors, the real estate investment arm of Prudential Financial Inc., dropped $83 million on 355 Alhambra, a nearly 500,000-square- foot office property at 355 Alhambra Circle.

High Rents

Brokers say the acquisitions are typically followed by multimillion-dollar renovations to support a rent increase. Average rental rates in Coral Gables jumped to $37 per square foot in the last quarter of 2015, a 2.4 percent increase from the first quarter, according to JLL’s latest market report. The office sector ranked in the top five most expensive Miami-Dade County markets, which included Aventura and North Miami at $43.50, Miami’s Brickell financial district at $42, downtown Miami at $37.20 and Miami Beach at $36.50.

The high rates are also a factor in Coral Gables’ low vacancy rate and lack of new supply.

Job growth in the professional services sector increased demand for space last year, pushing the average vacancy rate down to 12.5 percent across Miami- Dade, CBRE reported. In Coral Gables, the rate dropped to a low 9.2 percent across all office classes.

“The Coral Gables market is one of the lowest in vacancy,” said Maggie Kurtz, senior vice president at CBRE. “It’s leasing up quicker than most of the markets.”

International food distributor Quirch Foods Co. signed a 30,000-square- foot lease downtown for its new corporate headquarters last year. The company’s decision to relocate its 155-employee team to 2701 S. Le Jeune Road was prompted by its desire to find a location near major transportation hubs, dining and shopping, reported commercial real estate firm Savills Studley.

Last year, AMC Networks international expanded to 16,424 square feet at 2020 Ponce De Leon Blvd. Pipeline Workspaces chose the city for its third co-working location, leasing 14,000 square feet at 95 Merrick Way. Parker said both Geico and the consulting firm Retail Outsource Cos. also moved into the market, leasing space in the 10,000-square- foot range.

“It screams ‘absolute best place to have a business,’ ” said Leonardo H. Da Silva, a partner with Alvarez, Carbonell, Feltman & Da Silva. The law firm at 75 Valencia Ave. sits two blocks south of the city’s famous Miracle Mile retail corridor.

Downtown Miami “is too stuffy. In Coconut Grove, you can’t walk anywhere,” Da Silva said. “In Coral Gables, every other door is a restaurant.”

And for businesses seeking to escape the stifling gridlock in downtown Miami and neighboring Brickell, Coral Gables is a breath of fresh air.

New Construction

But in terms of new construction, Parker said, “Office has been the stepchild.”

Savills Studley reports large office spaces are becoming increasingly difficult to find. While more options exist for smaller space in the 10,000- to 20,000-square-foot range, tenants looking for a block of 25,000 square feet or more have only six buildings to choose from.

“We’re now reaching that famous tipping point where it makes sense for developers to consider office development in urban and suburban marketplaces of Miami,” Parker said.

Developer Camilo Lopez deems Coral Gables “the most established market in South Florida.” He is president and managing director of The Solution Group, a Miami-based company developing a 16-story office-condo at 1200 Ponce De Leon Blvd.

The developer is demolishing an existing building at the site and expects to go vertical in about a month, Lopez said.
Ofizzina, a planned 100,000-square- foot building, is 65 percent pre-sold, mostly to financial services tenants. Buyers have come from Switzerland and England to Latin American countries, Lopez said.

“They like to own their spaces,” he said of his future tenants. “They don’t want to rent.” While Ofizzina is the Solution Group’s first office project, Lopez and his team plan on launching a second one soon.

Veteran developer Armando Codina has a project underway at 2020 Salzedo St. that will bring 53,452 square feet of office space to a six-story building as part of a mixed-use complex. Codina will use half of the space for his corporate headquarters.

“There is a tremendous need for new construction,” said Tere Blanca, CEO of Blanca Commercial Real Estate.

Another 300,000 square feet of office space hangs in the pipeline in Agave Ponce’s Mediterranean Village, a proposed $500 million mixed-use development. But no construction or delivery date has been confirmed for the office portion of that project, Blanca said.

With vacancy rates pushing toward single digits, businesses may struggle to find room to grow.

Next Real Estate Frontier: Neighborhoods on Edge of Miami

March 16, 2017

Millennials and empty-nesters are moving in droves to city centers nationwide, but there are few places where the urban renaissance is more obvious than Miami.

The push has transformed the city into a multi-dimensional metropolis: Neighborhoods that were once overlooked are getting newfound attention from tourists, residents and real estate developers alike

“The Miami of 20 years ago versus today is night and day, and what it’s going to be in 20 years is night and day,” said Martin Pinilla, co-founder and managing partner of the Barlington Group, a Miami company actively investing in Little Havana, west of downtown Miami and the home of the Miami Marlins stadium.

Pinilla was one of five speakers on a panel focused on emerging Miami neighborhoods during a CREW-Miami luncheon Wednesday.

He was joined by other real estate leaders, including Shari Neissani, vice president of asset management for New York’s RedSky Capital, a major real estate owner involved in Wynwood’s striking transformation from an industrial base.

RedSky found in Wynwood what it initially saw in its Brooklyn home of Williamsburg years ago. The group began investing in the Miami enclave about four years ago with hopes to enhance and preserve its artsy, eclectic culture by revamping its dated real estate, Neissani said.

RedSky plans to soon break ground on its first local development, CUBE Wynwd, the first office building to rise in the community. It plans another office building at 2700 NW Second Ave., which was purchased for $31 million last year.

But it’s not easy to develop property in Miami, especially in up-and- coming neighborhoods like Wynwood, Little Havana and Allapattah, the panelists said.

The city sees the desire to build but sets high hurdles, Neissani said. RedSky’s strategy has been to work with Wynwood property owners to design projects that fit with the neighborhood to improve their chances of city approval.

The biggest challenge faced by developers entering these neighborhoods are policy issues, said Carlos Fausto, president of Fausto Commercial. He applauds the real estate community for working toward the zoning code changes needed to unleash neighborhood development.

While the city adopted the Miami 21 zoning overhaul in 2009, it’s already archaic, said Tony Cho, founder of Metro 1 Properties. The code fails to address resiliency, sea-level rise or affordability issues, Cho said.

Character

In Wynwood, stakeholders have successfully established the Neighborhood Revitalization District, or NRD, with a zoning code specific to the neighborhood that opened the door for development while keeping its arts orientation intact.

Fausto said Little Havana property owners are pursuing a similar initiative. While plenty of high-end buildings have risen in Miami, few affordable options have been delivered. The historic Little Havana neighborhood has small parcels dominated by one- to four-unit homes for middle- to low-income residents. It’s walkable with mass transit access, and it remains affordable compared with the pricey Brickell district to the east and Coral Gables to the south.

But zoning is a major impediment. Fausto said density restrictions and parking requirements limit developers’ ability to build affordable homes. A zoning overlay similar to Wynwood’s NRD would help bring affordable development.

Cho commends the effort: He supports less restrictive parking requirements as well as smaller and more affordable spaces across these neighborhoods.

Many homes in Little Havana date back to the 1930s and “require a lot of love” but hold a lot of promise, Pinilla said.

Cho sees Little Havana and Allapattah as home to Miami’s future creative workforce. It’ll be tough to attract companies to the area if their employees can’t afford a place to live.

Mass transit is also key, said Mitch Patel, CEO and senior managing principal of Platinum Cos. If the neighborhoods aren’t interconnected, residents and employees will have a hard time getting around.

Patel warned a lack of reliable transit options may deter people from moving to urban centers and reverse the trend responsible for the re-emergence of these neighborhoods.

Cho, a relative Wynwood pioneer who arrived in the neighborhood 17 years ago, said it’s important for each community to preserve its character.

“Wynwood was about street art,” he said. “Each neighborhood needs to have its own defining principle, its own characteristic.”

As land prices escalate in Wynwood, investors have started looking elsewhere.A number of high-profile deals has thrown Allapattah into the spotlight. The working-class neighborhood sits north of Little Havana and west of Wynwood.

“I love the neighborhood because it’s a working neighborhood, and it’s an ambitious neighborhood,” Fausto said.

It has a strong industrial core — “similar to what Wynwood looked like 10 to 15 years ago” — and a solid housing base.

When asked about Miami’s next frontier, Patel answered, “Every neighborhood is game.”

First look: New Turkish consulate in Miami

March 14, 2016

Amicon Construction is putting the finishing touches on Turkey’s new Miami consulate.

Turkish-born and U.S.-based Murat Mutlu designed the 7,500-square- foot space in the Brickell City Tower, at 80 Southwest Eighth Street.

The Consulate General of the Republic of Turkey’s new consulate features a modern, monochromatic design, and ballistic-rated glass, wall paneling and doors, Amicon project manager Jay Richmond told The Real Deal. He said the cost of the buildout was more than $1 million. It includes a reception area with multiple teller stations.

“When you’re doing a high-security buildout, you’re dealing with materials from specialty manufacturers with long lead times,” Richmond said.

While the space opened in time for the Turkish election in November, the consulate is still tweaking finishes and has yet to hold a grand opening reception.

Other tenants of the 33-story office building include Uber, Verizon, Lamex Agrifoods, Inlingua Language School, Chase Bank, Moye restaurant, the Beacon Council and the Consulate General of Japan. Property records show that Banyan Street Capital owns the building.

Danet Linares, vice chair of Blanca Commercial Real Estate, is the building’s exclusive leasing agent. Linares told TRD Brickell City Tower is currently 87 percent occupied with two new leases that will bring its occupancy up to 93 percent.

The Turkish consulate signed a 10-year lease about a year ago and moved into a temporary space in the building before the new office was ready. “Their space required a complete renovation,” Linares said. Amicon also built out the space of the French consulate in the Espirito Santo building nearby at 1395 Brickell Avenue.

First look: New Turkish consulate in Miami

Buildout for the new consulate is valued at more than $1 million

March 14, 2016

Amicon Construction is putting the finishing touches on Turkey’s new Miami consulate.

Turkish-born and U.S.-based Murat Mutlu designed the 7,500-square- foot space in the Brickell City Tower, at 80 Southwest Eighth Street.

The Consulate General of the Republic of Turkey’s new consulate features a modern, monochromatic design, and ballistic-rated glass, wall paneling and doors, Amicon project manager Jay Richmond told The Real Deal. He said the cost of the buildout was more than $1 million. It includes a reception area with multiple teller stations.

“When you’re doing a high-security buildout, you’re dealing with materials from specialty manufacturers with long lead times,” Richmond said.

While the space opened in time for the Turkish election in November, the consulate is still tweaking finishes and has yet to hold a grand opening reception. Other tenants of the 33-story office building include Uber, Verizon, Lamex Agrifoods, Inlingua Language School, Chase Bank, Moye restaurant, the Beacon Council and the Consulate General of Japan. Property records show that Banyan Street Capital owns the building.

Brickell City Tower is currently 87 percent occupied with two new leases that will bring its occupancy up to 93 percent, Danet Linares, vice chair of Blanca Commercial Real Estate, told TRD. Blanca is the building’s exclusive leasing agent.

The Turkish consulate signed a 10-year lease about a year ago and moved into a temporary space in the building before the new office was ready. “Their space required a complete renovation,” Linares said.

Amicon also built out the space of the French consulate in the Espirito Santo building nearby at 1395 Brickell Avenue.

Downtown Miami tower sold for $27.5M

March 2, 2016

The 23-story Courthouse Tower in downtown Miami traded for $27.5 million.

Courthouse Tower LLC, managed by Richard Donovan in Coral Gables and Christopher W. Bramley in Garner, Massachusetts, sold the 162,510-square- foot mixed-use building at 44 West Flagler Street to New York-based Brickman. RKF Senior Directors Benjamin Mandell and John Ellis and Executive VP Drew Schaul represented the buyer. The seller was represented by Mika Mattingly.

Santander Bank provided a $20.6 million loan to the buyer.

The price equates to $169 per square foot. The building has 7,137 square feet of retail space and 155,373 square feet of office space, with tenants such as Sabadell United Bank and GEICO Insurance. It’s near the county courthouse and county government center.

The city recently started building pedestrian and street enhancements to Flagler Street downtown.

“Brickman’s acquisition of the Courthouse Tower in Miami marks an important milestone and makes a big statement for the future of Downtown, as it highlights the market’s potential and Brickman’s desire to play an important role in revitalizing the area,” said Mandell. “There are plans to renovate the existing office spaces and upgrade the building’s common areas to better suit Brickman’s vision for Downtown Miami.”

Brickman hired Blanca Commercial Real Estate to lease Courthouse Tower.

“Courthouse Tower perfectly aligns with Brickman’s strategy to acquire assets in prime locations around the country, and renovate and reposition the assets to attract high-quality tenants and maximize their potential and stature within the community,” CEO Tere Blanca said “Brickman’s vision for Courthouse Tower includes investing significant capital to renovate and reposition the building from an aesthetic and functional point of view, including everything from a new lobby and elevators to adding tenant amenities such as conference and fitness centers.”

Courthouse Tower was built on the 7,440-square- foot site in 1974. It last traded for $27.5 million in 2006 – the same at its recent sale.

Brickman buys Courthouse Tower in downtown Miami: $28M

March 2, 2016

New York-based Brickman has made its second commercial real estate purchase in downtown Miami with the $27.5 million acquisition of the Courthouse Tower.

In February, Brickman paid about $34 million for the newly renovated and repositioned 200 Southeast First building. The private real estate equity fund is an owner, operator and investor in office buildings across major markets in the United States.

The 26-story, 162,510-square- foot Courthouse Tower building, at 44 West Flagler Street, was originally built in 1974. It’s across the street from the Miami-Dade County Courthouse, near All Aboard Florida’s Brightline station and surrounded by property Moishe Mana has purchased over the past two years. The mixed- use tower has about 7,100 square feet of retail and the remaining 155,373 square feet are office space.

Mika Mattingly of the Mika Miami team represented the seller, Courthouse Towers LLC, an entity owned and operated by the Donovan family.

Ben Mandell and John Ellis of RKF represented Brickman, which more recently paid $31.1 million for a former cigar factory in Long Island City. The downtown Miami sale, which breaks down to about $155 per square foot, closed on Tuesday, a spokesperson for Mattingly told The Real Deal.

Brickman paid $239 per square foot for the 200 Southeast First building. Brickman has plans to renovate the building and upgrade the common areas, elevators and lobby, Mandell said in a press release. Tenants include Sabadell United Bank GEICO Insurance, CityYear and a number of law firms.

Tere Blanca, president and CEO of Blanca Commercial Real Estate, told TRD that rents in the building range from the mid $20s to low $30s. Brickman brought on Blanca to lease the tower, as well as New York- based MKDA to design the renovation. The building is currently about 80 percent occupied. Blanca said the goal is to elevate the Class B building to a B+ or event A-. “By the end of the fall, we’ll have lots to show,” she said.

Downtown Miami is in the midst of significant redevelopment. Mana has spent more than $200 million in the area, with plans for retail, office and residential projects. Other investors, such as Danny Lavy and Daniel Pena, have also joined in. Pena will open the Langford Hotel, a former bank building, in March.

“[Downtown Miami] is at the very end of the selling period and then we’re going to go through a period of renovation and complete change,” Mattingly told TRD.

The county has also funded part of a $13 million improvement plan for Flagler Street that will include expanded sidewalks, more trees, new benches and bicycle racks. The beautification project broke ground earlier this year and is currently working on installing drainage structures, according to a weekly update released on Monday.

Mattingly said the beautification project is moving quickly. She said downtown Miami will be “brand new” in about two years.

Previous sales information for the property was not available online. Brickman financed the sale with a $20.6 million mortgage from Santander Bank, county records show