Value-Add Offices Getting Harder To Find, Buy In South Florida
A prominent office investor says it will likely be harder to find true value-add office plays in South Florida in the coming year.
Angelo Bianco, managing partner with Boca Raton-based Crocker Partners, which owns and manages 9M SF of office and mixed-use projects, said current value-add office deals in the market are priced in neutral territory, which is not giving buyers a strong leg to improve value.
“A lot of the deals being marketed today as value-add," Bianco said, "will be priced at a level that is unattractive to us."
The rising interest rate environment also will chill the ability of landlords to push up office values, Bianco said, forcing landlords to create value by repositioning it, mainly through improved management, leasing and renovations.
“Lenders are being more cautious and they're going to be pulling back the amount of available leverage," he said, "which will have another chilling effect on price appreciation.”
Bianco is part of a lineup of South Florida office heavyweights at Bisnow's State of the Office: Sunshine State Edition next week, including Josh Procacci, co-founder and chief investment officer with IP Capital Partners; Banyan Street Capital CEO Rudy Touzet; The Allen Morris Co. CEO W. Allen Morris; and Brian Gale, vice chair of Cushman & Wakefield.
Procacci said the trick is often to find off-market office deals that could preserve a value-add opportunity without the building getting into a possible bidding war with other competitors. He said the firm's discretionary fund helps him to be creative in making bids on properties in the competitive marketplace.
“In some cases there's a little more legwork to be done up front to make sure we're comfortable on how we're underwriting these things,” Procacci said.
Some of the more recent IP Capital buys in the past year include two office assets: 110 Tower, a 30-story, Class-A office tower in Downtown Fort Lauderdale; and Datran Center, the two-building, 450K SF-plus office complex purchased in a JV with Acre Valley Real Estate Capital, ABS Partners Real Estate and Ardent Cos.
Both, Procacci said, are solid value-add plays: With 110 Tower, IP Capital needs to lease up approximately 50K SF of top-of-the-tower spaces with "the lion's share of unobstructed water views."
With Datran, the partnership plans to invest $10M into the building and common areas. It helps that both properties have transit connectivity: Datran has a Metrorail station on the property, and 110 Tower should have a Wave Streetcar stop in front of it in the near future, he said.