AEW Capital Management just sold a Class A office tower in West Palm Beach to a joint venture between a Dallas-based private equity real estate manager and CREC for $42.3 million, The Real Deal has learned.
Velocis and CREC acquired the 218,500-square-foot, One Clearlake Centre “at a significant discount to replacement cost,” Mike Lewis, principal of the Texas firm, said in a press release. The buyers financed the sale with a floating rate, five-year $34.84 million mortgage from Mesa West Capital, a debt fund with offices in Los Angeles and New York.
The 18-story building, at 250 South Australian Avenue, is only 47 percent leased. The property includes a five-story, 662-space parking garage. It traded for nearly $195 per square foot.
“The vacancy is really attributable not to market factors, but rather the prior ownership’s investment strategy … The prior landlord had a philosophy to not break up spaces,” Carol Brooks, president and co-founder of CREC, told TRD. “There are 7 full floors that have not been multi-tenanted. It creates a really extraordinary opportunity for us. There’s not a lot of product out there with these outsized opportunistic returns.”
The joint venture plans to start a multimillion-dollar capital improvement program to update the building, which was built in 1986. The new owners will also create a modern tenant lounge and conference center and spec office suites. CREC will handle leasing and management.
Current rents are in the low $30s per square foot, gross, said Andrew Remick, CREC vice president of acquisitions. The firm aims to push rents up about $5 per square foot. Class A trophy buildings that are more than 95 percent leased sign deals between $60 per square foot and $70 per square foot, he said.
Current tenants include Rosenbaum Mollengarden PLLC, BB&T, Keyes, Prudential, Robert Half International and Northwestern Mutual.
A majority of the leasing in downtown West Palm is by smaller tenants, CBRE’s José Lobón said.
Lobón and Chris Lee represented the seller, and Amy Julian arranged the financing. CBRE began marketing the property without an asking price a little more than three months ago. Lobón said the value-add opportunity brought in “a plethora of offers.”
Property records show AEW affiliate One Clearlake Centre LLC paid $38.6 million for the building in 2005. It’s fronts the Clear Lake on the west side of the city’s central business district. The glass office tower is also near All Aboard Florida’s Brightline station and the Tri-Rail station.
Velocis, created in 2011, owns 24 properties in Texas, Colorado, Georgia, Florida, Arizona, Virginia and North Carolina.
AEW manages investments primarily on behalf of institutional and private investors with about $64 billion worth of assets around the world, including properties in South Florida, according to its website.