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The priciest Miami office tower to trade hands in the past two years is a bit of a fixer-upper.
As of March, the 810,000-square-foot Citigroup Center in Downtown Miami was only 62 percent leased. New owner Monarch Alternative Capital, which shelled out $300 million for the property last month, is planning to invest another $37 million to boost occupancy to 95 percent.
The 34-story tower “suffered from mismanagement under the prior ownership,” according to a rating report from DBRS Morningstar. The four previous owners, which included Townsend Group and Crocker Partners, “reportedly couldn’t come to an agreement on a cohesive leasing, capital improvement, or sales strategy.”
Monarch’s acquisition was financed with a $214 million CMBS loan from Ladder Capital. Documents associated with the securitization provide a closer look at the property’s finances and rent roll.
The property at 201 South Biscayne Boulevard was leased to 38 office and retail tenants, with average gross rent per square foot of just over $50 a year.
The largest tenant, and the building’s namesake, is Citigroup with 124,000 square feet and accounting for more than a quarter of the current rent roll. As an investment-grade tenant with a lease extending through 2030, the bank provides “a baseline level of cash flow stability for the property,” according to DBRS. The firm pays $55 gross rent per square foot.
The second largest tenant is law firm Shook Hardy & Bacon, which is headquartered in Kansas City and has major offices in Miami, Los Angeles, Atlanta and Boston. The third largest tenant, Vitas Healthcare, is the “leading provider” of end-of-life care in the U.S.
The property also includes an adjacent nine-story parking garage, with 918 parking spaces.
Monarch’s business plan for Citigroup Center envisions $11 million in capital improvements and $26 million in leasing costs “to enhance the overall competitiveness of the subject property.” The CMBS loan permits up to $37 million in future funding to cover these costs. The three-year floating-rate loan has two one-year extension options.
Founded in 2002 with offices in London and New York, private investment firm Monarch specializes in distressed debt and bankrupt companies. During the pandemic, the firm also helped take restaurant chain Chuck E. Cheese out of bankruptcy and played a major role in the liquidation of the U.S. hotel portfolio of Eagle Hospitality Trust, a Singaporean REIT.
The new ownership group also includes Tourmaline Capital Partners, a real estate investment firm founded this year by three former Rubenstein Partners executives.
As The Real Deal reported in May, one of the former owners, Crocker Partners (now CP Group), has retained an ownership stake in Citigroup Center. According to DBRS, that stake is less than 1 percent, although Crocker continues to manage the property.
"As the largest office landlord in downtown Miami, we are proud to have a continued stake in Citigroup Center with a partner who shares in our vision for the asset,” said CP Group managing partner Angelo Bianco. “We look forward to a prosperous relationship with Monarch."