Miami-Dade mayor backpedals on controversial plan to overpay $133M for aging offices

Miami-Dade Mayor Daniella Levine Cava’s administration will rethink a controversial proposal to pay $133 million more than market value for aging office buildings. 

Commissioners were slated to vote on the plan on Tuesday, but instead allowed for Levine Cava’s 11th-hour request to defer the item to a future meeting, the Miami Herald reported. The pair of proposals were postponed to a yet-unscheduled meeting. 

Administrators had put forth a proposal for Miami-Dade County to buy a pair of office properties in unincorporated areas where various departments would be consolidated into South Dade and West Dade government centers. The proposed purchase price of $365 million, combined, was above the properties’ market value, as determined by county appraisers. 

In the bigger deal, Miami-Dade would have purchased the six-story Flagler Corporate Center, completed in 1974 at 9250 West Flagler Street in the Fontainebleau neighborhood, for $205 million. That’s about 46 percent more than the $110 million average value of the campus, which is about 75 percent vacant. Two appraisal firms also came up with a hypothetical figure for Flagler Corporate Center that pegs the property’s value at $191 million, assuming it’s fully leased. 

Flagler Corporate Center’s occupancy dropped after Florida Power & Light vacated most of its space, leading the property’s loan servicer to watchlist the debt this summer, according to data from Morningstar Credit. The loan still is performing with a debt service coverage ratio of 1.6 as of this summer, meaning the owner is generating enough revenue to cover mortgage payments. 

Morningstar Credit records also show First Quality Homecare leased 8,400 square feet, with a term starting on Aug. 1. Simply Healthcare signed a five-year extension for its lease that represents 17 percent of Flagler’s net rentable area. 

Flagler Corporate Center’s loan is split into two commercial mortgage-backed securities, a $36.7 million slice and a $30.6 million tranche, according to Trepp. 

Calls to publicly listed phone numbers for Abraham J. Hoffman, who is tied to Flagler Corporate Center’s ownership entity, weren’t immediately returned. 

Miami-Dade administrators also proposed for the county to buy the six-story Assurant Center, completed in 1982 at 11222 Quail Roost Drive in the South Miami Heights neighborhood, for $160 million. That price is 23 percent more than an appraiser’s average valuation of the property of $122.5 million. 

The proposals come amid a slowing office market, prompting experts and opponents to question why the county would overpay for aging buildings while values are suppressed and buyers have the upper hand in negotiations. 

Levine Cava said the county would negotiate for a better price, though she added that the initially proposed prices were a good deal for the county in its quest to find permanent suburban offices that would better serve residents. 

“We’re not giving it up,” she told the Herald. “We believe it ultimately saves money and provides better services closer to the community.”

–– Lidia Dinkova