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Miami Tower in Gloria Estefan Video Sells in Bet on a Revival

The famous skyscraper is purchased by CP Group for $163.5 million as part of its ambition to update outdated office buildings and turn them back into viable ventures.

CP Group, which has created a $4 billion portfolio on the contrarian gamble that there is money to be earned buying damaged trophy real estate even in an era of distant work, inflation, and a probable recession, now owns those late-20th-century urban office skyscrapers.

The company has bought around $2.25 billion worth of assets in Florida, Georgia, North Carolina, Texas, and Colorado since the epidemic emptied offices in early 2020.

I believe that our team is the most active in the country, said Brett Reese, who oversees acquisitions and investments at the Boca Raton, Florida-based landlord. We’re seeing unbelievable deals out there. And we’re capitalizing on them.

Miami Tower, a 47-floor icon from the “Miami Vice” and MTV era that is around 30% unoccupied, is CP’s most recent acquisition. It was designed by I.M. Pei. According to a source with knowledge of the transaction, the cost was $163.5 million. According to Miami-Dade County property records, the building where Estefan recorded her video was last sold in 2016 for $220 million.

Through May, when commercial real estate prices gained 13.2% overall, US office values were 6 percent below their pre-Covid-19 levels, according to Green Street. Office transactions nationally decreased to $5.1 billion in May, down 34% from a year earlier and 56% below the five-year pre-pandemic average for the month, according to MSCI Real Assets, another indication of market deterioration.

According to a recent assessment by experts at Columbia and New York universities, office values may decrease by as much as 28% over the long term, or $500 billion, due to declining demand and the requirement for capital renovations to fulfill tenant expectations. The structures that house cubicle farms will be hardest damaged.

Other developers and investors are also looking for chances to buy aged offices at a bargain and remodel them. With the purchase of the South Temple Tower in Salt Lake City, Houston-based Hines announced this month that it had completed the first-ever office-to-residential conversion. The company is also in charge of a $2.5 billion renovation of the historic old Pacific Gas & Electric Co. headquarters in San Francisco, which will include new office space and housing.

According to Ryan Clutter, a senior managing director at commercial real estate firm Jones Lang LaSalle Inc., purchasers of buildings more than 20 years old must lavishly invest in outdoor space, entertainment, dining, and other facilities to entice employees back to their workstations.

To make something competitive in today’s environment is going to take a lot of capital, he said. Many owners aren’t able to do that.

The goal of CP’s strategy is to identify properties in prime locations, modernize them with new restaurants, lobbies, and outdoor areas, and resell them for a profit within five years. The company has sold or recapitalized eight properties since the first quarter of 2020 for a total of around $875 million.

One instance is the $320 million valuation of the majority interest sold last year in the Boca Raton Innovation Campus, an increase from the $170 million CP paid for it in 2018. In just three years, CP turned the building where International Business Machines Corp. created the first personal computer into a tech and life sciences hub, increasing occupancy from 66% to 90%.

We take this stale trophy, restore its luster and you get an attractive and exciting place for people to go to work, Reese said. Ultimately, that is what is going to drive success here.

As the cost of financing rises, fewer other buyers have the ability or stomach to execute a transaction, thus the company is receiving more requests from possible sellers. The Miami Tower is one of the almost 17 million square feet (1.6 million square meters) of offices that CP currently owns. For an additional 1 million square feet of offices, negotiations are now underway.

We’re one of the very few that is able to close on deals today, Reese said.

According to property records, the company has recently collaborated on deals with wealthy partners like Rialto Capital Management, Farallon Capital Partners, Related Cos., and DRA Advisors. According to Reese, investors like those anticipate double-digit annualized returns.

CP focuses on purchasing in booming metro regions’ major business districts. It acquired Denver’s Granite Tower in September for $203.4 million. The 1983-built, 31-story building was 77% occupied at the time of the deal. The company paid $380 million in February to acquire the 55-story Bank of America Plaza, Atlanta’s tallest structure and a 1992 construction. It spent $144.8 million on Atlanta’s One CNN Center last year.

According to Reese, the company has grown to become Miami’s largest office landlord. The market has benefited from an inflow of tenants from the finance sector, earning it the nickname “Wall Street South.”

Since 1987, Miami Tower has become a nightly landmark with illumination. It is desirable for tenants whose employees use public transportation because it has a Metromover station. The goal of CP’s plan for the downtown structure is to provide a more affordable alternative to the rent-inflating Brickell Avenue neighborhood nearby.

They’re doing a deal over there at $120 a square foot, Reese said.  In downtown today, we’re closer to $50.

According to Reese, now is a good moment to renovate buildings with the purpose of bringing them back online when a recovery is starting, in case a recession comes and the office market slows down more.

It sets up a massive opportunity, he said. 

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