Stephen Ross Becomes King of West Palm Offices

The following is an excerpt from an article by Lidia Dinkova in The Real Deal. Click here to view original link.

TRD: Stephen Ross & Esperante Corporate Center

For Stephen Ross, his latest bet on the West Palm Beach office market must feel like déjà vu.

In the aftermath of the 9/11 terrorist attacks, when buyers canceled contracts, financing froze and construction halted, Ross forged ahead despite doubt over the future of New York City real estate. His Related Companies kept building AOL Time Warner Center, now called the Deutsche Bank Center, with offices, condominiums, a Mandarin Oriental hotel and retail.

Ross, who owns the Miami Dolphins, did not know it at the time, but two decades later his newest conquest would be downtown West Palm Beach, where Related has become the biggest Class A office owner after spending more than $457 million in the past seven months.

Ross’ investment in the West Palm Beach office market mirrors his post-9/11 bet. Both times he was constructing a major project when unexpected events cast a serious shadow. Both times he moved ahead when few believed in the market enough to make a hefty play. And both times Ross invested fearlessly.

In West Palm Beach, Related was in the midst of building the 360 Rosemary Square office tower when the coronavirus pandemic struck.


“Related was really in a quandary because their new office building was under construction and Covid hit, and nobody was doing anything,” said Neil Merin, chair of NAI Merin Hunter Codman.


By last autumn, the South Florida office market had turned around, opening the door for Related to make its big play. The group bought two trophy office buildings and half of the interest in a third, while it finished and fully leased 360 Rosemary. It is about to start construction on another tower after purchasing a church site.

Yet the viability of Related’s office empire is under a microscope. While it is boldly betting on the influx of financial firms to South Florida, it remains to be seen whether tenants plan to make the region their permanent home.

To grasp Related’s confidence in the market, look at the numbers. It shelled out roughly $25 million more for the three buildings than competing buyers were willing to offer, according to Merin.

In January, Related bought the two Phillips Point office towers for $282 million. Then it bought the CityPlace Tower for $175 million, followed by the acquisition of half of the ownership interest in Esperanté Corporate Center for an undisclosed amount.

Related bid about $10 million more than the next-highest offers for Phillips Point, said Merin, whose NAI subleased the top three floors to a hedge fund prior to the building’s sale. Related also dropped $10 million over the seller’s asking price from two years ago for CityPlace. Related closed in May.

Merin, who represented an undisclosed unsuccessful bidder for Esperanté, said Related also offered the most for the interest in that tower, although he did not know exactly how much the group paid. Still, Related’s extra ante for this tower accounted for the remaining $5 million of the $25 million Merin estimated it shelled out above competitors’ bids.


“This is a case where one plus one, plus one, equals five,” Merin said. “The ability to raise rents at Phillips Point and not get undercut by Esperanté or CityPlace Tower … reinforces his ability. Ross is not going to get undercut by himself.”


He added that the occupancy rate in the three towers reached roughly 85 percent to 87 percent in June, although he expects this to increase with the financial firm influx.

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Author: Admin

Marketing Manager at NAI Merin Hunter Codman

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