August 5, 2021
The Palm Beach Post
By: Alexandra Cough
A Boca Raton-based company this week paid a blockbuster $54.2 million for three West Palm Beach office buildings, including the historic Comeau and Harvey offices buildings.
On Thursday, Morning Calm Management bought The Comeau at 319 Clematis St., which was built in 1926 and renovated in 2014; The Harvey, at 224 Datura St., built in 1926 and renovated in 2001; and the Atrium building at 324 Datura St.
Former owner David Associates paid $25.25 million for the three buildings in separate transactions during a 20-year period, meaning the company more than doubled its investment with this sale.
The sale of these office towers underscores continued investor demand for commercial property in West Palm Beach following the migration of numerous firms to Palm Beach County from the Northeast during the pandemic, said Alfred Marulli, chairman and chief executive of David Associates in West Palm Beach.
Morning Calm Management Chief Executive Mukang Cho said the $54.2 million David Associates portfolio purchase was spurred by financial services firms looking to establish a “beachhead” outside of places like New York, Greenwich, Conn., Boston and Washington.
“Our focus for Comeau, Harvey and Atrium is to not only target firms looking to establish a presence from faraway locations, but also to address the needs of the ever-expanding homegrown businesses and regionally-based firms,” Cho said in a statement.
“Downtown West Palm Beach has a lot going for it,” said Cho, who plans to move his own company to West Palm Beach from Boca Raton.
New buildings are expensive to build and take years to construct, so existing commercial space remains in hot demand by both investors and tenants, said Michael Falk, executive managing director for Colliers International in West Palm Beach.
And office tenants continue to look for space, driving investors into a real estate frenzy as they pay top prices for existing office properties, said Peter Reed, managing principal of Florida Commercial Realty Services in Jupiter.
“Just about every building in West Palm Beach that has any prominence has sold in the last 24 months, so there’s a new level of hype in values,” Reed said.
Even with the recent surge of new COVID cases in Palm Beach County, there’s been no let-up in demand for office space, said Ben Mandell, co-founder and managing partner of Miami-based Tricera Capital, an owner of two West Palm Beach office properties.
“The office leases we’re signing are a minimum of five or 10-year leases, long-term leases, which means tenants aren’t going to move here and out in a year,” Mandell said. “This is long-term growth.”
Although many companies continue to allow some employees to work from home during the pandemic, Falk said he hasn’t seen any companies giving back their office space.
How the Comeau, Harvey office deal got done
Marulli said Morning Calm approached him before the pandemic about buying his three-building West Palm Beach portfolio, but the company didn’t meet his price.
Then came the pandemic and the movement of companies to South Florida.
Morning Calm made another offer to Marulli. And this time, “they came up to the number I wanted,” he said.
The buildings already are 90% leased, Marulli said.
Marulli praised Morning Calm, which he said now controls about 250,000 square feet or about all the Class B office space downtown. “These are great people, and they’re going to add value to the assets,” Marulli said. “They wholly believe in West Palm Beach and South Florida.”
Cho said his company plans to upgrade the buildings’ interiors and create new tenant amenities, but Morning Calm will not change the exteriors of the Comeau and Harvey because of their historic designation.
Morning Calm already has a presence in West Palm Beach. In 2019, it bought 205 Datura Street, the former PNC Bank building, upgraded the property and filled it with blue-chip tenants.
These aren’t the only office buildings trading for big money in West Palm Beach and throughout the county.
In July, One Clearlake Centre, an 18-story office tower just west of downtown on Clear Lake, sold for $60.7 million to a group consisting of Tricera Capital, Palm Beach-based NDT Development, Boston-based New England Development and Boston-based Rockpoint Group. The 220,000-square-foot building at 250 S. Australian Ave. last sold for $42.3 million in 2017.
Tricera already owns 2751 S. Dixie Highway, a planned mixed-use center that houses The Palm Beach Post. The center, dubbed The Press, will feature Joseph’s Classic Market and other retail tenants. Construction is expected to commence on the retail portion this month.
Meanwhile, in Boca Raton, CP Group, formerly Crocker Partners, last month sold One Town Center for a whopping $99.5 million. The buyer is Prime US REIT, based in Singapore. CP Group bought the 10-story building at 5355 Town Center Road for $36.3 million in 2014.
Deals follow wave of Related Cos. purchases in the area
The deals come amid a wave of new investment and development by New York-based Related Cos., which is putting the finishing touches on a new office tower, 360 Rosemary, part of the mixed-use Rosemary Square. And 360 Rosemary is fully leased to a range of financial service and private equity firms, including Goldman Sachs, Point 72 and Elliott Management. Related recently bought the three existing Class A trophy office complexes in downtown West Palm Beach, too. The purchases of Phillips Point, Esperante Corporate Center and CityPlace Tower make Related the dominant landlord downtown.
Other investors flocking to Clematis Street
Over on Clematis Street, Morning Calm isn’t the only company scooping up property in and around Clematis Street.
In June, Brand Atlantic Real Estate Partners, a real estate investment and development group, together with Wheelock Street Capital, paid $20 million for 301 Clematis, the Galleria International Building and 300 Banyan Blvd., a parking lot just north of the property.
The properties, which border the main thoroughfare of Olive Avenue, are set to be transformed into a mixed-use project that will feature a new 12-story office tower on the parking lot.
“Our decision to invest in this Class A office development was supported by the strong demand for and the limited supply of the type of Class A space being sought after by the investment management firms expanding and relocating to South Florida,” Andrew Dance, Brand Atlantic’s managing partner, said in June.
Brand Atlantic plans to renovate 301 Clematis St., considered “B” class office space, into top-flight “A” class office space, Dance said. An office lobby on Olive Avenue and space for a new restaurant and shops will be added.
Is Palm Beach Lakes Boulevard, once a bustling office district, coming back?
Meanwhile, west of downtown on Palm Beach Lakes Boulevard, leasing activity has picked up as tenants scramble for space before rents rise even more.
Palm Beach Lakes Boulevard once was the heart of the city’s office district until Phillips Point and Esperante were built in the 1980s. Now with the rising rental rates at those downtown properties, office tenants once again are looking for space along Palm Beach Lakes Boulevard, Falk said.
One building leasing up is the Synovus Bank building at 1555 Palm Beach Lakes Blvd., said Falk, who handles the building’s leasing. The 15-story building is fully renovated with new air condition systems and an upgraded lobby.
The 180,000-square-foot building is about 90% occupied with only one floor available. Nearby, the Forum office buildings at 1655 and 1665 Palm Beach Lakes Blvd. also are nearly full, Falk said.
But demand for offices and office space is so great that even small office buildings are seeing a lot of action.
Broker Rebel Cook of Rebel Cook Real Estate in Jupiter said she just sold an office park on Northlake Boulevard in West Palm Beach for $11.6 million.
She was amazed at the interest in the property, which was built in the 1980s and considered a “B” complex.
“The minute I put it on the market, there were 50 phone calls,” Cook said. “And each buyer that came in had more square footage around the United States than the one before.”
“I never knew there was so much money in the world, in this country,” Cook said. “And they’re all here.”