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Office Condos Return To Miami's Urban Core

October 14, 2014

A 1952-vintage office building in downtown Miami designed by revered modernist architect Morris Lapidus is going office condo.

One Flagler, a 15-story building at 14 NE First Ave., is well along in some $10 million in upgrades, mostly to the interior of the structure previously known as the Ainsley building and the Foremost building.

Miami developer Harvey Hernandez’s Newgard Development formed a joint venture with Midgard Management, the building’s owner and manager, to convert the iconic building to office condos.

Over the years, the building — an example of MiMo, or Miami Modern, architecture — has had an array of tenants from the Cuban consulate and the Miami Athletic Club to the Israel Discount Bank and various federal offices. It currently houses a branch of Continental Bank and various law firms and investment firms, among others.

“The building needed to be renovated, and we said: ‘How can we renovate this building but at the same time make some business sense?’” said Hernandez, who describes his role as “the development partner doing the conversion for the venture.”

“The upgrades we have been making are very systemic, but we have been paying attention to details and leaving the most historic features,” said James Goldstein, CEO of Midgard.

Midgard acquired the property in 2010, by acquiring a defaulted note and negotiating a turnover. The company expects to continue managing the building once it goes condo.

“We love the building,” Goldstein said. The condo conversion will help preserve the building “for future generations,” he added.

Likely buyers are investors and businesses that plan to be owner-occupants, Hernandez said.

Miami’s downtown office vacancy rate has been declining from the yawning levels hit when the Great Recession collided with the delivery of a spate of new office space in the Brickell area. The office vacancy rate there is still about 20 percent — quite high by historic standards. Hernandez says he isn’t fazed by the volume of empty space in the area.

Hernandez, whose company has been focused on new residential condo construction, said he thinks investors will jump at the opportunity to buy commercial office space in a downtown building designed by a famous architect. Investors in many cases would be able to acquire space already occupied by a tenant and could expect a return of “in excess of 4.5 percent,” he said.

The 62-year-old building is a contributing historic structure in a historic section of downtown, he said. “We’re going through the process of making it designated historic.” Lapidus is best known for the Fontainebleau and Eden Roc resort hotels in Miami Beach.

Hernandez said the space in the building currently rents for $26 to $28 a square foot, compared to $38 to $40 a square foot in the Brickell area.

Plans call for offering 14 floors of office condos, totaling 143,000 square feet of space.

Renovations have been under way for months, including upgrades to the air-conditioning, plumbing, electrical and fire systems, according to the developer.

“We’re going to start demolishing the lobby in the next few weeks and build the new lobby,” Hernandez said.

Newgard’s projects include Brickell House, a tower that is expected to be delivered to buyers in the next few weeks, and Centro, a loft project with no on-site parking garage is going up at 151 SE First Street, not far from One Flagler.

Hernandez said he thinks the office condo trend is poised for a comeback.

In August, The Solution Group said its development affiliate, Ofizzina 1200, bought a site at 1200 Ponce de Leon Blvd. in Coral Gables with plans to build a new office condominium. Construction is expected to start in the fall of 2015. The Gables’ project is slated to have 47-units in a Mediterranean-style building with 97,000 square feet of Class A office space, plus space for retail and parking.

 

Source:  GlobeSt.

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