The complex assemblage, acquisition and planned adaptive reuse of the Las Olas Square office complex in Fort Lauderdale, Florida, received a 2023 CoStar Impact Award for the Sale/Acquisition of the Year in South Florida for its transformation of an underutilized site on a main thoroughfare.
The purchase of Las Olas Square included six parcels that were utilized by SunTrust Bank for surface parking and a drive-thru facility, all of which had limited benefit or utility to the surrounding community.
Three of the lots were subject to ground leases signed in the 1950s with less than 35 years remaining, which afforded limited utility and future development potential. To compound matters, the current ground lessors were descendants of the original owners and were held by two different parties in trust. And if the land was to be developed in the future, SunTrust Bank would need to relocate its drive-thru, not an easy task given the limited amount of open space in such a highly urbanized setting.
Square2 needed to locate, contact and negotiate the purchase of the ground lease rights from the two different trusts, which took time, patience and perseverance as the parties were acutely aware of the location of the parcels and their future appeal. After nearly 18 months, the company was able to secure a purchase contract for both ground leases, clearing a path for future development with more community utility than surface parking and drive-thru facilities.
The three-story 501 Building had functional floor plate configuration, ceiling heights and a location immediately fronting Las Olas Boulevard, but its exterior was characterized by heavy, Brutalist concrete panels and very few windows. Square2’s team responded by gutting and reskinning the entire exterior, removing the heavy concrete facade and replacing it with an energy-efficient, hurricane-rated glass exterior window system. All the mechanical systems, HVAC, life safety, electrical, plumbing, restrooms, roof, security access and common areas were completely replaced. Tenants responded, and the 501 Building was 100% preleased before completion. After 18 months of construction, Square2 completed the transformation from a fully vacant, Class C building into a Class A asset that is now home to Del Frisco's Grille, Spaces and SunTrust Bank, now Truist Bank.
Square2’s team was intent on returning the larger 515 Building to the prominence it once enjoyed while shoring up its connection to Las Olas Boulevard and the surrounding community. The perception of the 17-story tower, because it was behind the 501 Building, was that it had no real entrance. To remedy this, a complete reexamination of the entire site, courtyard, ingress and accessibly was required. The Square2 team decided on the creation of The Plaza, an urban park-like setting that created a sense of place for both buildings while providing a distinctive trellised walkway that clearly delineates a much-needed pedestrian path. Amenities and common areas throughout the building have been fully remodeled with a contemporary design that is both modern and functional, including improvements to modernize and update the lobbies, elevators, restrooms and conference areas, garage, lighting and outdoor covered tenant areas complete with seating and Wi-Fi. As a direct result of the improvements and repositioning, Square2 secured numerous tenant renewals in the 515 Building with marquis tenants including Holland & Knight, Billings Cochran and Berkowitz Dick & Pollack, bringing the current occupancy to 95%.
While repositioning the 501 and 515 Buildings, Square2 principals were also navigating a parallel course that included working with the Related Group, the region’s most prolific multifamily and condominium developer, to bring a mixed-use development to the vacant parcels. In the end, Square2 secured the sale of the adjoining vacant development parcels to the Related Group, and plans and permitting are underway to add a 350-unit high-rise residential project with ground-floor retail, parking garage and Equinox gym. Construction is expected to begin later this year.
Las Olas Square has been completely re-imagined and placed in a class of its own. The modifications have resulted in a 60% increase in rents and an occupancy increase from 75%. Equally important, the property is now distinctly ingrained in the business and residential community as a result of activating the entire 500 block of Las Olas Boulevard. And by freeing and activating once dormant and underutilized land in a prime location, Las Olas Square will contribute even more to the broader community with the addition of Related Group’s mixed-use residential and retail project.
About the Deal: Steelbridge Capital, Square2 Capital and Apollo Management Holdings sold the asset to CP Group and Related Fund Management for $144.5 million. CBRE brokered the sale on behalf of the sellers. The buyers financed the acquisition in part with a $121 million loan from Alliance Bernstein. Year-one net operating income was reported at $7.92 million, resulting in a 5.5% capitalization rate.
What the Judges Said: Robert Eckstein, principal with NAI Miami, noted the "complexity of assembling the property and dealing with various parties," would ensure that the project succeeded and "have a bigger future."
"While all the nominations in this category merit mention, the sale/acquisition of Las Olas Square will have the greatest impact in stabilizing an asset and breathing new life into the property and adjoining surroundings," said Mark Troen with the University of Miami's master in real estate development and urbanism program.
"The redevelopment of this asset was a challenging undertaking on many levels. Fort Lauderdale's CBD had four newer Class A office towers within one block of Las Olas Square, and those, particularly the Main, were receiving most of the attention from Class A tenants. So to increase rents by 60% and bring occupancy from 75% to 95%, during a pandemic, and in Fort Lauderdale — which was not the beneficiary of in-migration to the extent downtown West Palm Beach and Miami were — is impressive," said Michael Feuerman, Esq., SIOR, CCIM, senior vice president at Berger Commercial Realty Corp./CORFAC International. "Moreover, the sophisticated legal work and negotiations to acquire the ground leased sites and incorporate those into additional development [is] not easy, particularly dealing with trustees and beneficiaries."
They Made It Happen: CBRE Vice Chairman Christian Lee, Vice President Sean Kelly, Senior Vice President Amy Julian, Vice President Marcos Minaya, First Vice President Andrew Chilgren and Senior Analyst Tom Rappa; Albert Kim, managing director with Apollo; Jay Caplin and Michael Manno, managing principals at Square2; and Gavin Campbell, managing principal at Steelbridge.
