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Every town has its unloved commercial properties when recessions turn them into empty shells.
Royal Palm Square in Fort Myers was one of those aging centers that fell into disrepair during the recession as tenants fled. Half the remaining tenants weren't paying rent. Squatters moved into one empty shop, arranging a cozy living room with a television and a clothes-drying machine connected to a vent. In one case, one of the tenants had died and a former employee was running a business there.
Making matters worse, the previous owner and the bank had both failed during the recession, leaving the Federal Deposit Insurance Corp. in charge.
But Steve Goldfarb, a residential developer, thought Royal Palm Square had potential. The center had come to Goldfarb's attention because it has the same name as his residential development company, Fort Lauderdale-based Royal Palm Cos. “If the name wasn't Royal Palm, I wonder if we would have done it,” Goldfarb chuckles now.
Today, Royal Palm Square's 144,000 square feet of commercial space is fully leased, thanks to a turnaround plan that transformed it into an office complex. “We have about 700 people who work in this center,” Goldfarb says.
Goldfarb declines to say how much his company paid for the note at the FDIC auction in 2013. “We thought it was a deal,” he says.
Still, Goldfarb knew that it would take lots of money and hard work to change things around. The foreclosure proceedings took a year, and the company so far has spent $1.3 million in improvements. “The real estate taxes hadn't been paid for three years,” he says. “We had the leases, but not much else.”
But Goldfarb figured the center's location on Colonial Boulevard near the bridge to Cape Coral could be a draw, especially as the recovery was underway. It's also the well-known home of the Broadway Palm Dinner Theater.
What's more, Goldfarb says he could reconfigure the vast amount of empty space to suit office users. “Sometimes there are properties that are just ugly,” he says. “This one was easier to work with.”
Initially, Royal Palm attracted tenants with attractive rental rates of $8 to $12 a square foot, and he's since been able to raise those to as much as $19 a square foot. He simplified the leases so tenants pay a gross rent that includes common-area maintenance.
Goldfarb attracted a mix of users with an emphasis on office space, but with some retail and dining, too. “You made it possible for a coffee shop to survive,” he explains.
Plus, because it was originally a shopping center, Royal Palm has 698 parking spaces, making it attractive for office users. “We have enormous parking,” Goldfarb says.
Still, Goldfarb is sensitive to the current state of economic uncertainty. “The market is very efficient when it comes to rents,” he says. “This recovery is very, very tenuous.”
But Goldfarb has a long-term vision for Royal Palm Square that may one day include a residential development in the next real estate cycle, which he says could be as distant as a decade away. While he doesn't have a current plan, Goldfarb says the site could accommodate as many as 500 to 600 apartments. “The city would love us to redevelop it,” Goldfarb says. “That is one of the upsides.”
Follow Jean Gruss on Twitter @JeanGruss
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