Feldman Equities and partners plan to spend up to $10 million to enhance their newest acquisition in downtown Sarasota.
Feldman Equities LLC and partner Tower Realty Partners plan to apply many of the lessons they’ve learned as one of the most active office landlords in Tampa and St. Petersburg to their new venture in downtown Sarasota.
In the wake of their roughly $50 million acquisition of the Sarasota City Center office building earlier this month, the pair say they will embark on a roughly $10 million capital improvement plan at the 13-story building.
Improvements will be made to the lobby’s floor by replacing carpet with marble, enhancing common areas throughout, adding to an existing conference center within the 247,947-square-foot building, upgrading the in-house fitness center and the garage.
“Building lobbies need to look good now and 20 years from now,” says Feldman Equities CEO Larry Feldman. “All the great buildings in New York have that timeless element to them, so that’s what we’ll be striving for in Sarasota.
“The most transformative impact, in terms of what a tenant or visitor sees, is when they’re driving into the garage,” Feldman adds. “That’s where we can have the most impact for tenants.”
To fund the acquisition and the planned improvements, the pair raised about $10 million in equity in a period of less than six hours through online syndicator Equity Street and obtained a loan from NXT Capital.
The new ownership team intends to enhance the 1819 Main St. building’s conference facilities with more rooms and high-tech equipment, which should provide the property with a “big advantage,” Feldman says.
Additionally, the pair plan to partially build out available spaces with modern finishes and alike, so prospective tenants can better see the space they will be occupying. Most of the renovations should be completed by the first quarter of next year.
Feldman says leasing agent Ian Black Real Estate will be “aggressive” on rental rates. Previously, space has rented between $27 and $29 per square foot, gross.
Sarasota City Center is roughly 80% occupied by Wells Fargo, Boar’s Head Provisions, Merrill Lynch, UBS and others.
Feldman says the new owners were attracted to Sarasota City Center because the building was constructed from virtually the same architectural plans as the City Center in St. Petersburg, which the duo purchased for $16.5 million in 2012. At the time, it was 44% committed. Feldman and Tower Realty boosted occupancy to more than 94% in two years.
“For a downtown building the design is ideal because it means there’s a lot of glass offices,” Feldman says.
Office analysts say the purchase represents confidence in the Sarasota market, even though the city’s inventory has struggled with macroeconomic and workplace trends in recent years.
“It demonstrates confidence in the future,” says John Harshman, president of Sarasota commercial real estate brokerage Harshman & Co. Inc. “But while the Sarasota office market has gotten better, it’s still struggled with the way business is conducted today and with downsizing by banks and other traditional users. It’s why the office availability rate remains above 15% and sites that could be for office space are being developed as residential.”
Still, Feldman says he encouraged by the dynamics of the Sarasota market.
“People have traditionally been afraid to buy into a tertiary market like Sarasota because of a perceived lack of exit strategy,” he says. “But online investors today are looking for yield. They aren’t so interested in institutional buyers down the road.
“And with the growth in population and service-oriented jobs in Sarasota, we’re excited about this building.”
Commercial real estate brokerage firm JLL’s Miami office represented seller The Dilweg Cos. in the transaction and arranged for acquisition financing for Feldman and partners.
North Carolina-based Dilweg, which acquired Sarasota City Center in April 2017 for $36.5 million as part of a larger office portfolio involving nearly a dozen properties in Tampa and Lakewood Ranch, will maintain Florida operations in Sarasota.
“We’re happy with the transaction,” says Elizabeth Madzula, a Dilweg managing director based in Sarasota. “It gives the new investor a potential upside to take the building to the next level, and provides us the opportunity for additional acquisitions in the Tampa Bay area.”
Most recently, last April Dilweg spent $52 million to buy the four-building Concourse Center complex in the Westshore area of Tampa, boosting its Florida portfolio to 1.2 million square feet.
During its ownership of the 30-year-old Sarasota City Center, Dilweg spent $5 million on improvements there.
By contrast, Feldman and partners control about four million square feet of office space in the region, including Castille at Carillon, First Central Tower and Morgan Stanley Tower in St. Petersburg and the Park Tower and Wells Fargo Center in downtown Tampa.