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Commercial Real Estate
Business Observer Friday, Feb. 1, 2019 4 months ago

Sarasota Memorial's downtown office purchase will generate greater efficiency for the hospital

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Deal for vacant offices in downtown Sarasota will also result in more collaboration
by: Kevin McQuaid Commercial Real Estate Editor

The Williams Parker law firm took a hard look at it.

Call center operator Alorica toured it for a potential move.

BLVD condo tower and Concession developer Kevin Daves briefly considered converting the building to a hotel.

More than one potential buyer was attracted to entitlements that would have allowed up to 190 apartments.

Several interested investors suggested razing the building and rebuilding on the 3.8-acre site.

But ultimately, developer Wayne Ruben’s WMR Consulting LLC linked the three-story office building at 1741 Main St. in downtown Sarasota with Sarasota Memorial Hospital, which last week finalized a $10.7 million purchase.

The deal, which took WMR Consulting nearly a year to complete, will consolidate and shift 300 hospital workers to downtown Sarasota this summer in the largest corporate relocation to the city in more than a decade.

Just as importantly for Sarasota Memorial, the move to the 72,000-square-foot building will free up critically needed clinical space on the hospital’s main campus, on U.S. 41 in the city.

“I was always attracted to 1741 Main’s beautiful architecture, its futuristic design,” Ruben says. “It’s a trophy-type building.”

But Ruben, too, went through a series of potential re-incarnations before the hospital’s interest gelled.

“We explored multiple options,” he says. “We thought about an entertainment use or some ground-floor retail to take advantage of the building’s glass façade. We tried to get a department store interested, but because of the changes ongoing in that industry, we couldn’t quite pull it together.

“The site has apartment entitlements, so we looked at that, too, but the building’s chiller system and the lack of balconies derailed that idea.”

Through all the machinations, Ruben kept coming back to using the building, which was developed in the early 2000s by the New York Times Co. as a hub for its then-subsidiary the Herald-Tribune Media Group, for office space.

Several tenants were interested, including a number of Sarasota law firms, but they required only about 10,000 square feet — a fraction of the rentable area.

Ruben anguished over how to subdivide the space, and ultimately decided it would be too expensive and time intensive unless it was absolutely necessary.

“It was developed as a single-tenant use building,” Ruben says. “The prospect of subdividing it proved to be a bigger challenge than we initially thought.”

The Herald-Tribune, the building’s former anchor tenant, had moved in late 2016 to an adjacent building after failing to come to renewal terms with building landlord — and former company co-owner — Stephens Capital, of Little Rock, Ark.

Stephens then retained commercial real estate brokerage JLL, in Tampa, and Ian Black Real Estate of Sarasota to market the space for lease of sale.

The building came on the market for $18.1 million — roughly 50% of the cost to replace the project.

Shortly after Ruben put the building under contract in mid-2018, Sarasota Memorial President and CEO David Verinder mentioned to him that the hospital — for whom Ruben had done real estate consulting work for several years — was considering constructing a new 60,000-square-foot building on Gantt Road in Sarasota County to house non-clinical workers.

In recent years, clinical uses such as cardiology and radiology had grown exponentially and are now cramped into spaces on the hospital’s campus.

With a new building on Gantt, Verinder would be able to ease overcrowding and generate increased efficiency for non-clinical offices.

“I said, ‘David, wait a minute,” Ruben says.

The pair agreed that occupying 1741 Main St., just 1.4 miles away from the hospital’s main campus, could create greater efficiencies than a new building on Gantt at more than five miles away — at significantly less cost.

In mid-October, Sarasota Memorial’s board voted unanimously to acquire the Main Street property and develop a new 100-space parking deck on site at a total cost of $17.83 million.

Kim Savage, a hospital spokeswoman, says the board recently hired Bradenton’s A.D. Morgan Corp. to design and build the parking structure.

It will be constructed over the next three months, even as minor renovations are completed within the building.

“We’ll be able to consolidate and centralize a number of related services, with the goal that they’ll be able to work more collaboratively and efficiently,” Savage says.

For Sarasota’s office market, the closing removes a significant block of space that had skewed vacancy rates higher by several percentage points.

Steve Horn, an Ian Black partner, says marketing the space was difficult because of Sarasota’s relative lack of prospective large tenants.

“Sarasota doesn’t have an abundance of 72,000-square-foot users,” says Horn, who negotiated on behalf of Stephens with JLL Tampa Market Leader Brent Miller.

“Theoretically, a decade or more ago this space would have been snapped up by a bank as a regional headquarters, but with all the changes in that industry, that’s no longer an option.

“The tenants that could fill the space were interested in roughly 30,000 square feet, and they typically had a predominance of private offices, which didn’t work well because the building was developed for a single user with a large, open floor plate without individual offices,” Horn says. “Fortunately, the hospital departments being consolidated are also that type of user, and it’ll be such a boon for downtown to have that many workers coming in.”

Ruben agrees.

“Such a great ending to such a long saga,” he says. “And I think it’ll be a great outcome, a big help, for that entire section of downtown.”

 

 

 

 

 

 

 

 

 

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