110 Tower is a 394,830 square foot, 30-story office building built in 1988 located in the Fort Lauderdale, Florida CBD. 110 Tower was acquired in 2000 as a sale lease back from AutoNation, Inc., the largest owner of new vehicle dealerships. The building was successfully renovated between 2010 and 2013 – obtaining a GOLD LEED EB certification and winning numerous awards. 110 Tower was sold in October 2016 generating an estimated annual IRR before taxes of 9.2% for the Limited Partners.
- Acquire a Class A core office property at below market value with multiple exit strategy approaches.
- Provide solid cash flow from a 10-year master lease. If AutoNation subsequently terminates, renovate the building to GOLD LEED EB certification and re-tenant the property to a multi-tenant building.
Initial Investment Strategy
- With the acquisition, AutoNation signed a 10 year below market triple-net (NNN) master lease for the entire building expiring in September 2010 with an option to extend for 10 years.
- The acquisition price of $53,350,000 was based on an agreed rental rate and the then current market cap rate. As such, the building was acquired at a below market value.
- AutoNation subleased 45% of the building to third party tenants at market rates. This subtenant revenue covered most of the master lease rent, allowing AutoNation to occupy the building with a very low operating cost.
- The terms of the NNN master lease stipulated that AutoNation would revert to 95% of market rental rates in 2010 when their lease was up for renewal at which time the partnership planned to sell the asset. Alternatively, if AutoNation elected to not renew, the General Partner planned major renovations and would re-tenant the building at higher market rents.
Repositioning and Re-tenanting Strategy
- In 2008, AutoNation elected not to renew the master lease.
- In 2009, approximately 18 months prior to lease expiration, the master lease was converted to a space lease allowing the General Partner to control the leasing and management of the building.
- The lease conversion provided $2,270,986 for deferred maintenance and a lease termination fee of $6,114,196 from AutoNation.
- All 3rd party subleases were renegotiated and converted to space leases prior to their 2010 termination, keeping the building occupancy at 45%.
- In 2009, the Limited Partners approved the business plan to re-tenant and renovate 110 Tower to GOLD LEED EB certification and committed an additional $18,000,000 of equity to fund the business plan.
- Acquired the Class A building based on a below-market NNN master lease. Generated nine years of solid cash flow and made distributions in line with the original proforma.
- Secured additional equity to transform the asset into a highly awarded GOLD LEED EB certified building attracting major law firms and corporate tenants.
- Successfully refinanced the property during the last financial crisis at approximately 30% LTV further mitigating risk.
- Directed the design of the renovated common areas and supervised major construction and renovation work.
- Designed a strategic lease up program from bottom to top reserving the upper contiguous floors for higher rent paying tenants.
- Monitored property operations to keep operating expenses competitive in the downtown market.
Active community involvement and sponsorship to improve the name recognition and to support the downtown revitalization programs.
- • This approach resulted in a proven sound investment strategy and execution during two major economic downturns.
• 110 Tower sold to an institutional investment fund in 2016.
110 TOWER IS A 394,830 SQUARE FOOT, 30-STORY OFFICE BUILDING BUILT IN 1988 LOCATED IN THE FORT LAUDERDALE, FLORIDA CBD.
|PROPERTY NAME:||110 Tower|
|INVESTMENT TYPE:||Core / Core Plus|
|TARGET LP IRR:||8%-10%|
|MARKET:||Ft. Lauderdale, Florida|
|SIZE:||394,830 Square Feet – 30 stories|
|CERTIFICATION:||GOLD LEED EB|
- Energy Star certification
- GOLD LEED EB certification
- U.S. Green Building Council’s 2011 South Florida Outstanding Building of the Year
- 2011 Gala Verde Award for LEED Existing Buildings presented by the U.S. Green Building Council’s South Florida Chapter
- 110 Tower Day proclaimed by the City of Fort Lauderdale
- 2012 Regional TOBY Awards “Renovated Building of the Year”
- BOMA 360 Performance Building certification
- Global Real Estate Sustainability Benchmark (GRESB) Survey overall score of 54