KBS Sells South Florida Office Asset for $72M

Financial Center at the Gardens. Image courtesy of KBS

KBS has sold Financial Center at the Gardens, a Class A office property in Palm Beach Gardens, Fla., to New York Life Insurance Co. The 10-story, 188,950-square-foot office building sold for $71.8 million.

KBS had purchased the property in 2015 in a joint venture with a sovereign wealth fund. That price was $63.1 million, according to Yardi Matrix, which further indicated that the property hasn’t yet regained its peak dollar value, having sold in 2006 for $77.9 million.

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The building at 3801 PGA Blvd. was completed in 1997, and its current tenants include Morgan Stanley, UBS, Bankrate and JPMorgan Chase, according to information provided to Commercial Property Executive by Yardi Matrix. In a prepared statement, Allen Aldridge, KBS senior vice president & asset manager of the property, stated that Financial Center at the Gardens is nearly fully leased.

Accessible via Interstate 95 and the Florida Turnpike, the property is adjacent to Downtown at the Gardens, a lifestyle center that includes numerous restaurants, retailers and entertainment venues, and is within walking distance of the 1.4 million-square-foot Gardens Mall. In addition, tenants will have easy access to Orlando with the pending Tri-Rail station to be sited near the Florida East Coast tracks at PGA Boulevard.

Over the past few years, KBS reportedly spent more than $1 million to renovate the property, including a main lobby renovation with a new lounge and wine bar, as well as upgrades to the café, restrooms, corridors and elevators. The list of amenities also includes a putting green.

Mike Davis, Dominic Montazemi, Rick Brugge and Scott O’Donnell of Cushman & Wakefield represented KBS in the latest sale.

Steady for now, big changes ahead

During the second quarter, the overall vacancy rate for office space in Palm Beach County was 13.4 percent, or near historic lows and down 20 basis points over 12 months prior, according to a recent Cushman & Wakefield report. Year-to-date net absorption, however, was a negative 36,000 square feet, on an inventory of 23.5 million square feet.

Asking rents rose 2.2 percent year-over-year to $37.59. Looking ahead, however, the market could feel pressure from two projects slated for completion in 2021 and bringing nearly half a million square feet to the West Palm Beach’s central business district.

On the other side of the coin, completion of the new Virgin/Brightline train station in roughly the same time frame could entice more tenants to Palm Beach County, also per Cushman & Wakefield.