Future of Omni Center on the line: bank markets non-performing loan
By Yudislaidy Fernandez
The $160.8 million non-performing loan of the struggling 14-acre Omni Center & Hilton Downtown property is up for grabs and interested buyers have until today (12/9) to submit offers.
Realty firm Jones Lang LaSalle is marketing the commercial notes backed by the 1.5 million-square-foot property on Biscayne Boulevard, consisting of office, retail and a Hilton-branded hotel, on behalf of Capmark Bank.
Another recent commercial sale was that of Mayfair in the Grove, a retail and office complex in Coconut Grove, which sold for $37.8 million in late September.
In the case of the Omni Center, the bank is opting to take the debt off its books, said Jonathan Kingsley, managing director and executive vice president of commercial advisory firm Grubb & Ellis, who's not involved in the sale.
"What happens is that banks and owners have hanged on as long as they could," he said. "The bank never wants to take the property back, they want to hold for as long as they can... but it sort of gets to a point of no return."
The 1970s-built Omni complex is owned by New York City-based realty firm Argent Ventures, which has spent $66 million since 2008 to renovate the property. About $26 million was invested in the hotel and $40 million in the office component, according to Jones Lang's Web site, which details the listing.
The listing does not include the property's 2,700-space parking garage.
The non-performing loan, with a balance of $160.8 million as of September, was issued in May 2007 and is coming due this coming June.
The complex's office component is 38% leased.
It consists of 1501 Biscayne Blvd., which houses the Miami International University of Art & Design, an art school stretching over 100,000 square feet. This building has 250,000 square feet of vacant shell space, including a lease option of 28,000 square feet for the arts school, according to Jones Lang's Web site.
It also includes 1645 Biscayne Blvd., with two federal government tenants and 334,000 square feet of vacant space.
The existing tenants are the General Services Administration Passport Control, which occupies 33,000 square feet, and Diplomatic Security Service with 28,000 square feet. The building also has 17,000 square feet of empty street-level retail.
The Greater Miami Chamber of Commerce has long had its offices in the complex.
Office vacancies in Miami's urban core have been on the rise, as some tenants downsize and few new ones enter the market.
In downtown, the overall office vacancy rate is 24.8% and in Brickell 22.9%, according to Jones Lang's third quarter office report.
The non-performing debt is also backed by the 500,000-square-foot Hilton Downtown hotel with 527 guest rooms, including 45 suites and 34,500 square feet of meeting rooms.
Jones Lang, the firm marketing the listing, didn't return calls.
Despite the Omni Center's office and retail vacancies, Mr. Kingsley said it should garner interest from international and domestic investor groups looking for attractive real estate opportunities in Miami.
There are "offshore groups looking to make an "investment' here, quote-unquote, on the cheap," he said. "Could be Venezuelan money... The mindset from some of those challenged countries is to put money here because it is safer."
He also listed as prospective buyers German and Spanish groups eyeing attractively-priced properties that have potential, adding that the site's location is a big draw.
The surrounding Omni neighborhood is experiencing a boom, with a growing condo community, new restaurants popping up and popular venues like the Adrienne Arsht Center for the Performing Arts and the AmericanAirlines Arena, home of the Miami Heat basketball team. Nearby, construction is also set to begin on the planned Museum Park at Bicentennial Park.
Local groups might also make offers because while the property has a low cash flow today, Mr. Kingsley said, it could be worth more in the future.
Argent Ventures, the owner, had big plans for the site, but the collapse of the real estate market, coupled with the financial freeze, put the brakes on new development.
Formerly known as the Omni International Mall with former anchor tenants Jordan Marsh, later Burdines, and JCPenney and an original roster of luxury retail outlets, much of the property's retail space was later converted into offices.
Argent had long-term plans to develop 5 million square feet of new buildings on the site as part of a $1 billion phased development that would extent 10 to 15 years.
This expansion would have included a six-tower project totaling 5,766 condos that got the green light from the City of Miami in 2007.
But today that's not in the picture, and the sale is imminent.
As the bank and listing agent review buyers' offers, Mr. Kingsley said they are likely to focus on prices offered, the buyers' credibility and experience in that asset type, and how they plan to pay.
With financing still scarce and many banks preferring to sell for cash, he said, those making all-cash offers are to have an advantage.
"The bank could offer some financing," he said. "But more often than not, the lending community wants to get this [non-performing loan] off their books and move on."
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