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ORLANDO-Miami-based Continental Real Estate Cos. and Sterling American Property Corp. of New York took a calculated risk in paying $29.85 million in cash 2.5 years ago for Downtown’s 16-story, 275,000-sf, class B Wachovia Tower.

But the gamble has paid off in the sale of the 95%-leased building to Boston-based Cabot Investment Properties for $55.35 million–an 85% increase in the purchase price. About 20 bidders submitted offers, Continental executive vice president David Moret tells GlobeSt.com.

Sterling American, headed by New York Mets owner Fred Wilpon, and Continental invested about $3 million in interior and exterior renovations to the 21-year-old structure at 20 N. Orange Ave., in the center of the central business district.

When Continental-Sterling bought the building for $108.54 per sf, occupancy was at 89%. When the property was sold to Cabot for $201.27 per sf, occupancy at closing was 95%. Average asking rents when the partners bought the property were $19.50 to $20 per sf. Today the range is $22 to $23 per sf.

At the time Continental-Sterling acquired the building, it was on the market for only a month. Due diligence took another month and the closing period was two months. However, the anatomy of this deal began to evolve when the joint venture partners saw something in the property that other potential buyers apparently overlooked, Moret tells GlobeSt.com.

“When Wachovia Tower came to market in late 2002, nearly half of the leased space in the building–approximately 134,000 sf–was rolling over in the immediate future,” Moret says. Hughes Supply, a major tenant occupying 59,000 sf, “was definitely going to vacate,” the CREC executive tells GlobeSt.com.”The rollover risk is what frightened other buyers,” Moret says. “Because of the high rollover risk, negative market perception and a short closing period, most buyers passed on the deal.”

But Continental-Sterling was confident it could stem the looming vacancies. “We were able to renew Wachovia for about 26,000 sf, Morgan Colling and Glibert [law firm] for 45,000 sf, and backfill the Hughes Supply space before their lease even expired,” Moret says.

The seller, Hanover Real Estate Holdings of Hanover, Germany, was looking for a fast closing. Hanover paid $21.5 million or $78.18 per sf when it bought the building in 1993 from the Equitable Life Assurance Society of America.

“In order to assure a timely closing, CREC teamed with Sterling to acquire the property on an all-cash basis,” Moret says. “We recognized that Wachovia Tower enjoyed an outstanding location in Downtown Orlando, which was then in the beginning stages of a rebirth, driven by significant residential development.”

Asked to comment on the net overall return to its investors from the sale to Cabot, Moret tells GlobeSt.com, “I cannot specifically comment on returns, but given our very attractive financing, the returns were spectacular.”

Brokers Chris Lee, Charles Foschini, Ron Rogg and John Gilbert of CB Richard Ellis Inc.’s Orlando office represented the CREC/Sterling ownership group in the transaction. The buyer represented itself.

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