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(This story, in slightly different form, originally appeared in the Daily Business Review.)

WEST PALM BEACH, FL-After being on the market for about a year, the 20-story Esperante office building here has sold–but the seller, New York-based Clarion ING Partners, has taken a $36 million loss. The investment fund, which purchased the property for $104 million in late 2005, sold the 246,000-square-foot building at 222 Lakeview Ave. for $67.6 million to CB Richard Ellis Investors, a Los Angeles-based global investment management firm affiliated with CB Richard Ellis. CBRE paid cash for the property.

ING, which set a South Florida record for office deals with its purchase price of $418 per square foot, listed the property for sale with DTZ Rockwood in early 2008 for $115 million. The tight credit market made it difficult to sell the property, says John Bell, managing director of DTZ, who declined further comment.

“It is a big discount,” says Neil Merin, chairman of brokerage NAI Hunter Codman. “And it’s reflective of three factors: it was bought at the height of the market when real estate values were significantly higher, it is even more vacant than it was back then and we simply happen to be in a recession.”

The sale of the Esperante tower is part of a portfolio deal that included about 30 properties across the US. CB Richard Ellis bought the entire portfolio from ING, according to sources who did not disclose the value of the portfolio. Calls to ING Clarion and CB Richard Ellis Investors were not returned before deadline.

The credit crunch that has dragged down the entire US economy has stifled dealmaking. The volume of commercial real estate deals is down dramatically and in recent months only cash deals have been closing. The sale of Esperante is one of the largest deals in the region during the last year. The previous large office transaction in Palm Beach County was the sale of a three-building portfolio by JP Morgan Chase for $60 million in mid-2008. The Centurion Tower, Northpoint Corporate Center and 1400 Centrepark Blvd., all in West Palm Beach, were sold in that deal.

Current tenants in the waterfront Esperante building include Akerman Senterfitt and PricewaterhouseCoopers. It is about 70% to 75% leased, according to brokers familiar with the property. When ING purchased the office tower in 2005 the building was about 95% leased. Since then the property has dealt with tenants downsizing and departing,including Carlton Fields, which moved to the new CityPlace Tower in West PalmBeach.

The ground floor space in the building is difficult to lease because there is not much demand for retail space in that area, says Merin. And as the economy continues to deteriorate, real estate experts don’t expect occupancy rates to improve. But the new owner, CBRE, has one advantage–the discounted purchase price will give the investors an opportunity to lower lease rates at Esperante, which range from range from $26 to $32 per square foot to make it more competitive, Merin reports. “At least that would be my strategy,” he adds.

Polyana da Costa can be reached at [email protected]

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