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(Crystal Proenza is associate editor of Real Estate Florida.)

WEST PALM BEACH, FL-Cohen Commercial Properties LLC has acquired a 66,130-square-foot office building at 324 Datura Place from Palm Beach Gardens-based Applefield Waxman for $8 million in an all-cash transaction. The New York City-based buyer holds a portfolio of about one million square feet in South Florida and additional property in eight states, 80% of which consists of shopping centers, Andrew Cohen, the firm’s founder and chairman, tells GlobeSt.com. Cohen Commercial will relocate its local property management office into the building, bring it to 100% occupancy.

Applefield Waxman decided to dispose of the property, which was built in 1950 with a major renovation in 2001, in line with its strategy of taking underperforming properties and turning them around, says John Bell, managing director of Miami-based DTZ Rockwood. “They had achieved very high occupancy at the property and it was time to harvest profits for their investor groups,” says Bell, who handled the transaction on behalf of Applefield.

Cohen says his firm was attracted to the property because of its “irreplaceable location” at the center of the legal and government district, one block away from the new government City Center under construction in Downtown West Palm Beach. Abundant parking availability, proximity to the entertainment district of Clematis Street and a solid tenant base also drew Cohen to the property. The building’s main tenant, Healthcare District of Palm Beach County, leases over 40,000 square feet in the building. Small law firms occupy the rest of the space.

“We have a competitive advantage because we acquired the property well below replacement cost and so we can maintain ourselves as a lower-cost alternative for tenants in the area,” reveals Cohen, noting that the building’s rents run 75% of the market average. At approximately $121 per square foot, the sale is also below those deals that took place at the end of 2008, according to Jay Caplin, capital markets broker with Cushman & Wakefield in Miami.

“The last couple of properties that sold in this area averaged $150 to $175 per square foot,” Caplin tells GlobeSt.com. “Those numbers are reflective of what properties have traded for in West Palm Beach, which is not a high growth market from a construction stance. The market has been flat in size for the last 10 to 15 years.”

The local office market has slipped like most in South Florida, he explains, but is not expected to decline precipitately in 2009. “This is a region that, unlike Miami, does not have a large international influence. The market is driven by the domestic population in the area.”

Downtown West Palm Beach reached an average rental rate high of $42 per square foot in 2008, and that number is expected to stabilize this year, based on Cushman research. Vacancy in the CBD was at 20.1% in the fourth quarter, with year-to-date absorption of 23,051 square feet.

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