Miami's 4.2 MSF Flagler Station Sold to AEW for $340M
The industrial portfolio of Flagler Station, South Florida’s largest business park, has been sold by its developer to AEW Capital Management L.P. of Boston for a reported $340 million. Flagler and AEW jointly announced the transaction late last week. AEW acquired the 33-property, 4.2-million-square-foot portfolio on behalf of AEW Core Property Trust (U.S.), the company’s open-end core real estate fund. Under the deal, Flagler, based in Coral Gables, will continue to manage and lease the portfolio on AEW’s behalf.
Not included in the sale was about 150 acres of undeveloped land within and adjacent to Flagler Station, enough land for the development of approximately a further 2.4 million square feet.
The master-planned park, in the Airport West submarket, opened in 2001. Its occupancy rate was not disclosed, but reportedly is “strong,” with tenants that include Ryder Systems, Lagasse, FedEx and Brightstar.
AEW owns a number of office, multi-family, industrial, retail and senior housing properties in Southeast Florida, on behalf of its institutional clients and commingled funds, Dan Bradley, senior portfolio manager for the AEW Core Property Trust, told Commercial Property Executive.
Elevated levels of cargo traffic, driven by expansion efforts at Port Miami and Port Everglades continue in response to the expansion of the Panama Canal, are increasing demand for Miami industrial property, Flagler president Vincent Signorello told CPE. As a result, he said, overall vacancy in the industrial sector has been steadily declining and reached a two-year low in the fourth quarter of 2011.
The Panama Canal expansion, which will add a third set of locks, is expected to double the canal’s capacity when it’s completed in 2014. The largest ships that can currently transit the canal, the Panamax vessels, are 965 feet long (for container ships) and 106 feet wide and drawing no more than 39.5 feet of draft.
That set of limitations, in place since the canal was completed in 1914, will be replaced by New Panamax: maximums of 1,200 feet in length and 160.7 in width with draft of 49.9 feet. TEU equivalents for container ships will jump from 5,000 to 12,000.
In response, the Port of Miami is undertaking the Deep Dredge project, scheduled for completion in 2014. The ports of Norfolk, New York and Baltimore have completed or are working on similar projects.
A first-quarter industrial real estate report by Cassidy Turley pegs Miami as number nine for net absorption, with 880,000 square feet, out of 67 metro areas tracked. The report found “a broad-based recovery” under way in the industrial sector across the country in the first quarter of 2012, with the pace of demand for warehouse space back to pre-recession levels.
The Cassidy Turley report confirms that after 3.2 million square feet of negative absorption in 2009, the metro Miami market has rebounded strongly, gaining 3 million square feet and 1.8 million square feet of absorption in 2010 and 2011, respectively.
The Miami metro industrial market’s overall vacancy rate is estimated as 6.5 percent, and asking rents reportedly average an even $7.00 per square foot. Finally, the space currently under construction, according to Cassidy Turley, is a mere 311,000 square feet on a base inventory of 160 million square feet.