110 Tower's discount belongs to GEM's 2016 basis

Moishe Mana has taken his buying out of Miami and into Fort Lauderdale, paying $89 million for the 30-story tower at 110 Southeast Sixth Street, with City National Bank of Florida supplying a $66.3 million acquisition loan, Commercial Observer reported. Completed in 1987 beside Broward County's courthouse, the 777,248-square-foot building sold for 21 percent less than the $112.9 million Chicago-based GEM Realty Capital paid for the 1.72-acre site in 2016.

A discounted price needs a denominator, and GEM's is its own 2016 basis: a firm that bought into downtown Broward at a price the market has since repriced, in a county whose office recovery has trailed Miami-Dade and Palm Beach, where the new-to-market technology and finance tenants went. The 110 Tower print is less a verdict on Broward office than on 2016 underwriting in Broward office. As this publication argued when the sale surfaced, the tax deferral behind the bid says more than downtown office values do; office finds a clearing mechanism only where a trade actually prints, and here one did.

Whether Mana is the natural owner of what he bought is another question. Commercial Observer describes him as the largest landowner in Downtown Miami and Wynwood and a buyer who shows up every few months; this year has already brought a Downtown Miami office tower for $110 million and the Wynwood retail building housing Pastis for nearly $25 million. The same report relays a rumor that he is selling much of the Wynwood portfolio to Ken Griffin in a transaction worth as much as $1 billion, with some suspecting the buying spree is a 1031 exchange staged ahead of it—a deal both men deny.

Set the exchange aside and the loan becomes the more informative number. At 74 percent of an $89 million price, lent by a Florida bank against a courthouse-adjacent tower in a market the coverage describes as a laggard, it is the only outside capital in the deal whose return does not depend on the Wynwood rumor resolving—and the closest thing to a collateral mark the trade produces. The loan's rate and term are not reported, and neither is any figure for the building's income, which leaves that loan-to-value as the only underwriting ratio the print makes public.

GEM exits with a 21 percent loss on a decade of ownership, and the deal clears at a price a straight yield buyer might not have matched: the buyer's cost of capital is a deferred gain, and three-quarters of the purchase was borrowed. Broward landlords with similar vintage will have this comp quoted at them regardless; the question for them is whether their next buyer has a tax reason to bid.