As land development opportunities become increasingly scarce, owners and developers are focusing on redevelopment to enhance value for existing properties. Many developers are finding tremendous demand for well-located but obsolete office buildings that have been transformed into contemporary environments, boasting natural light, open workspaces and sustainable features.
One example of a redevelopment effort that modernized an existing building is the Plaza at Las Olas (PALO) on one of the most famous streets in the heart of downtown Fort Lauderdale, Fla. Bringing a modern dimension to the iconic Las Olas Boulevard, PALO is the story of an office building’s evolution over the course of more than seven decades. Originally built as a two-story structure in the 1940s, PALO has been renovated four times to achieve its contemporary style, with clean lines and an updated exterior.
Redesigned and reconstructed by Stiles Corporation (Stiles), the repositioned PALO has been entirely retrofit to serve as a functional office space with prime retail on the ground floor. Focused on the idea of collaboration and energy, PALO’s interior design is based on an open, flexible floorplan with very few closed offices.
A Fresh Design
Originally built in 1948, PALO served as the headquarters for First Federal Bank. In 1953, two stories were added, followed by four more floors on the eastern half of the building in the 1960s. In the 1990s, the building and surrounding properties were purchased by Stiles, serving as a catalyst for other development projects by the firm in the down-town corridor.
The most recent renovation of PALO moved it from a Mediterranean design to a more contemporary style. Specific renovations are highlighted below.
- The small punch-out window openings were altered and replaced with floor-to-ceiling, energy-efficient, hurricane-impact windows to provide 40 percent more natural light. The old windows were removed and the openings were demolished, re-sized and structurally reinforced.
- The building’s facade was completely redesigned to exhibit a simplified, clean look. Vertical pilasters with an accent color help define and showcase the verticality of the building. The cornice shape and locations were changed to work in proportion with the height of the building and create a contemporary exterior.
- Aluminum space frames were installed at both the top and bottom of the building, which not only added dimension, but also introduced a dynamic architectural focal point. The top frames are illuminated in the evening to draw the eye upward.
Sustainable materials used consist of low volatile organic compound-emitting paints and sealants, carpet and vinyl composite tiles.
Additional features include:
- A computer-operated energy management system that controls the air-conditioning and heating, while monitoring indoor air quality;
- Light sensors and water-conserving plumbing fixtures;
- Ninety percent recycled construction waste diverted from local landfills; and
- Top Gard 400 roof coating with a built-in UV product, reflecting 83 percent of the sun’s energy.
Juggling Tenant Needs and Construction Timelines
Originally built in 1948, PALO served as the headquarters for First Federal Bank. In 1953, two stories were added, followed by four more floors on the eastern half of the building in the 1960s. (early 1980s photo)
Renovation of PALO posed several challenges, the most difficult being the compressed time frame required for the renovation. Occupancy dates of December 2010 for Stiles, and July 2011 for Franklin Templeton, resulted in three shifts of around-the-clock workers. The PALO renovation included a complete demolition of the interior and reconfiguration of the exterior, both within a five-month period. Adding to the challenge, Stiles had to be mindful of the heavy foot traffic throughout the buildings and in the surrounding business hub. Safe walkways to the south and east were created, and most of the work was performed at night when tenants were not present. In an effort to maintain a working environment that was conducive to the tenants while constructing the very walls that would frame their offices, Stiles worked closely with each employee to formulate a start/stop timetable that worked around their schedule.
The building fronts a plaza that features a large, scenic fountain at its center. A covered garage and three-story office building, with ground-floor retail, were later built alongside PALO to buffer Las Olas Boulevard. With the benefit of the adjoining retail shops, eateries, lounges and night clubs, the plaza has become a lively community gathering place.
Stiles performed two financial analyses on the PALO building
1. Review of the renovation impact on the rent for the vacant spaces which indicated that a renovation of the building would achieve an additional $4 per square foot to the triple net rental rate.
2. Comparison of future building value after the term of the current tenant expired, predicting either a renewal at the market rate or lease termination with new occupancy at market rates. Landlord concessions were not part of the analysis because they can vary by lease term and creditworthiness of the tenant. Considering the increase in value over the original investment of $1.88 million, the investment was deemed worthwhile. Depending on when the asset would be monetized, Stiles forecasted a possible internal rate of return of 14 percent.