Ft. Lauderdale, FL
Darcie Lunsford – Broward Daily Business Review
July 11, 2001
Telecom builder T-Rex Developers isn’t conceding defeat in its mission to transform the IBM campus in
Boca Raton into a telecommunications hub, but the partnership is gearing up to spend $833 million in other sectors.
“It is not necessarily that we are looking to switch strategies,” said Tom Mulroy, chief executive officer of T-Rex. “We are looking to expand our horizons.”
The New York based group, which until now has cast itself as a telecom facilities developer and operator, is out raising $250 million for a venture fund. T-Rex Capital would swoop up bargain and financially distressed office, multifamily, hotel and retail properties.
The fund is slated to be used to sink at least 30 percent equity into acquisitions. The balance would be financed, thereby boosting T-Rex’s overall buying power to $833 million.
The fund would target properties in South Florida, New York, Boston, Washington, San Francisco and Chicago.
Funds like T-Rex Capital crop up with each downturn in the commercial real estate market. They were out in force during the late 1980’s and early 1990’s, when investors from Germany and the Netherlands and other nations bought up properties in South Florida.
“I think the market for real estate is going to get worse before it gets better”, Mulroy said. “Usually when no one else wants to put out money, that’s the time to buy.”
That’s sort of what T-Rex did last year when it paid $142 million of the 1.8 million-square-foot Blue Lake Corporate Center on Yamato Road. Only it was the aged IBM hub’s stiff price- not a recession- scaring off investors then.
T-Rex is arguably the larges owner of telecom real estate in the nation with about 5.4 million square feet in eight T-Rex branded Centers. With the collapse of the high-tech market, the firm is now courting office users to help fill 500,000 square feet at its Boca Raton facility. In this latest capital campaign, Mulroy and partner, Washington real estate lawyer Cliff Preminger, are hoping to capitalize on a downward trend.
This fall, they plan to start knocking on doors of pension funds, insurance companies and high net-worth individuals for a minimum investment of $5 million.
The T-Rex fund could get a mixed reception, considering some of the proposed investment sectors, namely office, retail and hotel, are widely regarded as depressed.
“Right now it’s been a little more than difficult to raise funds because people said Paul Jones, president of Pyramid Realty Group, a Coral Gables real estate finance and brokerage firm.
Mulroy’s background as a senior executive with well-known financiers Starwood Financial and Lazard Freres & Co., however, should go a long was in a shoring up capital.
“What you have to look at there is the resume,” Jones said. “He’s got the connections.” And if Mulroy and Preminger can raise the cash, the weakened real estate market promises to spur a plentiful bounty of bargains, real estate watchers say.
Ironically, financial brokers like Michael Kavanau, senior managing director of the Boca Raton office of Holliday Fenoglio Fowler, say the same Wall Street dynamics that are robbing commercial properties of tenants could make investing in them more attractive.”What we are finding is that a lot of people are ver nervous about keeping their money in the stock market,” Kavanau said.
“Certainly, they are worried that if the [economy] goes into a recession the real estate market will suffer, but at least it is not going to lose all of its value like stock.”