A real estate investment group has set its eye on the former Vaccine and Gene Therapy Institute – which now goes by Florida Center for Bio-Sciences. But what does the firm hope to do with the 107,000-square-foot building on eight acres?
In short, get a decent return on investment.
“I’m very enthused about the opportunity,” said Chris Kallivokas, a representative of RER Ventures, which has offered the full asking price of $14.5 million for the campus located in Tradition.
Kallivokas said that he anticipates finding one or two tenants to move into the Florida Center for Bio-Sciences within the first year of ownership and, over time, finding others to fill the remaining space. He pointed to the way the building was constructed – that the systems in the building are adaptable and can allow for multiple tenants and yet maintain confidentiality among the individual firms. That “gave me the encouragement that I think we can do this.”
Kallivokas pointed to his track record of taking over vacant excess corporate space and repositioning it successfully.
One he held up for example was a 45-acre, 425,000-square-foot Class A office complex Capital One Bank off-loaded in Richmond, Va. Kallivokas and his team worked on that property, repositioning it in two years and filled it with Phillip Morris, SunTrust Bank and other tenants.
The investor carved out a space for an 11-story hotel on one parcel and a bank branch on another, and a 125-unit apartment building on yet another.
Another Virginia project underway is a 260,000-square-foot mixed-use development. Kallivokas’ RER Ventures is not physically building the development but is selling the individual pads for construction. The development will include 25 single-family homes, office space, an Aldi grocery store, and a senior living facility.
He is working with two other firms as co-developer on two student housing projects at Florida International University in Miami. Each of the two housing projects will be 20 stories tall with at least 1,200 beds.
And, in Cincinnati, Ohio, RER Ventures with two other partners acquired 120 acres of excess corporate space from Proctor and Gamble’s research and development division, including 700,000 square feet of office and lab space.
Kallivokas said they will be converting the campus to mixed use and residential development.
Florida Center for Bio-Sciences “is much more sophisticated and specific,” Kallivokas said, comparing the P&G property to what he hopes to purchase from the City of Port St. Lucie.
Kallivokas told the City Council that he has been actively in business for 47 years – all in commercial real estate – and while he is a licensed Florida general contractor, he is inactive due to his advanced age. His fee company works with the federal government, including Housing and Urban Development, the Department of Energy, and the FDIC – essentially any agency involved with securing loans.
“I’ve never been sued,” Kallivokas told the council. “I’ve never been in default on a loan, and I’ve never been foreclosed on. I’m proud of that.”
While the Port St. Lucie City Council appeared very supportive of Kallivokas’ plans to purchase the Florida Center for Bio-Sciences, Mayor Gregory Oravec questioned how the purchase would be structured.
Kallivokas has offered the full asking price, but only if he puts 20 percent down and makes an annual interest payment for five years before making the final, balloon payment of the remaining amount.
Oravec called the structure the “only fly in the ointment.”
If the offer had been all cash, “it would be ‘OK, hey, how quick can we get the deal done?’” he said.
“The numbers just wouldn’t work,” Kallivokas said. He explained that if they made an all-cash offer, he’d have to offer less than the asking price because he’d have no income stream to repay any bank loan he’d need for the project.
Also, he would not be able to get an “adequate yield” on the property – a worthy return on investment.
Kallivokas said his plan calls for stabilizing the property (covering costs) with tenants, refinancing and holding onto the property for an extended period of time to increase its value.
And – he made clear – Kallivokas has no plan to strip the former VGTI building of its bio-science equipment and convert it to mere office space. Again, the price tag wouldn’t support such a project.
“It wouldn’t make sense,” he said.
If the sale ultimately goes through as proposed, the city stands to regain $1.3 million annually, which it currently spends on maintaining the facility.
Due to the way the city’s original $64 million bonds for building the facility were structured, the city will have to refinance the bonds – which now sit at about $57 million.
Doing so is expected to save the city between $350,000 and $500,000.
And, the city would receive $580,000 in annual interest payments from RER Ventures for five years before receiving the final payment from RER Ventures.
All that said, “there is a risk,” City Manager Russ Blackburn cautioned the council. “We never want to think negatively.”
However, Blackburn said it is possible that RER Ventures could decide to walk away before five years is up. If that were to happen, the city would retain the down payment as well as the interest payments to date. But, the city could find that the building was not maintained to the high level it expects for quality laboratory space.
It’s a risk the City Council will ultimately have to weigh against the chance of getting out from the failed former VGTI facility.
To that end, council members have directed the City Attorney’s Office as well as the city manager to make sure provisions to safeguard the city are negotiated during the process.
If all goes to plan, Blackburn expects the sale to close sometime after Oct. 1 and before the end of the year.