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Boca Raton: Office Depot buys IBM site for new HQ

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29 March 04

Office Depot buys site for new HQ

A prime piece of land on the former IBM campus in Boca Raton is now Office Depot property. 600,000-square-foot plan has $100 million price tag

The Delray Beach-based retailer acquired the 23 acres on Yamato Road earlier this month from Stiles Corp., which snapped up the site last year with hopes of building a new 600,000-square-foot headquarters for the office supply company.

Terms of the sale were not disclosed, but Stiles paid $11.6 million for the site in February 2003. It spent the last year crafting a deal with Office Depot (NYSE: ODP), Stiles Realty President Tom Kates said. In the end, the retailer wanted to buy the site, he said.

"We had discussions about a number of things," Kates said. "It was part of a long process."

The construction contract to build Office Depot's proposed $100 million headquarters is now up for grabs, while 550,000 square feet of existing space are expected to go on the market.

Office Depot, through its real estate representative Cushman & Wakefield, recently issued a request for qualifications to nine construction companies, including Stiles, Centex Rooney Construction Co., the Weitz Co., The Beck Group and Turner Construction Co. and Holder Construction. Atlanta-based Holder teamed up with Fort Lauderdale-based Miller Construction Co. to go after the contract.

"It was a good match for both of us," said Miller Construction President Harley Miller.

Holder Construction has a lengthy resume of building corporate facilities, including the 1.1 million-square-foot FedEx headquarters in Memphis. What it didn't have was the local market knowledge Office Depot is seeking.

Miller said his firm brings that to the table.

Construction cost: $80 million

The information Office Depot provided to prospective builders listed the estimated construction cost at about $80 million, which includes interior build out, furniture, fixtures and equipment, according to sources familiar with the documents.

"This is a corporate headquarters and it would be a nice profile project that any firm would want in their portfolio," said Judy Whitaker, marketing coordinator in the Tampa office of The Beck Group. "It is a big number."

Whitaker and other contractors said the deadline to submit qualifications was March 12, but so far no word has come back from Office Depot.

"What they are probably going to do is shortlist the firms and then call for interviews," said Taras Diakiwski, director of business development for the Weitz Co. in West Palm Beach.

For its architect, Office Depot has hired HOK, which is among the finalists to build the $137 million Scripps Research Institute in western Palm Beach County.

Conceptual design plans are in the works, but so far no formal plans have been submitted to the city, said Boca Raton Planning and Zoning Director Carmen Annunziato.

Office Depot spokesman Brian Levine said the company wants its 2,800 headquarters staff in the new location by 2006.

Snarl with current space

Accomplishing this won't be as simple as packing up and moving one city to the south.

Office Depot still has to unload 550,000 square feet in three buildings in Delray Beach.

Levine said the retailer plans to sell the space.

But Office Depot doesn't own the newest of its three buildings and is in a legal fight to buy the 215,000-square-foot building from its landlord.

Office Depot sued New York-based real estate titan The Zucker Organization in July 2002 alleging it is entitled to buy the building for $26.3 million under terms of the 1996 lease it signed with Palm Beach Gardens-based Catalfumo Construction and Development.

Zucker acquired the Office Depot lease from Catalfumo later that year.

Office Depot claims in its suit that it can't assume Zucker's mortgage because it is bundled with other loans as part of a securitized mortgage portfolio. Zucker denies that allegation.

Zucker's lawyer, William Spencer with the Fort Lauderdale office of Gunster Yoakley & Stewart, said that without resolution to the suit, Office Depot could only sublet its newest building.

The New York office of Cushman & Wakefield will market all three buildings, a source close the deal said, but none of the properties have officially been put on the market.

Finding buyers might not be so difficult in this seller-driven real estate environment, said Stephen Bittel, chairman of Miami-based Terranova Corp., which manages the Arbors Office Park where Office Depot's buildings are located.

"In this market, everything seems to sell," he said. "I think it is saleable today and it is probably saleable to an investor that might want to re-tenant it."

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