Commercial Real Estate Profile: Jay Caplin | investor, Miami

Jay Caplin and Gavin Campbell formed Steelbridge Capital in 2008 to take advantage of what they believed were recovering office markets with distressed and undervalued assets in Florida and Illinois.

The strategy appears to have paid off — even though Steelbridge has gone against the grain of many institutional investors by focusing on secondary markets like Naples.

In all, Steelbridge now owns a half dozen Florida office buildings or complexes totaling 1.8 million square feet of space, including the seven-story SunTrust Building and the Offices at Pelican Bay in Naples.

Those assets, totaling roughly 242,000 square feet, were purchased last year for in excess of $51 million with a series of co-investors such as pension fund advisers and private equity funds. The firm also owns the Cypress Financial Center in Fort Lauderdale and a 16-story Wells Fargo office tower in Orlando.

“We look for markets where there are strong barriers to entry for new product, and where there's good population growth and a strong job sector,” says Caplin, who previously worked as the executive director of real estate services firm Cushman & Wakefield's capital markets group.

While at Cushman & Wakefield, Caplin was involved in deals valued at more than $7 billion, with the likes of MetLife, Blackstone, Apollo Real Estate Advisors and Morgan Stanley Real Estate, among others.

Campbell had worked at LaSalle Investment Management, overseeing that firm's acquisitions and investing more than $1 billion. A third Steelbridge partner, Michael Manno, runs the firm's portfolio. The company is jointly based in Miami and Chicago.

In each acquisition, Caplin says Steelbridge looks to buy “value-oriented” properties at discounts to replacement costs that can be enhanced with targeted improvements, redevelopment or repositioning.

At the Offices of Pelican Bay, for instance, it bought a pair of six-story buildings -- once the headquarters of builder WCI Communities — from health care firm HMA after a merger led to a consolidation elsewhere.

At the time, the complex at 5801-5811 Pelican Bay Blvd. was roughly 30% vacant, providing a significant upside potential. Steelbridge has since installed new pavers and landscaping, improved the project's parking garage, painted and renovated both the lobby and common areas.

“They know their business, they know office markets well, and I've found them to be very professional and well organized,” says Craig Timmins, a partner at Investment Properties Corp., a Naples brokerage firm.

Caplin says the $33.65 million acquisition was driven largely by Naples' demographics and a likely lack of new office development in coming years.

“We felt we could market the buildings to tenants who had not been exposed to the project before,” he says. “And the demographics and the Naples tenant base are extremely attractive.”

At the Cypress Financial Center, Steelbridge partners bought back into a project they had previously owned — at a steep discount. When it sold in 2006 to Tricony CFC, the 11-story tower fetched $48 million. Steelbridge acquired it last September for $32.5 million.

There, too, the vacancy rate was 24%, and Steelbridge plans to undertake a major renovation to boost value.

And if plans hold, Steelbridge's portfolio will grow significantly over the next year or two. The firm also is targeting Boca Raton, Palm Beach and Sarasota in addition to markets it has already invested in, and it has properties under contract in Tampa and Miami, Caplin says.

“We'll continue to be active, following the strategy we've focused on,” Caplin says. “What's the saying about if it's not broke?”