Back to Square Two

After LaSalle Investment Management executive Gavin Campbell formed Steelbridge Capital in 2006 and former Cushman & Wakefield alum Jay Caplin joined three years later, their mission was straightforward: Acquire undervalued Florida office assets poised to recover from that decade’s economic recession.

The institutional investment advisory company’s operating platform, however, was less clear. Caplin was based in Miami; Campbell in Chicago.

For several years, the dual headquarters concept worked. Together, and with a third partner, Mike Manno, they acquired 14 properties containing roughly 2 million square feet between 2009 and 2018, including office buildings in Tampa, Naples and Clearwater.

But as the economic recovery solidified, Campbell’s geographic center increasingly became the Midwest. Caplin and Manno, conversely, wanted to double down on Florida.

“Our collective focus just changed over time,” Caplin says.

At the close of last year, the trio parted ways and Caplin and Manno formed Square2 Capital. Steelbridge remains based in Chicago and also continues to seek Florida properties to acquire, Campbell says.

“The idea was we weren’t looking back, we weren’t going back to square one,” Caplin says.

Amid all the change, what has remained constant, Manno and Caplin say, is their commitment to acquiring commercial properties in select Florida markets, such as Fort Myers, Naples, Tampa, Miami, Fort Lauderdale and Orlando.

Despite the split, Campbell, Caplin and Manno continue to own 10 Florida buildings totaling about 1.5 million square feet, including the Pelican Bay Executive Center in Naples, a pair of six-story office buildings and a 242-space parking garage that Steelbridge bought for $33.65 million in September 2014.

“For us, this is simply a recommitment to focus on what the original intent of the company was from the beginning,” says Caplin, a one-time Cushman & Wakefield executive director who co-founded the commercial real estate brokerage firm’s capital markets group in Florida and was involved in sales and financings in excess of $7 billion.

“Our focus then, as now, is Florida based.”

The focus also remains solidly fixed on enhancing each property’s attractiveness to investors.

“Our DNA is in value add,” says Manno,  who prior to Steelbridge oversaw Uccello Immobilien GmbH’s 1 million-square-foot U.S. real estate portfolio in Florida and Texas for the German company and ran Max Property Management Inc., in Miami.

But with more investment firms than ever before scouring Florida for similar deals, Square2 is expanding both its geographic reach and its desired property focus to include retail as well as office and industrial – so-called “flex” buildings.

“We’ve added retail to our criteria because a lot of retail properties are changing, or being converted to offices,” Manno says. “So that’s an area where we believe we can provide some value, or be part of a value-add equation, because we’re able to see something through a bit of a different lens.”

At the same time, the company intends to consider properties in St. Petersburg and Sarasota, and further drill down into markets such as Tampa as never before.

“We love those markets,” Caplin says. “The question is can we buy at a price that lends itself to a value-oriented opportunity.”

Caplin and Manno acknowledge that heightened investment competition – combined with organic appreciation from rising occupancies and rental rates – have made acquisitions more difficult.

“Many of the Florida markets that we’re focused on have become pretty priced out over the past five years,” Caplin says. “And we certainly understand it; there’s been a lot of solid job growth, the state has a very positive tax environment and because of those things and a lot of other factors, a lot of other people have discovered Florida.”

But Caplin and Manno say their collective experience, combined with the relationships they’ve forged over the past three decades, give them an edge.

It has before. In July 2015, Steelbridge sold the seven-story SunTrust Bank Building in Naples for $23.6 million, a 90% return after only a year of ownership. And in April 2018, the company sold the last of four buildings in the Park Place Office & Promenade, in Clearwater, generating a collective $27.8 million — a 26.3% return in less than three years.

“Our very granular view of things, we think, gives us an advantage,” Caplin says. “We don’t want to chase everything under the sun. When you’re new to Florida, it’s tempting to fall into a trap and look at things as though the landscape is a mile wide but only an inch deep.

“We, however, know these markets so well,” Caplin says. “We’re hoping that once the dust settles there will be an opportunity for us to really dig in again.”