A Palm Beach private equity real estate firm is moving off the island and into West Palm Beach, where the firm is turning an old downtown bank building into a modern, edgy office center.
The purpose of Sterling Organization’s move: To lure smart, educated hires who want to work in a vibrant city.
Sterling is pulling out all the stops for these potential employees by building an office that will include a rooftop kitchen and a coffee bar.
By the end of the year, 302 Datura St. will be a “small jewel box…The nicest boutique office in downtown West Palm Beach,” said Brian Kosoy, Sterling’s managing principal.
The firm’s move to West Palm Beach from Palm Beach signals an important shift in the finance industry’s view of the mainland city, which has even branded the eastern part of town the Flagler Financial District.
Once Palm Beach, where ocean vistas are around every corner, was the pinnacle of the South Florida work lifestyle for professionals who specialize in finance. But increasingly, firms say they need to offer their new hires the same opportunities for dining, living and entertainment that other major cities provide.
At Sterling, making the move to West Palm Beach will help the firm compete with employers in cities such as New York, Chicago or San Francisco.
“West Palm Beach is a much more attractive environment than the island of Palm Beach” for new hires, Kosoy said. “It’s a lot more youthful. And we want to be in an urban environment so we can attract highly educated, smart folks.”
“We view West Palm Beach as a very real place, and we’re happy to invest our capital there,” Kosoy added.
The Sterling Organization isn’t the only financial firm giving a fresh look to West Palm Beach.
Since the new tax law was signed by President Donald Trump late last year, other financial firms, including family offices, have been eyeing the city for space.
Over at the Northbridge Centre at 515 N. Flagler Drive, the building was peppered with inquiries during the first two weeks of January, a time traditionally slow in the commercial leasing world, said Peter Reed, managing principal of Florida Commercial Realty Services, which is helping lease the building.
Driving the inquiries: The new tax law limits deductions in states where there are state and local taxes. That’s prompting residents from the Northeast to take a look at living and working in Florida, which has no state income tax.
Reed said potential tenants said they were eager to establish themselves in Florida, which requires six months of residency before the state can be claimed as a residence. “They were on a mission,” Reed said.
Some finance or family office tenants took a look at Boca Raton, but Reed said they preferred West Palm Beach “because they want a city with a little bit of action, where young guys have a place to go.”
Angelo Bianco, managing partner of Boca Raton-based Crocker Partners, a co-owner of the building, said a family office called Sunrise Management Services (SMS) signed a lease for 4,500 square feet.
Other firms could make Northbridge their home once a $10 million renovation is completed later this year, Bianco said. In the works at Northbridge are some ideas similar to Sterling’s new building: A coffee bar with wifi, and an amenity floor with places for people to gather, Bianco said.
Crocker is doing something similar in Miami, where it is renovating the Citigroup Center Tower, which now features an art-filled gallery on the first floor of the 34-story tower.
For the Sterling Organization, the move to West Palm Beach was the result of its need for more space after 20 years on the island. Kosoy said firm executives soon realized a West Palm Beach office would be more convenient for its 70 employees.
“It made more sense for three people to go back and forth (to Palm Beach) than 67 people,” Kosoy said, noting that only he, principal Adam Munder and chief financial officer D.J. Belock live on the island.
But Sterling also was mindful of its need for new hires. It decided the building not only would be a new headquarters but also a recruitment tool, providing employees “the best of both worlds,” a lively downtown with great weather, low taxes and no snow.
In other words, not New York.
Last July, Sterling paid $7.4 million for the building at the southwest corner of Datura Street and Olive Avenue.
The former bank building later became home to an H&R Block office, then was slated to be apartments and most recently, a Marriott Renaissance, said Bill Jacobson, a West Palm Beach lawyer who previously owned a stake on the property.
But the deal’s partnership became fractured and the property wound up in the hands of an investment group, which sold it to Sterling last year.
Kosoy said Sterling will occupy 30,000 square feet of the two-story building, with the remaining 15,000 square feet upstairs available for lease to another tenant.
Sterling hired Glidden Spina Architects Palm Beach for its design. Glidden Spina redid an old building on 6th Street in West Palm Beach into a modern environment that set the standard for cool interior spaces.
“But our space will be way cooler,” Kosoy said.
The Datura Street building has an interesting feature, namely 12 basement vaults built during the 1950s when the property was a bank. Kosoy said all but three vaults have been removed, and those can’t be touched because they are structurally important to the property.
Keith Spina said the room-size vaults could be used for storage — or they might become home to ping-pong tables for employees needing a break.
Alexandra Clough writes about real estate, law and the economy.