Don’t call Angelo Bianco a contrarian — even though the firm he leads, CP Group, continues to bet big on an office sector buffeted by remote work.
“Listen, we just add value to buildings — that’s what we do, and a lot,” Bianco said during a virtual interview with Commercial Observer just before Labor Day. “If it’s contrarian, it doesn’t matter to me.”
CP does lean into office, especially in South Florida — his firm may be the state’s largest office landlord — and in markets as varied as Denver, D.C. and Atlanta. In particular, it specializes in offices that need fixing up and repositioning. That’s an especially lucrative business to be in now as tenants eschew older, less amenitized buildings for the more tricked-out sort.
CP dates from the early 1990s and has gone through different ownership structures and names. It was most recently Crocker Partners after founder Tom Crocker. Bianco, the company’s managing director since 2017, bought out other partners in 2020 with another partner, Chris Eachus, and the company rebranded as CP Group in 2021. It has more than 160 properties totaling 18 million square feet.
This interview has been edited for length and clarity.
Can you tell me how you got into the industry? Did you intend to go into real estate given you earned a law degree from Virginia?
Angelo Bianco: I started the 1980s in the sixth grade and in 1990 I graduated college. In addition to being the same age as the kids from “Stranger Things,” I was able to experience a very exciting time for real estate development. There was a tremendous push into buildings and development. And I saw that around me. I was very excited to have an impact on the world and to create things that were architecturally and artistically beautiful, or potentially.
Where did you grow up?
I grew up in Rhode Island. We weren’t seeing a lot of that here, but around the country.
Then I went to undergraduate, and I majored in finance. I figured I’d do something on that side of the business of real estate. Then 1987 came — big correction. So, going onto Wall Street — it was not something that seemed likely to lead to success as I neared graduation. So, I was like, “I’ll go to law school.” And that would be a good way to kind of get into what I liked about real estate on the law side and figure it out from there.
So I went to UVa, which was an excellent education in the law. And it turned out, by the way, to be invaluable in my career as a real estate businessman — having a legal education and practice as a real estate lawyer, which is what I was for seven years in New York City. Even though it was a longer route to get to where I wanted, I think it made me a better real estate businessman.
How’d you get into the investment and development side?
I very much liked being a lawyer and working on high-profile deals in New York. I loved advocating for my client and being creative in problem-solving. I didn’t mind the hard work.
But I noticed that myself and my colleagues would be working our tails off, and our clients would be flying in from out of town on national deals. I’d end up going out at night to fancy restaurants with legal documents that they would be signing at the table. It wasn’t so bad that they used my back as a table. But the next day we’d go to the closing table and the clients would be walking out with all this money, and they would say, “Hey, lawyers, that’s for you.” [Reenacts someone handing a few bills to someone from a much larger wad of cash.] And I thought, “I think I’m on the wrong side of the table. I want to be that guy.”
So I started looking at the business side. A firm that I respected highly — Tishman Speyer — reached out to me. They called up and said, “Do you have any interest going in-house?” I said, “That is of interest to me.” I went over there, and I worked on the redevelopment of Rockefeller Center, which was extraordinarily exciting at the time.
I loved it, it was fantastic. Tishman Speyer is an excellent company. I even use them as guidance in the decisions I make because I have so much respect for what they’ve done and continue to do today.
On to some of those business decisions and the outcomes. I wanted to focus on one in particular. CP in 2018 paid $170 million for the Boca Raton Innovation Campus, and sold the majority stake in 2021 at a much higher valuation with near-total occupancy. That increased as well. That’s quite a success story given the pandemic. Can you take me through how it happened?
The old IBM campus had over the years been whittled down by successive owners, who basically treated the campus like a chop shop — in essence whittling it down to 130 acres from 500, and never really investing in the campus as an office complex. So over time it degraded into a place that’s known for high-density, high-parking, lower-skilled labor. As a result, rents and occupancy remained low for decades.
When we took it over, it was really in bad shape. It had very few amenities. It didn’t have a purpose; it had a very poor reputation. We wanted to change that. How do we make this different? We already had tremendous experience in the office market, and we knew that you need amenities as a big driver, so that’s what we did.
But it was also 1.7 million square feet. That’s a lot of space. How are we going to fill it? We said, “Let’s focus on the businesses.” We found the top 20 most profitable businesses per employee in the world — most of which are American, by the way. Fifty percent are financial services. We didn’t think we were going to take on New York and London, so that was off the table. Fifty percent were tech and life sciences.
It struck me, “This is where they invented the first personal computer.” Maybe restore that; add a life sciences component because it and tech are becoming so close together now anyway; and really create something special. That’s what we did. We designed a program of extensive renovations, repositionings and amenitization. The tenants responded to this and responded well. We took rents from $14 net to $30 net [a square foot] in a few years. We took occupancy from 60 percent to over 90 percent.
In addition to that, we wanted to make sure the project was part of the broader community. We had tremendous community outreach and support; we had public events. We added arts galleries and a museum of history.
A lot of your holdings are older offices. Even in the best of times, it’s not that desirable an investment. What’s the thinking behind this? Is it a quick sale? Is that the goal?
At CP Group, we fix broken buildings. That’s our entire business plan. We don’t buy stabilized assets. We buy buildings that need to be stabilized.
So old buildings tend to be the most broken. And there are a host of reasons why they’re broken. We try to stay away from a building that’s broken because of a structural problem. Generally speaking, it works for us when things need a new approach; they need to be amenitized; they need to be renovated cosmetically; and they need to be reintroduced to the marketplace.
Do you think they always have to be reintroduced as office properties?
It’s very difficult to find those that can be easily converted to another use. You spend a lot of time looking at buildings for multifamily conversion, especially older buildings. It’s very costly to do so, however. Because the cost of housing is getting so high, we are getting very close to getting some to pencil out. So I imagine this will become a larger part of our business. But it’s just been unaffordable in most of our markets until just now.
Can you give me a sense of where it’s penciling out?
It’s difficult because you need to find office buildings that are cheap enough to allow this to work and there’s demand enough to have people move in. We had a deal in Broward County that seemed plausible. But then someone came in and paid more for it as an office building. I think it will be very difficult for them to make it successful as an office building. But because of their Pollyannaish views toward that building, they just paid more than I could.
It’s a math problem for me. When I buy an office building, it’s just what’s the cost to convert it plus the cost to buy it. If it’s too high, then I can’t do it. Now, we are spending more time with local municipalities because this is important to them as well. We think if we can tie this in with tax programs and waiving some impact fees, we think this will increase the amount of conversions we can do.
We’ve also looked at doing limited service hotels as another use. Those are very friendly for us. They are much easier to do, frankly.
You’re not worried about hospitality recovering from the pandemic’s effects?
Travel has decreased, and there’s going to be a permanent decrease in travel. A recession takes time, too, and I imagine there will be a slowdown in new development. But we will recover from that, and so will the hospitality industry.
The same is true for office. There is a permanent diminution in demand for office because of work from home. But we get reductions in demand all the time in our business — they’re called recessions.
You talked about fixing broken buildings. In between the acquisition and putting it on the market fixed up, do you worry that work from home and similar trends will cause a crash in value and make it very difficult to hold on to these properties and do anything much with it?
We’ve spent a lot of time creating a prediction of where work from home will be based on data we’ve put together. We have 18 million square feet in our portfolio, so we have a lot of tenants. In conversations with tenants, and architects and designers that we use all the time, the space plan that we’re currently doing — we think there will be a 7 to 12 percent hit in tenant space needs, but it will be offset by growth in our target markets.
That’s because work from home still requires people to have office space most of the time. I like to remind people that two days of the week you’re already not in the office — and you’re not supposed to be working from home, either [Editor’s note: It’s known as the weekend]. So, if you’re out for three or four, it doesn’t mean you don’t have an office. I think that is something we will see forever.
I do think that organizations that have done hot seats or hoteling have seen that very poorly received by their teams. Many things change; human nature does not. One thing people like is their own spot. As you probably remember from even when you were a kid in school, when you went to the cafeteria you had your seat. That was your seat and everyone in the whole school knew it. That’s kind of part of the human condition.
Frankly, the productivity hit — and the owners of businesses know this — from work from home is significant. So I think there is going to be an impact, but it is something we will lease up with and it’s in the underwriting when we buy things. Now, I could be wrong either way. That’s why I always say that’s why they call it investing and not saving.
Regarding conversations with office tenants, what do they want?
Can you elaborate?
They want two things: flexibility and amenities. Businesses don’t know what’s going on for sure, right? They are reluctant to take long-term lease obligations because they feel like, “What if I make a mistake and I don’t need this much space?” Obviously, they always have the right to sublease. But that’s not their core business. Their core business is selling widgets or whatever they do; it’s not leasing office space. We understand.
So they are willing to pay more for that flexibility as well as for space that has really good amenities — which, by and large, is food. There are so many examples, but food is the driver. So, in addition to providing the amenities and the flexibility, we’re also providing flexible space options.
One of the things we’re doing is creating enterprise solutions in a coworking environment — prebuilt spec suites that can be completely furnished. We’re creating a concept where they will share the common area elements on their floors so they won’t have any kitchens or copy rooms or conference rooms or reception areas, but they’ll have their own segregated space.
The idea would be you could come in and say, “I want a five-year deal for 20,000 square feet; but now I know that if I grow in the next five years by 2,000 feet or whatever it is, I can go take that space and it will be available.”
Does this customization make it more expensive for you?
It makes it more expensive for everybody. Once again, it’s a cost of doing business. Getting it ready and building out the space is more expensive for me. Having shorter-term deals is more expensive for me. The tenants, it’s more expensive for them because they have to pay for that flexibility.
But that’s only in dollars and cents. If you value flexibility — which the tenants do and so do I — it’s worth the extra dollars because you’re still improving your situation.
Where does the financing come from for these deals, and how do you pick partners?
We’ve been doing this a very long time. The company is 35 years old. We have a series of partners we work with and we communicate with them all the time.
You need money and the will to invest — those are the two things you need. So that doesn’t happen at the same time for all of our partners. Some have it and some don’t. So you end up having a whole bunch of sine curves — if you’re a math person …
A little bit.
I hope to have enough partners — we have maybe a dozen or so — so that all of our sine waves end up being a positive straight line somewhere for us. When we look at deals, we’ll look at where our partners are, and usually there will be one or two who have interest in pursuing a deal with us at that time; and that’s what we do.
The company recently went through a name change. Why the change?
The company has gone through many name changes, actually. The latest name was for our founder, Tom Crocker; it was called Crocker Partners. Tom was a pioneer and a visionary in our business. He was one of the first people to invest in and build mixed-use developments, which sounds so silly today — of course, there’s mixed use; but, no, it wasn’t like that before.
So Tom built a great company, but, like in all things, people decide to retire. My partner Chris Eachus and I bought out all the partners, and we wanted to take a different approach in the management of the company. We wanted to have a company that focused more on the people and our colleagues, and our ideals.
We came up with core values for our company, and then I wanted to come up with a name that would pay respect to our history but ready it for the future. So we used “CP” for where we came from and then called it “Group” because it’s not a personality thing — it’s not a “your family is more important than your job, period.” Two is mutual respect. Three is excellence. That means that you should want, personally, to do the best job you can every time you do a task.
Along the same lines, do you have an opinion on commercial real estate’s renewed focus on ESG?
Oh, yes. I think it’s extraordinarily important. I think people misunderstand ESG because it gets conflated with a lot of different issues. Although I do care about the environment and being a good person — and that gives me more passion about the ESG initiatives that we do — ESG is about saving your company and being prepared. It’s about managing your downside risks and understanding what those risks are. To us, if you’re not embracing ESG principles and guidance, I think you’re doing your company a disservice and your customers a disservice.
Carbon is getting more expensive in the future. I don’t care what your views are on global warming, anything, it doesn’t matter. That’s a fact. Are you preparing for that? China, most likely, will be invading Taiwan in some form or fashion in the next five years. Is your company prepared for that? The world that we’re in, you need to make sure that you are adopting policies and directives to thrive when those things happen.
Switching gears — CP invested in so-called secondary and tertiary cities like Denver and Atlanta. Was that a pandemic thing because of the supposed exodus from gateways like New York and San Francisco? Or has that always been a focus?
Since our founding we have invested solely in Sunbelt states. We call it the smile states. It goes from Washington, D.C., which is one end of the smile, down the coast, to Denver. We do that for a simple reason: net in-migration.
Why not have the wind at your back when you’re in our business? Every year we have more and more office workers in our markets, so that makes more sense. I always say you can make money, I’m sure, in Detroit in real estate; I just don’t want to.
So you consider Denver Sunbelt?
It embodies the same characteristics. It’s got net in-migration; it’s a very business-friendly climate.
Miami’s office market is probably the strongest it’s ever been. What’d you think is driving it, and what are the next more desirable areas for leasing? What sort of product is going to draw the most tenant interest?
During the pandemic, a lot of people reevaluated where they are and what they wanted to do. Frankly, it’s an enjoyable place to live. If you are a very wealthy person who runs their own business located in the Northeast or the Midwest, it became much more acceptable to move. So you are seeing a lot of movement in that regard.
As a result, you’re getting the highest-end real estate pricing going through the roof. It’s having the effect of increasing pricing everywhere. The Miami CBD consists of two markets — the Brickell market, which is south of the Miami River, and the downtown market, which is north. The Brickell market has been the nicer of the two for quite some time, and multi-use development has made it even nicer. So the rents have skyrocketed on that side of the river.
The downtown side of the river, where we own a lot of real estate, has not seen that same push. I think in the near term — because it costs so much to build real estate — we’re going to see a large increase in demand and rates in downtown because that’s where supply is available. Rate differential between Brickell and downtown is the greatest it’s ever been in my entire career.
Now, I’m sure that Citadel is building a new building — but so far out. Related’s building a new building — but so far out. What’s going to happen, and what’s been happening, is that residential growth is going to drive a lot more people north of the river. That’s where we’re seeing most of the demand.
Coral Gables, which is a great suburban market and has always seen steady demand, has weakened as people went back to the downtown. There should be some renewed interest in that because the rates have become so high in the core.
What are the tenant drivers in Miami? Financial services, crypto …?
Crypto is coming down here. I am not an expert in that particular industry. I don’t quite understand why it exists, but maybe I’m just an old guy. But there is crypto coming down and there is tech coming down.
But it’s mostly financial services and law. I think if you’re a law firm, you have to be in Miami, and that didn’t used to be the case.
Any other asset classes are you looking at?
We are working on developments where we would do a little bit of everything. They’re mixed-use developments. We have one where there’s multifamily, medical office, retail, grocery-anchored, hospitality.
We look at other things, but office to us is our specialty. We know how to do it; it’s our bread and butter. Our realized returns over the last 20 years are at a 20 IRR and two times multiple. That includes all the ups and downs in a 20-year period. That’s kind of our go-to.
Do you have anyone you’re supporting in the Florida governor’s race or any of the statewide races down there?
I don’t get involved in politics. I find that it’s something better left to people much more knowledgeable in that area than I am.
Tom Acitelli can be reached at [email protected].