Hogan Lovells, forced out of its space at the Sabadell Financial Center after water from a burst pipe flooded its space in January, may never return.
After spending several months in temporary space in Coral Gables, the law firm moved into additional temporary space at the Wachovia Financial Center at 200 S. Biscayne Blvd. on Monday and has settled on a permanent move to the new 600 Brickell at Brickell World Plaza building, according to several sources.
However, a Hogan lawyer who asked not to be identified said the firm does not want to return to the Sabadell building due to concerns over the potential for mold and long-term plumbing issues. “There are a few issues the firm didn’t feel comfortable with,” said the source. “The building owners are not willing to replace the pipe.”
A spokesman for the Sabadell Financial Center did not return calls for comment by deadline. However, other sources said both sides are trying to negotiate a settlement that allows Hogan to break its lease. If that doesn’t occur, litigation could ensue.
Steve Zelkowitz, a real estate attorney with GrayRobinson in Miami, said he would not be surprised if Hogan was using the accident as leverage to exit its lease and move to newer and possibly cheaper space. “It doesn’t surprise me that in a market where we have a lot of new product that is available and probably for a better price, that given the opportunity to attempt to break a lease they would do it,” said Zelkowitz, who is not involved in the Hogan matter. “Typically when there are lower vacancy rates and you don’t have as much product, I wouldn’t expect this to happen.”
He sees economic rather than physical issues dominating the decisions. “I’m sure the building can get rid of the mold and make the building inhabitable,” Zelkowitz said. “I presume there was a large sum of money spent on tenant improvements. I think this is more a matter of economics rather than it being uninhabitable.”
A number of tenants including the Hunton & Williams and Baker McKenzie law firms remain in the building as they were not affected by the flooding.
Whether there is litigation likely would depend on whether the Sabadell building is able to find a replacement tenant, Zelkowitz surmised.
According to the Hogan lawyer, the firm expects to move in eight month to floors 27 and 28 at the 600 Brickell building, which would be connected by interior stairs and a large conference center. Hogan also looked at 1450 Brickell, another new luxury office tower, but no higher floors were available.
Jeanmarie Ferrara, a spokeswoman for the Foram Group, developer of 600 Brickell, could not confirm the lease with Hogan. However, she said six leases for the 40-story office building are in the works, and the developer is negotiating with a number of financial service companies and law firms. JAMS, a national mediation firm, recently leased 10,000-square-feet on the 26th floor, and Restaurant du Cap announced last week that it would be the ground-floor tenant.
Landing Hogan Lovells would be a coup for 600 Brickell, which has struggled a bit since Bilzin Sumberg Baena Price & Axelrod backed out of a 10½-year, $58 million lease in 2009. Competition for tenants has been fierce in the last couple years as new Class A office space has opened, flooding the market with hundreds of thousands of square footage.
The broken pipe at the Sabadell building forced the closing of the 31-story building Jan. 6. Most tenants were allowed back in the following Monday, but those below the 22nd floor sustained extensive damage and had to find temporary quarters. Hogan Lovells was the second largest tenant in the building with 35,000 square feet on six floors. Also temporarily displaced was Moscowitz & Moscowitz, a small criminal defense firm that has returned to the building.
According to sources, air tests are being conducted periodically throughout the building to ensure mold contamination does not exist and other offices had carpeting and baseboards replaced.
Hogan Lovells, an international law firm based in Washington, quickly moved after the flood into temporary offices in Coral Gables supplied by Quest Workspaces. However, the firm felt it needed to be closer to downtown Miami and was squeezed in the Quest space.
Hogan had been in the Sabadell building since 2000.
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