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Business Observer Friday, Apr. 15, 2016 5 years ago

Exit strategy

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Osprey Real Estate Services spent years amassing an enviable office portfolio along the Gulf Coast. Now, it's for sale.
by: Kevin McQuaid Commercial Real Estate Editor

One of the Gulf Coast's largest office landlords has quietly begun seeking offers for more than a dozen properties it owns in the wake of a lawsuit and a breakdown in long-standing partnership relationships.

Osprey Real Estate Services, which owns more than 1.5 million square feet spread from Tampa to Sarasota, has floated a trio of offering packages to potential buyers through commercial brokerage firm Holliday Fenoglio Fowler L.P. in Miami and Charlotte, N.C., according to documents.

HFF has not assigned specific asking prices to any of the buildings being offered, though a package pertaining to 13-story Sarasota City Center and a 23-story, downtown office tower in Charlotte does note the buildings carry $113.3 million in total debt with an interest-only loan that matures in April 2017.

Commercial real estate analysts say the Osprey portfolio represents a unique opportunity for a bulk buyer to enter the Gulf Coast market by acquiring relatively high-caliber assets that have considerable upside potential.

“There's a huge opportunity here,” says Anne-Marie Ayers, a first vice president with commercial real estate services firm CBRE Inc., in Tampa. “These are great locations, though some of the buildings need renovations. But even there, these are value-add plays, which a lot of buyers are chasing now.”

But Osprey has had difficulty shedding some of its assets — despite significant current market demand — because of a complex debt structure that connects each individual property and the partnerships behind them, say industry sources with knowledge of the company.

As a result of the cross-collateralized debt that interlocks each Osprey building, each partner involved in each asset must agree to sell as it pertains to every transaction.

Osprey officials in Sarasota and Michigan did not return telephone calls for comment on the potential sales, and HFF's Herman Rodriguez, a senior managing director in Miami, declined to comment.

Founded in 1998, Osprey began purchasing Florida assets en mass just prior to last decade's unprecedented commercial real estate boom. At one point, the company — a collection of investors led by Michigan attorney and investor Mike Biber — controlled between 3.5 million square feet and 5 million square feet.

Today, Osprey's portfolio contains 24 buildings totaling about 2 million square feet, according to its website.

Of those, Sarasota City Center is the largest, at 245,293 square feet, followed by the 18-acre Independence Business Park, also in Sarasota, at 205,000 square feet, and the Westlake Corporate Center I and II, in Tampa, which total about 171,000 square feet.

Cracks in Osprey's veneer began appearing last fall, when Cushman & Wakefield announced that Wendy Giffin, who had been president of Osprey's St. Petersburg and Tampa operations for a decade, had joined the brokerage firm.

While at Osprey, Giffin completed $200 million in lease and sales deals, earning accolades from the Florida Gulf Coast Association of Commercial Realtors as a top producer from 2008 to 2012.

“Her ability to leverage her expertise and knowledge of the Pinellas and Manatee commercial real estate markets will make her a great partner to our clients and her colleagues,” Cushman & Wakefield Managing Director of Investor Services Tim Rivers said last September.

Giffin says she was not told why Osprey had decided to try to liquidate its Gulf Coast portfolio.

“I knew they were in a transition period,” Giffin says now. “I was a little surprised by the timing of it, but they never informed me as to the why. But I think they're a terrific company, terrific people, I don't have a bad thing to say about them, and they have a great portfolio of mainly Class A holdings.”

Around the same time, Osprey and HFF released the first of the trio of investor packages, outlining details of the Sarasota and North Carolina buildings for sale.

“This portfolio offering represents a rare opportunity to acquire two prominent institutionally owned and maintained assets and over (772,000) rentable square feet in urban in fill locations across the Southeast,” HFF noted.

A second offering package containing nine buildings in all — eight in Tampa and its suburbs and one in Lakewood Ranch — followed shortly thereafter.

The package included the Orion Center; Westlake Corporate Center; Palm Court at Hidden River; Lakeview at Hidden River; Tampa Oaks I; and a fully leased, 100,000-square-foot building at 9000 Town Center Parkway, in Lakewood Ranch.

Debt on at least some of those buildings matures later this year, say brokers who have seen the package.

A third package, containing Osprey holdings clustered in Sarasota, including the Live Oak Business Center; Cattleridge Corporate Center; Live Oak Commerce Center; Cattleridge Business Center; Osprey Commerce Center; the Live Oak Corporate Center; and the Live Oak Office Center came on the market in January.

And while the offering packages came as a surprise to many in the commercial real estate industry here, Osprey's problems dated back several years to internecine issues between partners in Michigan.

In August 2010, an entity known as Osprey East formed by Webber Investment Co. and Webber Development Co. — who were at one time Biber's clients — to invest with Osprey filed a lawsuit against the Biber-led Osprey S.A.

In their case, they alleged Osprey S.A. had breached a contract and its fiduciary duty and committed civil conspiracy to convert or embezzle beginning in 2006, when Biber and Osprey S.A. “began diverting large sums of money to themselves,” according to documents from the State of Michigan Court of Appeals.

It also stated that Osprey was guilty of conversion and unjust enrichment, and that Osprey S.A. partners had committed “fraudulent misrepresentation,” “legal malpractice, negligence and innocent misrepresentation.”

Biber, who now controls Lyon Properties Associates, officially left Osprey in June 2011. He could not be reached for comment.

Despite the legal troubles, Osprey has had some success in selling limited assets.

In November 2014, Osprey sold its 17-story First Central Tower, in downtown St. Petersburg, to Feldman Equities and Tower Realty Partners for $29.1 million, records show.

Feldman and Tower proceeded to invest $10 million into the 250,000-square-foot building, which today is fully occupied.

Osprey also sold a tract of land in downtown St. Petersburg to American Land Ventures, which is planning apartments on the site.

CBRE's Ayers contends investors could have similar success with other Osprey assets, such as Sarasota City Center.

“It's underperforming to the market there; it's more than 15% vacant,” she says. “It's a great opportunity to buy and invest capital and drive up occupancy. Tenants today want open space plans and significant light. New carpet and paint simply won't do it anymore. Many businesses are willing to sign longer-term deals but they will only do so if their space properly reflects their corporate image.”

- K.L. McQuaid

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