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Commercial Real Estate
Business Observer Friday, Sep. 7, 2018 4 years ago

FDOT slowly moving ahead on Westshore purchases

State transportation plans for intermodal, right-of-way improvements in Tampa inching forward
by: Kevin McQuaid Commercial Real Estate Editor

State transportation officials made a big splash in early 2016 when they purchased the Doubletree by Hilton Tampa Airport Hotel and an adjacent restaurant near the Tampa International Airport for $45 million for a future intermodal hub.

Around the same time, the Florida Department of Transportation also sent ripples through the Westshore business district near the airport with plans to acquire as much as 700,000 square feet of office space for an Interstate 275 expansion.

Last August, the agency spent $35.7 million to acquire the three-story Centrepointe office building in Westshore from Boston-based TA Realty for that program, which also involves State Road 60 right-of-way. The 5100 W. Lemon St. property contains 163,378 square feet.

But two years after the hotel deal was expected to usher in a wave of purchases aimed at transportation improvements — at least on the surface — not much has happened on either the intermodal or right-of-way front. Both programs continue to inch along, awaiting final analysis reports, funding and the political will to push them forward.

Last year the department began negotiations to acquire the 12-story Westshore Corporate Center, at 600 N. Westshore Blvd., but talked with New York-based owner Angelo Gordon & Co. ultimately broke down.

Kristen Carson, an agency spokeswoman, says the department is “not actively purchasing ROW” but would be willing to have discussions with landlords who are interested in selling their properties.

Meanwhile, the department continues to grapple with whether to bolster the area’s public transportation by proceeding with a high-speed bus transit line or light rail, or some other mode of transport.

That has put any potential closure of the Doubletree on hold, at least for now.

“Some people feel the state should pursue a light rail option, while others advocate for a bus rapid transit system,” says Ming Gao, the department’s Intermodal Development Manager.

“At this point, we’ve not identified which direction we’re going to go,” Gao adds. “The station for whichever path we take has been identified, but the connection to it hasn’t been fully outlined as yet.”

What is known is that the Doubletree will serve as the eventual hub for any public transportation that is developed, and that additional properties won’t be required.

That’s because the 489-room hotel occupies roughly nine acres. Intermodal sites typically require just over half that amount, officials say.

“Normally an intermodal site calls for about five acres, so the hotel and restaurant property more than fits the bill from that standpoint,” Gao says.

Under terms of the sale with a Blackstone Real Estate affiliate that continues to operate the hotel, FDOT was to receive an estimated $2 million-plus during its first two years of ownership of the 4500 W. Cypress St. property. Of the overall amount, Blackstone was to pay the department $900,000 in base rent.

FDOT signed a two-year lease to provide it with flexibility to complete an intermodal study of the Westshore area. Carson says in an email that the study is ongoing.

Officials say they bought the hotel in part because of its strategic location near the airport, Interstate 275, Interstate 75 and Interstate 4.

"Tampa up until now has been known as a place to get in a car, not a place for public transportation.” — JLL Senior Vice President Ryan Vaught

But cost was also a major factor, both then and now. The Doubletree, despite its $45 million price tag, was the least expensive of the options FDOT officials considered.

Penny Anthony, an FDOT district right-of-way manager, told the Business Observer in May 2016 that the purchase made sense in part because officials suspected the price of the Doubletree would rise.

“There was no doubt that the cost would have been substantially more than what we paid in the future,” Anthony says.

Those predicted price hikes have certainly come to pass, amid record job growth and a lack of new office construction, which combined have pushed Westshore vacancies to single digits and rental rates up by double digits over the past four years.

Any further acquisitions, commercial real estate brokers say, would likely cost the department considerably more on a per square foot basis than they would have in 2016, or even last year — despite plans for new office product in the submarket on the horizon.

“We’re certainly seeing record high prices for all property types in the Tampa area,” says Ryan Vaught, a senior vice president with commercial real estate brokerage firm JLL, in Tampa.

Vaught recalls that when FDOT first announced plans to acquire Westshore office space, many developers considered it a boon for the district and a potential catalyst for new office space, as FDOT tenants scoured the market for new quarters.

“Remember, FDOT was not looking to buy Class A properties,” Vaught says. “They were looking at older properties for the most part.”

But as purchases have stalled, Westshore landlords have largely retreated to relying on market fundamentals to justify new projects.

Since then, Vision Properties at Renaissance Center, Metropolitan Life at MetWest and Cousins Properties have pushed ahead with plans for new office space, and several other land owners are contemplating new development in the Westshore suburbs.

“The conversation as it relates to FDOT and what they might acquire tends to go through peaks and troughs,” Vaught says. “But there’s been a lot of talk about what will happen if FDOT moves forward, and what that would mean for the office market.”

He supports the idea of enhancing public transportation in the region, however, and contends such a network would further corporate relocations to the area.

“Improving the transportation infrastructure would have a number of positive benefits from a commercial real estate perspective,” Vaught says. “First and foremost, obviously, is it could reduce traffic congestion.

“It would also elevate Tampa’s place on the collective radar for corporate relocations, I believe. That’s becoming a necessary part of a modern city and a desire from tenants like Amazon and others. Tampa up until now has been known as a place to get in a car, not a place for public transportation.”

Even as plans for public transport of some sort continues, road improvements aimed at reducing congestion for cars proceed, as well. Centrepointe’s planned demolition is now scheduled for 2021, though officials acknowledge it may be delayed.



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