Parkway Property Investors teams with Partners Group to buy some familiar Tampa-area office properties
In a move that demonstrates a significant vote of confidence in Tampa’s office market and represents one of the largest commercial real estate transactions in the area in the past year, a joint venture between Parkway Property Investors and Partners Group has acquired a handful of 1980s vintage office buildings for $157 million.
The portfolio sold to PG-PKY Fairway JV LLC is unusual in that it contains a mix of both a downtown Tampa and suburban Westshore Business District assets.
In all, Orlando-based Parkway and Partners, of Switzerland, purchased five buildings containing 756,138 square feet, along with a roughly six-acre parcel entitled for a future six-story, 200,000-square-foot office building.
The portfolio includes the 19-story WeWork Place, at 501 E. Kennedy Blvd. in downtown Tampa, together with the 11-story Westshore Corporate Center, at 600 N. Westshore Blvd., and a trio of buildings on Cypress Center Drive.
“The demand for well-located, institutional real estate remains high,” says Mike Davis, a vice chairman of commercial real estate brokerage firm Cushman & Wakefield, who together with the firm’s Rick Brugge, Rick Colon, Zachary Eicholtz and Ryan Jenkins negotiated the sale on behalf of former owners Angelo, Gordon & Co. L.P., of New York, and Boca Raton-based Commercial Florida Realty Partners.
“And at the same time, Tampa has risen up on a lot of radar screens over the past three-plus years, especially,” Davis adds. “Some of that is because of Water Street Tampa, part of it is the overall demographic shift and population and job growth.
“There are lot of economic drivers at work, and as a result, investment capital is flocking to be a part of that growth and the subsequent rise in office rental rates.”
Parkway, which did not return telephone calls for comment on the acquisitions, knows the Westshore buildings well.
In 2012, as a publicly traded company at the time, it bought the Westshore Corporate and Cypress Center I, II and III buildings before selling them three years later for $66 million as part of a corporate shift to the Angelo Gordon and Commercial Florida venture.
Commercial Florida and Angelo Gordon bought the 296,082-square-foot 501 E. Kennedy building in February 2016 from IP Capital Partners and Silver Cos. for $42 million.
Parkway and Partners obtained acquisition financing for the portfolio from Berkadia Commercial Mortgage. The pair’s $121.5 million loan carries a three-year term with possible extensions and a floating interest rate, and represented a 65% loan-to-value, the lender says.
Berkadia Senior Managing Director Charles Foschini, who together with the company’s Christopher Apone arranged the debt placement, says the loan “not only allowed for the purchase but provided for the future leasing and capital needs of the property.”
“Flexibility was built into the loan to permit the opportunistic release and future sale or finance of the assets as the business plans were met building by building,” Foschini added in a statement.
The portfolio, which was built between 1981 and 1988, was 91% leased at the time of the sale.
In Westshore, primary tenants include Amscot Corp., Progressive Insurance, Federated Mutual Insurance and American Express. Downtown, the 501 E. Kennedy building is anchored by Banker Lopez Gassler P.A., GE Capital, Woodforest National Bank, BMO Harris Bank and the Florida Office of the Attorney General.
During its ownership, Angelo, Gordon and Commercial Florida invested nearly $13 million to upgrade an atrium, add a new fitness center and dining facility, install energy-efficient air conditioning systems and LED lighting and renovate elevators in the Westshore properties, and replace skylights, modernize elevators and put in new streetscaping downtown at 501 E. Kennedy.
But its most significant accomplishment at 501 E. Kennedy occurred through leasing efforts. Faced with a departure by law firm Fowler White Boggs P.A. that sent occupancy plummeting from more than 90% to 57%, Commercial Florida Realty shored up the building by landing co-working giant WeWork to 60,000 square feet in the property.
WeWork is expected to occupy three full floors in the building — renamed WeWork Place as a result of its commitment — beginning next spring.
“We accomplished our business objectives and exceeded our financial projections, so it was just time to sell,” says George Sacks, Commercial Florida Realty’s president.
For Parkway, the purchases mark a return to owning multiple properties in Westshore.
In 2016, its holdings on Rocky Point and a series of buildings known as Corporate Center at International Plaza, near Tampa International Airport, were folded into Cousins Properties’ portfolio through a $2 billion merger.
In all, the now privately held company today had a portfolio prior to the Angelo, Gordon and Commercial Florida Realty deal valued at $3.5 billion containing more than 12.4 million square feet, clustered in Houston, Miami and Raleigh, N.C., according to its website.
At $157 million, the Parkway and Partners’ purchase ranks among the largest commercial real estate deals of 2019 along the Gulf Coast.
The biggest transaction to date, by comparison, came this summer, when IP Capital and GEM Realty Capital closed on the 444-room Grand Hyatt Tampa Bay and the adjacent 11-story Baypoint Plaza office building for $226 million.
As for Florida Commercial Realty, Sacks says that despite the sale the company remains “very bullish on Tampa.”
“Westshore has had tremendous rent growth over the past three years, and we believe that downtown Tampa is ready to explode,” he says. “That will have a tremendous spillover effect for the whole area, so we’re seeking other investment opportunities, definitely.”