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Sometimes it pays to take risks in commercial real estate — especially if the market is beginning a significant upswing.
Take the case of the Cory Lake Professional Center, for instance.
Owner CLPC LLC garnered a 206% gross profit recently on the Tampa complex when it sold the eight-building center at 10311 Cross Creek Blvd.
The Sarasota investment firm didn't have to wait patiently through years of hand wringing for the asset to appreciate, either: CLPC had acquired the center for $4.1 million in December 2013 -- just 33 months earlier.
Nor did it have to wait long for the huge return on investment once it decided to sell. Cory Lake was under contract for just 30 days prior to the completion of the $8.45 million deal.
Instead, Cory Lake's story is a classic case of location and timing, of methodically bumping up occupancy and strategically investing capital. It is also a tale about the value of experience.
“I'd say we're very happy with the way the transaction worked out,” says David Shukovsky, a retired Sarasota attorney who was a partner in CLPC.
“My partner and I felt like we had done as much as we could do there, and with the market situation being what it is, it was a good time to sell.”
It wasn't always that way.
Cory Lake was built on 6.2 acres in 2003, a series of single-story buildings totaling 78,182 square feet in the so-called “New Tampa” area that attracted a mix of office and retail tenants.
In 2006, the heart of the previous decade's real estate run-up in prices, it sold for $7.87 million, according to Hillsborough County property records, financed by commercial mortgage-backed securities debt.
Trouble began a year or so later when property values started to fall and new deals shriveled up. Cory Lake's tenants, many of whom were mortgage brokers or had other ties to the residential real estate boom, stopped paying rent and then left.
As a result, the center's owner was unable to meet the CMBS debt obligations, and the property reverted to a special servicer to try and keep the loan from sinking further into default.
“The center was a victim of the economic downturn,” says Michael Winters, a former Cushman & Wakefield broker who founded Osceola Partners, a Tampa commercial real estate firm.
“It was a mess,” says Shukovsky, who came to know the property as a partner in a discount vitamin store that occupies space in Cory Lake.
In April 2009, Winters was appointed Cory Lake's receiver. He reconstituted a property owner's association to control the direction of the center, and together with Osceola's Sheriar Khorsandian and Lisa Hyde Ferich formulated a plan to bring Cory Lake back.
It was a formidable task.
“The challenge came in getting reasonable lease terms in a down market,” says Winters, Osceola's president and CEO. “The property is on the edge of a suburban area, so leases were perishable.”
At first, Osceola was forced to execute short-term deals just to keep the property afloat.
In May 2012, Wells Fargo -- the trustee for the CMBS debt — foreclosed.
By the time CLPC stepped in to buy Cory Lake from the lender in late 2013, occupancy had dropped to 70%.
But then the tide turned. The area around Cory Lake rebounded. New single-family homes were built, as were apartments and town homes -- all of which needed the service-oriented businesses that Winters and his team had moved into the center.
At the same time, CLPC embarked on a capital campaign at Winters' direction to paint Cory's Lake's buildings, repave its parking lot, correct deferred maintenance and make other improvements.
“We were able, eventually, to do longer-term deals with tenants, who could see the investment the owner was making and the growth of the area,” Winters says. “That was a large part of where the increase in the value of the property came from.”
Earlier this year, Shukovsky and his partner tapped Osceola to sell the property. By then, Cory Lake's occupancy had jumped to 91%.
CLPC II LLC, a Tampa-based investment firm that also had a relationship with Osceola, jumped at it.
“Because we had had the leasing and the management of Cory Lake for so long, and the buyer was comfortable with us, we were able to go over everything very quickly,” Winters says.
From the time a contract was signed until closing, just 30 days had passed.
“It's the fastest we've ever done a sale, let me tell you,” Winters says. “But we had control of the information, the property was clean and we were ready to go.”
Buyer Don Balaban of CLPC II is pleased as well.
“We plan to maintain it the way it is, and keep the tenants there happy,” he says of Cory Lake. “We like that area and the people. New Tampa is a really good area to be in.”
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