Tampa Commercial Real Estate | Florida Commercial Property

Tampa
Tampa fared the worst in the second quarter posting negative absorption of 296,000 square feet because of closings by major retailers. Small shop leasing helped, however, posting positive absorption of 26,000 square feet.

Despite the net absorption, the vacancy rate in Tampa stands at a relatively low 7.7 percent. Average asking rents fell 3.2 percent to $14.67 per square foot from the first quarter.

Click for the full report at Retail Traffic magazine

Date: May 28, 2010

BUYER: Kforce Services Corp. Tampa, FL

SELLER: iStar CTL East Palm — Tampa LLC

PROPERTY: 1001 E. Palm Ave., Tampa

PRICE: $28.5 million

PREVIOUS PRICE: $1.25 million, September 2000

PLANS, DESCRIPTION: Kforce Inc. purchased its headquarters in Ybor City for $28.5 million.

The price equated to $213 per square foot.

The four-story, 133,660-square-foot building was originally built in 2001. It occupies a 6.37-acre parcel and features a 4,200-square-foot fitness center, 100-seat cafeteria, coffee bars on each floor and an outdoor basketball court.

Kforce previously leased the building from iStar, a commercial real estate firm.

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Date: June 24, 2010

BUYER: MCA Enterprises Brandon, Inc

SELLER: Florida Wings Group, LLC

PROPERTY: Brandon Crossroads

PRICE: $2.6 million

PREVIOUS PRICE: $.7 million, January 2004

PLANS, DESCRIPTION: The property includes 2.01 unesable acres of land, and is improved by free-standing, 6,600 square foot Buffalo Wild Wings restaurant built in 2004.

The price equated to $394 per square foot.

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Comments:

There were also a couple of sizeable trades on apartment complexes, recently.  Providence Place apartments in Brandon, FL sold on August 4, 2010 for $30 million and Carrollwood Station Apartments sold for $18.9 million on August 6, 2010.  It is good to see some of these larger trades begin to happen.

The office vacancy rate in the Tampa/St Petersburg market area decreased to 14.1% at the end of the second quarter 2010. The vacancy rate was 14.2% at the end of the first quarter 2010, 14.1% at the end of the fourth quarter 2009, and 13.8% at the end of the third quarter 2009.

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Highlights from Report:

Results of the second quarter survey indicate that the Florida commercial real estate market continues to stabilize near or at the bottom. However, given the significant uncertainty that continues to hang over the general economy and particularly the state economy, most respondents believe we will hover along the bottom for the next several quarters.

Tampa-St. Petersburg

• Cap rates in the Tampa-St. Petersburg area are, on average, equal to that of the state, and range from 8.0% (Apartments) to 12.2% (Condo Conversion).

• Cap rate changes were mixed over the past quarter across property types, with the largest changes occurring in Warehouse (-0.47% change) and Flex Space (+0.42% change).

• Cap rate outlooks indicate that rates are expected to remain stabile across most property types in the next quarter.

• Required yields for Tampa-St. Petersburg are slightly higher, on average, than that of the state, 12.54% compared to 12.51% statewide.

• Required yields are highest for Condo Conversion at 20.4% and lowest for Office: Class A at 10.7%.

• Required yields increased across most property types last quarter. The largest shifts in required yields occurred in Condo Conversions (+3.44% change) and Free Standing Retail (+1.93% change). The largest decline occurred in Retail – Large (-0.85% change).

• The investment outlook is neutral to positive across property types, with the most positive outlook occurring in Apartments and the most negative outlook is in Condo Conversions.

• The outlook for Land Development appears to be neutral to negative for all land classifications with the exception of Land with Residential Entitlements which has an outlook of neutral to positive.

• Future occupancy is expected to remain stable for all property types except Free Standing Retail which is expected to decline further.

• Rental rates are expected to increase slower than inflation across almost all property types over the next quarter.

Comments: Certainly from our perspective, the market is stabilizing.    A relatively new occurrence is the emergence of the national and region retailers back to the market.  Doing deals?  Hmmmmm, not so much, but they do seem to be out sniffing the periphery of the market and testing what types of deals can be had.  This is a stark contrast to the same period last year, in which national and regional retailers were noticeably absent from our market and what little activity there was in the market involved primarily local-based, single location tenants seeking better deals or taking advantage of reduced rents by upgrading space.

While the office market appears to be stabilizing, high unemployment in the Greater Tampa Area will continue to be a drag.  Sub-lease offerings continue to weigh on the market, though new sublease offerings appear to have slowed to a trickle.  Displaced attorneys tend to be the most active in small spaces in the Downtown Central Business District (CBC).  Space that is close to the court house and or caters to the legal profession can be successful in attracting tenants.  Landlords must be open minded and creative in their efforts to attract tenants. It is our understanding that there is a substantially sized sublease space in the CBC that will come off the market shortly.  Expect further word in the near term.

Though not a scientific study, tracked in-bound, unsolicited requests in to our office from potential tenants/buyers seeking assistance with site location have increased noticeably this year compared to last.  It should be noted however, before landlords become too excited that the market is set to take off, that it would be near impossible for there to be less representation requests than 2009, which was a shockingly poor year.  We are cautiously optimistic moving forward, along with some teeth gnashing over longer term effects that the BP oil spill might have in our market.  All things considered, we have escaped relatively unharmed in the Greater Tampa Area, although hotel operators would probably strongly disagree.  Activity has increased and buyer/tenants are beginning to dip their toes in the market.  In the mean time, we will keep our fingers crossed and hope there is some carry through.

Attendees: Eric Odum and Brenda Dohring-Hicks, CEO The Dohring Group and Listing Broker for ENCORE!

Date: July 15, 2010

Subject: Downtown Tampa: ENCORE! Project

A 40+ acre mixed use redevelopment district in Downtown Tampa. ENCORE!’s city within a city concept unites the central business district with Ybor City, Tampa Heights and other neighborhoods.

EO: Good afternoon and welcome to another Market Report from Net Lease Commercial Advisory.  I’m Eric Odum, the principal and broker for Net Least Commercial Advisory in Tampa, FL, and today we have with us Brenda Dohring-Hicks for the Dohring Group.  Welcome Brenda.

BDH: Thanks Eric.

EO: Thank you very much for joining us.  Big news recently.

BDH: Big News!

EO: We have big news that the ENCORE! Project was approved recently and commercial real estate people got very excited, and the city got very excited, but a lot of the city of Tampa didn’t know what it was. Why don’t you just start from the beginning and tell us what the ENCORE! project is.

BDH: ENCORE! Is a brand new mixed use project….probably heard about it in the news the past couple of years as it was being formulated.  We’re going to end up with somewhere in the neighborhood of about 900 residences, residential units in the project, but it’s a mixed use project.  So it has commercial uses, there’s a site for a hotel; there’s a site for an office building, a couple of other commercial sites, one that we have ear-marked for a grocer.

EO: The entire project is on the East side of Downtown Tampa, correct?

BDH: That’s a good way to describe it – it’s on the NE side of Downtown.

EO: The NE side.

BDH: Yeah, people have been looking at maps lately to see where rail is coming in.  That’s where it is.  It’s on the NE side (of Downtown).

EO: Now, your involvement in the project is what?

BDH: We’re the broker responsible with our broker partner, Bill Eshenbaugh.

EO: So, Bill Eshenbaugh, the Dirt Dog.

BDH: The Dirt Dog. So the Dohring Group

EO: Ok

BDH: And as a brokerage firm, we specialize just in urban locations.  So this is what we do.

EO: Got it.

BDH: We reached out to Bill Eshenbaugh because he’s so good at land, and let’s face it, when you’re an urban broker not many opportunities you get to do 40 acres of land in an urban location, so we brought Bill on board and the 2 of us work as brokers.  We co-broke the entire thing.  There are opportunities for other brokers, because we have two things to sell right now.

Number 1, the grocer – we really want to get that grocer in.

Number 2, there was a site that was set up for the Housing Authority for an office building for their use. They have decided to go ahead and put that one up for other commercial use, because we believe the community needs it.

EO: In getting back to the terms of the players – you’ve got Bank of America, who really heads the project. You’re the broker. Who’s the contractor on the deal?

BDH: The contractor is ZMG Construction.  They are out of the Orlando area by home-base. It’s about a 1200 person National, and now International. They just got invited to go down to do some work in Haiti.  They have formed a partnership with Malphus & Son who is a local Tampa contractor.  So, the two of them now have a partnership – ZMG-Malphus.  They are on the street as the contractor which is responsible for hiring all of the subs.

EO: Ok, so you have an external, larger contractor and a local contractor.  And, of course, you and the Dirt Dog are the brokers and the Bank of America is the organizing entity, the driving force.

BDH: Yes, there’s a partnership between Bank of America and the Housing Authority. Bank of America is the managing member of that, but it is a partnership, ok?

EO: Ok, so between the Housing Authority and Bank of America. I heard you mention about multi family. You and I have talked about this in the past. I think a lot of people will be surprised, but there’s no a lot of discussion about….well there are all these towers that don’t have any people in them.  Let’s talk about that a little bit.  Because just north of us two blocks, we have two projects that everybody thinks are completely empty. So, let’s talk about housing in the downtown core.

BDH: Ok, well now, you know, those projects came out….. thank goodness they’re here.  Skypoint 100% sold out, and well occupied.  So, it’s not just sold out to the investors and nobody is living in them.  Many of those investors if they didn’t want to be in this themselves, at least have the spaces leased…The Element was built as a condo project, but luckily was able to go rent them before they sold any.  Its occupancy level is up in the low 80’s.

EO: Low 80’s – not bad for starving.  They’ve only been less than a year on the Certificate of Occupancy.  That’s not bad at all.  A lot of people were surprised to hear that because they just assume that you’ve got vacant buildings downtown and it’s really not true.  So there’s a need for this additional multi family in the ENCORE! Project.

BDH: There’s definitely a need.  The problem in the downtown area is finding affordable housing because it comes very expensive.  As we all know, the land or lack thereof, makes it very pricey.  By this project coming on board and the partnership and because of the basis on how they were able to acquire this land, get grant funding, get very creative funding from different, from the neighborhood stabilization funding, their basis is lower.  So, because of that strength from the financing, they can provide affordable housing.  And that’s going to make them a different player than a Skypoint or an Element is going to be.  So they are going to fill the niche because there are a lot of workers in Downtown, Tampa.  Everybody isn’t an attorney. I know you might find that difficult to believe.

EO: It is hard to believe, most of my office tenants, or clients are attorneys. But, there are other people besides attorneys in Downtown Tampa.  Talk about the transportation situation a little bit.

BDH: They always looked at transportation as an important piece as we started developing this property.  Let’s face it. It has entrance and exits to the Interstate right where it is.  So if nothing else had happened, it would still be good.  The Project is close to bus routes, and its walk able.  There’s no reason – I walk from my office which is what we call down in the core, up to this project all the time.  I don’t like to do it in 95 degree weather, but nonetheless, it’s walk able.  With the high speed rail that is coming in, it’s coming in due East one block from this property.  So, with that high speed rail that comes, what we’re all looking at now is the intermodal transportation piece that will be for Hillsborough County, and connecting….. is your improved bus service, your improved taxi service, your improved walkability to have people have pedestrian access back and forth.

EO: And the agenda that’s coming down the pike with the light rail, that’s going to be on the agenda for the transportation initiative, coming up at the end of the year, correct?

BDH: Correct.

EO: So you’ve got light rail, high speed rail, the regular rubber on road transportation which is all within very short distance from this new…

BDH: Less than a block

EO: Less than a block, so it’s going to be the center of the universe really in terms of Tampa.

BDH: It’s the center. Right now it’s the terminus for the high speed rail, and so everything else is going to emit from it.  So as we walk now.  A big part of this project is the park that has always been there.  There’s a linear park that has always been there.  Affectionately referred to as the “Bro Bowl”… this was the skate park that became very, very famous.  That park is going to be completely redone, so that will remain.  It will be a really nice park.  To the North of that, we’re putting in a Middle School.  This area, when we looked at what it needed, it needed a middle school.  Elementary schools are covered; everything is good, so now we’re going to have a middle school there.  The primary boulevard coming through the project,….. you know, “encore” means ‘yes, let’s do it again, bring back more,’….. The whole project is bringing back Central Park Village, which was a very vibrant part of North Downtown in years past, so we’re bringing that back.  Ray Charles Boulevard is the primary boulevard coming through the place, and the buildings are named things like “The Ella,” “The Fitzgerald,” you know those kinds of names….. “The Trio,” …..So, it’s really going to be the first time we’re going to have what we can call,  “a city inside of a city.”  We’re not alone. There are other cities that were able, but usually it’s something like we saw develop in Channelside, where there was an old industrial sector, and so it’s close enough to the city to be called a city.  But, Channelside has a distinct personality to downtown.  This is DOWNTOWN!

EO: Absolutely.  Now let’s talk about it from the broker standpoint.  Why should brokers pay attention to this project? Is there anything for the local broker community? Is there any way for them to participate?

BDH: Participate by bringing buyers for these parcels, typically about an acre in size, to put up multi family, put up an office, to find that grocer, to find that commercial piece – the new commercial piece is very excited to us because now we don’t have to put a corporate office there. Now we can put something that could be the likes of a drug store, a branch bank, coffee, fast food. There’s a prime opportunity.  Again, bring it back to where the rail is, as well.  So, some of those uses that might not have seemed to fit before because they were on the outskirts of downtown and now are at the epicenter of where all the people are going to be.

EO: In time frame, is this going to be 10 years out, 5 years out, what’s your timeframe for sinking the shovel?

BDH: Well, we’ve already started clearing, so we’re doing the entire infrastructure, and it’s a complete self contained.  This will be a (LEED) Gold status from the infrastructure.  I don’t think that’s been (LEED Gold) from an infrastructure standpoint. So, they’ve got their own water treatment plant, etc., etc.  All of that will be in the ground.  We must, by directive of the funding that we have, have more than 300 to 350 people living in units within 15 months now.

EO: 15 months! WOW! So you’re on roller skates…

BDH: There are a lot of people crawling all over that site right now. And with that, remember, these are mixed use buildings. So, it will be ground level retail. There are anywhere in the neighborhood of about 10,000 square feet per building that will be up and ready for someone to go into with some ready population within the next 15 months.

EO: That’s awesome.  I mean it’s really good for us to see some activity.  The last couple years, commercial real estate’s been tough, and so when  you start to see some new initiatives start to roll around, you start to get the feel that maybe we’re starting to pick up a little bit…. things are starting to move forward in the right direction.

Brenda, I’d really like to thank you for being with me today to explain the ENCORE! Project and hopefully our viewers had a chance to watch and get something out of it.  And, if somebody would like to get in touch, there’s an Encore site and I believe also your website, if you’d like to give us real quick idea how people can get in touch with you about the project.

BDH: Absolutely.  There’s a couple ways to do it.  http://www.DohringGroup.com. You can get a link there, but the best place to go is http://www.EncoreTampa.com.  All the info that I might have in front of me as I’m referring and taking a look is out there.  Information on how to get in touch with us direction is absolutely the best way.

EO: Brenda, thanks again so much, I appreciate you giving me the time.

BDH: You got it.

ERIC ODUM

www.FloridaTripleNet.com

813-514-1070

BRENDA DOHRING-HICKS

www.DohringGroup.com

www.EncoreTampa.com

Discussing SBA 504 Commercial Real Estate Loans

Finding Creative ways to Keep Business Moving in a Tough Economy

EO:      Welcome to another update on the market with Net Lease Commercial Advisory. Again, I’m Eric Odum, Principal at Net Lease Commercial Advisory and today, we have with us Scott Jacobsen who is with – why don’t you introduce yourself…

SJ:        NorthStar Bank, Commercial Banking Manager

EO:      Scott has been a banker in this area for ….gosh Scott, it’s probably been 22, 23 years now?

SJ:        At least…

EO:      So, you’ve been around a little bit and he (Scott) presented me the other day with an opportunity I thought was very interesting in the Commercial Real Estate market in terms of the financing.  Of course, there’s been a lot of discussion about illiquidity in the market.  We have our feelings about illiquidity.  It really has less to do, in my opinion, with the banks and probably more to do with the borrowers.  But, we’re going to talk about a program today that can help on some of those illiquidity issues.  So let’s talk about it.  It’s the Small Business Administration’s 504 Loan Program.  Why is this program a program that people should pay attention to, Scott?

SJ:        The 504 Program’s been around for a long time, as long as I can remember and there are some key components to it which if you don’t know it, is very attractive — One being the 10% equity requirement for the borrower, where most banks typically will require anywhere from 20 to 30% equity.

EO:      That has been going up recently (on traditional commercial loans), right?

SJ:        Yes, that’s been going up – banks are requiring more equity (on traditional loans).  Everybody knows rates are so low today and the SBA rates are very low as well, and the way the program is set up, the SBA takes 50% of the loan amount and actually fixes in a rate, and that rate is in the low 5’s (percent), and they lock that in for 20 years.  So you get a 20 year fixed rate on the SBA’s portion of the loan, which is half of it, and 40% portion of the loan which the bank holds is locked in anywhere from 5 to 10 years.

EO:      So you still have a balloon, its just there’s a smaller portion of the amount that’s going to be subject to the balloon.  The government portion is a 20 year fixed loan which is pretty attractive.  I know dealing with a lot of small business owners when they’re purchasing their property…physicians and lawyers too, their thought is that ‘gosh in 5 years, I don’t know what the interest rate, I want to be a little bit more sure about what my payments are going to be’ and this seems like a really good way to stabilize their payments over that period of time and not worry about the balloon, the adjustment, interest rate, that sort of thing.

EO:      Let’s talk a little bit about who you think might be suited for this type of a product.

SJ:        It can be and For-Profit business that…we’re going to look at underwriting this credit to typical standards, which would be: a business has to be performing well, even in this tough environment, has to be in business for at least 2 or 3 years, has to have a little equity in their balance sheet, and you know, doctors, professionals, manufacturing distributors, they all qualify.  Where this program is really helpful, is if there’s something with the credit that just doesn’t quite get the approval in a traditional manner; the SBA program can push it over the top, because the bank actually at the end of the day, the bank is in at 40% LTV and the SBA is in for 50% so the capital or the equity so that the bank’s first position is very well secured.

EO:      So the SBA is essentially taking away some of the risk of the bank which makes it a more attractive deal for the bank to go ahead and make the loan.

SJ:        Yes, absolutely.

EO:      I think you talked about there was a chiropractor you had worked with…

SJ:        Yes, we had a case here just recently….. we had a Chiropractor that owns a half dozen locations, sorry, leases a half dozen locations throughout Tampa Bay and felt like this was a great time to negotiate those leases to purchase and was a little concerned about putting 20 to 30% equity into the traditional financing and thought this SBA program would be a good avenue for him to acquire those offices, lock in a fixed rate for 20 years for half of it and take some of the risk out of the balloon which you mentioned could sometimes give heartburn to clients when they know there’s going to be a balloon after 5 or 10 years.

EO:      Great!  So let’s talk about in terms of size…can you do this with $10k, can it be $50mil, what are the size requirements?

SJ:        Minimum size is $125k and maximum is $10mil.  So it’s pretty wide – it covers most transactions.

EO:      Most transactions. In Tampa, your typical physician practice was less than $1.5mil. Certainly more than the $125k – it’s going to be right there. I don’t want to make this sound like it’s only for physicians, because of course, you guys have had experience with manufacturing companies and distributors, but it seems to me that the professional practices tend to gravitate toward this more. Maybe that’s because they tend to be more balanced in the Tampa Bay area toward the professional industries.

SJ:        Well particularly if you’re a physician or anybody for that matter – if you’re going to be in your building and be there a long term – one of the requirements is that you have to occupy at least 51% of the space so it’s an owner occupied facility that we’re talking about.  But if you’re going to be there for a while and if you’re going to pay somebody, you might as well pay yourself.

EO:      It’s not a speculative investment then, this is something for owner occupied’s, running their business, has a sound business, has an established business, so that is what this loan program is really all about.  Let’s talk about some of the folks that perhaps can’t get this loan, because we talked about who can. Let’s talk about some who can’t.

SJ:        The ones that jump out at you: If you’re a not-for-profit corporation, you do not qualify, and if it’s real speculative then you wouldn’t qualify either.  Those are really the two big ones, and there are a few other ones: gambling establishments.  You know!  .….the obvious ones that jump out at you.

EO:      Ok, very good.  So, how does this compare with the fees to traditional bank financing?

SJ:        The fees…… the SBA’s got some programs now that they’re reducing fees to make it more attractive for borrowers.  There is a little over a 2% fee on the SBA portion to run it through and so that has to be an embedded cost, so that at the end of the day, if the SBA’s running 20 years on their fixed rate portion at around 5.25% then throw another 2% of closing costs,  you’re going to be somewhere in the 7.5% range all in which is still very, very attractive.

EO:      Then you throw in the balloon-free government portion, the SBA portion of it and it becomes pretty attractive.  So you have the origination fees which are a down side, but then of course you get extended lower rates through the term….. even with the fees included, it’s relatively inexpensive debt.

SJ:        Now, you compare that – it you walked into a bank today and asked for a traditional owner occupied mortgage, putting 20 or 30% down, and look at a 5 year balloon, our rates would be somewhere in that 6.5% range fixed for 5 years, and we’re going to charge anywhere from .5pt to 1pt so your cost is somewhere in that 7 to 7.5% range anyway for 5 years, where you can lock in the SBA portion for almost the same time but for 20 years.

EO:      Great. Terrific.  Well, why don’t we just shift a little bit here and summarize.  In terms of why we want to do this or why we at least want to consider this is

1. the SBA’s guaranteeing it, so you’re able to be perhaps a little bit more aggressive on underwriting than you guys typically would be.
2. It’s only 10% down and the government portion of the debt is for 20 years amortization with no balloon.

So, those are certainly the benefits to it.  People that we’re looking for (the folks you want to try to lend to) they’re going to be anybody with a track record, purchasing real estate, between $125k and $10mil. Is there anything else that I’m leaving out here in terms of summarizing this program?

SJ:        We haven’t really talked about – but there is the opportunity of throwing some of the equipment into the acquisition purchase and roll that into the loan amount. So, if there’s a capital intensive business or any business for that matter, we can roll that cost into the SBA as well as a significant portion of the fees can be rolled into the SBA loan as well.

EO:      Oh, that’s nice.

SJ:        So, there’s some great creative ways to make this worth while, and if you’re a business owner that your in a lease and you have the option to buy out that lease, we’ve seen a lot of activity recently as people recognize it’s a good time to be a value shopper for real estate and if you can lock in these rates for long term, it’s a good time to move on it.

EO:      Good point.  Scott, I’d like to thank you again for taking the time today to talk to us, and hopefully you guys got something out of it.  If anybody wants to get in touch with you Scott, how would they reach you on this program?

SJ:        Call me at 813-549-5030, or you can email me.

EO:      NorthStar Bank is located in the Beer Can building in downtown Tampa.  Again, we appreciate you joining us today and hopefully you got something out of it.  Feel free to contact Scott if you’d like to have more info on the 504 SBA Lending Program. Thank you again, Scott.

SJ:        Thank you, Eric.

An affiliate of investment firm W.P. Carey & Co. paid $57.2 million for two buildings in the Westshore area that are leased by JPMorgan Chase Bank N.A.

Carey affiliate Corporate Property Associates 17-Global Inc. disclosed the purchase price in a filing with the Securities and Exchange Commission Tuesday, one day after Carey published a release about the purchase. (…..Full Story on Loopnet)

We reported on the original building sale in the Westshore SubMarket of Tampa earlier this year.

Well it was rumored for several weeks prior to execution and it came to fruition May 3rd of this month.  The Church of Scientology acquired Ybor Square, one of the most notable and significant historic landmarks in the Ybor District.  Ybor Square had been owned by Zybor Inc.  The property sold for $7.05 million. Zybor purchased the building in 2000 for $3.9 million, not a bad profit on a building for which discussed plans never seemed to fully materialize.

The building was constructed as a cigar factory by Vicente Ybor, the father of Ybor City, in 1886.  In the early days of Ybor, Jose Marti, the legendary father of Cuban Independence frequently waxed eloquently about the need for Cuban independence on the steps of the entrance to the building.

Needless to say, because the buyer is the Church of Scientology, the sale and zoning changes are controversial.  The zoning changes seemed to be hurried through, and allegedly, places of religious assembly are prohibited in that part of Ybor.  Because the Church is a not-for-profit, the city loses all property tax revenue.  Additionally, local residents are concerned that the increased presence of the Scientologists will change the vibe of Ybor and the Church could further restrict access to the space.  The most notable tenants in the property are Creative Loafing and the Spaghetti Warehouse.

Sublease space, rented property in which the tenant gives up all or a portion of the designated space to a 3^rd party, continues to be a hot topic in the commercial real estate market in Tampa.  Although absorption rates have stabilized somewhat in the Tampa area, there still remains a considerable amount of sublease space in all the submarkets.  Last we checked, West Shore had over 500,000 sq feet in available sublease space alone.

There is no question that subleased space can be considerably less expensive than renting outright from the landlord.  Owners need to maintain pricing on their properties not only for future negotiations with other tenants, but also for refinancing with the banks. Sublessors, however, do not have the concerns of precedent that extremely low rental rates would create for owners.  Sublessors are only concerned with reducing the costs of their current lease commitment.

Here are some examples of deals we have either been involved with or know of in the last year:

We know the primary reason subleasing is attractive….pricing and affordability.  But, there is downside risk that should be considered.

1. Default by Sublessor – The legal agreement with the owner of the property is with the original tenant.  More often than not, the deal is structured so that the sublessor is paying the difference between their rent agreement with the owner and their agreement with the sub-tenant.  In the event the sublessor defaults to the owner, the owner will come to the subtenant to pay for the entire lease.  In all probability, the sublessor defaults because their business is in financial jeopardy, making the likelihood of financial remedy improbable.
2. Chargeback’s/Expensive Provisions – Leases can be very complicated.  It has always amazed me the types of poor deals that people negotiate (usually businesses trying to negotiate without the assistance of a good broker or attorney).  The Sublessor might try to pass on these disadvantageous terms to the subtenant.
3. Term of the Sublease – The vast majority of subleases is short term (less than 30 months).  Short terms can be terrific for a start up business or a company that is rapidly expanding.  For an established company, however, a short term can mean higher expenses.  Moving a company can cost HUGE dollars and these costs should be considered in the analysis of whether a sublease is a good fit or not for any given business.

Maddux Report Stops Circulation

A mainstay of the Tampa Bay business scene for more than 26 years, the Maddux Business Report has decided to cease further print publication and distribution of its magazine.  From its infancy, the “Maddux Report” was a friend and reliable source for all things happening in commercial real estate development, construction and leasing in the Tampa Bay market place.

Eventually, the magazine expanded to cover a broad scope of news in the business market, but as a commercial real estate broker and lender back in the late 80’s and early 90’s the publication was an important and useful tool for most of my professional life. One did not have to be much of a soothsayer to predict that this day was coming.  Print media across the country has taken a shellacking by news distributed through the Internet.  Compounding with the fact that the area is still in the grips of the worst economic downturn I have witnessed in my lifetime, it was all too much for the magazine to endure.

I will miss the regular recaps on the commercial development market (although permits have been shockingly low for almost 3 years now) and I continue to use the directories for information on developed retail, industrial and office properties around the area.  I know this information is available on Loopnet and CoStar, but call me old school.  I like picking up a piece of paper and flipping through color pages to find the property for which I am looking.

I wish the publishers good luck.  It sounds as if they have some new project on the Internet (http://www.madduxpress.com).  I hope it works for them.  I will miss the service they provided over the years.