Tampa Commercial Real Estate | Florida Commercial Property

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.

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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.

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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.

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