Tampa Commercial Real Estate | Florida Commercial Property

Recent foreclosed commercial properties in the Greater Tampa Bay area, November and December 2010.

Sample of Foreclosed Commercial Properties – Hillsborough County, Florida

Attendees:        Eric Odum & Bob McDonough, City of Tampa Urban Development Manager

Date:                December 29, 2010

EO: My name is Eric Odum, I’m the principal broker at Net Lease Commercial Advisory, and welcome to the Market Minute. Today we have with us, Bob McDonough, who is the Urban Development Manager for the City of Tampa, correct?

BM: Correct, Downtown & Channel District.

EO: Downtown & the Channel District. Well, thanks so much for doing this today, Bob.

BM: Certainly.

EO: I want to talk a little bit today about some of the changes that are going on downtown….how they affect business, the commercial real estate market downtown and how all these things are coming together to help move us in a different direction or hopefully to advance us. Most noticeably, when people come downtown I hear, because I lease property all over the area, there are three things that have always been an obstacle for people coming down, one is the traffic and the traffic flow seems to be very confusing. Two, is the ticketing situation, seems to be a pretty aggressive. People are afraid they are going to get a fine, and then three, the coin meters have been a challenge.  People don’t, ….this is 2010, and people don’t walk around with pockets of coin anymore, so it’s been more of deterrence for people who really want to come downtown.  Noticeably, there’s been some changes that have been going on with regards to, …well, let’s focus first on the parking. What are some of the changes are in regards to that.

BM: Yeah, we’ve taken a quantum leap into the modern age, the city studied it for several years.  We did requests for quotations, requests for information.  We went out and spoke to other cities all across the United States about what was successful and was not successful, and we settled on a standard parking electronic meter which accepts coins as well as credit and debit cards. We had a bad model, again, we were using 1930’s …1940’s technology in our downtown which required lots of coins, and if you didn’t have the coins you got a traffic ticket. When I first moved to Tampa it was $1.00.  Currently a parking ticket is $35.00.

EO: It ruins your day.

BM: It ruins your day.  You know, the parking division at one time was 25 to 30 percent of the Parking Division’s revenue stream. It’s a bad model. We want to encourage people to come to downtown, not discourage them.

EO: And get sales tax out of it as opposed to…

BM: Well, you know what?  Actually electronic meters generate more income for you.  People are saying ‘I only had 75 cents so I put .75 in the meter.  When I’m using a debit card, I can go ahead and put in 2 hours, 3 hours, and not have to worry about it. And so, that was one of the benefits.  It also gets rid of some of the visual clutter of all those heads that were there.  It’s environmentally friendly.  We have solar collectors on it, it does not necessarily – and it’s interesting because, one of the technologies out there prints the little paper ticket.  You put it on  your dash board….Well, it does two things: one it creates more waste in the waste stream, so it’s not really environmentally friendly, and two, you have to go back to your car.  So, you parked at one end of the block. The machine is on the other end.  You get your ticket.  You have to go all the way back to your car, which if you have a lot of time that’s fine, but on a rainy day, people don’t want to do that. So, that was one of the reasons we picked the machine we did. And one of the nice benefits is, that if you park in space number 62 and you go someplace else for your meetings, …. You decide to have lunch but you really know that the time is going to run out…

EO: And you’re three blocks away…

BM: 4 blocks, 10 blocks, anywhere downtown, ….You can go to another one of the machines and add time to that space, from anywhere downtown.

EO: That’s terrific. Normally you just leave

BM: They say, “The heck with it! I’m not going to stay downtown.  I’m not going to stay for lunch. I don’t have any more coins. I’m going to leave!”  It makes it user friendly. We have…. the downtown today is not what it was 20 years ago. At 5 o’clock, the carpet was rolled up and we closed down. We have people who live here now, and because of that, to make it more attractive to live downtown, we want some more merchants and more retailers.  You have to have curbside friendly parking for those folks. That was another driver…..trying to make downtown more user friendly for the people who live here, for the people who do business here and the people who visit here.

EO: Now, for those folks that might be technologically challenged, I understand that there is going to be some sort of holiday provided (with no ticket)….. A warning system that’s given, and some instruction that’s given too, in terms of helping them through the process. So it’s not a situation where they’re going to be intimidated by the technology. …..”I’m not going to come downtown because they have those newfangled machines and I’m going to get a ticket. I just know I am!”…..So why don’t we talk a little bit about that?

BM: Well, we’ve taken a couple of steps to address that. There were handouts and flyers people put on people’s cars with simplified instructions. There are a series of guides that are walking about during this installation period. We started installing the meters around the middle of December.  We’ll finish around the middle of January.  And, during that time, there will be two things going on. We will have a series of guides where they’ll be located near these Parking machines. If people have a question or concern, the Guide can give them a quick tutorial on how to use the equipment, and secondly, if, they just say,  “You know what!?  I couldn’t figure it out,”… They get a ticket. But, the first time will be a warning ticket.

EO: So no more of those $35.00 fines, the first time.

BM: Well, the first time…The first time they get a warning and so, it behooves you then to say, “Ok, I have to pay the meter next time. I will.”  That was not the case before. The meter would click to zero and magically a meter maid would appear. You would have a $35.00 ticket. So, we’re changing the model. Right now, about 30% of the use of those meters is through coin, …..Excuse me…. through credit cards. 65% is coin, and about 35% is credit card usage. About 52% of the income generated right now is through credit cards. So it’s gaining acceptance, and again, I only have 75 cents in my pocket.  That’s all I can put in the machine, but I like to hang around and stick around downtown.  I’ve got a debit card.  I’ve got a credit card. I’ll put it in the machine.  Put 2 or 3 hours on it and enjoy myself.

EO: I’m sure it’s going to be a transitional period anyway.   I know a lot of my older clients that have been living in Tampa for their entire lives. When they come downtown, they raid the piggybank, and the first time they came down it was a little confusing. So I spoke with one of my clients, and now she’s fine. She’s says “Oh this is terrific! I don’t have to raid the piggybank anymore!” So, I think that there’s just going to be a transitional period where that debit ATM card, credit card user will probably just continue to pay.

BM: It’s a learning curve. And something that we’re going to roll out, not this year, but next year or the year after, is actually adding time to the meters using your cell phone.  Instead of having to go to the machine – you’re in a meeting. The meeting is running long – you just go ahead and punch it in the cell. The reason we didn’t initially do that is that the target audience we want to help right now for the occasional visitors to downtown, and to do a cell phone, you have to set up an account.  You have to give a deposit.  You have to put a credit card number, which unless you’re going to use a lot of times, is somewhat cumbersome.  But for the folks that are going to come downtown all the time, we’ll offer that as an opportunity later on. So it’s another leap in technology that will make it a little more user friendly for folks.

EO: Well terrific! I can assure you that the retailers that I spoke with are very happy about the situation, and I know you consulted a lot of retailers in the area trying to get the meters.

BM: They were the unhappiest about the existing situation, and I think they were probably the happiest about what’s going on. We have about 999 parking spaces downtown and they are being accommodated with this equipment.  By the end of January virtually all these parking spaces will be electronically monitored and fed through ATM.

EO: That’s awesome!

BM: Well something else, like another decision we had to make – do you take the ticket? Do you not take the ticket? Another one we looked at was using bills. Do we or do we not? There are some locales where that are very effective, but in Florida where it’s warm, and moist, the bill holds a lot of humidity and they tend to jam the machines. We didn’t want a lot of down time. We wanted something that was going to be easy to use and efficient, and so we opted out of having the bills.

EO: Well, in terms of parking, that’s not the only thing going on downtown.  That’s going to be a big, and has been a big boost to the businesses down here. I know for example the Park just opened up.  People have come to see the park, and what a phenomenal resource that is.

BM: We had 10,000 people there for Santa Fest.

EO: That is crazy!

BM: The ice skating rink set up in the park that about two weeks ago, the count was 8200 people use it, and it’s a big draw people are having a lot of fun with it.  (Note:  The season has since ended for the Rink.  The first year was a phenomenal success!)

EO: And all those people are coming and eating at the local establishments….coming in and getting more comfortable in dealing with downtown environment.

BM: Well, one of the things that we’ve done in the last three to four years is, we’ve begun to “two-way” a lot of the streets that were one-way. Now, some of these North-South, which are main arterials which feed the interstate will probably remain one way, but the East-West, which were one way,  we’ve converted to two-way again.  Visitors to downtown find it less confusing, making our downtown a friendlier place. We are right now going out with just – I think we’re going to rehire a construction manager – to begin to improve Zack Street, because that really is a main artery, pedestrian wise, for connecting the parks and the two museums to our downtown.  So, we will be widening sidewalks, narrowing traffic lanes, adding more shade structures and pieces of art, again, to make downtown a little friendlier to visitors.

EO: That’s terrific!.  So, the three things we talked about,… just to summarize, we’ve talked about people – their reservations about coming downtown with the traffic situation.  You guys are addressing that. The parking situation, in terms of the meters, the coin meters, you guys have addressed that.  And then the aggressive nature of getting ticketed…..That’s been addressed at least in near term to get people ramped up on the new system. Not to mention the park, the art, the new Art Museum,…. things are going downtown.  For people that haven’t been downtown, they really need to come down and check it out. Curtis Hixon Park is one of the most beautiful parks I’ve seen anywhere in the state of Florida.

BM: We get a lot of compliments.  What’s interesting is that you know we’re in a down economy right now, but in the near future, we’ll actually have two construction cranes. We have Metro 510, which is 120 unit work force housing project on the north end of downtown, and on the south end of downtown, the University of South Florida Health is building the CAMLS project, which is a high tech surgery training program.  They are building a 90,000 foot building and they’ll have the ground breaking on that on January 11. So into downtown…

EO: You also have the ENCORE! Project which is going in the East side of downtown

BM: We have a lot of things going on and all good news in particularly bad times.

EO: Well Bob, I really appreciate you coming out and talking to us today.  And as always, if someone needs to figure out more about the parking situation, they would contact the City of Tampa parking, or what?

BM: City website. City of Tampa website (http://www.tampagov.net/). There is an instructional on there, and if they wanted, they can print that off and bring it downtown with them. Or, call somebody from the city parking.  They’ll be happy to speak with them.

EO: Perfect, well again, we appreciate you coming out today, Bob.

BM: Thank you.

EO: Thank you.

This is the most recent rent and sale data on Office, Industrial, Retail, Shopping Center and Vacant property for Tampa, Florida produced by FGCAR and Catylist.

CREpricing

1. Thinking Space is a Commodity – In commercial real estate, square feet are not created equal.  Load factors, functional obsolesce and poorly laid out floor plans can quickly diminish actual value to the tenant.
2. Thinking Rent Is an Absolute Measure – There are a lot of factors to consider when comparing price per square foot.  Electricity, Janitorial Expenses, and Common Area Maintenance charges are just SOME of the factors that come in to play.  Full service (Gross Leases) are supposed to include all expenses.  In triple net leases, all expenses are passed through to the tenant.
3. Not Understanding Rentable vs. Useable Square Feet – Useable Square Feet (USF) is the space within the walls of your unit.  Rentable Square Feet (RSF) is USF plus common area space that is outside of your suite, but is accessible to and from your space (i.e. hallways, corridors, bathrooms, foyer, etc). In office space, there can be a significant difference between USF and RSF.  With a free standing building, the difference is negligible.  It is important to know, because a lot of common space can be of no use to you or your business, but yet you pay for it on a monthly basis.
4. Not Planning for an Exit Strategy or the Future – What happens if you have to leave the space before the end of the term?  That rate that was negotiated for 5 years might not seem so great if you have a hiccup in your business and need to downsize.  Negotiating a shorter term lease might have made the rent more expensive in the short run, but limited your downside expense in the longer term.  Clauses that allow for subleasing can mitigate risk.  What about if your business out grows the space?  Can the landlord accommodate your need for additional space without you having to break the lease?
5. Not Allowing Enough Time – If you wait until the last minute to search for a space, not only will you have trouble finding that perfect space for your business, but by waiting, you transfer negotiating leverage to the landlord.
6. Not Utilizing a Professional Team – Unless you are in the real estate business, you probably only become familiar with the market when your lease is up or you acquire more space.  Attorneys, commercial real estate brokers, architects, and insurance agents work with real estate every day.  They can assist to guide you away from some very expensive mistakes.
7. Poor Site Selection – Location, Location, Location ….its not just about being situated in a visible location for your clients.  Ingress and egress should be considered as well as distance from your employees when selecting property.
8. Not Paying Attention to the Fine Print in the Lease– Do you understand how the landlord is calculating Common charges?  Is it fair and reasonable?  What about the other clauses, such as parking, access to the building after hours, insurance, use and exclusivity?
9. Underestimating the Condition of the Premises or Access to Utilities– How you would like to run a technology company that doesn’t have access to the Internet?  Or a flower company housed at a location in which the AC constantly breaks down?  Check to make sure that the space can accommodate your business and mission critical features actually function.

Drive-in chain Sonic has closed 11 Florida restaurants, among them locations in Hillsborough, Pinellas, Sarasota, Manatee, Hernando, Polk, Citrus and Levy counties.

Read more: Sonic shutters 11 Florida restaurants | Tampa Bay Business Journal

Comments:  This is another reminder of the need to conduct proper due diligence when purchasing single tenant, net lease properties as an investment.  Sonic’s design and locations frequently make the sites difficult to redevelop for some other use.

The Tampa Bay Business Journal released its list of top 25 SBA Lenders over the past year.

The Top 5 are as follows:

1. Florida Business Development Corp – 813.348.0677
2. Live Oak Banking Co. – 866.954.8362
3. PNC Bank – 772.231.6300
4. Gulf Coast Business Finance – 727.234.5340
5. Synovus Bank – 727.823.9199

For the complete list, please see www.tampabaybusinessjournal.com.

For those unfamiliar with the SBA’s 504 Loan program, it is a terrific vehicle for financing owner-occupied real estate.

1.  Alienating Tenant Brokers – Brokers are not afraid to share opinions of properties and landlords with their colleagues.   Defaulting, negotiating down after the fact, or slow paying on commissions is a sure fire way to retard future leasing efforts.

2.  Overly Complicating the Lease – Everyone acknowledges that it is important to have a solid and secure lease, which fairly lays out the intentions of both the tenant and landlord.  In every tenant’s mind though, there is an invisible line in the sand in which “enough is enough.”  If the lease provisions and clauses become onerous or tilt too heavily in the favor of the landlord, it can be difficult to consummate the deal.  Placing the tenant in a defensive posture is no way to complete a deal or forge a lasting relationship.

3.  Over Estimating Property’s Value – Having a run down of competitive ask/receive rates is only part of the process in pricing a property.  Someone, usually an unrelated third party such as a broker or colleague, should provide the owner with an unbiased estimate of competitive value.  Pricing the property from the outset is important.

4.  Nit Picking on the Deal – Many a deal have been killed over seemingly minor issues, based on the perception that too much had been acquiesced earlier in the negotiation.  Sometimes a little perspective is necessary.

5.  Failure to Properly Investigate the Tenant’s Creditworthiness. Provided that it adds value, personal guarantees or large deposits can make the deal more attractive to the landlord.

6.  Failure to have a Strategic Leasing Plan and Sticking with the Plan. If the idea is to have a Class A building, then lease to Class A tenants with a compatible Class A mix.  Reaching on a tenant that is outside of the box can alienate other tenants and lead to an increase in vacancy.

7.  Failing to Create a Value-Added Message – This is the building’s elevator speech…the message that can be told in the short time period that it takes an elevator to go from one floor to the next.  “This is a great building because……..”  It might sound hokey, but everyone from listing and tenant brokers to maintenance staff will understand how to sell and service the building based on what the perceived value of the building is.

8.  Lack of Attention to Details – Cluttered common areas, shoddy landscaping and wilting decorative plants in the lobby can create negative attitudes from current tenants and place downward pressure on asking rates for prospective new tenants.

Although the Tampa office market continues to struggle with abnormally high vacancy and subdued tenant demand, over the past three months overall vacancy continued to fall, with the marketwide overall vacancy rate declining to 18.9% at the close of the third quarter of 2010. This is a one-tenth of a percentage point decrease from mid-year 2010 and a four-tenths of a percentage point drop from the overall vacancy rate recorded this same time last year.

For complete Florida Real Estate Journal article…..

Attendees: Eric Odum and Brian Willis, Esq. Becker & Poliakoff

Date: October 26, 2010

Subject: Hillsborough County Transit Referendum: Additional One Cent Tax. What’s its Purpose? What Does it Mean to YOU?

EO: Good afternoon and welcome to another Market Minute, I’m Eric Odum from Net Lease Commercial Advisory, and this is the second part of two parts of the discussion of the Light Rail Initiative and the One Penny Tax. I keep saying Light Rail Initiative; it’s really not light rail initiative, but…

BW: It’s a one cent Investment.

EO: It’s a one cent Investment and its more than light rail, and we have with us Brian Willis again, and he’s an attorney with Becker & Poliakoff, and also the Citizens Advisory Board for TBARTA to talk with us today a little bit about some of the questions and concerns of the light – I keep saying light rail initiative – it is the “Investment Tax.”

BW: Yeah, the Investment Tax

EO: Ok, terrific, so the penny Investment tax, the penny Investment initiative is going to be on the November ballot, correct?

BW: Yeah.  That is correct.

EO: Ok, so you know we talked in the first component about why we need to have it, what are some of the things that are going on with the plan and why do we need it? Obviously this is the first and foremost question people ask – I have my car, I drive to work, why do I really need this thing for?

BW: Well, we talked a little bit the last time about the growth that is projected for this area….how we’re already having trouble meeting the demand with the capacity of our roads as it is. We continue to grow.  There was a slow down with the economy, but now we’re seeing population growth again. We’re running out of capacity on our roads. So, we need this …..  Our transportation is the key to moving people around and when we look at comparable cities for instance, the amount of time the people in Tampa spend in traffic delays is significantly more than what people in our competitor cities do. If you look at someplace like Charlotte, Tampa has consistently almost doubled the traffic delays every year compared to what people in Charlotte experience.

EO: It’s going to end up making us the highest taxed county in the state of Florida, so is it really worth it to make that Investment, knowing we’re going to end up having these taxes.

BW: There are a number of issues there. The one thing is taxes.  People get focused on taxes, but people continue to move to New York City. They continue to move to the places that have high taxes because they have high quality infrastructure.   I think that’s what the question really should focus on. Is this worth doing? What’s the value we get from this? More importantly, we look outside Florida, when you look at comparable Sunbelt cities it’s not going to be a – our tax will still be comparable if not lower than competing Sunbelt cities outside the state of Florida. So, I think what people want is they want value. They want a valuable infrastructure and the tax is not going to place us outside the range of what other competitive cities …

EO: Ok, so Charlotte, Atlanta – you’re telling me that they are still going to be at higher tax than…

BW: They have over 8% sales tax

EO: So what would we be at?

BW: We’d be right at 8%.  We’d be competitive if not lower than other Sunbelt cities, and some of those other Sunbelt cities and states have Income Tax as well, which we don’t have here.

EO: I think the initial rail is running to the airport first, right?

BW: The initial plan is that it would run from the airport to downtown, including the West Shore area.  The second part would be downtown up to USF, and eventually the Cross Creek area at Bruce B. Downs.

EO: So two rails, and really people running between downtown Tampa and USF.  That’s a fraction of the transportation routes that are being run by car everyday, so these people that say ‘I’m not going to use it’ – It’s a legitimate complaint, right?

BW: Well, there’s clearly going to be some people who aren’t going to use it. First off – HART’s done a study of this – 43% of traffic takes place within the corridor that’s roughly going to be served by this light rail. So, everyday, even if not every person is going to use this, you’re either taking people off the roads within the corridors people are traveling or your giving them an alternative means of transportation in that corridor. And I think, as I’ve said, you’re getting people off the roads. So, it’s not just whether you’re a user of the light rail or not, but its also helping insure that our congestion doesn’t continue to build up and slow everybody down.

EO: Well, ok, I hear you, but let’s say I live in Brandon. I’m not going near that downtown to Tampa corridor, so what’s in it for me? How would people in Brandon care about this, or people in the Northeast part of the County?

BW: Well, a portion of it, we’ve been focused (talking) on light rail, but a portion of that tax is going to go fund road improvements throughout the county. It’s also going to fund a bus system that’s going to serve bigger area, bigger portion of the county. I think the third thing to keep in mind, I know people in Lutz and Brandon, and they say, “Well I don’t want more roads in my neighborhood. I don’t want more traffic.” And what we’re building here, which is a transit system which serves the entire Tampa Bay region, is about ensuring that we don’t have more roads.  It’s about ensuring that we don’t just continue to over build our suburbs. So, I think a vote for this is a vote to help preserve the character of places like Lutz and Brandon.

EO: From a road perspective, Brandon, are they really going to see roads (and increase in transportation options) out of this. I mean is Brandon really going see…..They’re going to vote for a penny tax. Are they really going to see road (and transportation) development?

BW: There are projects across the county to fix different problems that have developed, and you can actually go – HART has a website they have developed where you can go neighborhood by neighborhood and find out what exactly is going to come to your portion of the neighborhood from this investment.

EO: That’s on the HART website?

BW: You go to HART and they have a special project page which is called the “HART alternative analysis” page, and you can type that in Google – H A R T, and you’ll get to the page and find it.

EO: Terrific. This thing is going to cost a lot of money. It seems to me like it’s really high. So let’s talk about that and whether this makes sense or not.

BW: I think people don’t realize how much money we’re spending on our road system. We’ve had some projects that haven’t been that controversial, like the I-4/Crosstown Connector, which everybody thinks is worth what we’re investing in.  That project’s been priced out at $350m to complete it.

EO: Ok, so the Crosstown Connector is like a mile of road.

BW: It’s a mile of road.

EO: It takes you from the Port of Tampa, to I-4.

BW: It’s a great project. It’s going to get a lot of road traffic out of Ybor.  It’s going to make Ybor more amicable to neighborhood development. It’s going to connect Crosstown and I-4 so that all those trucks from the Port don’t have to go through Ybor neighborhoods.

EO: What is the rail going to cost, let’s say the rail is going to run from Downtown Tampa to the Airport, what is that going to cost?

BW: Well there, they’ve got a couple different alternatives that they are considering, but you’re looking at roughly a $500-$600m price range for that portion of the rail. Another example, which is the north portion of that segment which would connect downtown to USF, that portion is coming in right under a billion dollars, about $900m. Well, the alternative to do that, if we don’t build up the rail capacity, we’re going to have to increase the capacity of the roads. So, we go from what’s an 8 lane road now to a 12 lane road. They’ve priced out that project and it’s going to cost $2.2 billion. So, for the same length of rail traffic, we’re less than half the price of what it would take to increase road capacity.

EO: So, to increase 275, you’re at $2.2 billion…. to build a rail, you’re at $900 million?

BW: That’s about right, yes.

EO: When you ask people around Hillsborough County, you hear this very frequently… “This is going to be a situation that we’re going to be funding forever.” And so, what do you say about that?

BW: Yeah, and I hear that all the time. That’s what people always say. They say we don’t want to build this if it’s not going to produce any income back. There was an editorial in the Tampa Tribune saying well they’re only going to get 8 or 9% of the revenue from the fare boxes. Well, I drove here from Clearwater today, and I didn’t pay anything. There were no tolls on my way here. So, they didn’t get any fare box revenue on my trip. I-275, Dale Mabry, Kennedy, Howard Franklin Bridges – They all don’t pay for themselves. The other part of that is we look at what we built with the rail system. People have studied the numbers, AAA, Forbes Magazine say that you’re looking at about $12,000 per household per year that gets devoted solely to car expenditures. So it’s incredibly expensive system pushing…

EO: Car expenditures meaning insurance on your car, gasoline…

BW: Car insurance, payments, gasoline, maintenance, new tires, oil changes, you know the whole thing – everything that looks into getting you where you need to go in your car. And, that cost is extraordinary. It’s pushed off to the individual users. So, sales tax is going to cost the average household about $125 per year, it’s about 1% what the household is spending on their car budget right now.

EO: Ok, well thanks again Brian. I do appreciate your time, and again, if you’re interested, you can find out more from the HART website and the Moving Hillsborough Forward website. Thanks again for joining us and for more information, can they contact you at Becker & Poliakoff.

BW: I’m at Becker & Poliakoff they can contact me. Our offices are in Clearwater. We serve the whole Tampa Bay region. Look for us on Google.

EO: Thank you, Brian!