CTO Realty Growth Buys Tampa Office Building

As part of a 1031 exchange, the company purchased a 120,000-square-foot Class A property that has been fully leased to Ford Motor Credit since 1998.
Sabal Pavilion

CTO Realty Growth, of Daytona Beach, Fla., has acquired an approximately 120,000-square-foot Class A office property in Tampa, Fla., for about $26.9 million. The four-story building is fully leased to a single tenant, Ford Motor Credit Co. LLC, and has been since Highwoods Properties developed the 12-acre project in 1998.  

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Located at 3620 Queen Palm Drive, the building is known as Sabal Pavilion, according to information provided to Commercial Property Executive by Yardi Matrix. That information also indicated that the seller was Pacer Partners, of Miami.

CTO Realty reported that the lease with Ford was recently extended through March 2026. The transaction was arranged as part of a 1031 like-kind exchange using about $27 million of the approximately $37 million of the CTO’s restricted cash generated from unspecified previously announced property dispositions primarily sales of single-tenant retail assets. The company further noted that the initial investment yield is about 8.4 percent, or above the high end of CTO’s 2020 guidance.

In a prepared statement, John Albright, CTO’s president & CEO, said the acquisition represents an attractive cash flow–accretive transaction in a high-growth MSA. He added that the company has so far this year completed more than $164 million of income property acquisitions, at a weighted average cap rate of about 7.9 percent.

Tampa trends

Tampa’s office market ended the second quarter with an overall vacancy of 12.8 percent, which represents a rate increase of 120 basis points from last year, as well as an increase of 50 basis points for the first half of 2020, according to a second-quarter report from Cushman & Wakefield. Class A vacancy increased by 80 basis points year-over-year, to 11.0 percent.

The I-75 Corridor submarket specifically had an overall vacancy of 18.9 percent on an inventory of nearly 7.8 million square feet. Fortunately, no further office space is under construction in the submarket. The average asking rent for Class A space in the I-75 Corridor is $24.46, again according to Cushman & Wakefield.

Last November, a Swiss-American joint venture bought a five-building, 756,000-square-foot office portfolio in Tampa for $156.9 million.

CTO also announced that it has collected about 90 percent of its August 2020 contractual base rents. Of the remainder, the company reportedly agreed to defer about 3 percent, while about 7 percent remains “unresolved.”

The majority of the unresolved contractual base rent is related to a property in Falls Church, Va., that’s leased to 24 Hour Fitness. CTO reports that it’s in discussions with 24 Hour Fitness and “is hopeful to reach an agreement on current and past due rents in the coming weeks.”