Suddenly Attractive

Suddenly Attractive

By David R. Corder

Associate Editor

Last December, an investment group led by Pradip Patel acquired several aging retail buildings in the 600 block of North Franklin and Tampa streets. The former president of what now is Wellcare Health Plans Inc. negotiated a good deal.

Patel's investment group, 610 Franklin LLC, paid about $3.8 million or only $21.36 a square foot for the 179,366 square feet of retail space that fronts the Franklin Street Exchange office building on the east side. The seller was Greg Hughes' 610 Franklin Inc., who had planned to build a mixed-used condominium project on the site.

Three months later, Hughes obtained a much better price for adjoining property it sold to Patel. Patel's investment group paid nearly $2 million or about $97.14 a square foot for a 20,089-square-foot, mixed-use retail building at 602 N. Franklin St.

The two deals illustrate the quickly changing dynamics in this under-used, underdeveloped commercial section on the northern side of Tampa's central business district. Over the years, this area north of Twiggs Street to Interstate 275 between Ashley and Jefferson streets seemed all but immune to any sustained economic growth. That is changing.

Simple economics accounts for the change, says Tampa commercial real estate broker Bill Eshenbaugh. Investors are more willing now to take risks in this section of the central business district because of the increasing scarcity elsewhere of affordable vacant or underdeveloped properties.

"Choices are limited in the Channelside district or downtown because properties are either gone or prices have increased to $80, $90, $100 a square foot or more," says Eshenbaugh, president of Eshenbaugh Land Co. "In this area, it's under $50 a square foot. It's at least at the lower end of the price scale."

Recently Eshenbaugh negotiated a $1.34 million contract for the owner of a one-acre commercial parking lot on Marion Street across from the city's bus transit station. That's a deal pending at about $33 a square foot.

"I have it listed and under contract with at least two backup offers trying to buy if this current deal falls apart," he says.

Just look at Russ Versaggi's renovation of the old Arlington Hotel at 1209 N. Franklin St. to understand how quickly the change is occurring. Almost a year ago, Versaggi's investment group - Arlington Partners LLC - paid slightly more than $1.22 million for the aging 36,612-square-foot property or about $33.43 a square foot.

Right across the street, however, the owner of a vacant 9,600-square-foot lot has listed it for $725,000 or about $75.52 a square foot. It's attracting interest too, says Kevin Platt, an associate in the commercial division at Tampa's Smith & Associates Realtors Inc.

"It's been on the market for only about four months, and we are receiving offers for the seller," say Platt, who envisions the possibility of a mixed-use multifamily development use on the property. "It's zoned CBD-1, which will allow for height of up to 120 feet, theoretically."

Up until Versaggi's group acquired the Arlington Hotel, no other entrepreneur had ventured as far in recent years into this blighted commercial district. Many buildings there are condemned. A considerable homeless population frequents the area.

Yet, neither of those factors dampened Versaggi's enthusiasm about what he hails as the "the Tampa Theatre and Cafe District." Just prior to the hotel's acquisition, he invested in a historic but aging church building in the city Tampa Height's community and turned it into a mixture of loft-style condos and office space.

The brisk sales at The Sanctuary convinced him a historic renovation of the hotel property would attract just as much buyer interest. He was right. Buyers clamored for the ground-floor retail space and second-floor condos.

"We sold about a year ago before anybody was up there," Versaggi says. "All but two or three of the units were sold over a weekend."

Ever since, investor interest in the submarket has been on a steady upward trend. It's attracted Miami's Doran Jason Group, which has brokered $3 billion in commercial real estate over the past 33 years in Miami-Dade County and maintains an active development arm.

Since February this year, the Miami firm has purchased about 167,711 square feet of blighted and condemned property in the 800 and 900 blocks of North Franklin for almost $5.8 million. That's about $34.39 a square foot.

This is the type of growth the Tampa Downtown Partnership hoped for when it included the fringe areas in the group's visioning plan, says partnership Chairman Ray Sandelli, CB Richard Ellis' Florida senior managing director.

"Anytime you have growth the way we have, the border keeps pushing out," he says. "The natural path of progress (from downtown) is north."

That progress may not bode well for late entrants in the markets, suggests Smith & Associates' Platt.

"Unfortunately, a lot of those pieces of properties have been owned a long time by the same people," he says. "People have been holding on to them. There was some turnover over the past several years. At this point, people are holding on and forming alliances to develop with local and outside development interests."

The best example of that is the Residences of Franklin Street, a seven-story, 40-unit condominium project under construction in the 1200 block of North Franklin. Tampa certified public accountant Luciano Prida Jr. and his family have owned the 17,404-square-foot parcel since at least the early 1980s.

Just a couple of months ago, Prida's Franklin Street Developers LLC obtained a $10 million construction loan on the project from Wachovia Bank Mortgage.

Last month, Teco Properties Inc., the real estate arm of Teco Energy Inc., sold a 44,100-square-foot commercial parking lot at 710 Tampa St. for $3.3 million or $74.83 a square foot to Tampa's Skypoint LLC. Skypoint is an acquisition vehicle for Novare Group Holdings-intowngroup and Novare-Intown Tampa Development LLC, developers of the 32-story, 390-unit mixed-use Skypoint condo project.