Benderson Development Co. LLC buys Tampa Electric's TECO Plaza

BUYER: 7978 Associates II LLC (principals: David Baldauf), University Park
SELLER: Franklin Street Associates Ltd.
PROPERTY: 702 N. Franklin St., Tampa
PRICE: $22 million
PREVIOUS PRICE: $1 million, July 1979

PLANS, DESCRIPTION: Commercial real estate giant Benderson Development Co. LLC purchased the 277,454-square-foot TECO Plaza for $22 million.

The price equated to $79 per square foot. That figure is lower than the two-year average price per square foot for office space ($115) in the Tampa Bay area, according to the CoStar Group.

The office property, which covers a 1-acre city block in downtown Tampa, was built-to-suit for Tampa Electric Co. in 1979. Tampa Electric, the primary subsidiary of TECO Energy Inc., occupied the property shortly thereafter and has leased it ever since. It has 13 years remaining on its current lease.

Camille Renshaw of Stan Johnson Co. represented the seller, a partnership managed by financial services firm UBS.

“This is their headquarters, and they have expressed nothing other than they plan to continue to stay there,” Renshaw says. “It is a classic absolute net lease. The landlord has absolutely no responsibilities. It's a lot like a bond. With single-tenant properties like these it's less about the real estate and more about the creditworthiness of the tenant.”

She says the seller was looking to take advantage of a heated single-tenant market, she says. Its view of the market was proved accurate with an intensive bid process and highly compressed return for Benderson. Based on the property's cash flow and the buyer's cash investment, Benderson received a cash-on-cash return of 5.78%, which sets a new low-return benchmark, according to Renshaw.

For certain business models, such as those used by Tampa Electric or PWC, it makes more sense to rent their real estate leaving more capital in the business.