Heading for the 'shore

BUYER: Roseview-PMRG Fund I LLC (Westshore Center Investors LLC), Houston
SELLER: MWH #14 Corp.
PROPERTY: 1715 N. Westshore Blvd., Tampa
PRICE: $40 million
PREVIOUS PRICE: $23.08 million, November 1998

Another national company is staking a big claim on the continued vibrancy of the Westshore office market.

Roseview-PMRG Fund I LLC, a $250 million joint venture fund of Houston-based PM Realty Group and Boston-based The Roseview Group, spent $40 million entering the Florida market with the acquisition of Westshore Center.

The price equated to $185 per square foot.

Constructed in 1984, the building sits south of International Plaza and Tampa International Airport on a 2.66-acre site along with a five-story parking garage. Its most prominent tenant is design firm RS&H.

Mike Davis, Rick Brugge and Michael Lerner of Cushman & Wakefield represented the seller.

Although the nine-story, 216,410-square-foot office building was about 88% occupied, it is considered a fixer-upper. Both the seller's brokers and the buyer say it needs several capital improvements and some of its rents are below market.

The fund plans to make a number of improvements, including renovating the common corridors and bathrooms, upgrading the building systems and renovating the exterior.

Steve Corridan, a partner with The Roseview Group, says the building had already started improving recently under the prior owner.

“It was really timing that led to the below-market rents,” he says. “Some of the floors were renovated and those are all at market rate. We plan to do all the infrastructure and bring the building back up to Class A top of the market.”

Another reason for the below-market rents, Davis says, is that rents have risen fairly dramatically over the last 12 to 18 months. The real estate research firm CoStar Group reports that gross asking rent per square foot has risen for Class A Westshore office space from $26.45 in the first quarter of 2014 to $28.10 for the current quarter. A big driver for this is the vacancy rate, which has fallen from 13.5% for all classes of Westshore office space in the third quarter of 2014 down to 10.9%.

With incomes up, prices are also up, which is persuading a growing number of current owners, such as Boston-based TA Realty Associates, to sell, Davis says. TA Realty Associates has owned the property since 1998.

Corridan says that Westshore has been a target market for the fund for a while and that it shares many of the same characteristics of the regions, where it currently has holdings. The fund currently owns properties in Cambridge, Mass.; the Galleria area of Houston; and the Buckhead region in Atlanta; and King of Prussia, Pa. These regions all have population and job growth, access to high-end residential housing, a highly educated workforce, growing retail amenity base and expanding high-end multifamily apartment communities, according to Corridan.

“It has solid bones and was the right size for us,” he says. “The timing was right. When you look at what's happened right across the street with the retail and several thousand apartments going in, our strategy is really to take advantage of what will happen to this end of Westshore over the next five to 10 years.”

Now that it has made its first purchase in the Tampa Bay area, Corridan expects to make more market and off market offers for other properties.

“We are looking to acquire several buildings [in the region],” he says.

The fund's operating partner, PM Realty Group, which manages more than 130 million square feet of commercial, multifamily and special-use space, will operate Westshore Center.

The buyer mortgaged the property to Compass Bank for $33.1 million.