Critical Mass

In one of the largest Gulf Coast office portfolio deals of the past five years, a North Carolina-based firm earlier this month acquired seven buildings for $101 million.

Dilweg Cos.' purchase of the buildings follows its acquisition of a 13-story, downtown Sarasota office tower, in April, for $36.5 million.

All of the buildings — together with a 23-story tower in downtown Charlotte, N.C. — were purchased from partnerships controlled by Michigan's Osprey East LLC and Osprey S.A. Ltd.

Six of the seven properties are located in the Tampa suburbs, while the remaining building is in Lakewood Ranch. In all, the seven buildings contain nearly 700,000 square feet and were 74% leased at the time of the June 1 sale.

“Each property has the opportunity, we believe, for meaningful improvements, and we're excited about entering the Tampa market with some critical mass,” says Drew Cunningham, a Dilweg partner and the firm's COO.

Dilweg, formed in 1999 by former National Football League and Duke University quarterback Anthony Dilweg, intends to spend “millions of dollars on this portfolio” to enhance the Tampa-area buildings, Cunningham says.

In Sarasota, the company has created a roughly $4 million capital program to install a new conference, fitness center and lounge area and improve the lobby of the Sarasota City Center tower.

“Our approach is always that we're value-add buyers,” Cunningham says. “We want to do things to our properties that will translate into higher rental rates. We will make capital improvements throughout the Osprey portfolio, but some properties will see more improvements than others.”

At Orion Center on Rocky Point, for instance, Dilweg plans to make significant improvements to two floors, totaling more than 50,000 square feet.

Some of the rental hike opportunities will come primarily through leasing.

At First Citizens Bank Plaza, in Charlotte, the 476,393-square-foot building is only 29% occupied, the result of a Westinghouse Corp. relocation last year. Dilweg paid $79 million for that property.

With the acquisitions -- the company's portfolio now totals 11.8 million square feet in six states with a value in excess of $1.3 billion — Dilweg also has set up a Florida office and retained a former GE Capital Real Estate and New York Life Real Estate Investors veteran to run it.

Liz Madzula, the Florida operation's managing director, will be based in Sarasota, Dilweg says.

Cunningham says the company was drawn to Tampa because of its sustained job growth, lack of new office construction over the past five years and because lender restrictions have slowed approvals for new office development.

The Osprey portfolio sale was negotiated on behalf of the seller by commercial real estate brokerage Holliday Fenoglio Fowler L.P.'s Miami and Charlotte, N.C., offices.

In addition to the sale, HFF also arranged $67.82 million in floating-rate acquisition financing with Benefit Street Partners Realty Trust.

Cunningham says the commercial brokerages CBRE Group and JLL, both of Tampa, to lease the properties going forward.

“This really represents an opportunity for us to plant our flag in the ground in Tampa, a place we hope and plan to be for a long time to come,” Cunningham says.