Pizzuti, Colonial Close on $149M Office-Land Deal

ORLANDO-Colonial Properties Trust of Birmingham, AL has purchased 996,000 rentable sf of 95%-leased, class A office product in eight buildings at the trophy 370-acre Heathrow International Business Center and 102 acres of adjoining developable land in a $149.1 million all-cash transaction with Columbus, OH-based Pizzuti Cos.

The acquisition is one of Central Florida’s biggest commercial real estate deals in the last 20 years, according to GlobeSt.com research.

Nationwide Realty Investors Ltd., a division of Columbus, OH-based Nationwide Insurance Co., was a partner with Pizzuti in the transaction.

The Heathrow office buildings acquired by Colonial comprise 300 Heathrow, 84,953 sf; 400 Heathrow, 100,821 sf; 500 Heathrow, 75,860 sf, 701 Heathrow, 126,570 sf; 801 Heathrow, 150,567 sf; 901 Heathrow, 178,241 sf; 1000 Heathrow, 87,066 sf; and the 192,159 sf 1001 Heathrow building, completed in June.

The price and size of the deal was confirmed in a prepared statement to GlobeSt.com late Wednesday from Richard Cooney II, managing director of New York-based Greenwich Group International LLC which arranged the sale.

“The sale of this extremely high quality office park attracted very keen domestic and foreign institutional bidding, illustrating the tremendous demand for top investment property,” Greenwich chairman Simon J. Milde says in the statement.

In an earlier prepared statement, Colonial Properties said the deal comprised only seven buildings totaling 804,000 sf. The REIT didn’t disclose the price.

At that time, Orlando area brokers intimate with the deal told GlobeSt.com on condition of anonymity the acquisition was valued at an estimated $200 million. GlobeSt.com couldn’t immediately reach principals at Colonial or Pizzuti Cos. to confirm that number.

But Sandra Lee Robertson, Colonial’s senior vice president/finance, tells GlobeSt.com in a telephone conversation the price for the buildings alone was “at replacement cost.”

She would not disclose the price or break down the price for buildings and land “because Colonial doesn’t do that sort of thing.”

The 102 acres could hold another two million sf of class A product, multifamily, or retail area brokers tell GlobeSt.com.

Colonial will manage the properties, Linda Geiss of the company’s marketing staff tells GlobeSt.com on Sept. 8. She disputes Greenwich’s statement of Sept. 7 on the price and that eight buildings were involved in the transaction.

“We did not buy the (192,000-sf) 1001 Building,” she tells GlobeSt.com.”We certainly don’t want our analysts confused.”

Marcus Gauzza of the Greenwich Group followed up with a duplicate news release Sept. 8 on the transaction, following Geiss’ e-mail request for a correction on the price and number of buildings. Gauzza’s information repeated the same details GlobeSt.com received Sept. 7 from Milde and Cooney.

Speculation on the property’s buyer has been widespread since Pizzuti chairman Ronald A. Pizzuti announced in February he was putting the suburban Orlando assets up for sale, largely to see what price they would generate in the existing market.

Pizzuti told GlobeSt.com at the time that “industrial has always been Pizzuti Co.’s primary focus” and that proceeds from any deal would be used to acquire new industrial product. Pizzuti said he was looking for new Florida industrial sites in Lakeland, Ocala and Jacksonville.

While he is pruning his office portfolio in Orlando, Chicago, Columbus and Indianapolis, his 5.64 acre, jewel Downtown Orlando site is not for sale, he says.

For the past seven years, the developer has been searching for anchors that would allow him to build a two-building, 29-story, 800,000-sf office property and a five-star, 350-room hotel across from the 25-story, one million-sf Orange Courthouse complex at 425 N. Orange Ave.

Although Pizzuti wouldn’t discuss price at the time he last spoke with GlobeSt.com, independent area commercial appraisers tell GlobeSt.com on condition of anonymity they base their estimated value of the Heathrow deal solely on minimum estimated replacement cost.

The eight buildings couldn’t be built today for less than $200 per sf or about $199 million, they tell GlobeSt.com.

The appraisers estimate the 102 acres could bring $300,000 per acre or about $31 million ($6.89 per sf). Pizzuti paid Chemical Bank of New York $7.5 million or $21,429 per acre (49 cents per sf) for the land in 1994, according to Orange County real estate records.

One of the key deciding factors in Colonial’s purchase of the Pizzuti portfolio was the existing cash stream in the seven office buildings.

In his company’s prepared statement, Colonial executive vice president Bo Jackson says “we were particularly attracted to the limited lease rollover exposure.”

He says, “With high-profile national and regional clients like Veritas, Bank One, FiServe and the United States government, and only 11.5% of the leases rolling in the next three years, this asset will perform well for our company.”

The corporate international AAA travel office, with 300,000 sf, is the largest tenant at Heathrow International Business Center.

Colonial chairman/CEO Thomas H. Lowder says in the same statement he will be renaming the Heathrow park, Colonial TownPark Heathrow, to complement the company’s nearby Colonial TownPark, a 500,000-sf mixed-use venture under construction.

“Colonial Properties Trust’s presence in the Orlando market makes up 17.6% of the company’s portfolio, making Colonial Properties one of Central Florida’s largest real estate owners,” Lowder says.

Colonial “will be the largest suburban Orlando landlord with this acquisition which will allow an abundance of opportunities, including management efficiencies,” Lowder says.

Besides Colonial TownPark and Heathrow International Business Center, the REIT’s metro Orlando portfolio comprises the 901 Maitland Center office building; 2,200 multifamily units at Colonial Grand at Heathrow (312 units), Colonial Grand at Hunter’s Creek and Colonial Grand at Cypress Crossings; and 2.2 million sf of retail, including the 800,000-sf Orlando Fashion Square Mall in east Orlando.

Another factor that attracted Colonial to the Heathrow property is the robust Lake Mary-Heathrow submarket, 25 miles north of Downtown Orlando.

Tom Green, Colonial’s vice president, calls the submarket, with 3.65 million sf of office, “one of the fastest growing suburban markets in the MSA, increasing approximately 7.5% annually over the last five years.

Cushman & Wakefield of Florida Inc.’s second-quarter statistics show Lake Mary with an overall vacancy rate of 26.9% and a direct vacancy rate of 20.3% among 30 monitored buildings totaling 3.31 million sf.

Year-to-date leasing activity total 93,881 sf with 268,402 sf under construction and 155,000 sf completed.

Directed weighted average class A quoted rent is $20.01 per sf. Year-to-date direct absorption was 13,734 sf.