Calif-based REIT pays $51.4M for three Class-A office bldgs in Maitland

A view of the Eastwoods office building on Lucien Way at Maitland Preserve office park.
A view of the Eastwoods office building on Lucien Way at Maitland Preserve office park. (Highwoods Properties)

UPDATED: AUGUST 2, 2017 4:06 PM — Affiliates of California-based public REIT Gladstone Commercial Corp. paid $51.4 million on Monday for Highwoods Properties' Maitland Preserve  three Class-A office buildings in Maitland totaling 306,435 square feet, marking its market entry to Greater Orlando.

Located at 2405, 2599 and 2600 Lucien Way, the portfolio is 72 percent leased to ADP through September 2027. The three buildings were fully leased at time of sale, and the deeds were recorded Wednesday in Orange County.


"Orlando is a secondary growth market we've been targeting for a year and a half," Brandon Flickinger, managing director for acquisitions in the southeast, told GrowthSpotter. "We'll continue to look for similar stabilized acquisition opportunities in Orlando. We think it's a strong secondary growth market that will continue to benefit from population growth, and corporate relocations."

The initial capitalization rate for the acquisition was 7.43 percent, with an average capitalization rate of 8.48 percent, he said. The weighted average lease term of the portfolio is 8.7 years, and the next lease rollover is not until 2019.

Prior to this acquisition, Gladstone's only other Florida assets were three office properties in South Florida.

The portfolio's three buildings include: Eastwoods, a five-story, 177,117-square-foot office building leased at 80 percent to ADP; Westwoods, a three-story, 79,318-square-foot office building fully leased to ADP; and Southwoods, a single-story, 50,000-square-foot office building fully leased to two tenants. It includes two parking garages.

"We're a buy-and-hold investor that pays a dividend to our shareholders, and see this as an attractive stabilized asset that will let us deliver for our investors for the foreseeable future," Flickinger said.

Gladstone Commercial typically invests in single-tenant and anchored multi-tenant net leased office, industrial and medical properties, in what it considers growing submarkets with strong underlying land value.

Its transaction size ranges from $5 million to $50 million on average, with lease terms of at least seven years. It regularly conducts third-party acquisition, sale leaseback, build-to-suit, build-to-suit forward purchase and development financing deals.

Insight on the value-add potential driving office investment in Maitland, and what the seller is looking for next in Greater Orlando.

Gladstone sourced a $28.78 million loan from Sun Life Assurance Company of Canada, with a fixed interest rate of 3.89 percent. The company has hired associates at JLL Orlando for leasing and property management.

The Maitland Center submarket is arguably the top value-add investment area within Greater Orlando's office market over the past year.

The submarket closed the second quarter of this year with a total vacancy rate of 9.5 percent across 98 buildings, middle of the pack for 11 area submarkets, but has the highest year-to-date absorption with 232,729 square feet, according to Cite Partners' Q2 office market report.

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