UPDATED: November 17, 2017 12:16 PM — A San Diego-based commercial real estate investment group has Cousins Properties' trio of Downtown Orlando office towers under contract for an estimated $208 million, four sources with knowledge of the deal told GrowthSpotter.
Southwest Value Partners (SVP) is a privately held company focused on institutional-quality CRE assets in U.S. growth markets, and has owned a variety of hotels, mixed-use campuses, multifamily and office buildings across the country.
The company is expected to close on the three-building Orlando acquisition by the end of this year, and is currently in the market seeking financing to complete the deal.
The downtown office towers, which total more than 1.03 million square feet, would be a big market entry for SVP in Orlando. The company currently owns one other asset in Florida, a hotel in Sunrise, according to its portfolio online.
The three office buildings include the 28-story Bank of America Center (421,069 square feet); the 19-story One Orlando Centre, better known as the Wells Fargo Building (355,783 square feet); and the 18-story Citrus Center (260,751 square feet).
Officials with SVP declined to comment on Thursday.
GrowthSpotter first reported on Oct. 6 that Atlanta-based office REIT Cousins Properties was marketing its Orlando towers for sale. The company moved to divest its local holdings just 12 months after buying in to the downtown office market.
At an estimated price of $208 million for the three Cousins buildings, that reflects a value of $200 per leasable square foot. The price is lower than other downtown tower sales in recent years, but within reason.
All three Cousins buildings are currently leased at a range of 85 percent to 95 percent. The Citrus Center is a Class B building, 1970s vintage, near fully leased with a highly valued amenity on top in the Citrus Club, but some deferred maintenance.
The Bank of America building is the tallest and most notable of the three, but has energy efficiency issues. Its location value suffered after Orlando's modern arena and Dr. Phillips Center opened a few blocks to the south, an attribute that won't fully recover until Creative Village opens in 2019 and creates new demand.
And the One Orlando Centre is well regarded for its ample parking, recent investments in a new fitness center and popular shared conference center space. Its location north of Colonial Drive and distance from the Central Business District have been considered a negative, but it's also surrounded by a growing residential base in the North Quarter.
The two most recent office tower sales downtown reflect a much higher price per leasable square foot, but are considered preeminent Class A buildings and trophy assets.
Piedmont Office Realty Trust paid $170.8 million in November 2015 to enter the Orlando market with the 35-story SunTrust Center tower, with 654,618 square feet of conditioned area marketed in the tower and a second building, as well as a seven-story parking garage. That reflected a price of $260 per leasable square foot.
And in July 2016, Piedmont paid close to $168 million for the CNL Plaza I (14 stories), CNL Plaza II (12 stories) and related parking garages, which total 622,487 square feet of marketed leasable area. That reflected a price of $269 per square foot.
In May 2015, DRA Advisors and Tower Realty Partners paid $51 million for the Regions Bank Tower at 111 N. Orange Ave., which with 246,023 leasable square feet boiled down to $207 per square foot.
And in December 2014, Highwoods paid $68.3 million for the Lincoln Plaza building with 82 percent occupancy and 246,000 leasable square feet, reflecting $278 per square foot.
Cousins inherited the three Orlando buildings when it reached a deal in April 2016 to acquire Parkway Properties, an acquisition valued at more than $2 billion that involved a portfolio of Parkway's Class A office buildings in major urban markets across the southeastern United States. The company closed a stock-for-stock merger in October 2016.
In listing the properties now, Cousins is signaling an intent to refocus its capital on core assets in larger MSAs of the southeast, where average rents are generally higher than the $26 to $31 per square foot that Class A high-rises in Downtown Orlando are commanding now.
Orlando's CBD submarket has less than 8 million square feet of office space available for lease, relatively small compared to the other cities Cousins is established in. That makes it difficult for Cousins to grow its footprint any further in downtown when other REITs it competes with own the remaining high-rises, and want to grow as well.