UPDATED: OCTOBER 25, 2016 5:02 PM — Largo-based Equity Management Partners (EMP) is planning a parking lot expansion and new retail building on its Four Points by Sheraton Orlando Studio City property along N. International Drive, and has yet to hire a local real estate broker to market the property, the company's principal told GrowthSpotter.
Tampa-area hotel investor Ben Mallah of EMP bought the Four Points property for $23 million in late January to fulfill part of a 1031 exchange opportunity, and said at the time he was budgeting $4-5 million for an extensive renovation, to include parking lot improvements along with regular upgrades to the hotel.
Mallah filed a Master Plan application with the city on Oct. 19 to create additional parking on the north side of the hotel, on a strip of green space that separates it from the Super 8 motel directly north.
The plan also calls for a pad-ready parcel for future development of a 4,800-square-foot retail building on the northeast corner of American Way and I-Drive.
"We've just started the Master Plan process, and I was thinking of maybe a two-story restaurant for that pad where the second floor could be a playground attraction," Mallah said on Tuesday. "We still have to find the right broker to deliver the right tenant there."
Located at 5905 International Dr., the two parcels total 5.83 acres, with the 302-key Four Points hotel occupying 4.55 acres. The sister parcel targeted for a retail building is 0.83 acres, currently part of the hotel's surface parking lot.
The plan and supporting documents explain that eventual construction of the new retail building would be for a single user or multi-tenant, yet to be determined. That small lot could also be kept as existing parking, if retail demand doesn't present itself.
But demand for pad-ready sites in the tourist corridor is high, and at 4,800 square feet the developer should be able to secure a fast casual franchisee in need of a drive-thru fairly easily, said Cindy Schooler, senior vice president for SRS Real Estate Partners in Orlando.
"He might do a 3,200-square-foot end cap with drive-thru for one user and the remaining square footage to a small concept like sandwiches or coffee," she said. "If he does a multi-tenant building I could see rents in the high $30s to mid $40s (triple-net)."
Set directly across from Universal Orlando's proposed redevelopment of the Wet 'n Wild property, there is a lot of demand in the market for multi-tenant space, said Bobby Palta, first vice president-retail for CBRE in Orlando.
"Recent deals have been completed in the mid $30s NNN in the immediate area, but prime International Drive retail space can exceed $50 or $60 NNN," he said.
That new retail building would be set up near the I-Drive frontage to enhance the pedestrian experience, according to Peter Pensa, director of planning for AVID Group, planners hired for the project.
The Four Points property currently has 255 parking spaces. After the proposed development it would have 295 spaces if the 4,800-square-foot retail building is indeed built, or 331 spaces if the lot is maintained as surface parking.
New development plans and demand for property at the I-Drive and American Way intersection have been plentiful in the past year.
In late October 2015, Buffalo Lodging Associates filed plans with the city for a 134-key Home2 Suites by Hilton hotel on American Way, northwest of the Four Points tower.
Last November, Chinese investor Chih "John" Yuan-Yu paid $7.5 million for the Super 8 on American Way, and relocated to Orlando to manage his first local hotel investment. In late December he bought the neighboring Alltour American property for $2.6 million, and this July began preparing plans for a 137-key prototype design Wyndham Garden.
In March, the IHOP directly west of the Four Points hotel sold for $4.3 million and a cap rate of 5.49 percent, reflecting a price per square foot of nearly $1,400.
The Four Points property investment by Mallah may come in step with his company's planned purchase of the 176-key Hawthorn Suites by Wyndham Orlando International Drive, located at 7975 Canada Ave.
EMP won the hotel purchase rights on Oct. 6 for $9.25 million through a Ten-X auction online, with the property marketed by Ten-X and HREC Investment Advisors in Orlando. Closing on that sale is projected for early December.
That hotel was targeted to place $10 million in proceeds from previous multifamily property sales this year by Mallah to fulfill a 1031 exchange, he said.
In November he should have another $19 million and in December another $15 million from multifamily sales elsewhere in Florida, for which he'll again be considering Orlando 1031-routed investment in new properties.
"The multifamily market is very hot right now and we've chosen to sell a lot of our assets at the market's height," he said. "If we can find more multifamily that would be great but it's difficult, so we'll replace with value-add hospitality or retail as well."