Drake Real Estate Partners Acquires Orlando Office Properties
Drake Real Estate Partners has acquired two Class A suburban office buildings totaling 151,479 SF located in the SouthPark Center office park in Orlando, Florida. Drake is purchasing for $28mm ($185/SF; 8.85% in-place yield, 25% discount to replacement cost).
SouthPark 700 is an 83,279 SF building that is currently 100% leased to three tenants – Walgreens, Banco Do Brasil, and University of Phoenix. Walgreens (Baa2 rated) occupies 52% of the Property and owns an adjacent flex office building making them highly captive at the Property. SouthPark 800 is currently 100% leased (68,200 SF) to Catamaran PBM, which was purchased by United Health Group (A3 rated) for $12.8B in mid-2015 and consolidated with their Optum RX business. OptumRx is a significant component of UHG’s overall operations and generates 32% of the top line revenue ($63.8B). Optum RX provides a full spectrum of pharmacy care services through its network of more than 67,000 retail pharmacies. The subject Property serves as Optum RX’s only call center for East Coast operations.
The two Properties in the portfolio are amongst the most recently constructed (2007 and 2008 vintage) buildings in SouthPark Center, a premier office park located in South Orlando. They are modern two-story product with attractive lobbies, efficient column-free floor plates and above-market parking ratios (average of 6.7 per 1,000 SF, top 5% of all office properties in Orlando). There is a high concentration of call center and middle office demand in this area due to large employee population bases south of the portfolio. The subject Properties are positioned extremely well to attract these tenants, as demonstrated by the UHG and Walgreens tenancy. Large efficient floor plates and exceptional parking fulfills the two features that are most important to these tenants. The average existing tenant size in SouthPark is 36k SF, fitting well within the portfolio’s 34-42k SF floor plates range.
According to the US Bureau of Labor Statistics Orlando was the #1 MSA for both population (3% increase) and job growth (4% increase) in 2017.