Overview
In May 2021, Paddock Park Processional Center, a 42,763 Sqft, 7-building garden-style office park, was acquired by a South Florida investor representing a foreign investment fund. Situated just a mile from the interstate and within Ocala’s busiest retail corridor, the property boasted prime accessibility but was underperforming.
At the time of acquisition:
- Occupancy: 75.62%
- Average Gross Rent: $15/Sqft
- NNN Leases: Only 6 out of 16 units
- Deferred Maintenance Issues: Overgrown landscaping, outdated parking lot, vacant units in poor condition
- Net Operating Income (NOI): $352,649
- Purchase Price: $3.9M
The investor’s primary objective was to aggressively increase the property’s value and position it for a profitable sale.
Our Property Management & Leasing Strategy
Maintenance & Capital Improvements
Before taking over, we developed a comprehensive maintenance and improvement plan to enhance the property’s appeal and functionality. Several vacant units were in poor condition, requiring substantial investment to prepare them for new tenants. Our team implemented:
- Interior Improvements: Replacing outdated light fixtures, removing worn flooring, and ensuring all plumbing and mechanical systems were fully operational.
- Exterior Enhancements: Addressing overgrown landscaping, refreshing common areas, and refreshing the parking lot.
Leasing & Renewal Strategy
To attract premium tenants and increase property value, we repositioned the park for medical use—a strategy that would justify higher rents, longer lease commitments, and a lower eventual cap rate. Key leasing initiatives included:
- Targeting Medical & Healthcare Tenants: Offering a generous tenant improvement (TI) allowance to attract high-quality, long-term occupants.
- Converting Leases to NNN Format: As leases came up for renewal, we negotiated market-rate rents while transitioning tenants into NNN lease structures, significantly improving the property’s financial profile and marketability.
Marketing & Tenant Attraction
A strong marketing campaign was crucial to filling vacancies and improving lease terms. We:
- Created premium marketing materials that highlighted the property’s prime location and quiet park setting.
- Invested in high-visibility online and offline exposure to attract a targeted pool of tenants.
- Focused on long-term stability by prioritizing businesses that would benefit from the office park’s medical-friendly environment.
Results & Financial Impact
By Summer 2022, our strategic execution had transformed the property:
✅ Occupancy increased from 75% to 96%
✅ Average gross rents increased by 25%, from $15.50/Sqft to $18.60/Sqft
✅ Medical & Healthcare tenants comprised 70% of occupants
✅ 85% of leases were converted to NNN format, improving the property’s investment value
In October 2022, we listed the property for sale. The response was overwhelming:
- Hundreds of leads were generated.
- Final negotiations came down to a 1031 exchange buyer and an active investment group.
- The 1031 buyer ultimately purchased the property for $7.2M—a $3.3M gain in just 18 months.
“Most of the properties we acquire are in South Florida, so expanding to Ocala was a new step. We needed a professional partner we could trust—one who understood the market and could execute a strategy to maximize the property’s value. From day one, Heritage delivered. They didn’t just manage the property; they helped us transform it. Our collaboration enhanced operations, secured high-quality tenants, and optimized lease structures, creating tremendous value. Heritage’s work and results were outstanding, which led us to engage them to manage additional properties in West Palm Beach and Broward County.”
Arturo Alvarez, Managing Partner at AD4
Key Takeaways
This case study highlights how the right strategy, executed with discipline, can create extraordinary results:
- Value-add property management can transform underperforming assets.
- Targeting the right tenant mix and structuring leases strategically significantly enhances asset value.
- Proactive marketing & leasing strategies drive increased occupancy and stronger financial performance.
