The Advantages of Buying Over Leasing

ORLANDO—The former Bally's location ins Casselberry, FL is now the permanent home to Herzing University. Herzing acquired the asset for $4.45 million from Casselberry Partnership, LTD, for $4.45 million after leasing it since 2010.

Some brokers recommend tenants purchase buildings they are leasing in today's market in order to leverage the low cost of capital, avoid paying sales tax on the lease, lowering operating costs, and being their own landlord. It's not always a good match, but it worked for Herzing, a for-profit university with 11 campuses in eight states, provides undergraduate, graduate, online and continuing education programs. The Casselberry campus is its only location in Florida.

Cynthia Shelton and Kane Morris-Webster of Colliers International Central Florida and Mike Milano and Ron Schultz of Colliers International Tampa Bay represented the seller. The property is located at 1865 Semoran Boulevard.

“More and more tenants are purchasing their locations, especially with the low cost of capital right now,” says Shelton. “In today's market, rates are still historically low, and for strong capitalized companies, money is not hard to find. These low rates have caused many tenants to look at their bottom line and figure out if owning is more cost-effective than leasing.”

What's more, by owning the property rather than leasing, tenants avoid paying a 6.5% sales tax on a commercial rental property lease. This sales tax is one that is only imposed in Florida. Morris-Webster says, “We're seeing this tax factor into both commercial leasing and purchasing decisions more and more throughout the state.”

The property was originally developed as a Bally's Health Club location, which closed in 2007. Many former large-format gym locations have been repurposed to other non-traditional tenants, such as higher education, furniture expos and churches. “Higher education is a good fit for these former gym properties, Morris-Webster says, mostly due to the sheer size of the building and plenty of parking spaces.”