Lenders in Georgia Unloading REOs

By Hortense Leon

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ATLANTA-Lenders in Georgia are starting to let go of their distressed retail assets, first by foreclosing on them, then selling them off, according to real estate experts in the Atlanta area.

“We are seeing an increase in foreclosed retail properties becoming available and expect this trend to continue through 2010,” says Kyle Stonis, a partner with Bull Realty in Atlanta.  “Banks will start to sell more of their properties now that they have had some success in raising capital and are starting to see positive earnings,” he says.

While retail properties are the first to be sold off, says Gary Lee, senior vice president at Carter, office and industrial will follow.

Recently, Bull Realty was hired by Flagstar Bank, based in Jackson, Michigan, to sell the 43,000-square-foot-Ellard Mercantile Exchange center in Alpharetta, Georgia. The property, which is mostly vacant, was sold to Northlight Investment Partners which paid $4 million or $93 per square foot on July 30. The Ellard Mercantile Exchange was built in 2007 just as the retail market began to decline, says Stonis.

Bull Realty has been hired by several lenders to sell foreclosed properties including the newly-built, foreclosed Shops at Breckenridge Center in Duluth, Georgia for Ameris Bank.  

Also in Duluth, the 170,000-square-foot Paragon shopping center was sold by Flagstar Bank in the first week of July for $6.5 million to NDI Development. Mark Joines, a retail investment sales broker with Carter who represented the seller, says that the center, which is 95% vacant, failed partially because it was planned as a two-story shopping center but that it could accommodate an office or school on the second floor.

The Paragon center, which was completed in early 2009 by the Cornerstone Investment Group, was a victim of bad timing and is in a secondary location, says Joines. “It was probably 20% to 25% occupied at most,” he says.

The advantage that NDI has with respect to the Paragon shopping center, says Joines, is that the new owner is familiar with the Asian market, which is dominant in the area. NDI wants  to put a grocery store in the center of the shopping center in addition to other Asian retailers, he says. 

“The more REOs there are, the more likely lenders are to sell them,” says Joines,  “although some banks are taking more shopping centers back and then sitting on them, waiting for brighter days,” he says. “The banks which were quicker to foreclose are more likely to sell properties now. But the ones which  held off foreclosing are more likely to sit on them,” he says. Plus, there are still some banks which can’t take the losses, because their balance sheets are not strong enough, says Joines.

Categories: Retail, Atlanta