Beat Up Lender-Owned Shopping Center Fetches $1M

(Save the date: RealShare Industrial 2012 comes to The Bankers Club, Miami, December 5 - 6.)

ATLANTA—Jones Bridge Shopping Center is the latest retail REO asset to trade in the Southeast. A lender from El Segundo, CA sold the 20,500-square-foot shopping center to an Atlanta investment company for $1.025 million, or $50 per foot.

Mac McCall, regional managing partner for Franklin Street, and his colleague Marc Irvin, represented the seller in the transaction. McCall tells GlobeSt.com the retail center included significant deferred maintenance, which skewed the price per square foot. He says the buyer will have to complete substantial improvements to make it leasable and spend tenant improvement dollars to entice retailers to the shopping center.

“This is one of the more distressed submarkets in Metro Atlanta,” McCall says. “Although the demographics are among some of the best in the metro, the mass overbuilding of retail in this submarket has made it where almost all of the non-core, unanchored strip centers will be foreclosed on at some point as most of the properties were financed based on $25-plus-per-square-foot rents where rents are now below $15 per square foot in many cases.”

Jones Bridge Shopping Center is located at 10875 Jones Bridge Road in a neighborhood about 20 miles north of Atlanta. The retail strip center is surrounded by national retailers and has an average household income above $150,000 within 5 miles of the site.

According to Franklin Street market research, about half of the distressed properties in the submarket have been foreclosed upon and sold through brokers or auction—and there are quite a few where the lenders are taking a wait-and-see attitude, hoping market rents stabilize and they can lease up the vacancies. McCall says the main challenge to this strategy is that most of the leasing is occurring at centers that have already been foreclosed and sold where the new landlords can reset the rents and attract more tenants.

Franklin Street generated more than five qualified offers within a few weeks of marketing the property and closed within 30 days of signing a contract. The firm is marketing several other lender-owned properties and also seeing strong interest.  

“There is a tremendous appetite for properties with upside through leasing and new money is being raised every day to acquire this type of product,” McCall says. “It is non-traditional investment capital as well that is hungry for a return on their money and traditional investors are being shut of out of the market as they can’t believe how aggressive some buyers are being.”