December 4-10, 2017
Commercial Real Estate around Central Arkansas
By Jeff Yates
As this column is ostensibly on the topic of commercial real estate in central Arkansas, announcements of commercial real estate meetings are typically included if I know of them. In that light, the CCIM/LRRA commercial real estate holiday party will be right upon you, or maybe past you, by the time you read this month’s edition. It is Wednesday, Dec. 6 at 6 p.m. at Dave & Buster’s. Soon after will be the Q1 Commercial Real Estate Lunch hosted by CCIM and LRRA, on Thursday, Jan. 18. with the doors open at 11:30 a.m. The program will be on the economic outlook of the state as well as commercial real estate in Arkansas. You will soon be able to find more information on the CCIM website. Again, if you are interested enough in commercial real estate to read this column, you ought to put that quarterly lunch on your calendar.
Last month this column covered the opening of the new Lowe’s next door to Sam’s Club. Now, a party associated with the recent sale of a former Sam’s Club advises of another home improvement store coming to town. The building on Colonel Glenn that is currently home to iHeart Radio (formerly Clear Channel) and home to the Metroplex event location has sold and is said to become a Lumber 1 location. This building started life as a Sam’s Club before the store relocated to the current location. This will be Lumber 1’s third location, joining the Stuttgart and Mayflower locations.
In Riverdale, a three-story office building at 2222 Cottondale Lane sold for the second time in just over 2 years. Winrock Holdings paid a couple of trusts associated with Douglas and Peggy Kerin $3,290,000 for the nearly 24,800 square foot building that overlooks the Arkansas River. The Kerins had paid $2,875,000 in April of 2015.
Across the river on Maumelle Blvd., look for a new Popeye’s Louisiana Kitchen just west of the Walmart Supercenter. WNLR Investments sold a 1.58 acre lot there for $550,000 to Sweet P Investors. Around the corner a new Big Red convenience store appears to be in the works. Burkhalter Commercial Group sold a parcel on Counts Massie Road to AF Partners for a recorded value of $458,000.
A property at 3924 West Markham sold last month to MPK Holdings for $389,000. This 5,000 square-foot building sits across the street from Walgreens, between Cedar Street and Pine Street. I can tell you first-hand that most of the value was in the land. This building needed some TLC. It had seen an assortment of uses over the last few years and now seems to have found a new owner that will make some investments in the building for long-term occupancy. When renovations are completed it will house physicians’ offices. Seems like a logical location since UAMS is also right across the street.
An example, to me, of the exuberance in the single tenant net lease market came up last month at Gateway Town Center. Christiane and Hagop Kouyoumdjian paid $3,300,000 for the to-be-completed Hooters restaurant. Hooters of America Holdings had closed on the land about 35 days earlier and paid $1,350,000 for the 1.63 acre site. Even while some restaurant segments are slowing, even struggling, and closing stores; others are growing and opening locations. The most recent site plan I’ve seen for the redevelopment of the former Sears site at I-630 and S. University has a bevy of restaurants gathered there. There is a planned development on Chenal Parkway just east of Wellington Hills that provides several pads aimed at restaurants. There is another site plan proposed in front of the Euronet building on Chenal Parkway that has restaurants proposed on either end. And, in the continued westward march of Little Rock, a restaurant site is proposed along side a proposed aloft hotel at the southeast corner of Rahling Road and Chenal Parkway. Added to the inventory of existing, entitled, sites and some empty restaurant buildings, there’s plenty of supply for any new restaurant demand in Little Rock.
Next door at The Village at Rahling Road, home to Arthur’s Steakhouse and O’Looney’s Wine & Liquor sold just before Halloween. I understand that the tenants there got the “treat” of substantially higher rents proposed that those historically charged by the previous landlord. Deltic Timber built the shopping center in 2001 with Brannon’s Market as the anchor tenant. Brannon’s is long gone. And the property has been anchored by many years since by Arthur’s and O’Looney’s. VARR West, LLC paid Deltic Timber $4,000,000 for the 75,000 square foot group of buildings. Chronic vacancy in the upper floors and rear building likely contributed to the modest value per square foot.
We touched last month on the growing differential between Class A properties and Class C properties. Capitalization rates, values per square foot and so forth always have a gap between Class A and Class C properties. That is the very nature of the difference in classes, right? Class A properties demand higher rents and higher values, especially those with “credit” tenants, than Class C properties. The data in the presentation I sat through clearly illustrated a flight to quality. The difference in prices between “A” & “C” has been growing, especially in acquisitions. The risk premium being required by buyers has been growing. The point being that the best properties have seen greater demand and appreciation while the lesser properties have increased less in value. What does that mean to me? To me that means that I want to list the best properties for lease or sale because that is where the demand is. And I want to advise sellers of lesser properties that they may need to have more modest expectations in lease rates or in the selling price.
Several readers emailed with answers on the question about the name origin of Baseline Road. Thank you all for participating. And I appreciate the unsolicited compliments on the column (thanks Mom). The first correct answer came from Logan Hebda at First Financial Bank. He won lunch on me.
Tips and suggestions, well most of them anyway, are appreciated. Hope you found something interesting in the column this month. Check back again next month for the things that didn’t get included here this time and that pop up between now and then.