The Challenge

Regions Bank purchased AmSouth Bank in the fall of 2006.  As a result, there were several instances where Regions and AmSouth had overlapping locations. As part of approval from the FDIC, AmSouth was forced to sell some of their assets without any bank use restrictions.  

The issues were:

1.         Multiple bank sites were placed into a large pool of assets across the mid-south then were put up for bid which made a very competitive sale process.

2.         The very large bank building on Gunbarrel Road was approximately 6,000 square foot with three drive-thru lanes.

3.         Bank buildings were selling for premium prices and other end-user banks were bidding at pricing levels well over $500 per square foot.

4.         Rent levels needed to drive a market return on the investment were going to be unusually high.  Bank users wanted to own assets as opposed to leasing them.

5.         Financing would be difficult due to the high price that bank sites were commanding.

6.         A sign lease was in place with a local sign vendor who was paying a below market rent of only $350 per month.  The sign blocked the visibility of the bank building from Gunbarrel Road.

Our Strategy

BSM identified multiple properties in the portfolio to bid on in hopes of obtaining better pricing.  BSM underwrote each asset in the west, middle and east Tennessee markets then submitted a lump sum offer for fourteen assets.   BSM also purchased the former AmSouth Bank on Gunbarrel Road that was directly across from the Hamilton Place Mall in Chattanooga, Tennessee.  This particular asset was one of the best of the Tennessee assets that was being auctioned.

BSM Consulting needed to provide an in-depth demand/gap analysis that included all high-end retailers that were not yet in the Chattanooga market.  In addition, a market study was needed to identify banks that were already in the Chattanooga marketplace.  Research revealed several banks that were not yet in the Chattanooga market but planned on building a presence.  Marketing materials had to demonstrate the quality of the real estate and its relevance in the Chattanooga area next to Hamilton Place Mall.

In order to engineer a reasonable equity and long-term debt structure, BSM had to make a judgment call regarding the underwriting standards and estimate the resulting loan dollars available to acquire the bank. It also seemed possible to create more value from the current outdoor sign lease.

Results

During the short diligence process, BSM identified and began contacting a handful of banks that did not have a presence in the Gunbarrel Road area.  BSM discovered that BB&T Bank wanted to enter the Chattanooga market with an important branch in terms of location and size.

Also, during this time period, all physical inspections, title, survey and other legal investigations were completed. 

A 15 year, NNN lease was negotiated with BB&T Bank within three weeks after the end of the limited inspection period.  The rent level was well above the typical market rent and yielded a return that exceeded 10% on cost.  The new lease stipulated a 15% base rent increase every five years. The billboard lease contained a termination right if the AmSouth building was sold.  BSM terminated the lease and then executed a new five year lease at a rental rate of $2,000 per month as well as a four percent increase each year. The sign was repositioned to open visibility of the BB&T Bank building.

BSM arranged for and placed a permanent loan on the property at an attractive interest rate which resulted in substantial cash flow.  The total value created was 7.2 million dollars and represented a yield on cost of 10.37%.

The Challenge

BP had closed its combination fuel and Burger King location on Highway 96 in Murfreesboro, Tennessee.  The 1.8 acre of land contained one free standing building and a fuel canopy. The location was a major intersection in the best retail section of this fast growing submarket of Nashville.   

The issues were:

1.         Contamination and remediation from operation of the BP station.

2.         A new retail building would have to set perpendicular to Highway 96.

3.         The price of the land was above market and significant competition to purchase the property     existed from end users.

4.         The existing signage did not meet Murfreesboro codes but was critical to the projects success.  This was due to its height which made it visible after exiting from Interstate 24 onto Highway 96.

5.         The diligence period was only 90 days.

Our Strategy

Although the intended project was only 15,000 square feet in size, the need to quickly organize BSM’s expert teams in marketing, finance, legal and local political relations would be crucial for a successful outcome, especially with the intense competition for the site.

BSM Consulting provided an in-depth demand/gap analysis.  The market study concluded Hickory Hollow Mall was losing retail traffic to Murfreesboro and some likely tenants could be relocated to this project. 

Although the property was perpendicular to Highway 96, it was located at a signalized intersection across from Target.  To the rear of the property was a ring road that connected to Super Wal-Mart, Old Navy, Linens ‘N Things and other notable national retailers.  The BSM team felt the retail space farthest from the main road (Highway 96) could be marketed as “the north end cap”.  This would be a desirable location if the user was given prominent architectural features and top position on the sign.

Quality regional and national type tenants had to be quickly identified and contacted. BSM had to call upon its existing tenant relationships across the country to see which retailers would commit to the site before BSM had to close on the property. 

The legal team of Boult Cummings Conners & Berry was able to use their extensive expertise dealing with environmental sensitive properties to underwrite and quantify the environmental risks that were associated with the project.

BSM principals lobbied Murfreesboro planning commission to allow the large interstate sign to remain and be granted a sign permit through a successful variance process.

Results

Through an effective marketing and leasing process, BSM quickly identified Men’s Wearhouse, who wanted to relocate from Hickory Hollow Mall.  Panera Bread and EB Games were identified and were known to be expanding in Middle Tennessee. AAA Auto Club of the South was contacted and discovered they needed to reposition themselves out of an existing center. 

Panera Bread leased the “north end cap” subject to a successful variance process for the large interstate sign.  BSM was able to successfully demonstrate to the Panera Bread real estate committee that although their space was furthest from Hwy 96, the internal road network to Wal-Mart and the other retailers would provide a successful location for them.  Panera Bread opened and maintains above original projected sales.

Letters of Intent were negotiated within a 90 day time period.  Leases were fully negotiated and executed. The center was 80% preleased before construction began and opened 100% leased.  The project came in on budget and on time.  Murfreesboro city and political officials praised the finished project as cutting edge.  They also appreciated the team approach and follow through to several problems that arose during the development process.

BSM arranged for and placed a permanent loan on the property at an attractive interest rate which resulted in substantial cash flow.  The property was sold to a 1031 buyer from California.  The total value created was 4.5 million dollars and represented a yield on cost of 10.25%.

The Challenge

In the fall of 2003, BSM Investments acquired Nippers Corner, a property that was comprised of four separate buildings sitting on 10.5 acres of land.  It included 45,000 square feet of local retail space; a closed 25,000 square foot theatre and one outparcel which was occupied by a quick-lube oil change company. 

The issues were:

1.       What to do with the relatively small theatre parcel.

2.       How to economically terminate or relocate several leases in order to allow for an anchor tenant.

3.       What to do with a failing health club located in a former Walgreens at the end of the center.

4.       How to handle recorded parking restrictions that were in place when the property was acquired and potentially stood in the way of the redevelopment.

Although it was a good real estate acquisition, the center was dated and had been poorly leased and managed for many years.

Our Strategy

This was a complicated redevelopment project that required the integration and expertise of the BSM teams.  The areas of legal, marketing, consulting, capital markets as well as construction were all needed.

BSM Consulting undertook an extensive demand/gap analysis.   The conclusion of this analysis was that a demand existed for a new grocery user, a bank and other regional users. 

The legal team of Boult Cummings Conners & Berry began unraveling multiple encumbrance issues that potentially stood in the way of redeveloping the theatre parcel along with other common areas located in the center.  

The health club user, the quick lube business and the pad user would need to be replaced. These changes would allow the center to be upgraded and reflect the quality of the real estate.

Results

Two and half years of effort resulted in the development of a new 45,000 square foot Publix Grocery store.  This required the demolition of the tired theatre building and a separate retail building with three retail users. The health club lease was terminated and replaced by AmSouth Bank.  The quick lube lease was successfully terminated and replaced by Smoothie King.   A new, 8,000 square foot retail building was built next to Publix. 

The entire sign package for the center was redesigned along with new parking, landscape and lighting designs. 

A new permanent loan was placed on the property at an attractive interest rate which resulted in a substantial cash flow.

BSM Investments created a center worth over $19 million which represented a 35 % return.

The Challenge

K-Mart had terminated and closed its store on James Campbell Boulevard in Columbia, Tennessee, a town 45 minutes to the south of Nashville. The center, along with four others across the country, was owned by a private investment group out of New York and had been acquired back by the lender, GMAC. Although it was located in a good real estate location, the city of Columbia had experienced limited retail growth for a number of years. The center would have to be acquired with no executed tenant leases which made financing of the project challenging. Due to several planning and codes issues, the task would require cooperation from Columbia city officials in order to redevelop the center to its fullest potential. The center had been vacated for several years and was an eyesore to the residents of Columbia. City officials and residents wondered “why someone doesn’t do something with this property…bring us some new retailers into Columbia” was the common theme heard over and over.

Our Strategy

Carl Storey served as a valuable member of the team. He successfully executed the acquisition and the rezoning of additional property needed for the development of a new Harris Teeter grocery store.

A full team approach would be required to combine BSM’s marketing, legal, construction and market skills in order to successfully redevelop the project. BSM Consulting reports indicated a substantial trade area existed for the city of Columbia and was an underserved retail market. The city should be able to attract national users to the market and to the project itself. The plan would require subdividing the building to allow for a multi-tenant use.  Although BSM would have to close on the property without commitments, the company felt that the risk reward analysis indicated an appropriate use of company resources needed to successfully redevelop the property.

Results

The capital markets group secured an acquisition and construction loan from a regional lender. An exhaustive financial analysis was completed for multiple scenarios that resulted in an optimum redevelopment strategy. Likely tenants that BSM felt should be in the market were identified. Our legal and marketing team helped the city of Columbia rewrite its parking and zoning codes which allowed for the redevelopment of a multi-tenant center. In March of 2006, the center held its grand opening with TJ Maxx, Ross, Office Depot and Rack Room Shoes. A new façade, parking and lighting sign package was completed and the center was totally transformed into something that the city of Columbia and its residents took pride in.  BSM Investments realized a 45% return on its investment upon completion. The center was sold by BSM Properties to a 1031 exchange buyer in the summer of 2006 for a 7.2 cap rate.  Retail sales from all the tenants remain healthy.



The Challenge

Home Depot had completed a new store at Truse Parkway and Poplar Avenue located in the fashionable Mendenhall trade area of Memphis, Tennessee.  Through its relationship with Home Depot, BSM discovered that Home Depot had some excess property that could potentially be developed.   BSM placed under contract a 1.2 acre parcel of undeveloped land. The submarket of Memphis was hard to duplicate given the restrictive zoning and development obstacles.  This was only the second ground-up development project that BSM had undertaken since its formation.

The issues were:

1.       Successfully negotiating the entitlement and utility easements across the property of two major retailers in addition to CSX Railroad Company.

2.       Due to a short diligence period, BSM’s leasing team had to quickly mobilize in order to find suitable tenants that would commit to the site.

3.       A suitable site plan and elevation that would satisfy Home Depot and any potential new retailers would be difficult to locate in such a short timeframe.

Our Strategy

BSM quickly identified a local civil engineer who had a good relationship with both Home Depot and the city of Memphis.  BSM also realized the importance of a second civil engineer who had a relationship with CSX Railroad and was also in good standing with the city of Memphis.  Bringing together the right team members in order to quickly attack the utility issues was crucial.

The legal expertise of Tom Trent, Esq. and David Rutter, Esq. of Boult Cummings Connors & Berry (both principals in BSM) was utilized to develop an extensive development checklist.  The checklist was web-based and very detailed.  It assigned tasks by names of responsible parties, dates to be achieved, and a notes section that allowed for the principals and vendors that were to be involved to log on and be held accountable.

BSM leasing and marketing team members worked with David Baker.  They were able to leverage David’s tenant representative experience and market knowledge to quickly complete a demand/gap study of the Mendenhall submarket.   

The A & E team needed to work closely with Home Depot in order to arrive at a suitable site plan and layout in conjunction with elevations.

Results

David Baker represented Vitamin Shoppe in a tenant representative capacity. Vitamin Shoppe was introduced to Truse Plaza and quickly committed to the site. Through local market knowledge contacts, it was discovered that Men’s Wearhouse needed to relocate from an inferior shopping center.  They were contacted and they quickly committed to the project.

The two civil engineer teams obtained the cooperation of CSX Railroad and the City of Memphis. Utility easements were successfully negotiated.  Although the 8,000 square foot building blocked a portion of Home Depot’s visibility from Poplar Avenue (as did the raised railroad tracks), a successful compromise was reached between all parties involved on the scope of the elevation and the ultimate site plan that was needed to assure ample parking and free flowing ingress/egress points along Truse Parkway.

BSM arranged for and placed a permanent loan on the property at an attractive interest rate which resulted in substantial cash flow.  The total value created was 3.2 million dollars and represented a yield on cost of 11.2%. 

David Baker represented Vitamin Shoppe in a tenant representative capacity. Vitamin Shoppe was introduced to Truse Plaza and quickly committed to the site. Through local market knowledge contacts, it was discovered that Men’s Wearhouse needed to relocate from an inferior shopping center.  They were contacted and they quickly committed to the project.

The two civil engineer teams obtained the cooperation of CSX Railroad and the City of Memphis. Utility easements were successfully negotiated.  Although the 8,000 square foot building blocked a portion of Home Depot’s visibility from Poplar Avenue (as did the raised railroad tracks), a successful compromise was reached between all parties involved on the scope of the elevation and the ultimate site plan that was needed to assure ample parking and free flowing ingress/egress points along Truse Parkway.

BSM arranged for and placed a permanent loan on the property at an attractive interest rate which resulted in substantial cash flow.  The total value created was 3.2 million dollars and represented a yield on cost of 11.2%.

The Challenge

H. G. Hill Realty Company owned a small grocery store in an obsolete facility on a key retail corner of a densely populated area. There were several retailers interested in the site; however, it was too small to accommodate most of their needs. The surrounding neighborhood was politically active and opposed to any change, especially one that might deprive them of their neighborhood grocery. BSM needed assemble a larger site and secure a tenant who could pay the rent for this location. The tenant would also need to be acceptable to the neighborhood.

Our Strategy

Carl Storey served as a valuable member of the team. He successfully executed the acquisition and the rezoning of additional property needed for the development of a new Harris Teeter grocery store.

The neighboring property owner was very reluctant to sell because of the tax consequences and concerns about the time constraints that were associated with a conventional exchange. On H. G. Hill’s behalf, Carl Storey designed a unique short term ground lease which gave the seller more time to identify a suitable exchange. This gave H. G. Hill fee simple ownership within a relatively short time frame. Carl served in an advisory role during the entitlement process working with neighborhood groups and public officials.

Results

H. G. Hill Realty Company was able to increase the size and value of their holdings at this key intersection. The neighborhood groups, who were initially opposed to any change at all, warmly embraced the final concept of a mixed use facility that provided a new modern grocery with office space on the upper level. This unique project is frequently referred to by local planning officials as a model of cooperation between government, neighborhood groups and a development team.