Turnarounds - South Park Shopping Center

Size and Type:
51,385-square-foot strip center.

Location
Corpus Christi – The corner of Weber Road and South Padre Island Drive.

Condition at Purchase:
The center was built in 1955. A second section was added in 1959. It contained 3,600 square feet of office space for professional offices which had been vacant for several years. The roof leaked. Occupancy was 39%. The parking lot was large but underutilized. The owners and anchor tenant had an adversarial relationship involving legal actions. The property was involved in a Chapter 11 bankruptcy case. Back taxes were owed, and the lender was trying to foreclose. Due to the owners’ image, real estate brokers were not willing to present the property to tenant prospects.

Ownership
The property had been owned by an out-of-town limited partnership since 1984. In 1985, Cravey Realty Inc. was hired by the owners to lease and manage the property on a fee basis with bankruptcy court trustee and creditor approval.

We identified the following potentials:

  • The center faced the freeway providing high visibility for every tenant.
  • The adjacent intersection had high traffic counts.
  • The large parking lot would allow for an out-parcel.
  • The exterior was in good shape. (New canopy and restriped parking lot).


Management Action Plan:

We identified the following negatives:

  • Low tenant morale.
  • Owners had a reputation for non-payment which had to be changed. Owners were requiring “as is” leasing.
  • A brick wall prevented the office space from having a window store front.

We initiated Bankrupty Court approved actions:

  • Negotiated for lender to provide loans to finish out tenant space which allowed leasing to quality tenants at higher levels of rent.
  • Convinced 1,000-square-foot tenant to take 4,500 square feet instead of leaving the center using a “no lose lease” which allowed cancellation if the tenant did not attain projected sales levels.
  • Obtained an out-parcel tenant who constructed a freestanding building on center-leased land in the parking lot.
  • Generated activity in the center to attract a national electronics retailer.
  • Leased to a Chinese restaurant.
  • Phased out office space and replaced brick wall with a glass storefront which attracted another national retail tenant to the space.
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Project Results
The center achieved 100% occupancy 18 months after we took over leasing and management. The center came out of Chapter 11 bankruptcy with a unilaterally accepted plan through which all creditors and lien holders would be paid in full. Appraised value of the property rose 54% from 1985 to 1988.