“The circumstances involving Gilbert really illustrate how we are able to identify properties that fit in our value-add strategy to act fast and close the transaction,” said Steve Jaffe, executive vice president and general counsel for BH Properties. “The center, which was built in 2001, experienced a rapid lease-up to a 94 percent occupancy rate, which included restaurants, entertainment and service. However, that changed in 2007.”
In 2007, when the recession hit the nation, the Phoenix metro retail market was hit particularly hard as the region experienced a sharp increase in vacancy going from a low of 6.2 percent to 12.6 percent.
“In regard to Gilbert Town Center – when the center started to experience vacancy during the recession – the structure of the TIC ownership made it difficult for ownership to fund shortfalls in income and to pay for new leasing costs associated with tenant improvements and leasing commissions,” said Jaffe, noting that average retail rents fell from $20.04 per square foot to $14.12 per square foot. “As a result, because of the TIC’s inability to properly manage and lease the property in order to weather the downturn, the property was forced into receivership.”
BH Properties wasn’t the first group to try and purchase the shopping center. Two other groups previously had the property under contract but were not able to close on the deal. When BH Properties was finally able to get the deal under contract, it moved quickly to put it into escrow with an all cash, quick close offer.
“Gilbert Town Square is a great addition to the BH Arizona portfolio. The team was great to work with and I was very happy when they got involved with the property as a buyer, since I knew they were going to close once they were under contract,” said Greg Valladao, senior managing director and market leader at Cushman & Wakefield. “They were persistent and dogged in their pursuit of the deal. They did exactly what they said they would do, and there’s nothing more important to me as a broker.”
Constructed in several stages from 2001-2004, the eight building asset has tasteful architectural nuances and strong curb appeal, indicative of the historical accents of the region. Gilbert Town Square is anchored by Regal Theaters and is shadow-anchored by Brunswick Bowling Lanes. The center’s prominent exposure along Gilbert Road has historically been a key to attracting national tenants such as Chipotle, Sport Clips and Pei Wei.
On an unrelated timeline, in the fourth quarter of 2013, BH Properties was working to restructure almost all its debt with Wells Fargo and secure an additional $60 million in financing from U.S. Bank. Not only did the company reduce its interest rate significantly, but it also freed up a significant amount of funds to be available to purchase assets. Gilbert Town Square was purchased using funds from these financings.
At the end of 2013, BH Properties announced it finished with $100 million in transaction volume and $82 million in acquisitions, a 57 percent increase over the previous year’s results. Since 2012, BH Properties has acquired 24 properties in the west and southwest regions.
Overall, the company acquired properties in all of its major disciplines – multifamily, retail, office and industrial, and will continue to keep its “value-added” focus in its core markets like Arizona and California. This past year also saw the firm move back into the Denver and Texas markets in acquisitions, closing two purchases, with additional purchases in those two regions expected this year.
Founded in 1997, BH Properties is a Los Angeles-based commercial real estate investment company that focuses primarily on troubled assets in the industrial, multi-family, office and retail markets. With regional offices in Dallas and Salt Lake City, BH Properties has developed its own distinctive acquisition strategies in 18 states and become one of the repositioning experts in its core markets including California, Arizona, Nevada, Utah, Colorado, and Texas. For more information, please call (310) 820-8888 or visit www.bhproperties.com.