Case Studies
Below are a couple success stories that have come to fruition. To see all the stories that are in the making, press below.
Village Shopping Center
902 W Kimberly Road, Davenport, IA
The Challenge
The property is a 237,637 sf community shopping center on approximately 25 acres at 902 W Kimberly Rd in Davenport, Iowa. Capstone purchased the property in 2014. At acquisition, the center was in a significant state of disrepair, with a declining occupancy of 69%.
Opportunity Identified
Located in a dense commercial trade zone in the Quad Cities market, adjacent to NorthPark Mall, the third largest mall in the State of Iowa with over one million sq. ft. retail floor area. Capstone immediately changed management and performed significant capital improvements to upgrade the property’s image and increase its attractiveness to shoppers and better tenants, including a new façade, new parking lot lighting, roof and parking lot improvements, and new pylon signage. A major marketing effort was initiated targeting Capstone’s national network of tenants.
Results
The center is currently over 90% occupied and rental rates have increased significantly. Major credit tenants at Village Shopping Center include Ross Dress For Less, Popshelf (Dollar General), Shoe Carnival, Dollar Tree, Five Below, Pet Supplies Plus, and Iowa Department of Transportation.
Capstone has generated significant returns and successfully returned all capital to investors.
Meadowbrook Shopping Center
910 W. Lincoln Highway, New Haven, IN
The Challenge
Located in a bedroom community of Fort Wayne, Indiana, this property was a former single-tenant department store that had languished in various states of vacancy and disrepair for the previous ten years.
Opportunity Identified
Capstone saw opportunity in the property’s strong lease-up potential and its prime location, which included more than 800 feet of direct frontage on the major retail thoroughfare of the area. In addition, the property had substantial developable land which could potentially increase the size of the shopping center by 70%.
Results
Capstone acquired the property with the objective of maximizing its long term cash flow through a three-stage redevelopment process. First, Capstone hired local contractors to renovate the existing main building while tenants were signed on. Next, the additional land was developed with a goal of attracting maximum traffic and enhancing the image and resale value of the center. Finally, Capstone engaged area leasing brokers and management professionals to reposition the property as a discount shopping center.
The property’s anchor tenant, Big Lots, Inc., re-signed a new, long-term lease and immediately renovated its space. Dollar Tree, another national discount retailer, signed a new lease. The new leases, national brand-name tenants, and major capital improvements – including a new parking lot, building façade and new multi-tenant loading dock – resulted in a dramatic increase in the property’s image and access to financing. The center, still with significant development potential, was quickly refinanced, returning capital to Capstone investors before selling the property at a robust IRR.
Volunteer Crossing Shopping Center
1103 Volunteer Parkway, Bristol, TN
The Challenge
The former tenant of this Bristol, Tennessee property was a department store that had declared bankruptcy, leaving the premises vacant for an extended period and in need of substantial repair and investment. Local investors viewed the property unfavorably due to its close proximity to the State of Virginia, which carries a lower sales tax.
Opportunity Identified
Capstone’s interest in the property was based on two key factors: the substantial unrealized value of the land, and the property’s location, which included direct frontage on two major traffic arteries.
Results
Capstone acquired the property and met with real estate brokers, lenders and local contractors to devise a plan to make renovations, maximize the property’s cash flow, and increase its long-term economic value. To raise the capital needed to repair the main property, install a new roof and HVAC units, and make cosmetic improvements, Capstone quickly sold two prime outparcels. A former storage area in the back of the building was then converted to individual retail spaces with direct road frontage and parking, resulting in a 25% increase in the property’s retail square footage. Capstone utilized its database of national and regional retail tenants operating in the area to market the property as a multi-tenant discount shopping center. After intensive marketing, Big Lots Inc. signed on to become the anchor tenant. Subsequent national and local tenants were found and another outparcel was sold.
Based on increasing operating income, the Bristol, TN shopping center has been refinanced three times, returning capital to Capstone’s investors before selling the property at a robust IRR.
California Industrial Center
705 North baldwin park Blvd.
City of Industry, CA
The Challenge
The property was an over 185,000 sq. ft. industrial facility on four separate land parcels in City of Industry, California. The majority of the building, parking and road access was controlled by a long-term land lease, with the fee owned by an unrelated second party. The remaining building improvements and parcels were owned by a third party. The roof was over 30 years old and the State of California was mandating all buildings conform to costly new earthquake guidelines pressuring landlords throughout the State. In addition, two successive tenants which had previously net-leased the facility had declared bankruptcy. The age of the building, complex ownership structure and high cost of repairing the Property and bringing it to code deterred the majority of purchasers.
Opportunity Identified
With already strong international, and particularly trans-Pacific trade projected to escalate in the coming decade, Capstone identified the area, just east of the port of Los Angeles, as a high growth opportunity for industrial properties. The complexity of the ownership structure and the high cost of necessary capital improvements if navigated and managed well could allow Capstone to acquire the Property at an advantageous basis while minimizing costs, boosting overall returns.
Results
Recognizing that the leasehold controlled the road access and the majority of the building and parking, Capstone acquired the leasehold for a low basis. To minimize its its operating expenses and carrying costs for the Property, Capstone then alternatively litigated and worked aggressively with two successive tenants to induce them to pay all property expenses and perform required roof replacement and California-mandated earthquake structural reinforcements for the Property and to protect landlord’s interests in Federal bankruptcy court when the last tenant declared Chapter 11. Initiating a multi-year negotiation between three separate owners that controlled the four separate land parcels and leasehold, Capstone was eventually successful in its negotiations, selling its leasehold interest at a high multiple to its original acquisition price.