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January 15, 2018

Two Topsham Fair Mall deals: One remains retail, the other to be redeveloped

Courtesy / CBRE | The Boulos Co.
Courtesy / CBRE | The Boulos Co.
131 Topsham Fair Mall Road, an 85,636-square-foot retail center, was purchased as an investment for $5.25 million and will continue to operate as a retail property.

TOPSHAM — Two significant purchases of mall properties in Topsham could signal optimism for the type of property that has been struggling to remain viable in the retail bricks-and-mortar market.

B33 Topsham Crossing LLC purchased 131 Topsham Fair Mall Road, an 85,636-square-foot retail center on 10.94 acres, from a special servicer for $5.25 million. The transaction, which closed Dec. 4, 2017, was arranged on behalf of the buyer and the seller by Derek Miller of CBRE | The Boulos Co.

105 Topsham Fair Mall LLC purchased neighboring 105 Topsham Fair Mall, a 45,469-square-foot retail building on 4.44 acres, from seller AB Holdings Co. LLC for $5.14 million. That transaction, which closed Dec. 14, 2017, was arranged on behalf of the seller by Miller and on behalf of the buyer by Chris Paszyc, also of CBRE | Boulos.

131 Topsham Fair Mall

With regard to the 131 Topsham Fair Mall Road transaction, B33 Topsham Crossing LLC is a national NNN-leased retail group that will continue to operate the asset as-is. According to Property Metrics, the NNN lease, also called the triple net lease and commonly used in commercial real estate, is defined as a lease structure where the tenant is responsible for paying all operating expenses associated with a property. The triple net lease is considered a turnkey investment with predictable revenue stream due to the long-term leases and low management requirements.

The property had been in financial trouble and was put up for an online auction, said Miller.

"The previous owner bought it at the height of the market in 2007," he said. Ultimately, when tenant Bed Bath & Beyond relocated to Merrymeeting Plaza in Brunswick, in 2016, the owner was not able to cover debt service anymore. "So they gave it back to their lender, and we were hired by the special servicer to market it in conjunction with an online auction."

The center is currently occupied by Dick's Sporting Goods, Petco and Target, but Target was not included in the sale. Initially, there was 22,000 square feet of lease space available, where Bed Bath & Beyond was formerly located. Dollar Tree moved from 105 Topsham Fair Mall to take part of that space, leaving a 11,000-square-foot space available for lease.

During a 75-day marketing period, "We saw numerous inquiries nationwide," said Miller. "Ultimately, we had five to six bidders in the auction process."

The property will continue to operate as a retail entity.

"The buyer will get a healthy return on their investment," he said.

105 Topsham Fair Mall

Courtesy / CBRE | The Boulos Co.
Courtesy / CBRE | The Boulos Co.
105 Topsham Fair Mall, a 45,469-square-foot retail building, was purchased for redevelopment for $5.14 million. Most of it will be redeveloped as a non-retail property.

105 Topsham Fair Mall was formerly home to a Best Buy, which declined to renew its lease there as of October 2016. According to an article in The Times Record at the time, that decision was made due to flagging sales, changing customer patterns and increasing lease costs.

This property was also in financial trouble. Miller said CBRE | The Boulos was handling the leasing of the property for the former owner, who ended up giving the property back to their lender.

"The lender retained us to market it for both sale and lease," said Miller. The property ultimately sold to an in-state developer who saw it as a redevelopment opportunity.

"It was a traditional sale where we marketed it through direct outreach to likely candidates," he said. "We had good interest from retailers in the former Best Buy space, and we could have gone that route. But ultimately, we had a strong buyer come forward with an exciting plan to redevelop the property."

The building structure is in good shape, but there will be extensive renovation. An existing tenant, Buffalo Wild Wings, will stay on. Best Buy formerly occupied the 20,054-square-foot anchor space with smaller tenants occupying the inline suites.

With the exception of Buffalo Wild Wings, the rest of the center will be redeveloped for non-retail use, said Miller.

"It will be great for the area and for the community, when it's all said and done," he said.

The deal took about 1 ? years to finalize, although it was under contract about six months once the deal terms were agreed to and a purchase and sale agreement was signed.

"It was a different deal than the sale of 131 Topsham Fair Mall Road. We had good interest throughout our marketing effort, but it took longer to put the deal together because there were a lot more moving pieces. We had to relocate Dollar Tree to 131 Topsham Fair Mall Road so that the planned end user could have the space they needed. The relocation was pivotal to the sale of the property."

In a related move, 105 Topsham Fair Mall LLC also purchased two pad sites – 1.86 acres and 0.71 acres – Topsham K&K LLC for $575,000, in a deal that closed Jan. 5. They will be part of the overall redevelopment of 105 Topsham Fair Mall Road, said Miller.

The successful sales are cause for optimism, Miller said.

"It's an opportunistic time for retail properties," he said. "I think the demise of retail is vastly overstated. We were able to sell the former Shaw's in Biddeford — which was 55,899 square feet — last October to Ocean State Job Lot after a relatively short time on the sale market. We saw really strong demand for the investment property in Topsham and were able to put together a great redevelopment project at 105 Topsham Fair Mall Road. At the end of the day, we were able to achieve strong pricing for all these assets, yet the deals made sense for the buyers as well. We're seeing some of these big box vacancies getting back-filled fairly quickly."

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