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  • As seen in the Daily Record

Lowe's In Little Rock

After a decades-long absence, Lowe’s is back in Little Rock. This column covered the purchase of the land last year. Over the summer the building grew on the northwest corner of South Bowman Road and Kanis Road. The site is adjacent to Sam’s Club, although a customer can visit Sam’s and not see Lowe’s unless they stop and look closely. A tree row and a difference in elevation combine to restrict the visibility of either store from the other. The elevation of the store causes Lowe’s to be much less visible from the intersection of South Bowman and Kanis than is the substantial retaining wall that was constructed as part of the site work. There was some pretty substantial excavation on the back side of the building, too. It works out that Lowe’s sits at a lower elevation than the homes behind it. As noted in a previous column, maybe the parking lot at The Home Depot will have an empty parking spot or two now. Evelyn and I will still go there on first Saturdays for the kids’ workshops. I will be shopping at Lowe’s soon, too. There are some items I’ve had to go across the river and through the hollow to get at the Lowe’s on McCain Boulevard.

McCain Boulevard will see increased traffic on the east end starting next year. The new bridge over the railroad tracks is nearing completion. Much of the land that was available on Springhill near McCain has sold. Some of it has come back on the market. Baptist Health has a new medical office building in the works on the Springhill campus. I’ll put a plug in here for the idea of extending Landers Road (US 67 Frontage Road) from the current dead-end behind the Baptist Health campus so that it connects to Springhill over by Cracker Barrell. Also behind Cracker Barrell, construction on a new clinic for Arkansas Specialty Orthopaedics is progressing toward a first quarter 2018 opening and the new Dick’s Sporting Goods looks to be on target for a second quarter 2018 opening at McCain Plaza. Those disheartened by the closing of Gander Mountain a little further north on Landers Road will surely be glad to shop for hunting, fishing and camping gear at Dick’s Sporting Goods.

On the subject of selling sporting goods, let’s touch on a sporting goods store that sold. Before we do that, I’ve worried about what the upcoming capital lease accounting changes might do to the single tenant net lease (STNL) market. I had the opportunity at a retail real estate conference in October to ask that question of a Wall Street analyst that specializes in publicly-traded retail companies. His answer was more germane to stock performance than to the real estate, however it does transfer (and he did dumb it down for me a little too). His short answer is that he believes the markets already have the changes priced in because of how well the changes have been telegraphed. I guess we’ll see. And I guess the bigger disruption possibility in the STNL markets may be the potential elimination of the Section 1031 provisions of the tax code. Many investors have utilized Section 1031 in STNL transactions. We’ll keep an eye on that. So, the sporting goods store that sold was Bass Pro Shops at Gateway Town Center over off Interstate 30 at Otter Creek Road. Bass Pro Outdoor World, LLC sold the approximately 105,000 square foot store and almost 15 acres to SPT Prairie 1 BP Drive, LLC for $21,892,000. SPT Prairie Holdings, LLC is a Delaware Limited Liability Company that has been on a nation-wide buying spree of Bass Pro stores and Cabela’s stores. I’m no investigative reporter, I can connect dots, though, and see this as related to the purchase of Cabela’s by Bass Pro. Anyway, the sale works out to be close to $210 per square foot on the building. There is a little excess land with the purchase, and that land has been cleared and readied for development. It’s a nice corner in what seems to be the hottest retail development site in Little Rock. Recounting some things that have been touched on previously is to mention Dave & Buster’s, some new in-line centers, new hotels, Studio Movie Grill, local favorite David’s Burger’s, and a very nice, very busy, (which ones aren’t?) Chick-fil-A.

Other interesting activity at Gateway Town Center includes an offering of one of the new in-line shopping centers adjacent to the outlet mall, and an offering of the to-be-built Hooters restaurant. The Hooters offering price is $3,414,634 and is based on a capitalization rate of 6.15%. The building is 6,400 square feet so buying that stream of income translates into paying about $530 per square foot for the building. I’m just guessing that maybe it might not bring that as an empty building. The gap between the price is paid and the true value of the land & improvements is part of the risk. Does the 6.15 percent cap rate reasonably reflect that risk? That’s the sort of question I ask. At the same conference last week, I had an enlightening conversation with a STNL broker who has dealt exclusively with that product for years. He explained to me that many, most even, STNL buyers are not looking past the monthly cash flow and have little, if any, concern with the market value of the underlying real estate in the event of the tenant’s default. I have to say, it is hard for me to look at single-tenant buildings without wondering what the next use could be and what would the value for it be. For example, there are dollar stores in all sorts of rural “Bugtussle” sorts of towns that are paying three or four times the rent that Cooter’s Garage or similar likely re-use is going to pay. Just sayin’, someday the music will stop again and there won’t be enough chairs.

Just up the interstate is some other new retail development. Just a block or so off Baseline Road (first correct answer with the name origin of Baseline Road wins lunch on me) a Northern Tool + Equipment store is being built. This 18,000-square foot to-be-built building is also available for purchase. No asking price is named at this time. And, next door to Northern is to be a Duluth Trading Co. store. I haven’t seen an offering on that property. The same merchant builder is building both, so I’ll guess that it could also be a purchase opportunity. Boot Barn is another retailer nosing around the southwest Little Rock market. All of these retailers, as well as The Home Depot and Harley-Davidson there on the corner, share an overlapping customer base.

It was said to me recently that this column is a gossip column. I take exception to that. First, there is a whole lot of observation and research put into extracting interesting, to me anyway, tidbits from the detritus of information we see. Second, I don’t get a lot of gossip offered to me. Per the standard closing below, I do welcome tips. All that being said, there are some people that want the speculation (yes, you Max), so the bit of rumor I will offer is that the latest word is Costco might join Lowe’s over at the intersection of South Bowman Road and Kanis Road. Personally, I’ll wager on that only with long odds. I’m often wrong though. If you don’t believe me, just ask my wife.

I had the opportunity last month, yes at the same conference, to hear and see a presentation from an economist that laid out empirical data illustrating a flight to quality in commercial real estate. Among other points, he illustrated growing value differentials between Class A and Class C properties, and that not all malls are dying. I’m inclined to share some more of that next month.

Tips and suggestions, well most of them anyway, are appreciated. Hope you found something interesting in the column this month. Check back again next month for the things that didn’t get included here this time and that pop up between now and then.

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