Bankruptcy – Vacant Big Box – Tertiary/Rural Markets – What is “Too Deep” 2003

Acquired Kmart Bankruptcy Foreclosure property from Deutsche Bank at SEC of Ming & Stine in Bakersfield CA – Vacant Builders Square (Kmart Subsidiary) was a 103,000 sf box with 20K sf garden center at a 67,000 cars/day intersection with 3 mi population over 160,000 and HH Inc $60k per year. Extensive market research revealed that there were key mid-size box retailers (Sporting Goods and other soft goods retailers among others) that were either not in the market at all or were operating without any of their key competition – Plans were devised to take the front of the building back 80-100 ft to create more marketable bay depths of 200-220 ft and layout new storefront facades to house strong co-tenancies and alternatively to convince Home Depot to open a new location that would constitute a blocking maneuver to crowd out market share from Lowes. Ultimately cut a deal with Home Depot at rents so low that they would likely never exceed market rents for 100k sf industrial box space in that Metro Market.  Sold the property in Sep 2008 at 5.125% when such exit caps on large NNN deals were rarely achieved.