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ACQUISITION & MANAGEMENT

SUWANEE JUBILEE
Suwanee, GA

Suwanee Jubilee is a sophisticated, two-level retail center located in the affluent community of Suwanee, Georgia. The center boasts a prime location in a thriving Atlanta suburb, offering exceptional visibility and easy access. Anchored by the highly successful organic grocer Fresh Market, this upscale property attracts discerning customers. Spanning approximately 73,524 square feet, the center is situated on approximately 10.9 acres of land. Constructed in 2006, it comprises four distinct buildings, two of which are multi-tenant buildings. The other two buildings house prominent tenants: Fresh Market, a nationally recognized grocery tenant with an excellent credit rating, and Cinco, an upscale southwestern cuisine restaurant that operates multiple locations in the Atlanta area. In addition to these key tenants, the center also accommodates a diverse mix of businesses including medical offices, a beauty salon, a pizzeria, an interior design firm, and a gift store.

  • Two-story retail center

  • Located in the heart of  downtown Suwanee, GA

  • 73,524 rentable square feet

  • Land Area:10.96 acres

  • Yea rBuilt 2006

OPPORTUNITY

The property was developed from the ground up by Paces Properties, an established and reputable real estate company headquartered in the Atlanta area, which also developed Vinings Jubilee, a highly successful upscale retail property located in the heart of Vinings, an affluent Atlanta neighborhood. Completed in 2006, Suwanee Jubilee suffered from an unanticipated market downturn and as a result, was not able secure the leases necessary to service its debt from operations. Paces Properties had secured a construction loan for $10 Million originated by Synovus Bank, a note that was subsequently purchased by Rialto Capital in 2011. Rialto foreclosed Paces Properties to take fee simple title and proceeded to market the property for sale.

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The property was approximately 62% occupied and generated an annual net operating income of approximately $530,000. It was under contract for $7.5 Million, representing a per square foot purchase price of approximately $102. Anticipated closing costs and associated contingencies and fees yield an all-in purchase price of approximately $7.9 Million, which equates to $108 per square foot. With the initial net operating income, the acquisition provided an entry capitalization rate of approximately 7% with a stabilized capitalization rate of approximately 12% upon stabilization.

 

VALUE OPPORTUNITY

  • Attractive property acquired at 60% below replacement cost

  • Low occupancy of 62% on in-place tenants

  • Competitive advantage in leasing process due to strong mix of in-place tenants (generally driving higher income customer to shopping center)

  • Sophisticated, upscale feel can be leveraged to achieve strong results in leasing marketplace

  • Extended lease agreement with fresh market

  • Upside via leasing vacant space

  • Favorable exit valuation

 

Due to the up-scale architectural styling and appearance of the property, Urbana estimated a replacement cost, inclusive of the land value and building cost, of approximately $170 per square foot, which would yield a project cost of approximately $12.5 Million. The attractive basis in a property that was originally designed to house higher-end tenants provides the new ownership with a competitive advantage in the leasing marketplace in terms of providing strong value with a superior product. The property was designed as a higher-end lifestyle center As mentioned above, the attractive exterior of the property creates a sophisticated feel to the shopping center that will be leveraged to achieve strong results in the leasing marketplace. The two-story surface parking entrances in the back of the property provided a challenge in the lease-up, but Urbana’s experience in retail  prevailed, nonetheless. Another challenge was the difficulty finding lending on a two-story retail center. However, Urbana was able to employ its deep relationships in the industry to solidify proper capitalization and fund the project.

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​Supplementing Fresh Market, an up-scale, credit-rated, national grocery tenant, is a well-established local tenant base ranging from Medical Doctors to Interior Design that includes the casual upscale Southwestern, Cinco. The mix of in-place tenants drives a generally higher income customer to the shopping center which, paired with the attractive property-wide styling, will give the property a competitive advantage in the leasing process. At a basis of $108 per square foot net of acquisition and associated closing costs, the property was able to compete on pricing with older and less attractive properties that had less favorable in-place tenant bases.

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OPPORTUNISTIC SALE

Suwanee Jubilee ultimately realized an IRR of 75% when Urbana Holdings sold the property to Levy Properties in November of 2017-51months after its acquisition. Within that period the property recovered from a 38% vacancy factor, stabilizing at 100% occupancy and realizing its full capitalization potential. Having analyzed recent market trends involving organic specialty grocers that suggested future instability for the property anchor Fresh Market, Urbana decided to sell the property at the height of its profitability. Suwanee Jubilee was purchased by Levy Properties in late 2017 for over 14 million dollars - double its purchase price.

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