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Hy-Vee sale marks largest 4Q deal

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Recent commercial activity suggests grocery stores are a prized piece of real estate in the Springfield area, particularly with real estate investment trusts.

In the fourth quarter, two grocery store sales to REITs represented the largest area commercial transactions, according to real estate market tracker Xceligent’s latest Market Trends report.

West Des Moines, Iowa-based Hy-Vee Inc. sold its 86,000-square-foot Battlefield Road store property to LHV Springfield LLC in November. LHV Springfield was formed by New York City-based commercial real estate finance company Ladder Capital Finance LLC, and Greene County recorder records reveal the deed transferred Nov. 12.

Hy-Vee began serving the local market in October 2011 when it opened its $17 million store at 1720 W. Battlefield Road. The company secured a zoning change for plans to build a $12.7 million East Sunshine store a year after opening on Battlefield, but the development is on hold.

Tara Deering-Hansen, a spokeswoman for the company, said Hy-Vee often owns its stores during construction before selling them to buyers.

“We lease and own property, and the Springfield Hy-Vee store property is a sale leaseback. It is part of our portfolio and is something that is occasionally done in the ordinary course of business,” she said via email, adding the buyer is not affiliated with Hy-Vee. “We many times prefer to own stores through construction due to our expertise in building them with our subsidiary, Hy-Vee Construction.”

She said the Sunshine store remains in the company’s development pipeline, but no timeline for construction has been set.

Also in November, former Price Cutter parent company Roswil Inc. sold a Price Cutter property at 2021 W. Republic Road to a publicly traded real estate investment trust. The store’s new landlord is Realty Income Properties 30 LLC, a division of Escondido, Calif.-based Realty Income Corp. (NYSE: O). That deal was one-fourth of a larger agreement valued at over $14 million. Listing agent Mike Fusek of Sperry Van Ness/Rankin Co. said in December he had sold four Price Cutter properties the month before to the Realty Income Corp. division at full list price, including the 67,000-square-foot West Republic store. The other three stores sold were at 708 S. Elliott Ave. in Aurora, 1013 U.S. Highway 60 in Republic and 1901 E. Division St. – each around 46,000 square feet.

The deals, however, had no effect on the local retail vacancy rate, which stayed at 5.1 percent in the fourth quarter, compared to the same quarter in 2013, according to Xceligent. The market tracker, which monitors commercial activity in Springfield, Strafford, Rogersville, Ozark, Nixa, Republic and Willard, had reported a low 4.6 percent retail vacancy rate in the fourth quarter of 2013.

Commercial broker Todd Chambers of Chambers Real Estate Services LLC said grocery tenants represent a solid investment for many REITs.

“What REITs are looking for are single-tenant net-lease properties,” Chambers said. “They want long-term leases. They don’t want landlord responsibilities. They want to invest in properties that have stable tenants with stable businesses – and that’s groceries.”

Jerry Redfearn, an agent with CJR Commercial Group and member of Xceligent’s local industrial board, said the downward movement is a good sign in the office and industrial vacancies. On the industrial side, however, he said the numbers don’t tell the full picture. “There are no warehouse spaces under 5,000 square feet figured into these numbers,” said Redfearn of the 4.3 percent industrial vacancy rate.

He added that companies such as 3M and Kraft occupy significant chunks of the 13 million-square-foot industrial market, and those companies have occupied their Springfield properties for decades. Even so, on the industrial side, speculative building – construction before tenants have been secured – is taking place locally.

“They are starting to build some specs because there is demand,” Redfearn said.  

He pointed to the 30,000-square-foot Westgate Industrial Center expected to be complete next month in northwest Springfield and the 64,000-square-foot industrial warehouse in the North Creek Business Park.

On the office side, the market absorbed 67,124 square feet during the fourth quarter, which helped nudge average list rates to $12.62 per square foot from $12.44. The vacancy rate landed at 9.1 percent for the sector, down from 9.7 percent the year before.

Speaking to the REIT activity, Redfearn said he has seen the trust investors take a liking to multifamily apartment complexes, as well. During the first half of last year, Missouri Valley REIT purchased more than $27 million worth of multifamily properties including Essex Place, The Gazebo apartments and the TLC Properties-managed Cambridge Park apartments.

“There are lots of investors out there looking for that type of property,” he said. “Overall, everything is slowly getting better.”

Earlier this quarter, Chambers brokered an agreement to sell Glenstone Avenue properties Brentwood Center to Jared Enterprises Inc. and Brentwood Center South to a St. Louis investment group, Pace Properties. Four generations of the Gillenwaters family had been involved in owning and operating the centers before the Jan. 1 deals closed for undisclosed terms, Chambers said. Together, those properties represent roughly 150,000 square feet of retail space.

Similarly, Redfearn said he expects a 35-acre land sale at the southwest corner of Kansas Expressway and Walnut Lawn to close by the end of the month.

“That deal has been in the works for two years,” he said, referring to plans by St. Louis-based Lutheran Senior Services for a $40 million retirement community. Springfield City Council approved a planned development for the project in June 2013.
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