Closing a business is often not the end of the property it was built on – closed businesses can be opportunities for redevelopment. These unfortunate situations can create market outlets and opportunities for redevelopment.
A silver lining of the silver screen’s demise
Connecticut-based companies Spinnaker and Eastpointe, for example, are nearing completion of a project that saw closed Showcase cinemas in Bridgeport, Connecticut, demolished and replaced with an apartment complex.
“We have two buildings, there’s a 69-unit building with two guest suites and a 231-unit building,” said Bill Finger, co-manager of Eastpointe. Finger estimated that the project will be completed by the first quarter of 2023.
A similar renovation is underway in Raleigh, North Carolina, where Dominion Realty Partners is transforming the former AMC Classic Raleigh 15 (cinema) into a 260-unit Atlantic Springs Place Apartments complex. In nearby Chapel Hill, North Carolina, Parkway Holdings Phase Two LLC, VIP Chapel Hill LLC and Harry A. Kazazian have partnered to convert the Regal Timberlyne Theater property into a 20,000 square foot medical practice.
As has been the case for many businesses, the COVID-19 pandemic accelerated the closure of many cinemas across the United States. Those aforementioned North Carolina theaters were just two of 630 theaters that closed between the March 2020 outbreak and December 2021, Bloomberg reported. After a first wave of closure of small urban businesses at first, other business owners were able to readjust with greater emphasis on e-commerce. Theaters, which require in-person attendance, could not adapt in the same way, and they are far from alone.
Shopping for a new life
Shopping malls are in a similar state of decline. In a New York Times report on this phenomenon, real estate analytics firm Green Street estimates that of the 1,000 malls they track, 750 house empty “anchor boxes” or large sections designed to house large retailers. The report also found that COVID-related bankruptcies of retailers like Brooks Brothers and JC Penny have fueled mall declines. This highlights the precarious market positions of malls; these are the businesses that are most dependent on the success of other businesses.
The Alderwood Mall in the Seattle, Washington suburb of Lynwood, which has been operating since 1979, has undergone a large-scale renovation. As reported by Bloombergdevelopers such as Brookfield Properties are turning large vacant swaths of the property into a 300-unit apartment complex: Avalon Alderwood Place.
This trend of turning malls into mixed-use properties dates back to before the pandemic. In 2013, the Arcade Providence, located in Providence Rhode Island and the oldest mall in America (having been built in 1828) was reopened as a mixed apartment and business complex. These projects strike a balance between development and preservation.
Stock up on inventory
The fate of the Arcade isn’t the only evidence that an esteemed legacy isn’t enough to stunt innovation or market forces. In Philadelphia, Pennsylvania, 2145 N. Front Street, the site of the gymnasium featured in the “Rocky” film series, was recently confirmed be under renovation. The site will be converted into four apartments with a commercial space of 1,276 square feet on the ground floor
The businesses most naturally suited to being turned into apartments are hotels, and in Farmington, Connecticut, one such project is underway. The Local Marriot is being transformed into a residential complex that will house 224 apartments ($1,100 to $1,800 per month rental depending on size) and amenities such as a swimming pool, fitness center and restaurant/bar . Similar projects are in place across the country.
In Mesa, Arizona, Vivo Living is creating an apartment complex out of a former Ramada Inn. In Pinellas County, Florida, Miami-based Eagle Property Capital Investments LLC and Mexico-based private equity firm Promecap have partnered for a renovation. Two local hotels, the 95-room TownePlace Suites and the 88-room Residence Inn (both operated by Marriott St. Petersburg Clearwater) will be converted into a single-family community called “Pelican Lake Apartments.”
Hotels are another business that requires in-person presence, but unlike the aforementioned businesses, they also depend on travel. Covid has led to a decrease in traveland therefore less used for hotels.
The loss of these companies is the gain of another. The fact that current redevelopment projects are focusing on the creation of housing speaks to a real estate market problem frequently cited by agents: inventory, or lack thereof. Among the benefits the Spinnaker/Eastpointe project will have for the community of Bridgeport, Connecticut, Finger cited a greater supply of market-priced housing in the area.
What good is more housing if people don’t want to live there? This shapes the areas that are targeted for these projects. Asked about the types of properties Spinnaker favors for construction and investment, Spinnaker Vice President of Development Frank Caico said, “Urban/suburban and close to a train station, excellent access to a freeway and also part of a district”.
Caico adds, “The other thing I would say is that it’s a very different environment in the Northeast and Connecticut where a lot of our communities are already very built up, so the availability of properties or land for redevelopment is not as plentiful as in other markets. Then the eligibility process tends to take a lot longer, whereas in some of these other markets it might be easier to find opportunities, but you’re competing against a lot more people. Even though it’s easier to build in some of these other markets, you almost have to be a little more careful because there’s so much more competition because the barriers to entry are lower.
This does not mean, however, that the renovations are going smoothly. Indeed, COVID has actually erected greater barriers to redevelopment due to supply chain disruptions.
Bryan Robik, Finger’s Co-Managing Partner at Eastpointe, explained the challenges his company has recently faced: “We have encountered the uncertainty of construction costs, particularly lumber, but it has little stabilized now or seems to be. Generally, anticipating market increases.
Construction is not the only place where the question of cost arises. The former AMC Classic Raleigh 15 property was purchased by Jonathan Greenwood’s Asprings, LLC, for $3.9 million, a huge drop from the $13.3 million price paid by previous owners in 2010. The Records from the county show that the property has an estimated value of $3.75 million.
Similarly, Rodrigo Conesa, Managing Director of Eagle Property Capital Investments, says of the purchase of his business: “Negotiations for both hotels began at the height of the Covid-19 crisis, allowing us to negotiate an attractive price for two high quality properties which are perfectly suited for conversion into apartments.
Renovating these businesses may be the developer’s area of expertise, but to complete that renovation, they need to close the sale. Navigating these sales is where brokers and agents come in.
Devin Meenan is the Associate Editor of RISMedia. Email him your story ideas at email@example.com.