Andersen Fiesta Shopping Center

Andersen Fiesta Shopping Center is a 117,391 square foot, grocery anchored, multitenant shopping center comprised of anchor and junior anchor spaces, inline shop space and outparcel pad buildings.

Objective & Challenges

Andresen Fiesta was part of a three-asset collateralization that started to deteriorate in 2016. The Special Servicer engaged Kidder Mathews to provide Broker Price Opinions on all three assets and develop a strategy for each asset. Two of the three assets were put into receivership in Q2 of 2017 and Kidder Mathews was retained to execute an asset strategy for each asset in partnership with the receiver. Andersen Fiesta’s challenges included near term rollover, shop space and junior anchor vacancy, and a struggling anchor tenant.

Process & Strategy

It was determined, based on unanchored tenant leasing velocity, that there was high probability of retaining the existing tenants while working a parallel path to determine Basha’s long term viability as the anchor. Adding new tenants to the center at market rates was also a core strategy to boost the exit value of the shopping center. In the event the anchor could not be retained, Kidder Mathews recommended one of two options: (A) secure a new tenant as an anchor that would generate appreciable cap rate compression to offset the re-tenanting costs, or (B) sell the asset with the anchor space vacant to appeal to a broader swath of buyers that could capitalize on anchor tenant relationships or redevelopment opportunities. The disposition would take two very different paths based on the chosen anchor tenant strategy: traditional shopping center “cap rate” strategy or value-add/ redevelopment buyer pool.

Results

In less than a year, Kidder Mathews added several new tenants to the shopping center and stabilized 95% of the existing shop tenants. Through numerous meetings, it was determined that Bashas would close due to systemic brand issues across the portfolio. Two lease offers for the entire anchor space were secured prior to Bashas vacating. It was determined that optimum value would be secured during the disposition if the anchor was vacant. The vacant anchor space required that Kidder Mathews vet the buyer pool and ensure the asset was accurately presented to groups with known tenant relationships or redevelopment experience. Kidder Mathews ran a traditional unpriced disposition process and through an extensive vetting process and numerous property tours Kidder Mathews was able to filter buyers into groups that either had an immediate solution for the anchor space or did not. Ultimately, Kidder Mathews generated six qualified offers; five of which were invited to the best-and-final. Only two of the groups had a “committed” solution, yet Kidder Mathews was able to use this knowledge to generate a closing price $1 million over the second highest bidder.

While this was a difficult lender-owned assignment involving a vacant anchor, foreclosure, and receiver, the Kidder Mathews team was able to successfully execute an asset strategy and disposition on behalf of LNR Partners.