Cypress Equities Buys 350 KSF Alabama Power Center
- Sep 19, 2013
Cypress Equities, acting through a fund managed by its real estate investment management group, adds a third Alabama retail property to its portfolio with the acquisition of Promenade Tannehill, an approximately 350,000-square-foot regional power center in the suburban Birmingham town of Bessemer. The real estate company purchased the unencumbered asset from its developer, Colonial Properties Trust, for $38.5 million.
Promenade Tannehill has quite the tenant roster and with an occupancy level in the 90 percent range, a rather full one. Retailers include Publix, Michaels, Ross Dress for Less and a host of other national names, in addition to shadow anchors JCPenney and Target, which were not included in the transaction.
Colonial had marketed Promenade Tannehill, developed in 2008, through commercial real estate services firm CBRE Group Inc. as part of a portfolio that included the 150,000-square-foot Colonial TownPark Smyrna in Smyrna, Tenn., and the 300,000-square-foot Promenade Alabaster in Alabaster, Ala.. Promenade Alabaster sold for $37.4 million in October 2012, sans anchor-owned space.
For Cypress, whose other Alabama retail holdings are located in Tuscaloosa and suburban Mobile, the acquisition of Promenade Tannehill marks the company’s first asset in metropolitan Birmingham. While it may not be high on the radar of most retail real estate investors, there’s something about Birmingham–and other infrequently talked about locales.
“There has been a trickle-down effect from primary markets to secondary markets and even tertiary markets due to the insatiable demand for well positioned commercial retail assets across the country,” Josh Randolph, a director with commercial real estate services firm Colliers International told Commercial Property Executive. “The demand for this asset class is mainly due to the lack of comparable returns in alternative investments such as treasuries and corporate bonds. The demand has outpaced supply by a wide margin with private and international capital equity firms playing a big role in aggressively out-pricing the competition. Investors have come to realize that they can come in to a market like Birmingham and purchase a property with very solid fundamentals and can get an average discount of anywhere from 100-175 basis points depending on the type of asset. If market supply and demand factors, property fundamentals, and strong economic bases are comparable across core and secondary markets, this seems like a no-brainier for those investors seeking a higher return with very little additional risk.”