Creating Success From Excess
Atlanta-based Corporate Property Dispositions handles excess properties with ease.
Randall Shearin

Best Buy is one of several new clients that Corporate Property Dispositions has picked up in the last year.

It was the launching pad for Folio's next career, founding Corporate Property Dispositions just a few miles away from The Home Depot's Atlanta headquarters. He brought with him the disposition group from The Home Depot, which included Jeff Poole, Keith Valentine, Brent Ryhlick, Lisa Polcin and Christine Murrietta. Accountant Jamie Holley joined the company as well. In addition to its Atlanta office, Corporate Property Dispositions (CPD) maintains a West Coast office in Tustin, California, headed by Ryhlick.

Starting with the assignments from The Home Depot — which also include Expo Design Centers and The Home Depot Landscape Supply locations — CPD grew, adding retailers like ShopKo, Best Buy, PETCO and Publix Supermarkets to its client base. The Home Depot remains CPD's largest client. Disposing of excess real estate means finding new and creative uses for property the owner no longer needs. This could be excess land or stores that have been relocated. For instance, The Home Depot recently closed a store it had operated in the Atlanta area. CPD is in the process of subleasing that location to a high-end antique mall in downtown Atlanta. To dispose of a store, CPD will sell the property, terminate a lease or sublease the property to another retailer.

Corporate Property Dispositions has its roots with The Home Depot, still the company's major client.

“Once Home Depot has identified a site, they call us and request a valuation on the excess property,” says Folio. “We start right from the beginning by helping them so that we can maximize the value of the excess land.”

Since most large retailers who self develop have excess development property, CPD works closely on that front with the retailer to ensure cohesive development project for future property sales. After a master plan for a site is complete, the firm then sells the excess property to retailers who like to locate adjacent to CPD's clients to take advantage of their high traffic generation. These include a wide variety of retailers, from restaurants to car dealerships to traditional retail.

“When you sell an outparcel or space next to a retailer like Home Depot, ShopKo, Best Buy or Publix, you are selling synergy,” says Poole. “A retailer gets to enjoy the compounding effect of their own traffic along with the existing anchor's customer count.

A lot of locations that CPD works on are the result of a retailer relocating its store in that market to a better, newer and larger location. CPD then back-fills the vacated properties with another user or, if the client owns the store, it will sell or lease the building. In recent months, CPD has sold Home Depot buildings in Austin, Texas; Southfield, Michigan; and Mountain View and Thousand Oaks, California. CPD also recently received an exclusive new assignment to help Home Depot Design Center Division dispose of 18 locations ranging from 50,000 square feet to 127,000 square feet throughout the United States. Another assignment came through Home Depot's second generation use of other buildings.

In 2004, The Home Depot purchased 18 Super Kmart locations. Most Super Kmarts were around 180,000 square feet, about 70,000 square feet larger than the average Home Depot. As such, in some cases there was excess building space. CPD was able to sub-lease that extra space to other retailers. In effect, CPD developed several Home Depot-anchored centers. Small and medium sized tenants were the usual takers, but in some cases, larger retailers like Target have moved into the space.

Outparcel users are diverse, ranging from tenants like Fifth Third Bank to Sonic Drive-In and every imaginable in between.

“In some cases we leased the excess space to one user, while in others, we are creating opportunities to locate several,” says Folio. “Theoretically, we are also in the development business.”

Lease terminations are a big part of the business as well. CPD has negotiated everything from subleasing to barter exchanges. With sales of excess property, creativity is everything. In some cases the firm has packaged a group of properties together and sold it to national buyers, like REITs. It has also facilitated donations of land to communities, based on the after-tax benefit to its client.

“We're basically in the business of converting potential liabilities to liquid assets for clients,” says Poole.

Buyers for the excess properties often include other large format boxes. Last year in Massachusetts, CPD sold a former Home Depot to Dick's Sporting Goods. BJ's Warehouse is leasing a former Home Depot in New Jersey. The latest hot trend is developers buying outparcel properties to create a retail convenience center in the shadow of The Home Depot or other major tenants. CPD recently sold 9 acres in Medina, Ohio, to The Zaremba Group, which is developing a power center adjacent to an existing Home Depot center. Because CPD is staffed by former retailers, it creates an empathy bridge with retail end-users. Many of the retailers will share a list of locations where they plan to open over the next few years. This way, if excess property becomes available in those markets, CPD can let them know of opportunities in advance of property being mass marketed to the public.

In some instances, CPD may receive an assignment for an impaired property. Oftentimes this happens in over-retailed markets or in markets where demographics have changed. In these cases, the firm looks for a unique buyer who may be interested in using the property for non-retail purposes. In the past it has sold properties to churches and community groups as well as donated properties to municipalities. It has even sold acreage behind stores to multifamily and single-family residential developers.

CPD divides its properties by geography. Ryhlick handles properties west of the Rocky Mountains, while Valentine and Poole handle assignments east of the Rockies. Many of its clients are active nationwide, so CPD must maintain a national presence. CPD constantly researches potential users for property in the markets where its clients are locating new stores, and tenants who will use second generation space in markets where its clients are vacating an old location.

“Having a geographic specialization allows us provide our clients with   consistency in our market knowledge nationwide,” says Valentine.

CPD utilizes a network of 40-plus brokers around the country to stay in touch with every market. The company is active in markets as small as Bemidji, Minnesota, to as large as the New York metro area. CPD adds value to the brokers' ability to sell through its strong relationship with retailers and developers throughout the country.

“Thanks to our previous in-house retailing experiences, we can collaborate with the in-house legal staff at the retailer. We work with the construction department and the real estate department on the disposition,” says Folio. “We are involved in the full process of the development or sale to customize the transaction to meet their needs.”

Corporate Property Dispositions now counts ShopKo Stores among its clients.

“ShopKo has great real estate in middle markets throughout the Midwest,” says Poole. “We are currently handling over 100 outparcels for them and there are a lot of retailers that are interested in the ShopKo excess.”

Excess real estate can be an asset or a burden to retailers, depending on how much of it is on the books. It is a non-productive asset, so retailers are excited when CPD locates a tenant or buyer for a property. Added benefits of having CPD handle a listing include the principals of the company always being involved in the deal. They handle the listings as well as the supervision and negotiations, and contract review of any deal that is made.

CPD doesn't recommend its clients jump at every deal that comes its way. It is always seeking maximum value for the client and work to find that perfect fit.

“At the end of the day, we do what's best for our clients,” says Ryhlick. “We recommend what's best for the retailer.”

“We want to be client-centered first, and deal-centered second,” adds Poole.

“Once we have what we think is a viable tenant and a viable sales price, we will submit that to the client for approval,” says Folio. “They have a tremendous amount of trust that we understand their programs and that we have their best interests in mind.”

Since CPD did not start with the goal of being the biggest name in the disposition business, it has the luxury of not playing a numbers game. Instead, the company's goal is to provide the best service in the industry to all their clients. The company's mission statement calls for it to build a solid group of core clients who are regional and national retailers in scope. As a result, the company plans to have a maximum of 10 to 15 clients.

Corporate Property Dispositions has received several assignments from Lakeland, Florida-based Publix Supermarkets.

Last year, the company took on four new clients: Publix, Best Buy, ShopKo and PETCO. Over the last year it has more than doubled the number of properties in its inventory. The group continues to generate excellent results, and helped its retail clients realize millions of dollars in profits from the sale of their excess properties last year.

“We're blessed with great clients who have excellent properties and strong real estate expertise,” says Folio. “We think of ourselves as their partners; if it works for them, it works for us.”