High-profile retail buildings in downtown come to market
A slew of commercial property in the heart of downtown Reno is up for grabs.
The Palladio’s 13,173 square feet of first-floor retail spasce, the 83,560-square-foot former Woolworth building at the corner of North Virginia and First streets and the 22,999 square-foot mixed-use building that houses Java Jungle and Sierra Tap House on the corner of First and Arlington streets all came on the market within the last month or so.
Bids for the $3.5 million Palladio were due at the end of June, but Mark Keyzers, senior vice president and principal in the retail properties group of NAI Alliance, the broker on the sale, says the deadline may be pushed out.
“It was well received and we’re still taking some additional offers so we may extend the deadline,” he says, although he declined to say how many offers were submitted.
The riverfront condominium property retail space is 93.5 percent occupied and features its most well-known tenant, Campo, arguably Reno’s most popular restaurant. The space is listed with a capitalization, or cap, rate of 7.3 percent, which is generally arrived at by dividing the property’s annual net operating income by its sale price. That works out to $255,500 in net operating income a year.
“The unique factor that this property benefits from is a percentage rental income generated from the sales of Campo. The receipt of this significant additional income has resulted in a hybrid valuation that takes into account both the rental income and the retail sales income. The additional income should allow investors to lower the risk/reward threshold providing for a cap rate premium on the rental income portion,” reads the listing.
The buildings other tenants are Old Bridge Pub, Subway, J.B. Mapes & Co., which is in the process of being re-launched as a Creole-style eatery by its owner, says Keyzers, and its latest tenant, Reef Sushi.
“The property has been stabilized with Reef Sushi, which put the property at fully occupied status,” says Keyzers. “It’s ready to sell now that it’s stabilized.”
The sale of the long-vacant, seven-story Woolworth building around the corner from the Palladio and across Virginia Street from City Hall includes the 7,000-square-foot adjacent two-story building for a total of about 90,000 square feet of office and ground-floor retail. The property is listed at $2.29 million or about $25 per square foot, well below other commercial space in the area.
“The property needs a fair amount of renovation to make it usable, depending on its use,” says Frank Gallagher, a principal in Commercial Partners of Nevada, the building’s representative.
Gallagher ticks off the 48-year-old building’s elevators, heating, ventilation and air conditioning and exterior glass as all in need of rehab.
The mixed-used building on First Street near West Street, which is 60 percent leased and includes retail, offices and apartments, is being represented by the Johnson Group.
“Technically, it’s been on the market for two months but the owner has been out of town for half of that,” says Richard Johnson, owner of the broker.
He says the 40 percent of unoccupied space in the building has been gutted and is ready for renovations by a new owner.
Johnson and the brokers for the other buildings say there has been interest in the properties from both local and regional investors. And despite all being within blocks of one another, the properties are significantly different from one another and not competing for the same buyers.
“It’s kind of like buying a car,” says Johnson. “We all have four wheels and we’re all made to drive.”
But that’s where the similarities end, he says.
Despite ongoing difficulties, Northern Nevada’s office real estate market will endure, experts predict
IGT’s decision to list its 1.2 million sq. ft. campus for lease this month and the recent $3.8 million sale of Harley Davidson’s 3-story financial services building in Carson City are the latest examples of companies no longer needing larger-scale office properties to maintain productivity levels and meet customer needs.