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Thread: Supercenter replacing existing Wal-mart . . . advice please

  1. #1
    Cyburbian
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    Supercenter replacing existing Wal-mart . . . advice please

    Wal-mart is in the initial phase of seeking approvals for a new Supercenter. Locally there is a lot of concern about the likely future of the existing high-visibility location once the old store on that site closes.

    Any advice for us on how to proceed to minimize the chances of this parcel ending up with a vacant/abandoned building and/or anti-competitive deed restrictions that limit future uses? Have any of you successfully wheedled cooperation/concessions from Wal-mart's people during the approval process to address a similar situation?

    Perhaps this has been discussed in another thread, but I haven't managed to find it.

  2. #2
    Cyburbian SGB's avatar
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    Re: Supercenter replacing existing Wal-mart . . . advice please

    Originally posted by indigo
    Any advice for us on how to proceed to minimize the chances of this parcel ending up with a vacant/abandoned building and/or anti-competitive deed restrictions that limit future uses?
    I'm not sure that American municipalities can prevent any landowner from placing private restrictions/covenants on property deeds.
    All these years the people said he’s actin’ like a kid.
    He did not know he could not fly, so he did.
    - - Guy Clark, "The Cape"

  3. #3
    Cyburbian Rumpy Tunanator's avatar
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    Re: Re: Supercenter replacing existing Wal-mart . . . advice please

    Originally posted by SGB
    I'm not sure that American municipalities can prevent any landowner from placing private restrictions/covenants on property deeds.
    Yep, its up to the property owner.

    -The only other business I could possible see using the existing space and/or building would be a Home Depot.
    A guy once told me, "Do not have any attachments, do not have anything in your life you are not willing to walk out on in 30 seconds flat if you spot the heat around the corner."


    Neil McCauley (Robert DeNiro): Heat 1995

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    Cyburbian Wannaplan?'s avatar
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    Re: Supercenter replacing existing Wal-mart . . . advice please

    Originally posted by indigo
    Any advice for us on how to proceed to minimize the chances of this parcel ending up with a vacant/abandoned building and/or anti-competitive deed restrictions that limit future uses?
    You could amend or update your master plan to include a redevelopment plan for the old Wal-Mart site. Open up the process to the public to gain their input and support for a future concept for the site. Many large sites like this can be redevloped into mixed-use or housing, a la Calthorpe and others. But large-scale mixed-use may not be appropriate for your area.

  5. #5
    Cyburbian Emeritus Chet's avatar
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    There are a few approaches that can help, but SGB is ultimately correct. Being from my area, you (and definitely your boss) would be familiar with Menard's S. 27th street location, where they replaced an aging store with a mega box, across the street from the original and in a different municipality. The old box sat vacant for years due to private covenants, but now its an Ashley furniture store.

    That said, here's my approaches to these situations:

    1. Work with the Walmart realestate rep. If you can identify a non-competing retailer or an adaptive re-use, they would love nothing more than to quickly dump an unproductive asset.

    2. The heavy handed one-two punch: Get the community's CDA to declare the empty store blighted and poise for condemnation. A circuit court can vacate covenants which are antithetical to the redevelopment plan. Sometimes you wont even need to go all the way on either, but demonstarting community resolve can push them into action.

    and of course:

    3. Do nothing. It worked in the Menards example above, but the community has to have patience.

  6. #6
    Cyburbian PlannerByDay's avatar
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    I don't have any recommendations other those already stated in previous posts but thought I would post something regarding the new development.

    The following is an article which was in the Charlotte Observer back in July of 2002.

    Charlotte Planners Want Demolition Bond for Big Boxes

    The very visible and costly proliferation of "dead" big box stores that are littering American highways has caused some communities to try and deter the construction of huge retail buildings that will sit empty within a decade. Wal-Mart euphemistically calls their 400 empty buildings "dark stores", like something out of a George Lucas film, but many communities don''t want them anymore, and are taking action to force developers to tear down what they put up.

    In February of 2001, the township of Buckingham, Pennsylvania enacted a zoning ordinance that limits stores to no greater than 35,000 s.f. But the community went further. The developer has to submit a market analysis showing there is a "market for the proposal facility from which patrons will be attracted", and, for any store larger than 10,000 s.f. "as part of the land development agreement,,,provisions shall be made for the removal or adaptive resuse of the structure by the applicant should the facility not be used for a period of 12 consecutive months. Financial security may be required by the township." "It protects the township against blight," said Max Weisman, the township manager. "It''s for revitalization."

    Now word comes that the city of Charlotte, North Carolina, already seriously marked by sprawl, is considering a similar plan. A recent report found that the city has 30 empty big box stores in the trade area. The Charlotte Observer reports that city planners have proposed a zoning ordinance that would require two things: 1) a developer must provide the financial means to tear down their building if their store closes and remains empty, and 2) big boxes must be part of a larger, mixed use development of stores, offices and apartments. "We''re not going to accept some corporate, logo-stamped design," the newpaper quoted Charlotte Planning Director Martin Crampton as saying. "My attitude is, let them go someplace else." One of the solutions proposed by the Charlotte-Mecklenburg Planning Commission was to require developers to put up a bond, or place money in escrow when they build a big box. If the store closes and stays empty long enough, the city would take the escrow money and use it to tear down the site for redevelopment. The concept is being called a "Demolition Bond". In Buckingham, PA, the idea is simply called the "abandonment program". Planners in Charlotte are already talking with two developers about a demolition bond. Such local responses may finally begin to throw some light on the "dark store" problem.

    What you can do: For more information on the Charlotte ordinance or the Buckingham law, contact info@sprawl-busters.com.

  7. #7
    Cyburbian Cardinal's avatar
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    Chet's response is the best I have heard so far. I have also heard of some communitiesconditioning their approval of the new store on certain actions being taken with the existing store. I guess you'd have to be careful about over-stepping your legal authority to do so.

    I am concerned about the "demolition bond" approach. Twelve months is not a long time for a building to sit empty even in a good location during a good economy. There are also many situations in which a business may hold a lease and not occupy the space, but it is not available to other tenants either. I think you would also find it next to impossible for developers to secure financing when the building is the collateral for their loan. Finally, the building does represent some of the economic infrastructure of the community. Do you really want to tear it down, lose the tax revenue, and not have it available when a potential tenant does come along?
    Anyone want to adopt a dog?

  8. #8
    Cyburbian ludes98's avatar
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    Originally posted by Cardinal
    I am concerned about the "demolition bond" approach. Twelve months is not a long time for a building to sit empty even in a good location during a good economy. There are also many situations in which a business may hold a lease and not occupy the space, but it is not available to other tenants either. I think you would also find it next to impossible for developers to secure financing when the building is the collateral for their loan. Finally, the building does represent some of the economic infrastructure of the community. Do you really want to tear it down, lose the tax revenue, and not have it available when a potential tenant does come along?
    I agree. A commercial property may sit vacant 2-3 years even when there is a deal in the works. I have worked with several clients who pay on their abandoned boxes. One pays for 8 more YEARS if no tenant takes their place. Anyone think the landlord is rushing to find a tenant? They are still paying the local LL rent and the property taxes are still going in the City's coffers. It may appear ugly, but it isn't a total loss for the City.

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    Cyburbian donk's avatar
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    Living in a place with quite a few vacant older strip malls and "small boxes" they are a detriment to the community. the reason is the location they consume and the image they project to people passing through.

    We have one that is about 50-75000 square feet in size on the main highway that has been allowed degenerate to such a point that it an eyesore(but not such an eyesorer to be able to declare it "unsightly") and makes the entrance to the community look dumpy and reinforces negative images about the community.

    The developers of these sites know exactly how long they are going to amortize the structure and should be forced to be more up front with the community they are going into. if this means bonding them, then so be it. Underwear just went up by six cents.
    Too lazy to beat myself up for being to lazy to beat myself up for being too lazy to... well you get the point....

  10. #10
    Cyburbian
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    Thanks everyone.

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    The Economic Impact of Abandoned Big-Boxes

    Not only does an abandoned big box show up as "visual blight" in a community, but it has serious economic consequences as well. The value of a commercial site (in most cases) is calculated using an income-valuation approach. Without getting overly technical the income-approach puts a dollar value on the expected future cash flows from the site. If the site has not incoming cash flow or is not expected to in the future, the value will plummet. Clearly, this can have a significant impact on the area's property tax base and, thus, the ability of local governments to fund ongoing operations. The lost tax revenue has to be made up somewhere (assuming government does not scale back its expenditures) and it is likely that this burden will shift (in part) to homeowners.

  12. #12
    Corn Burning Fool giff57's avatar
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    Valuations are not figured that way in Iowa. Commercial properties are valued by a complicated formula, but future cash flow is not a part of it. Empty big boxes bring in almost as much tax revenue than a full one.
    “As soon as public service ceases to be the chief business of the citizens, and they would rather serve with their money than with their persons, the State is not far from its fall”
    Jean-Jacques Rousseau

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    Cyburbian Emeritus Chet's avatar
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    Valuation here in Wisconsin is a difficult beast. Once a commercial property assessment hits $1 Million, the State handles the valuation and the locals lose all control. One of the accepted valuation methods is the income approach. I've seen mixed results in assessment appeals on vacant commercial properties. Generally, the state will accept an income appraoch on a struggling business property easier than an already defunct one. A good case in point are the few remaining greyhound tracks.

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    Iowa Valuation

    We should make a distinction between value and assessment, which I think we can both agree are not one in the same (though they should be). For example, a real estate investor will not pay the same amount for an empty Wal-Mart as he would for a thriving Wal-Mart. The investor (in this case he is the marketplace) is valuing the future cash flows from the property. More expected cash flows will incrementally increase the price he is willing to pay to capture those flows. That is the value to the marketplace, regardless of what kind of number the local assessor comes up with.

    Consequently, when the property does finally sell the assessor will be forced to adjust his assessment to reflect the new value of the property, as determined by the willing buyer (who has discounted his determination of value because of the current income flow from the property). The unfortunate part is this: the real estate investor believes that he can turn the site around and increase the expected cash flows from the center, which should increase the transaction price for the parcel. But as any logical developer knows, the investor will offer what the seller believes to be an acceptable price (often times lower than the future expected value with higher cash flows). As a result, the investor gets the property below what he thinks it might actually be worth, the seller walks away with an acceptable sum, and the city and assessor are forced to assess the property close to the transaction price (which we have established is probably lower than the real potential value).

    Bottom line: Real estate value and city assessments are different beasts altogether (though they should not be).

    So what is the complicated formula for commercial assessment in Iowa? From a real estate standpoint, the income approach is commonly accepted around the world.

  15. #15
    Corn Burning Fool giff57's avatar
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    Quote Originally posted by EconomicPlanning
    So what is the complicated formula for commercial assessment in Iowa? From a real estate standpoint, the income approach is commonly accepted around the world.
    The formula is complicated and I am not familiar with the whole thing. One aspect is comparable sales. So for instance if a big box owner pays a premium price for a lot for a new store, the valuation for the lot the old store is on could go up, even if the store is empty. We found out about this at my old job when three lots on the commercial strip sold for twice their assesed value. A year later every commerial property in town had their assesed value increase significantly.

    The structures are valued by use commercial, residental, or industrial. Building area, and structural componants are valued as well, but I am not sure of the formula.
    “As soon as public service ceases to be the chief business of the citizens, and they would rather serve with their money than with their persons, the State is not far from its fall”
    Jean-Jacques Rousseau

  16. #16
    Cyburbian Emeritus Chet's avatar
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    Quote Originally posted by EconomicPlanning
    We should make a distinction between value and assessment, which I think we can both agree are not one in the same (though they should be).
    Valuation is as assessment term, but I'm guessing that not everyone here knows that, so thanks for clarifying.

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