In an era of slack consumer spending, an empty shopping center could be seen as a sign of the times.
But in the case of Alexander Place Crossing, it's the signs -- not the times -- that have led to an ocean of emptiness. The times just make things worse.
Best Buy and Faison, a Charlotte developer, agreed last month to settle a lawsuit over signs at the shopping center near Brier Creek in northwest Raleigh.
But so far there's no word on what that settlement might mean for the future of the development. Britt Byrne, Faison's managing director of retail development in the Carolinas, declined to comment, other than saying: "We're very optimistic and hopeful that it will be completely resolved shortly."
For now, Faison has been left with a nearly completed -- and completely empty -- shopping center and the daunting task of filling it in a brutal recession.
The case offers a glimpse into the nuanced world of commercial real estate, illustrating how bad breaks and unfortunate timing can stifle what in any other time would be a success.
It all started in October 2007, when Best Buy agreed to lease almost one-third of the 107,000 square feet planned at Alexander Place Crossing. The store would anchor the development and encourage other retailers to sign on. And it would do battle with hhgregg, a Best Buy competitor, which opened a store across Brier Creek Parkway a week after the ink dried on the Best Buy deal.
The contract came with an important stipulation: Best Buy had to have 700 square feet of signs featuring its tilted-ticket logo.
Store signs are crucial in driving traffic to any shopping center. But this much signage was particularly important because Alexander Place Crossing sits behind a tree-lined bluff, mostly out of view from the 70,000 vehicles that pass Brier Creek each day. No problem, Faison's brokers said. And the deal was done.
Faison used Best Buy's commitment to secure up to $18.7 million in construction loans from Regions Bank of Birmingham, Ala. And the Best Buy name indeed lured other tenants. The developer promised to begin building by December 2007 and finish by Sept. 11, 2008.
But a few months after starting construction, Faison learned that city rules prevented it from including so much signage for the store. The developer appealed to city officials with little luck. And it tried unsuccessfully to get Best Buy to flex, offering all kinds of smaller-sign solutions.
On July 14, Best Buy lawyers said the store wanted out of the lease. Without all those signs, they said, the store just wouldn't work. The timing was convenient, considering consumer confidence was nearing what was then a decade low and most retailers were retrenching.
A snowball effect
Because Best Buy backed out, other leases fell apart. Faison's lender froze funds. Faison, which by then had spent at least $5.6 million on building the store, sued Best Buy. "Best Buy's actions have put in motion a domino effect," D. Blaine Sanders, a lawyer for Faison, wrote.
Today, a 30,000-square-foot box, the Best Buy that never was, sits dark. Its deep blue and egg yolk-yellow skin dictates the design of other empty store fronts, including one with a shattered window. Grass grows in an almost-finished parking lot.
And while there are some encouraging signs for landlords -- in March, the Dow posted its biggest monthly gain since 2002 and consumer confidence ticked up from a historic low in February -- the center could be empty for a while.
Indeed, there's always a chance Best Buy, whose profit in the fourth quarter beat expectations, could still fill the space. Spokesmen at the Richfield, Minn., electronics retailer did not return messages seeking comment.
The store no doubt knows its position. The Triangle's retail vacancy rate, which climbed to 7.7 percent in 2008, is expected to hit a 10-year high of at least 9 percent this year, according to projections from Grubb & Ellis/Thomas Linderman Graham. Translation: Tenants have the upper hand. And it's expensive for a landlord to reconfigure specially tailored space to lure a tenant with perhaps less stringent sign demands.
For now, hhgregg isn't complaining.
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