It’z Now a Warehouse | Repositioning Real Estate

By Alex Pulliam, NAI SunVista Land and Industrial Advisor

Commercial real estate has many cycles and what once worked may need updating to compete in a contemporary market. Such was the case for Montgomery Plaza, a retail center on one of the busiest intersections in Albuquerque. It was a vibrant retail destination that housed junior box retailers and had an entertainment component. However, as the real estate cycles changed over decades, retailers began contracting their footprints and entertainment establishments relocated to areas with interstate visibility. Recognizing the longtime vacancy of a freestanding 53,300 SF box, the owners of Montgomery Plaza (Goodman Realty Group) looked beyond the box to what the current market was demanding- industrial opportunities.

The owners engaged members of the NAI SunVista Industrial Team (Alex Pulliam, Jim Wible & Keith Meyer) to discuss the property and evaluate it as an industrial opportunity. As location would have it, repositioning the former It’z Pizza, located at 4595 San Mateo NE, into what is now becoming Dion’s Commissary & Headquarters, was the right move for many reasons.

Here’s why this reposition worked:

Market Conditions

Originally marketed for over 5 years as a single purpose retail lease opportunity, this property was brought to the market in July 2020 as a potential lease or sale opportunity. The economy was in the middle of the COVID-19 Pandemic and “ambiguous” was a word often used to describe the state of the market. The industrial vacancy rate was hovering just above 2%, a then historic low. Interest rates saw a slight drop and government incentives were introduced to stimulate the economy. Due to these factors and others, interest came from buyers and multiple purchase offers were received. Industrial became the hottest asset class in the market and this property went under contract less than 3 months after being introduced to the market.

Construction Type

The previous user was an entertainment center with plenty of open space for children’s carnival rides/games which required a large electric capacity, a necessary component for any industrial building. Couple that electric load with concrete tilt-up construction, decent column spacing, easy to add dock wells (this building has a usable slope in the back that allowed for a dock well and ramp access) and 24’ ceiling height- the bones of the building created a functional canvas for industrial reuse. The eventual buyer, a commissary user, also benefited from the existing commercial kitchen infrastructure which boasted built-in walk-in coolers and freezers and versatile plumbing.

Zoning

Previously, 4595 San Mateo was zoned MX-M (Mixed Use Moderate Intensity) which allowed for retail & commercial uses. After evaluating the nearby properties and the large amount of NR-LM (Non-Residential Light Manufacturing) & NR-C (Non-Residential Commercial) properties in the immediate area, a zoning upgrade was relatively easy to justify. A public notice did not receive pushback and a successful NR-C designation was achieved in a couple months.

Yard Space

A requirement for any industrial user is a solid truck court with sufficient trailer parking & truck circulation. With the oversized 5.4-acre industrial lot, we were able to achieve 22% Floor Area Ratio which left plenty of space for trucks and future growth.

Replat

The biggest obstacle in the repositioning process was the replat process. The former It’z Pizza building was part of one contiguous parcel that included the movie theatre to the north. These two properties needed to be separated into individual parcels for the sale of both properties. Since easements, CC&R’s, and utilities of the retail center were tied together and under a single ownership, it became a delicate process to untangle these intricacies and provide agreeable boundary lines. After 9 months of meeting with the local municipalities, the third-party planner was able to achieve a replat.

The Buyer

Dion’s, the selected buyer, is known locally as a favorite community restaurant and is well received by neighborhoods and the public. Together, buyer and seller established a strong working relationship that embraced continuous communication and resulted in a successful transaction for both parties.

Though timing and replat related hurdles were encountered during this transaction, the buyer and seller worked together with their respective teams to achieve one of the most successful repositions in recent times. This project recreated great synergy in Montgomery Plaza which led to the sale of the adjacent movie theater, that will ironically remain a movie theatre. These sales will provide capital for the owners of Montgomery Plaza from otherwise non-performing assets and continue to serve as a catalyst for other projects in the area that will add to the vibrancy of this intersection.

Alex Pulliam is an Advisor in our Land and Industrial Division. For more information on his properties click here.

NAI SunVista is a full-service commercial real estate company serving New Mexico since 1996. The company is a dynamic commercial real estate firm offering best-in-class real estate services in brokerage, property management, asset management, business brokerage and development services.