How much is Perkins Rowe worth? It’s a question investors are asking as they evaluate the lifestyle center and decide whether to try to buy it. There’s no simple answer.
Last month, the Texas-based investment firm that owns the nearly 711,000-square-foot development, TSSP, put it up for sale with no announced asking price. The Dallas-based real estate brokerage firm handling the sale, HFF, has not listed the property on its website and has not made public any information about the property.
But nearly two years ago, shortly before lenders took back Perkins Rowe from developer Tommy Spinosa, the development was appraised by Cushman and Wakefield for $103.4 million. Its projected net operating income for 2013 was $4.5 million, and its capitalization rate was 7.25%.
At the time, the development was caught in a four-year-long foreclosure battle. A lot has happened since then. The property’s 128,000 square feet of office space is more than 94% leased, and its 375,000 square feet of retail space is 85% leased. TSSP has spent millions on upgrades and improvements to the development, not including the $2 million it spent acquiring the water-chilling plant for the tenants’ air conditioning system.
Presumably, then, the property will fetch considerably more today than the $103.4 million for which it appraised in 2013. But how much more? It’s hard to say, especially because nothing comparable—not that many developments are comparable to Perkins Rowe—has sold in this region recently.
Earlier this year, a lifestyle center called the Mercado in Naples, Florida, sold for around $240 million, according to Kevin Imboden with the California research firm Real Capital Analytics. But Naples is a much richer market than Baton Rouge, and the sale price of the Mercado—which is slightly more than half the size of Perkins Rowe—averages to about $525 per square foot.
“Something like $525 per square foot would be totally unprecedented in Baton Rouge,” Imboden says. “I can’t imagine we would see those kind of numbers.”
Imboden does predict, as have others, that Perkins Rowe will generate plenty of interest from national, and even international, investors.
“A lot of capital is coming in from outside the U.S.—Asia, even some from Europe, too,” he says. “A lot of these larger funds have been able to get capital from investors, and now they need to place it. So where do they place it? Commercial real estate.”
Though initially, those big investors look to major markets, eventually the investment dollars trickle down to secondary and tertiary markets, like Baton Rouge.
“They start feeling like these larger markets are too expensive,” Imboden says. “So for Baton Rouge, if there are nice assets like the one we’re talking about, someone nationally might say hey, this is looking good.”
—Stephanie Riegel
