» Jackson firm just added Knoxville CVS center to inventory
By TED CARTER
Duckworth Realty’s commercial real estate pros put the emphasis on newness with the District at Eastover office, retail and entertainment complex they developed just off Interstate 55 slightly north of Lakeland Drive in the middle of the last decade. But nowadays it’s properties with some age that appeal to them.
In embarking on the District at Eastover, they correctly figured metro Jackson had a lot of unmet demand for something new in office space offerings, shopping, entertainment and lodging. They followed up that success with a new Academy Sports/Hobby Lobby center in Madison.
Duckworth Realty Inc. President and CEO Ted Duckworth, whose $16 million renovation of the mixed-use Electric 308 Building in 2005 gave momentum to downtown Jackson redevelopment, is credited as the architect of the new development and acquisition efforts. Duckworth recruited Breck Hines, a former acquisition analyst with Jackson’s Parkway Properties, in 2005. Today, he is executive vice president and a principal of Duckworth Realty. Duckworth later added John Michael Holtmann, who is now vice president and principal of Duckworth Realty in charge of the company’s retail division.
The trio has since added Concord Capital LLC to their business cards and with it an emphasis on acquiring older, well-situated, income-producing properties.
The properties must be stabilized and in highly-visible, master-planned locations supported by first-class retail, restaurants, hotel, residential and other office space, Concord said in detailing its goal of acquiring income-producing assets at a price below the cost of building the same assets today.
Concord completed a key part of the discount-to-replacement-cost strategy with the closing earlier this month on the $9.9 million acquisition of a 60,000 square-foot office property on Cherahala Boulevrd in Knoxville, Tenn. The building in the East Tennessee university town is 100 percent leased by CareMark PCS, a wholly-owned subsidiary of CVS Health Corp.
Th company expects more acquisitions of similar properties in Knoxville and elsewhere in the South. “The Knoxville MSA shows positive demographic and growth trends, which when coupled with a tax and business-friendly climate and the charm of a SEC (Southeastern Conference) college town, we believe provides good long-term opportunities in select assets such as this,” Hines said in the press statement.
The release noted Concord has made “numerous office and retail acquisitions and build-to-suits across the Southeast United States.”
These include the 102,000 square-foot grocery-anchored Bluebonnet Village Shopping Center in Baton Rouge in late 2019. Shopping locally, Concord in spring 2018 acquired the 5-year-old 600 Concourse building in Ridgeland. Concord and its affiliates also acquired the smaller 400 Concourse and 200 Concourse properties in 2018.
The opportunity to buy the 73,000 square-foot Class A Concourse 600 property at 1076 Highland Colony Parkway arose from former owner law firm Copeland, Cook, Taylor & Bush’s decision to build a new, smaller headquarters elsewhere in the metro. The three-story building has about 10,000 square feet available for lease, according to the Duckworth Realty website.
Concord is not unique among real estate investors in finding “assets that are five to 10 years or older to sell for a price less than it would cost to build that asset today,” Hines said in an interview after the Knoxville acquisition. The approach offers clear advantages in a state such as Mississippi, according to Hines.
“Pe-coronavirus construction costs were very high, particularly in a market like Mississippi where we’re kind of capped out on rental rates,” Hines said.
Concord, he said, sees a lot of value in acquiring leased-out buildings on land owned by the seller. “A lot of those soft costs that go into a development are done and paid for,” Hines said. “A lot of times we come in and find a way to add value.”
Concord saw an attractive opportunity in 600 Concourse “because it was a great building at a great location,” he said.
The building is in the heart of the emerging Highland Colony submarket with a new interchange off Interstate 55. “It took 12 months to fill up,” Hines said.
Concord started on the deal for the Knoxville CVS support center in February before the spread of covid-19 began in earnest. With the onset of the pandemic and the multi-state lockdowns that followed, Concord curtailed business travel
but did not shelve its pursuit of new deals. “We haven’t seen covid really effect the transactional side of the business except it has probably slowed things down,” Hines said.
Also, in recent months, the firm has done two new office leases and tenant buildouts at 600 Concourse and another at 200 Concourse. Both buildings received lobby renovations as well. “There’s always something to pursue or improve,” Hines said.
Meanwhile, covid’s damage to the retail and hospitality tenants at the District of Eastover has been limited, according to Hines. “We had multiple discussions with all of our tenants in The District,” Hines said, noting forgivable loans from the federal Paycheck Protection Program have helped to keep the tenant businesses afloat.
“They are all back open and working hard to re-establish their businesses back to pre-covid levels.”
Hines said the District gave tenants some flexibility on rent timetables. “Some just wanted a month or two to conserve cash, buy inventory and pay employees,” he said.
Still, prospects for a second wave of the deadly virus in late summer or fall add fragility to the recovery the tenants are having, he said. “We’re keeping our fingers crossed.”
Hines and the other Concord principals bought The District’s office building component, the 115,000 square-foot One Eastover Center, and adjoining 400-space enclosed garage from Holder Properties. The center opened in 2016 on the north end of the 22-acre Eastover parcel that once was the home of the Mississippi School for the Deaf and Blind.
The purchase of the office building, now nearly fully leased, gave Concord control for “optimal brand positioning” of the entire complex, the company says.
Law firm Baker Donelson anchors the building and is part of a tenant roster that includes the Cosmich Simmons & Brown law firm and insurance firm Ross & Yerger.
Concord sold the District Lofts apartments portion of the complex in 2018.
For the retail and hospitality space in the District, Hines said the company “quickly realized this needed to be a locally supported and locally sourced development.”
Aside from a fitness chain and a physical therapy group with national scope, the tenant mix came from within the region. That wasn’t something other commercial real estate professionals were doing at the time, Hines said. But they are now, he added.
“All of a sudden, the big box guys are hurting,” Hines said. “Now they want local.”