Strong Leases Keep Developer Building During Tough Times

by Bob Pepalis / Appen Newspapers

November 30, 2008

Easlan Capital of Atlanta keeps building despite the economy, and has fewer worries about its shopping centers staying empty.Jessie Shannon, the vice president of retail development, said the company won't even start building until it has a center 50 percent leased. They keep their centers small, closer to 20,000 square feet than the big centers.

An example will be seen at the Webb Road development that's begun construction on Ga. 9 across from the Super Target center that continues to be built in phases in Milton.

The inline portion of that center, which sits on a site that's a little more than seven acres, will be 35,000 square feet, with a series of outbuildings, one a multiple tenant building and the remainder single tenant.Shannon said a small grocer has an agreement for 17,000 square feet of space, with American Bodyworks, a small gym, also on board. A series of restaurants are in discussions with brokers. Lease rates are between $24 and $26 a square foot, he said.A conservative opening date is the first week of May 2009. Good weather could allow an earlier date.

If you've seen the Steinway piano center at Mill Creek Avenue on North Point Parkway north of Haynes Bridge Road and across from the Golden Corral, you've spotted another Easlan property. It's a little under 28,000 square feet, has just been completed and is 86 percent leased. Tenants are putting in fixtures. They include Figo Pasta, a nail salon, American Bodyworks, Quiznos and an H&R Block office.Another project on Peachtree Industrial Boulevard is the second phase of a center, adding 20,000 square feet. Chik-Fil-A and Starbucks already have spaces, with remaining tenants building out.

Look for another American Bodyworks, a nail salon, Fedex/Kinkos, an optometrist and a T-Mobile store.North of these two centers, at the intersection of Castleberry and Bethelview Roads, Easlan Capital is about 30 days from completion of a 26,000 square foot center, just across from the Publix grocery store.An Italian restaurant and a Mexican restaurant, plus Dunkin Donuts, a veterinary clinic and a financial services business handling tax accounting and similar services to H&R Block have leases."It's pretty well leased, in the high 80s, probably 87 percent," Shannon said.Easlan Capital's Jessie Shannon said a lot of vacancies exist down Ga. 9."We are having to do a little bit more for the tenants these days, a little more improvement dollars. We are not always hitting our pro forma rents," he said.The company hasn't been offering "free rent" at this point. With its centers heavily leased, that hasn't been necessary.

Reducing the shop space makes it easier to lease. Above 20,000 square feet, similar shops start opening in the same center, essentially competing with each other. That's not what retailers want to see.A builder pays from $180 to $200 per square foot to build a center. Up to 25 percent must be put down as equity to get finances. Once leased, the carrying costs have to be paid and it must generate cash flow to meet the costs.Well located centers can succeed, Shannon said. It's still competitive to get space in those centers. The biggest challenge is for the retailers to find financing for build outs, including people with good credit."We kind of changed our business model in order to get our centers leased," he said.