Foothills Plaza - Case Study

When taking on a new listing, the primary objective should always be to achieve full occupancy of the center. Simultaneously, you should want to ensure that you are meeting your client's requirements, setting them up to maximize the assets total value, whether they intend to hold or sell the property. Doing so not only enhances the property's value but also provides flexibility for potential future sales.

The Project

Foothills Plaza: 1450-1470 W Horizon Ridge Parkway, Henderson, NV 89012

The project that I am choosing to do a case study on today is located in a well populated and high demographic trade area in the Las Vegas/Henderson valley, however the site has had a few hiccups since inception. It was originally slated to be a Smith’s anchored shopping center and was built as such, Smith’s ended up taking a deal closer to the freeway and left the original developer with a vacant 27,771 square foot anchor space which did not help with the original roll out of the project. Today, Foothills Plaza is a 122,572 square foot shopping center that is located in the Henderson trade area with close proximity to the Dragon Ridge, McDonald Highlands, Green Valley, Seven Hills, and Anthem master planned communities with easy access to highway 215, which is a highly desirable area to be in. Due to the center’s great real estate, the center has been able to obtain some decent tenanting throughout the years, but has had to be priced at a more discounted rent then the market to keep it occupied.  

About 10 years ago B.I. (which stands for Before Isabella), my team had worked on this project and they were able to find the first Tenant to take the anchor space, which was Lost World’s a children’s party and play experience. Having the anchor box finally occupied definitely helped fill up some of the surrounding retail spaces, but still never got to full occupancy.  

Fast forward to 2022, we received a call from the same Landlord asking if there would have interest in taking this project back on. At the time, the center had around 8.25% vacancy, which consisted of an old dry cleaner space (super easy to lease by the way – not), very small pie shape retail space, a vacant bank pad building that sat tenantless for 5 years, and a free-standing parking lot pad that had been advertised but never built on. In a market where retail vacancy has been at a rapid decline, it seemed like a great project to work on even with the challenges at hand, so we took it!

We had our on boarding call and discussed everyone’s goals for the project. During this process it is  important is to hear what the client’s long-term vision is and understand some of the issues that they have had in the past with leasing some of the vacancies. Our job is to advise and give guidance on highest and best use. After analyzing the center and spaces available, we came up with our target category uses and hit the ground running.

Naturally, we had a couple more spaces come back throughout the years including a nail salon space, a restaurant space, another bank space, a retail space and… the anchor space. I will mention a few of the notable transactions and how we were able to overcome some issues and think creatively, because leasing this center was not an easy feat!  

 Wheeling & Dealing

1.      But it has a Drive-Thru: This one took us about a year to get through. This out parcel bank building had been sitting vacant for probably 5 years before we took on the project. It was one of the most interesting pieces of the puzzle when we took this project on. Of course, from an outsiders perspective, you look at this and think that is one of the most valuable pieces of real estate, why is it still vacant?

Well for those of you that have not dealt with a vacant bank building, there are these heavy and incredibly expensive to remove vaults that are a fun twist to the puzzle when it comes to releasing. We had to work with obtaining multiple bids to get a quote that fit into the budget for demo to get this space to a shell for the next tenant to take over.

When analyzing the pad, for the dirt that it sits on, the access points, etc. you are left with only a few uses that you can actually do there, which was a drive-thru or a free-standing retail space. We knew that the highest and best use would be to get a drive-thru food user, but we wanted to make sure that we asked all of the right questions up front to make sure that we could actually do so.

To be clear, this space has always had a lot of interest from a wide range of qualified tenants, but there were a lot of objections that came with it including the removal of the vault, if they would be able to take just half of the space and how it would lay out, the car stack, obtaining a SUP from the City of Henderson, getting the right amperage to the space. There was a lot to be done, but luckily, we had a great Landlord that was willing to do these things and take on a lot of the leg work to set these Tenant’s up for success.

They worked with the City of Henderson to make sure that the new Tenant would be able to obtain a SUP for a fast-food use, they also had to figure out with NV Energy on how to obtain more power to make the building suitable for two restaurant tenants, which was quite a process. But nonetheless, it was completed, and we were able to work with tenants simultaneously, which helped us overcome a lot of the previous objections when talking with groups, because there was a plan in place and a real timeline on the table.

This building has been leased to two great new tenants, Dunkin Donuts and Poki Bowl, a new franchise group out of Southern California. Both of these restaurants should both be open by the end of the year.

2.      Easy As Pie: The pie shape space has a very narrow storefront that gets wider towards the back of the building. It was hard to think of what uses could go in here, but after a long lease call, we came up with a good idea to go after rental car group since there was an unutilized parking field behind the anchor space, which was adjacent to this space. After calling a couple of the rental car companies, we were able to sign a corporate deal with Avis at strong rental rate for a space that was basically unleasable for a general retailer.  

3.      Restaurant $pace: Every Landlord agent’s dream, we got back a second-generation restaurant space back. We had a flood of interest that poured in for this space as it was the right size, on an endcap, and had a patio that could be utilized. We ended up signing a local and notable oyster bar concept that wanted to open their second location in Henderson. We were able to do this within just two months of getting the space back and we leased it at a record rent for shop space within this center.

4.      Turning Nothing into Something: Now that we have completed about 5 deals together, we were picking up some steam. We still had a few retail spaces that we were actively negotiating with, but it was time to put some added focus onto one of the more challenging pieces of the center and see what we could do with it. Since the center was built, there was an undeveloped internal pad that just sat there vacant. It didn’t have much visibility, but it was adjacent to the 7-Eleven building, which got me thinking, why don’t we add a car wash?

I called up a couple of my friends that have car wash clients and soon enough, we were able to start our very own car wash bidding war on this site.

While we were excited to have immediate interest at great rents, there was still a LOT that needed to be done in order to get this deal across the finish line. In order to fit the car wash tunnels and lay out their stacking plan appropriately, we had to grow the pad which required additional approvals from other groups within the center, in addition to having to get the pad approved by the City of Henderson, and more. But once again, thanks to the Landlord and their great efforts to work simultaneously with the Tenant on overcoming any obstacles to obtain these approvals, we were able to get this deal across the finish line.

5.      Progressive Tenanting: I will leave you with deal as the grand finale! A few months ago, I got a call from a very notable Landlord broker in town that was running around with a new pickleball concept in our market, and he had asked if we knew if the anchor space may be coming back soon. I told him, not that I was aware of, but that I would check in with ownership and see if there may be an opportunity soon. As I am sure you are all aware, there has been quite a craze with Pickleball since the pandemic. Since then, there has been a surge in courts and now there are multiple groups running around looking to build indoor courts in vacant big box spaces.

After chatting with my client, turns out the timing could not have been better. Turns out the existing Tenant was looking to get out of their Lease. So, I went back to the broker and got a proposal together. Since this is a newer concept and one that has not opened in Las Vegas/Henderson just yet, we set up some in depth calls to understand the operators’ background and also the company’s growth model.  

We had a couple of other offers that were submitted, but after much consideration, we felt that PICKLR would be the best fit for the center. Two big deciding factors here were that this would be a great use given the location to the project is close by multiple country clubs that do not have a ton of pickle ball courts available for their members and the second was that we believed in Tenant and their unwavering passion for the concept and how they plan to continue to grow the model not only in Vegas but other markets. With that said, we are very excited to have PICKLR join here at Foothills Plaza, and we hope that is will be open before the end of the year!

The Results

In between all of the deals mentioned, we had a couple of other successes throughout the project, which brought us to 100% occupancy for the first time in 20 years. Since 2022, we have leased 9 existing spaces totaling 46,935 total square feet and have leased an additional 3,956 square feet of new space, monetizing unused parking spaces.

Now for the fun stuff. Below is breakdown of the added value that we have been able to provide our client by taking on this center and leasing out existing and new space throughout the project.  

At the beginning of 2022, the property’s NOI was roughly $1,900,000.00 annually and had roughly 8.25% vacancy for the total 117,914 square foot shopping center. Giving it a total estimated value at of $26,500,000.00 at a 7.25% CAP, which would have been appropriate at that time. Fast forward to today, the center is 100% leased with an increased gross leasable area of 122,572 square feet and has a current NOI of $2,610,000.00 annually. Bringing the new total estimated value to $40,150,000.00 at a 6.50% CAP for a fully leased and stable center. That is total increased value of $13,650,000.00 within just two years of working on this project, which is a pretty excellent growth value.

While our team is incredibly proud of the work that we have been able to do at this project, I would like to mention that this would not have been possible if we did not have such a hard working and trusting client that worked with us and did a lot of the tough work behind the scenes to make it all come together.

It has been a fun project to work on, and again I would like to thank Christie Berg and Jeff Parker for their help here! I’ve had fun working with you both and look forward to seeing all of these deals that we have worked so hard on come to life within the next few months.

Hope you enjoyed this case study. If you have any questions on your properties, please feel free to reach out to our team!

Thanks for reading! ‘Til next time.