Kolb Plaza Office Complex Sells in Short Sale For Rehab
Romano Real Estate Corporation recently brokered the short sale of the Kolb Plaza Office Complex. The 27,820 sq. ft. office complex located in three building at 2090, 2096 and 2100 N Kolb Road in Tucson was purchased by an investor (Kolb Office Park LLC ) who saw an opportunity to create value by rehabbing an office complex that offers attractive architecture, a convenient location, ample parking, easy access, and proximity to many amenities.
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Bruce Romano of Romano Real Estate Corporation has managed Kolb Plaza for approximately 10-12 years. He first started managing the property for Oak Properties of San Diego that purchased it back in the RTC days and continued to manage it for Kolb Plaza, LLC after it purchased the property in 2007 for $4.2 million.
Like many commercial properties that were purchased near the peak of the market, Kolb Plaza fell into hard times as lease rates began dropping in 2008 and vacancy rates started to rise. Unfortunately for the seller, the rental income could no longer support the debt service and the property continued to lose tenants that were not replaced.
As the property manager, Romano had many discussions with the lender about the property, the Tucson office market, and the need to invest a lot more money into Kolb Plaza for both capital improvements and tenant improvements in order to stabilize the property.
In the beginning of 2012 the seller and lender both felt some changes were needed to be made at the property and asked Romano Real Estate Corporation to take over the marketing of the property for lease and/or sale in addition to the property management. A change was made in early 2012 and John Yarborough of Romano Real Estate Corporation was hired.
As Romano and Yarborough began analyzing the property and establishing their marketing plan, they soon realized that even if the property was fully leased again, it would still fall considerably short of being able to support the debt service, and it would take several hundred thousand dollars of additional debt to cover remodeling and leasing commissions to achieve 100% occupancy. Since the additional debt would not have significantly increased the value, Romano recommended a short sale to the lender and suggested scaling down its leasing efforts since the abundance of vacant space actually created opportunities for potential owner/users to occupy entire buildings.
After some internal analysis, the lender agreed to the short sale recommendation and authorized Romano Real Estate Corporation to begin marketing the property for $2.5 million. The offering generated interest from several investors as well as a couple of owner/users and eventually sold for $1.9 million cash.
Romano Real Estate Corporation will continue to handle both the management and the leasing for the new owner, who has plans and cash available to make some capital improvements to the property in order to attract new tenants and turn Kolb Plaza back into a desirable office location. With uncertainty for the property lifted, Dr. Gann’s Diet of Hope, a medical weight loss center, has already leased space and Romano is actively working with several additional prospects.
Romano Real Estate Corporation manages approximately 50 office and retail properties in the area. Its growth has been achieved from word of mouth. The key to its success, Romano explains, “is the uniqueness of Romano’s business model, that is, we are a ‘client-based’ instead of a ‘property-based’ company. We don’t compete with our clients with our own properties. We stay focused on asset management for our clients and have maintained their trust over the years for this reason.” Romano Real Estate employs ten agents in leasing and management combined.
Romano can be reached at (520) 577-1000.
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