Part #3 – Retail Site Selection for Drug Stores
Drug Stores Have Unique, Evolving Characteristics
Around the turn of the century, the Drug Store War for “Class-A” corners erupted across the Gulf South. Between the Rite Aid and K&B merger, as well as CVS and Walgreens aggressively competing for market share, the race was fast and furious. I distinctly remember sale prices exceeding $20/foot for the first time, and “Coming Soon” signs appearing on corners on the regular. Most of the drug stores that we frequent today were likely built between 1998-2006.
Unlike convenience stores that rely on traffic counts or quick-serve restaurants that benefit from both traffic counts and proximity to customers, drug stores focus more heavily on population or “warm bodies.” And, even though location and access are important, drug stores can be considered a “destination retailer.”
The reason being, although a large portion of a drug store’s customer base picks up their prescriptions during their P.M. commute, drug stores don’t rely on the impulse consumer dollar.
Extensive studies have shown (in a market size like Baton Rouge, LA) most script fillers will use the drug store located within a five-mile radius of their home.
Further, one-third of a drug store’s gross revenue is generated during off-peak hours, attributed to homemakers and retirees shopping during the day, patients picking up scripts after doctor’s visits, as well as their weekend customer base.
However, with the amount of capital that major drug stores like Walgreens, CVS and their competitors have invested in their marque locations, they in turn, usually have higher overhead and product pricing.
At a time when families have less disposable income and higher healthcare and prescription costs, more and more consumers are starting to sacrifice convenience for cheaper pharmacy alternatives.
Grocery-store pharmacies such as Walmart, Kroger and Sav-On, as well as discount prescription providers, online pharmacies, wholesalers and health clinics have seen a spike in sales, posing a threat to the retail drug store industry.
While existing population is still a key factor in the drug store site selection process, drug stores have started purchasing sites in outlying/rural areas where new home sales, multifamily communities and spikes in population are projected.
We are also seeing drugstore chains looking at more unique locations than they have in the past, capitalizing on mall shoppers, students, office building and hotel users. Some are incorporating smaller footprints with more curated product offerings or expanding in-store healthcare services to enhance their brick-and-mortar customer experience.
As consumer behavior continues to evolve, so will the characteristics and site selection needs of retailers, including drug stores.
Working with a site selection specialist that knows the market trends and projected growth patterns can be an invaluable asset for any retailer looking for sustained growth in a market.
Stay Tuned for Collier’s Next Post!
If you are interested in a site selection specialist, or for questions regarding your commercial real estate property, contact J. Collier Thornton at (225) 926-4481 or cthornton@stirlingprop.com.
Tax Reform – First Filing Season
October is the time for fall, football and pumpkin-spiced everything. (Here in the south, it’s a time for the heater in the morning and air-conditioner in the afternoon.) What else rounds out the blissfulness of fall? Tax deadlines! October is the extended filing deadline for the 2018 tax season.
The Tax Cuts and Jobs Act passed in late 2017 with many of its provisions taking place in 2018. As a refresher, below is a list of some of the major components relating to real estate business owners and investors. For a complete overview of the tax reform changes, check out my last blog here.
- Expanded Bonus Depreciation – an increase from 50% depreciation to 100% bonus depreciation of certain items with a 15-year life or less
- Qualified Business Income Deduction – 20% of the taxable income generated from a business could be eligible for a deduction pending multiple limitations
- Property Tax Deduction – remained in place for real property trade or businesses
- Interest Expense from Loans – remains deductible for entities generating less than $25 million in gross receipts and are not considered a tax shelter
- 1031 Exchanges – real estate continues to benefit from 1031 exchanges
With our first filing season behind us, we’ve seen firsthand how these reforms resulted in significant tax savings for our investors. In 2018, we completed a $6 million development that yielded over $1.8 million in year one depreciation expense. Prior to the Tax Cut and Jobs Act, only $900,000 of depreciation would have been allowed in year one, with the remaining amount spread across 5, 7 and 15 years.
For individuals, many investors benefitted from the new Form 1040: Line 9 – Qualified Business Income Deduction. This tax revision now offers some tax relief for rental real estate entities rising to the level of a trade or business. The deduction, referenced in bullet point #2 above, provides a 20% deduction from taxable income generated from your qualified trade or business investments. This new deduction has brought about substantial tax savings for individuals, sometimes resulting in the thousands of dollars. This deduction will remain in place through 12/31/2025.
Evidently, real estate investments do provide some tax and asset diversification benefits. When asked about real estate as an investment alternative, Randy Waesche, CFP, of Resource Management, said, “Many of my investors seek real estate as an alternative to stocks and bonds. It adds a level of diversification in asset class, as well as a different risk and return profile. On a risk vs. return basis, investors are seeking real estate for the 6-8% tax-deferred annual distribution that is significantly higher than a short-term municipal bond or ten-year treasury yield. Real estate has many attractive investment qualities. In the low inflation, low growth economic environment we have today, strong tax-deferred returns are attractive for investors. My clients invest tens of millions of dollars in real estate annually.”
As we have previously reported, the Tax Cut and Jobs Act has been beneficial for the real estate industry and we expect it to continue to spur opportunity in the real estate market. At Stirling Properties, we will also continue to find ways to benefit our investors and real estate assets.
Disclaimer: The information contained herein is intended for information purposes only. Individuals should seek advice directly from a qualified professional before making any decisions or taking any action that might affect your personal finances or your business. Stirling Properties is not responsible for any investment or monetary decisions made based on the information provided above and is not a tax advisor. The information provided above was done so with the perceived intent of the legislation and not based on the actual regulations. The actual regulations could yield significantly different results.
Stirling Properties Celebrates the Grand Re-Opening of Cornerview Plaza in Gonzales, Louisiana
Redevelopment of former Kmart into multi-tenant retail center.
Jackie Baumann, Chief Engineer, City of Gonzales; Peyton Gallup, Business First Bank; Sandy Menetre, Business First Bank; Councilman David Guitreau, City of Gonzales; Councilman Tyler Turner, City of Gonzales; Councilman Neal Bourque, City of Gonzales; Scot Byrd, CAO/City Clerk, City of Gonzales; Councilman Kirk Boudreaux, City of Gonzales; Mayor Barney Arceneaux, City of Gonzales; Steve Zito, Zito-Russell Architects; Grady Brame, Stirling Properties; Tommy Chisolm, Zito-Russell Architects; Ryan Juneau, Stirling Properties; Townsend Underhill, Stirling Properties; Willie Robinson, Ascension Realty of Louisiana; Kate McArthur, President & CEO of Ascension Economic Development Corp.; Barker Dirmann, President & CEO of Ascension Chamber of Commerce; Justin Lomax, Brasfield & Gorrie; David Laizer, Duplantis Design Group; Jacob Green, Brasfield & Gorrie
Stirling Properties and Gonzales-area community leaders celebrate the grand re-opening of the newly renovated Cornerview Plaza located at Airline Highway and Cornerview Street in Gonzales, Louisiana. A formal ribbon-cutting ceremony was held with Honorable Barney Arceneaux, Mayor of Gonzales; Councilman Kirk Boudreaux, City of Gonzales; Councilman Neal Bourque, City of Gonzales; Councilman Tyler Turner, City of Gonzales; Councilman David Guitreau, City of Gonzales; Kate McArthur, President & CEO of Ascension Economic Development Corp.; Barker Dirmann, President & CEO of Ascension Chamber of Commerce; Grady Brame, Executive Vice President with Stirling Properties; and Townsend Underhill, President of Development with Stirling Properties.
“What a wonderful day for Gonzales! We are all so excited to be here today at this beautiful new site. Not only does this redevelopment bring exciting, new-to-market retail stores for our community, but it also means more jobs for our people, a much better tax base for our folks, and, let me tell you, that means everything to Gonzales. We appreciate you all being here with us today to celebrate. Thank you to Stirling Properties for facilitating this project and working with us to bring it to fruition,” said Mayor Arceneaux.
Stirling Properties recently redeveloped and re-tenanted the 124,000-square-foot retail center.
Marshalls, ULTA Beauty, Ross Dress for Less and Five Below backfilled the 40-year-old, 86,000-square-foot former Kmart space into a fully renovated, upscale retail center. A 3,500-square-foot outparcel building was also constructed on the property for Aspen Dental. The new retailers join anchor-tenant Rouse’s Market and AT&T. An additional, 2,800-square-foot retail space is available for lease.
Construction on the site commenced in early 2019, and most of the retailers are open and operating. ULTA Beauty is on track to open in early November. Ryan Pécot, Senior Retail Leasing & Development Advisor with Stirling Properties, worked on behalf of the landlord in securing the tenants for the center. Stirling Properties serves as the Asset Manager and exclusive leasing agent of the property and is overseeing the redevelopment project. The company will also continue daily property management operations.
“Stirling Properties is excited to celebrate the grand reopening of Cornerview Plaza and to officially welcome these highly anticipated tenants to the Gonzales market. We are proud to have been a part of this unique development project—reestablishing Cornerview as a major shopping destination and creating economic growth for the surrounding Ascension community,” said Grady Brame, Executive Vice President with Stirling Properties.
“Economic impact trickles through the whole community. New economic announcements like this show that people are coming here, they are shopping here, they’re buying houses here. Every single new project builds a stronger, better economy—not only for the City of Gonzales but the entire Ascension Parish. We hope projects like this will serve as an impetus to even more development in our community,“ said McArthur.
“Thank you for investing in this community, the City of Gonzales and the Parish of Ascension. Thank you to our Mayor and community leaders for your vision and for putting together a comprehensive plan to move this city forward. It shows that we are not just looking at tomorrow, we’re looking 5, 10, 20 years in the future, and that is critical for sustained success,” said Dirmann. “Economic development wins like this directly influence the quality of place in this community and quality of life for our citizens.”
Stirling Properties has developed/redeveloped nearly $2 billion of commercial real estate across the Gulf South region, totaling more than 23 million square feet, including retail, office, industrial, healthcare, residential and mixed-use properties. For leasing information, contact Ryan Pécot at 337.572.0246 / rpecot@stirlingprop.com.
Walk-On’s Bistreaux & Bar Coming to Hammond Square
Stirling Properties announces that Walk-On’s Bistreaux & Bar is coming to Hammond Square shopping center in Hammond, Louisiana. This marks the 3rd Northshore location for the award-winning, family-friendly restaurant and bar.
Walk-On’s Bistreaux & Bar local franchisee DBMC Restaurants will close on the purchase of 1.35 acres of property located at C.M. Fagan and Hammond Square Drive, as part of the redevelopment currently underway on the northeast side of the shopping center. The restaurant will occupy approximately 8,025 square feet of space. Construction is expected to commence by the end of 2019, and the restaurant plans to open in the summer of 2020. DBMC Restaurants is a veteran restaurant group that currently operates three restaurant brands across six states and is one of the largest franchisees of Walk-On’s.
Rhonda Sharkawy, Stirling Properties’ Senior Retail Leasing & Development Advisor, represented the property owners in the sale.
The popular sports-themed restaurant started in Baton Rouge by two former LSU basketball walk-ons has thrived over the years and expanded with more than 100 locations planned across 15 states. Currently, there are 18 Walk-On’s restaurants operating in Louisiana. Hammond Square marks the 3rd location for the Northshore region, with existing restaurants at Stirling Properties’ River Chase development in Covington and Fremaux Town Center in Slidell.
Stirling Properties previously announced the demolition of the former Sears and Rite Aid buildings at Hammond Square to make way for a multi-tenant retail redevelopment project. This summer, the company announced that Michaels, HomeGoods, Five Below and PetSmart would occupy the space and join the tenant lineup. Buildout of the new space is underway and expected to be completed in the first quarter of 2020, with the retail tenants anticipated to open in the second quarter of 2020. Hammond Square is also developing a two-tenant building in front of the former Rite Aid that will house additional restaurants, including Five Guys. This building is expected to be completed in the summer of 2020.
Hammond Square is Tangipahoa Parish’s premier shopping destination, located on approximately 100 acres at the northwest corner of Interstate 12 and US Highway 51 Business (SW Railroad Avenue) in Hammond, Louisiana. It is the 2nd largest open-air center in Louisiana encompassing over 902,000-square-feet of more than 40 national and local retailers, shops and restaurants, including Dillard’s, Target, The Home Depot, JCPenney, Academy Sports+Outdoors and AMC Theatres. Stirling Properties redeveloped Hammond Square and currently manages and leases the center.
For more information on Hammond Square, visit www.hammondsquare.com or facebook.com/hammondsquare. For leasing and sales information, contact Rhonda Sharkawy at (504) 620-8145 or rsharkawy@stirlingprop.com.
Stirling Properties Mixes Philanthropy & Fun
Inaugural Stirling Fest raises $60,000 for local nonprofits!
Aloha. Stirling Properties celebrated our inaugural Stirling Fest last Friday, a day of Hawaiian-style fun and philanthropy to raise money for charitable causes throughout the Gulf South region. The event, hosted by the Stirling Stewardship Committee, was a HUGE SUCCESS, raising over $60,000 for local nonprofit organizations!
Representing our motto of #BeTheChange: Helping others is a work of heart, every year, Stirling Properties selects charitable organizations to become the recipients of our annual company-wide fundraising efforts. Nonprofit groups are nominated and then voted on by Team Stirling members. This year, we are proud to have expanded our recipients to four worthy organizations—Special Olympics Louisiana, Camp N.O.R.A., Safe Harbor Northshore and Ronald McDonald House Charities Mobile! Representatives from each organization were in attendance to celebrate with us and receive a check for $15,000.
Celebrating our 7th year, the fundraising event was changed from an Olympics-style to more of a festival with music, games and tons of great prizes. Held at Digs Volleyball Complex in Covington, the Luau-themed day featured delicious food and beverages along with live music by in-house band Craig Marks the Spot and DJ El Camino (aka Michael Hecht of GNO, Inc.). Games and activities were held throughout the day including Beach Volleyball, Simon Says, Hula Hooping and Checkers.
The main event was a 4-team Cajun Huki Pull relay representing each of the designated nonprofits. Congratulations to Team Special Olympics, they took home the trophy for Beach Volleyball and the Huki Pull!
Mahalo. A special thanks to all of our sponsors, supporters, and Team Stirling for your generosity. Major sponsors include BXS Insurance, Berkadia Commercial Mortgage, Brasfield & Gorrie, Fishman Haygood LLP, IBERIABANK, Richard Price Contracting Co., BH Management, Hancock Whitney Bank, Capital One, Duplantis Design Group PC, Rotolo Consultants, Walker & Dunlop, Wells Fargo, Louisiana Landscape, Ogden Painting, Zito∙Russell Architects PC, Acadia Land Surveyor, Baker Donelson, Kent Design, Regal Construction, Robert Refrigeration, Stratum Engineering LLC, Armstrong Property Services, Associated Building Services LLC, Bellingrath Wealth Management, Champion Security, Cleco, Construction South Inc., Donahue Favret, E. Cornell Malone Corp., Eustis Mortgage, First Bank & Trust, First Guaranty, Gallo Mechanical, Greenleaf Lawson Architects, Jimmy Maurin, Jones Walker, Jones Swanson Huddell & Garrison LLC, Lemoine Company, Malone Roofing Services LLC, Metro Mechanical Inc., Newmark Grubb Knight Frank, PGIM Real Estate Finance, Pinnacle Elevators, Precision Metal Inc., Precision Waste Solutions LLC, Real Estate Tax Group, Resource Management LLC, Roger Ogden, SCS Electric Inc., Sun Interiors, Trimark Constructors LLC, VergesRome Architects, Vinson Guard Service Inc., WLS Lighting Solutions and Fidelity Bank.
And a big shout-out to the Stirling Stewardship Committee and the Stirling Fest Committee for all their hard work organizing the event and making it happen!
A hui hou (until we meet again)! #StirlingProud
Thank you to Big Easy Parking Lot Maintenance, Cosmich Simmons & Brown PLLC, Gulf South Electric, River Parish Disposal, Chris’ Paving, Coastal Environmental Services, Connelly Construction Group, Cost Segregation Services, Covington Electric Services Inc., Geiger Heating & Air, ITS Fire Alarm Security LLC, Jefferson Sprinkler, Larry Loyd Construction Co., Moran Construction Consultants LLC, Mullin Landscape Associates, PMAT Real Estate Investments, Premier Service Team LLC, Premium Parking, Professional Maintenance Services, Southeastern Waterproofing, Southern Farm Bureau Life Insurance Company, Upchurch Services, CMC, Moradel Cleaning Services Inc., Angelos Landscaping, B&G Lawn Maintenance LLC, Cook Moore & Associates, Dale’s Paving Inc., NcNeer Electrical Contracting Inc., Unit Design Inc., CertaPro Painters of Lafayette, Delta Flooring, Dixie Office Products, Floor Trader, Huseman & Associates LLC, Mele Printing, Pat Brister, ACA Mechanical/Industrial LLC, Susan Bonnett, T.L. Construction LLC, Grass Unlimited, Acadiana Lighting & Signs, CJ Ladner Insurance Agency Inc., Multitech Office Machines and Sign Lite.
Stirling Properties Promotes Laura Wallace to Controller – Corporate Accounting
Stirling Properties is pleased to announce that Laura Wallace has been promoted to Controller – Corporate Accounting.
In her new role, Laura will manage all of Stirling Properties’ corporate accounting functions, including, receivables, payables, cash flow and payroll.
Laura has been with the company for nearly 14 years, and previously held the role of Corporate Accountant. While she will be responsible for many of the same functions, she will also be handling new and expanded duties.
“We are thrilled to promote Laura Wallace to Controller – Corporate Accounting,” said Paul Mastio, Chief Financial Officer with Stirling Properties. “Over the years, everything that we have thrown at Laura, she has not only learned, but excelled in, and consistently gets the job done. In her previous role of Corporate Accountant, she graciously took on added responsibilities when needed, so she has essentially been performing many of these functions already.”
As Controller – Corporate Accounting, Laura will continue to handle the company’s accounting and the brokerage production in Realcore. In addition, she will be responsible for our corporate budgeting process and 401K audits. She will also supervise our accounting administrator and banking administrator.
Laura Wallace will work from Stirling Properties’ Covington, Louisiana, office. She can be reached at lwallace@stirlingprop.com or (985) 246-3777.
