Baceline Investments LLC has purchased the 37,000 sq. ft. Fountain Village Shopping Center in DeSoto, Texas, a south suburb of Dallas, for $1.2 million, or approximately 60% of the property’s original loan value. The deal, which represents the fourth distressed property Baceline has acquired in the past year, closed March 23.
Denver-based Baceline acquired the foreclosed property from a special servicer and plans to convert the distressed retail center into medical office space. The company employed a similar strategy in South Bend, Ind., last year.
Built in 1986, Fountain Village underwent a renovation in 2000. Due to growth and construction in the area, however, the property had become obsolete as a retail center and is currently only 25% occupied. Current tenants include two hair salons, a restaurant, donut shop, as well as a payday loans and cash advance business.
“Fountain Village has suffered in recent years, but it provides great opportunity and is a perfect fit for our convenient neighborhood medical office space conversion program,” stated David Puchi, principal of Baceline, in a news release.
“With medical costs under enormous pressure, hospital and physician groups are open to new solutions for real estate needs. Obsolete retail centers are typically located in heavily populated areas, convenient for patients with great parking, and more affordable for primary care physicians,” added Puchi.
Baceline’s investment strategy is to target distressed commercial real estate in stable metropolitan areas in the nation’s heartland that have a history of growth. Last year, for example, Baceline acquired University Commons, a 100,000 sq. ft., multi-tenant retail center in South Bend.
In September 2010, after holding the property for only eight months, Baceline sold University Commons, turning a profit of 117%. The reason for the quick flip was that an aggressive buyer wanted the property for the express purpose of converting the retail center into medical office space. Baceline typically holds the properties it buys for two to three years.
Privately held Baceline targets both retail and industrial properties across the Rocky Mountain, Southwestern and Midwest regions of the United States. Puchi said that Baceline’s ability to find properties at highly discounted values enables the company to invest significantly in redevelopment.