There's a lot of pain at the corner of Double R Boulevard and Prototype Drive in South Meadows.
But a new owner of a little shopping center at a busy intersection hopes the corner may be a story as well about how a recovery of real estate markets in northern Nevada might unfold.
Roger Shaheen, a veteran developer in northern Nevada, bought the 37,000-square-foot Double R Galleria on four acres late last year, paying about $3.1 million in cash for the center along with a small parcel of undeveloped property at the edge of its parking lot.
That price tag meant the shopping center had lost 70 percent of its value since it was sold out of bankruptcy in 2006 at the height of the real estate euphoria for more than $10.2 million. Lest anyone think the previous owner was speculating wildly, that deal involved only about 50 percent debt.
Originally developed in 2004 as Magnolia Commons, the center had been caught up in the bankruptcy filing of The Magnolia Companies, a Reno developer of office and retail spaces.
As the recession settled in, tenants in the center across the street from International Game Technology's big manufacturing plant began to close. The day spa. The hair salon. The wine shop.
Even though the property wasn't highly leveraged, it ended up in the hands of its lender. And the note ended up with Benewolf LLC, a Guthrie, Okla., company that auctions distressed loans.
Benewolf, in turn, was connecting last autumn with Sperry Van Ness, a national real estate brokerage, to handle sales of the properties themselves.
Thomas Y. Johnson, managing director of Sperry Van Ness/Gold Dust Commercial Associates in Reno and Carson City, brokered a deal in a matter of only weeks, and Shaheen closed on the purchase in mid-December.
Although Jazmine Restaurant, the center's signature tenant, remained in place, the rest of the center was largely vacant.
Johnson, who now works with Joel Fountain of Sperry Van Ness to lease the property, says the recession wasn't the only reason that tenants left. Some also were frustrated by a lack of management attention during the long months that lenders owned the center.
"When we looked for our analysis, we looked at it as if it were 100 percent vacant," Johnson says.
The leasing strategy, he says, is to find tenants for the center's larger spaces that will draw the sort of traffic that's needed by smaller tenants who will serve nearby workers as well as the 15,500 residents who live within a mile and half.
Jazmine Restaurant pulls in some traffic, he says. Talks are progressing with a potential tenant for a 7,000-square-foot day spa in the building that's also a key traffic-builder. The undeveloped corner might become home to a drive-through restaurant.
With rents of $1.50 a square foot, Johnson said, "We're not getting much resistance. We're happy with the response we're getting."
At the same time, Shaheen is putting more hands-on attention to the center, naming his son, Dan Shaheen, to manage the property.
But the important story of Double R Galleria, Johnson says, may be the renewed stirrings of life in the commercial real estate sector.
The deal shows, he says, that the buyers with cash who have been waiting on the sidelines are ready to come into the market, assuming that the prices however painful to sellers make sense in the current economy.
