CVS Real Estate Development
From Derelict Offices to CVS: Strategic Relocation Challenge
The vision was clear: transform a run-down property comprising two three-story office buildings into a thriving CVS/Pharmacy. A mission that seemed simple on paper was fraught with complications, especially since CVS had been striving for this relocation for over a decade. Previous endeavors, some spearheaded by Mr. Aguirre during his tenure at Armstrong Development, had not seen success. This particular commercial real estate development presented a labyrinth of issues: from reluctant tenants and an owner receiving misguided advice to looming threats of foreclosure. Yet, with these odds, Capital Rivers was undeterred, ready to channel its expertise to tackle each challenge head-on.
Acquire a property that Capital Rivers identified as a strategic location for relocating an existing in-line CVS/Pharmacy. CVS had been trying to relocate their existing store for over a decade with no success and in-fact Mr. Aguirre worked on several other potential relocation sites when he was at Armstrong Development in the early 2000’s. The subject property consisted of 2 – 3-story office buildings that were rundown and desperately needed to be demolished.
The challenges were:
1. There were existing tenants in the building with lease term and they weren’t going to just willingly relocate,
2. the owner still needed the income to pay the mortgage on the property,
3. There was cell-phone carrier equipment on the roof and long-term leases (with no termination or re-development clauses) with 3 large carriers (AT&T, T-Mobile, and Verizon) all of which had little to no motivation to relocate and to get anything done you had to navigate a maze of red-tape,
4. The owner was un-sophisticated and was receiving poor advise from a residential real estate agent who was a friend,
5. The owner had been burned by previously developers that were unsuccessful in completing the project so the owner was skeptical of anyone else having success and
6. to add insult to injury the owner was unable to make his mortgage payments putting the property in jeopardy of foreclosure and was delinquent on past due property taxes.
Again, it was necessary for Capital Rivers to get extra creative in order to solve this series of challenges.
- Capital Rivers utilized it’s in depth market knowledge to identify the specific target site.
- Capital Rivers knew it wasn’t going to be easy to get the owner to feel comfortable with another developer getting involved, so before approaching the owner we needed to make sure we had a strategic plan and the support of CVS/pharmacy in advance.
- The first major issue, which prior developers were unable to solve, was figuring out how to get the cell phone carriers off the roof. Prior developers hired hourly consultants, but we knew that wasn’t going to work, so Mr. Aguirre reached out to his contacts and was able to build a relationship with a local cell phone tower developer / telecommunication company and offered a proposal. The proposal was we will give you the land (for free) for you to build a new cell tower on the property and might even subsidize the tower project, if necessary. In essence we entered into a partnership whereby Trinity Towers, via its existing relationships and expertise, would negotiate with the carriers and convince them to relocate onto a new mono-pine tower with better cell coverage allowing us to have a better chance of eliminating that hurdle.
- Utilizing Mr. Aguirre’s existing relationship with CVS we secured their support to pursue the project which helped get the owner comfortable Capital Rivers.
- The owner was disenchanted with the complexity of the contract and deal terms with the prior developer, so Mr. Aguirre kept the purchase and sale contract as simple as possible while still securing the necessary terms to ensure Capital Rivers was protected.
- Since Mr. Aguirre was able to present to the owner a strategic plan, including the cell tower developer partnership, show CVS’s support, and his willingness to work with the Seller to keep the terms simple he was able to garner a certain level of trust allowing Capital Rivers to move forward with the project.
- Mr. Aguirre worked with the existing tenants to secure new short-term leases allowing for continued income, but the ability to terminate the leases for re-development. This included finding a relocation site for Edward Jones, which ultimately led to a long-term relationship with Edward Jones and Capital Rivers has subsequently completed several other Edward Jones lease deals.
- Midway through the project the Seller said he couldn’t make the mortgage payments thereby putting the project and several hundred thousand dollars of work in jeopardy due to foreclosure. The solution was to cover a portion of the mortgage payment for the Seller in-exchange for a credit against the purchase price and additional time.
- The cell tower project took the work of approximately 5 different attorneys on all sides, coordinating with dozens of consultants working for the carriers, and lots of navigating red-tape to successfully pull off the relocations, construction of a new tower, and to ensure the timing lined up with the property closing, demolition of the building, and construction start for CVS.
- During the process we secured a ground lease with CVS and also secured a build-to-suit with Starbucks to relocate an existing location to the remainder parcel in our development.
Navigating the multifaceted world of commercial real estate development, Capital Rivers has consistently showcased its adeptness in addressing complex challenges and optimizing opportunities. From intricate escrow closings to strategic lease negotiations and fostering robust relationships with city stakeholders, our track record in Merced stands as a testament to our unwavering commitment and proficiency.
- Capital Rivers was able to successfully work through all of the very complex challenges and close escrow with building permits ready to pull.
- After a 10+ year project to relocate the in-line CVS pharmacy and at the detriment of several developers who were un-successful we prevailed, and CVS successfully relocated and opening its new store without incurring penalties under its current in-line lease.
- Capital Rivers was able to secure a build-to-suit lease with Starbuck for the adjacent remainder parcel which was a relocation of an existing non drive-thru store that was located across the street.
- Capital Rivers built a strong relationship with the City of Merced and proved itself as a highly skilled and creative developer.