Michaels - Bellingham

Property Overview

4383 Meridian St in Bellingham, WA is a 23,687 SF single-tenant retail building occupied by Michaels, the largest arts and crafts retailer in the country with over 1,200 stores. Built in 2004, the property sits on Meridian Street, one of Bellingham's primary retail corridors, with traffic counts exceeding 32,000 cars per day. The property is leased on a triple net basis.

Challenge

Our team was engaged to sell this single-tenant Michaels location in Bellingham, Washington. The property carried a lease that had been written at $15.22 per square foot, well above the current market rate of $11 per square foot. Before the asset could be positioned for sale, the lease needed to be addressed to reflect market conditions and provide a buyer with a stable, long-term income stream.

Action

The Kidder Mathews leasing team first negotiated a new 10-year lease extension with Michaels, commencing in September 2014, at the market rate of $11 per square foot. The restructured lease included three five-year renewal options with contracted 8% rental increases at each option, giving prospective buyers a clear picture of long-term cash flow. With the lease in place, our team brought the property to market as an on-market sale. The offering generated multiple offers, giving the seller the ability to select the most suitable buyer.

Result

• Sale price of $4,050,000, exceeding the asking price of $3,980,000
• $171 per square foot
• Property sold 100% occupied with a new 10-year triple net lease in place
• Multiple offers received, providing the seller with competitive leverage
• Buyer completed a 1031 exchange, broadening the qualified buyer pool and supporting pricing