Mockingbird Station Case Study
Mockingbird Station was purchased in May of 2005 as a core plus asset with upside expected from an improving location and upgrades to the tenant base. The project generally met expectation for the first few years from a rent and occupancy standpoint, but the deepening financial crises in 2008 began to impact both rents and occupancy. In early 2008 Phase III retail (an additional 40,000 feet) was delivered into a very soft market further increasing vacancy at the site. Developers had also delivered several lifestyle retail centers to the area and North Park Mall, the largest in the area, was still trying to fill their 2007 expansion that doubled their size.
Despite these challenges it was clear that Mockingbird’s location was improving. Southern Methodist University (SMU) located across the freeway was expanding rapidly and were buying parcels adjacent to Mockingbird Station as they had run out of space. Their projects included new student housing, the George W Bush library, classrooms etc., all increasing the traffic and density around our site. We remained convinced that investing in Mockingbird was would result in improved value and a positive result in the end.
Our asset management strategy was twofold. First, rebranding the center to give it a fresh modern look that would appeal to the millennial demographic we were seeking. This included new logos, colors, website, marketing materials, and an active advertising and public relations campaign. These efforts resulted in a much higher public awareness of our project and a reputation as the hip, “anti-mall” place to shop, dine watch movies and socialize. Second, we continued to invest in the physical site. This included signage programs (monument and building signs facing the freeway), new facades in some areas, new colors, better building identification, attractive outdoor seating and gathering areas and improved parking. We remodeled the office lobby, common area and elevators as well as the physical plant.
The end result was a property that far outperformed the market. It has a very fresh appearance, is well leased, rents have recovered near or above underwritten levels and it achieved a sale price approximately $40 million higher than originally anticipated.
Phase III retail created meaningful value as it contributed approximately $15.3 million to the sale price versus a cost to construct including tenanting costs of $7.9 million. We believe that another few years of ownership would have produced even stronger results from the investments that were made and given the very successful sale, the market seems to agree.