We’ll Be There!
Rite Aid Drug Store
Mellon Bank was the Trust that controlled the property at 32nd and Market Streets in Camp Hill (the former T-Mobile store). I spoke with my contact at Mellon Bank. There was an interest in this property becoming part of our assemblage with the Kentucky Fried Chicken and Lio’s Pizza for a Rite Aid drug store. They had no interest in selling at that time. We continued with sporadic phone calls for over a year.
I was in contact with a partner in Mid-Atlantic Development Company, the preferred Rite Aid developer for this site. I explained my conversations with Mellon Bank regarding the T-Mobile site and now they were not willing sellers. In an attempt to sway their decision, she said to offer $1 million for the property.
I spoke with Mid-Atlantic again and was told that Rite Aid was increasingly interested in this high profile corner. The Trust still was not interested in selling at this time for $1 million or even more.
I spoke with the owner of Lio’s Pizza to see if he was interested in selling his property. They would sell for $1.5 million. I had already spoken with KFC, who would sell for $600,000.
Contracts were signed by both Lio’s Pizza ($1.5 million) and the KFC ($600,000).
With a few changes, both contracts were returned to me, fully executed and initialed.
T-Mobile had no interest in relocating. It turns out there was not much term left on the lease; they would be out in February. However Mellon Bank was not aware of this.
For six months I pursued the building. I submitted an offer in writing to Mellon Bank, but T-Mobile would not budge.
I had a conversation with Mid-Atlantic Development Company and they exercised a time extension in the KFC agreement. I also sent a letter to Lio’s Pizza which gave Mid-Atlantic additional time (the second due diligence period) in this transaction.
T-Mobile was officially out of the building. In the meantime, Mellon Bank received countless phone calls from people expressing serious interest in the now-vacant property.
A preferred developer for CVS (Rite Aid’s main competition in this area with a location adjacent to the site) was looking to buy the parcel as a defensive measure to keep Rite Aid out.
My contact at Mellon Bank finally explained why there was no interest in the written offer. He did not want to do a long-term lease in case the real estate needed to be liquidated, and he did not want to sell because the interest income that would be received upon a sale would be less than the income stream they currently receive for the beneficiaries. I suggested some options that would benefit both parties, but Rite Aid became uninterested in leasing. We were back to buying the property in order to assemble a large enough parcel.
I wrote another contract, this one in a different format with various options. It also was rejected.
I submitted another written offer for sale to see if we could get any movement. The offer price had been increased to $1.25 million, our buyout number from July. Mellon Bank realized they may never get that price from anyone else for 0.8 acre, unless it was an assemblage with the adjacent parcels. Additionally, if Rite Aid passed on this deal, it was obvious that the CVS developer would purchase one of these three properties in order to block Rite Aid from being able to build on this corner.
We made more changes to the Lio’s contract. Mid-Atlantic needed time to stay there after settlement for clean up. The deal with Lio’s was extended to February 2008.
Our discussions continued, but there was still no movement on the part of the Trust to push forward – even at $1.25 million.
I spoke with Mellon Bank about making the Trust a partner with Mid-Atlantic Development after Rite Aid was built. The Trust could be cashed out at any point, with 60 days notice. With a sale price of $1.25 million, the Trust could be a partner for up to 60 years, or the Trust could liquidate at any time with 60 days notice. Unfortunately, there was still no interest.
Mellon Bank indicated that if there was a deal, it would be a straight sale with no contingencies for land development plan approvals. Perhaps the only time we have would be minimal for due diligence regarding environmental issues (the site was a gas station at one time). Mellon Bank did not want to jeopardize the high income being generated since they might not get that type of income from the investment of the net sales proceeds.
We extended the KFC closing until February of 2008.
We revisited the option of an outright sale of the property. The other two properties were under agreement and Rite Aid was going to committee January 22 to authorize land banking these two parcels. Mellon Bank asked if $1.25 million was the best price. I told him I thought it was, but if he was concerned he should make a counteroffer. There was no interest from the Trust Department.
Mellon Bank wanted written confirmation. After confirming the deal points with Mid-Atlantic, I e-mailed them to the bank. Now we just had to sit and wait. The bank knew we were going to committee on January 22 for the other two properties.
At this point we still have no word on what the beneficiaries will do. I informed Mid-Atlantic I would stay in touch, but the CVS developer wants to buy KFC if the Rite Aid deal does not happen. Rite Aid opted to postpone taking two properties to committee for land banking.
The tables had turned. Mellon Bank told me to expect a counteroffer or correspondence from their local attorney. The committee meeting on the other two parcels was still on hold.
We extended the contracts for Lio’s and the KFC until the end of March. We also worked out a leaseback situation for Lio’s, because the owner wanted to stay open until the demolition started for Rite Aid.
I got a call from the attorney who is representing Mellon Bank in this matter. He got the Trust Officer on the phone who had been working with our Mellon Bank contact. They want to proceed with the sale and will have the document with the necessary changes to me next week, hopefully to close in 45 days.
At this point, the estimated close date on the T-Mobile was June 12.
We finally had a signed agreement. Settlement was to take place at the end of May.
This is one of the most expensive sites that Rite Aid had assembled to date. The due diligence period was extended two weeks for more environmental testing. We were also having issues with the appraisal. We were able to work everything out.
Due to certain issues, the closing on the KFC and Lio’s was extended on a few occasions. The T-Mobile site finally settled on June 2. The KFC settled on June 21 and Lio’s partially settled on June 23, with the balance to settle in February 2009. It was an interesting deal, with a lot of moving parts, but one in which I truly enjoyed being involved.