Six prime acres of riverfront property in Richmond were recently taken off the market.
The Reynolds Packaging North Plant at 10th and Byrd streets was advertised for sale beginning in March, but the owners have decided to hold off on a sale because of the weak economy, according to Trib Sutton, a broker for CB Richard Ellis who headed up a team marketing the property.
“The plan now is to wait for the current economy to end and let it pass by,” Sutton said.
He said he thinks they will probably wait about a year before trying to sell the property again.
There was no advertised price, but the property is appraised by the city at more than $13.7 million. The property has four buildings, and two that are eligible for historic tax credits.
“We did receive some offers but found none of them were acceptable and very reflective of the current economy,” Sutton said.
The commercial real estate market is suffering across the country, and Richmond is no exception. At a real estate conference held this week at VCU, speakers said that property values have fallen 40 percent since the peak in 2007 and are still falling. You can read more about that here.
Sutton didn’t say how much potential buyers offered to pay but said interested parties included investors who wanted to hold it and resell it, as well as developers who likely had plans to create a mixed-use community at the plant.
Because of the company’s long history in Richmond, Sutton said the company wants to make sure that they sell it to “the right group with right plans.”
“They have been tremendously responsible stewards of that property,” Sutton said.
Aluminum foil was produced at the manufacturing plant, and operations there will wind down by the end of the year.
The Reynolds Consumer Products division of Alcoa was purchased by a private equity firm last year that announced in September 2008 they would shut down the three manufacturing facilities in Richmond, which also includes the 17-acre plant across the river in Manchester, which is still for sale, and a distribution center on Bells Road near the Port of Richmond.
Meanwhile, he said the South Plant is still being marketed, and about a dozen groups have taken tours of the property. The firm will issue a call for offers in late October or early November, he said.
The fact that the owners couldn’t find an acceptable buyer does not surprise real estate investment banker John B. Levy, founder of the Richmond-based firm that bears his name.
“It’s a terrific piece of property,” said Levy. “The problem is there is no interest in development right now, and there is no money for development.”
One big problem, Levy said, is that developers don’t have enough liquidity and are unable to get financing for such projects. Even if an investor had enough cash to by the property, they would probably still need financing for the improvements, which is hard to come by at the moment, he said.
“Two years ago, it would have been done in a heartbeat, but we are in the middle of a horrible real estate market,” Levy said. “There are not a lot of people willing to speculate.”
Levy said the area needs to absorb the vacant space it already has before new space can be built, which could take several years.
“When new space comes on, you’ve got to have rent growth,” Levy said. “We’re still having rental declines.”
Al Harris covers commercial real estate for BizSense. Please send news tips to Al@richmondbizsense.com.