IRVINE, CA—As technology evolves, sellers need to find more-creative methods for marketing shopping centers, especially properties located in smaller markets, Hanley Investment Group’s EVP Eric Wohl tells GlobeSt.com. The firm recently represented seller Phillips Edison in the sale of Blaine International shopping center, a 130,448-square-foot grocery-anchored retail center located at 1733 H St. in Blaine, WA, to a private investment company based in Texas and the sale of Cedar South Shopping Center located on 9.56 acres at 889 S. Main St. in Cedar City, UT, also to a private investment company based in Texas. Individual sale prices for the properties were undisclosed, but the combined was $13 million and comprised nearly 250,000 square feet. HIG has completed the sale of 13 Phillips Edison properties in 12 months totaling 1.5 million square feet. We spoke exclusively with Wohl about the transactions and trends in the shopping-center realm.
GlobeSt.com: What was particularly unique about your most recent Phillips Edison transactions?
Wohl: With Blaine International Shopping Center, we had some challenges to overcome including the 30,000-square-foot Rite Aid that went dark at the start of our marketing process. Although Rite Aid will continue to pay rent for 2.5 years, it created a challenge for some potential buyers, but the ultimate buyer saw it as an opportunity. Another challenge was the fact that the grocer was not a national brand, so investors didn’t have the name recognition that they are used to when purchasing a center of this size. The buyer was able to get comfortable with the tenant as the tenant exercised a five-year option during escrow, which showed the tenant’s commitment to the location and its reported consistent sales growth year-over-year. Blaine International Shopping Center also only had 14,000 people within a 5-mile radius, but it sits across from the Blaine Border Patrol Station and is less than one-half mile from the U.S-Canadian border crossing, the third busiest US-Canadian border crossing in the US with more than 10.5 million annual crossings. This was attractive for the buyer since many Canadians cross the border daily to do their shopping.
With Cedar South Shopping Center, one of the main challenges was the fact that Christensen’s Department Store, located in a freestanding 22,272-square-foot building toward the back of the property, vacated during contract negotiations, taking the occupancy from 90% down to 70%. We also thought that one of the other anchors at the center was going to execute a five-year extension during escrow, but after getting through negotiations, the tenant only signed a one-year extension. The buyer viewed this as an opportunity since they felt like they could find a stronger tenant for the space because it is located in one of the prime locations within the center.
GlobeSt.com: How is the way shopping centers are being marketed to potential investors changing as the sector changes?
Wohl: As technology evolves, we are having to come up with more-creative ways to market shopping centers, especially properties located in smaller markets. In these markets, it is important to have a firm grasp on area demographics and the different drivers that are supporting the local economy like major employers, tourist destinations, development growth, schools and other local retailers. These factors all become increasingly important when you are dealing with a limited population. At Hanley Investment Group, our collaborative proprietary database allows us to share relationships and details about our clients’ needs so we can maximize our reach and sell properties nationwide to investors across the country.