Shopping Center Business

MAY 2018

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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SHOP ONE 134 • SHOPPING CENTER BUSINESS • May 2018 been successful at finding assets com- ing through special servicers, from loans that were originated a decade ago. There is a lot of product coming through that channel." In December, ShopOne acquired Oak Park Commons, a 139,717-square-foot, grocery-anchored shopping center in South Plainfield, New Jersey. The asset marked ShopOne's entry into the New York City MSA. The ACME Markets-anchored proper- ty also includes CVS, Advance Auto Parts, Goodyear Tire, Dollar Tree, McDonald's and Wells Fargo Bank. Like McKinley, the center is surrounded by a dense popula- tion with an average household income of approximately $140,700. ShopOne's portfolio is currently spread across 10 states, including Michigan, Indi- ana, Ohio, Florida, Georgia, Tennessee, and California. ShopOne is looking to add more locations around the mid-Atlan- tic, Southeast and West Coast for more geographical diversity. Carroll says Shop - One will consider portfolio acquisitions as well as one-off purchases. Finding below-market rents then sign- ing new leases at higher rents provides a compelling opportunity to drive internal growth, Carroll says. "All the talk about tenant bankruptcies is happening with below-market leases in a time when there is still good demand for that space," says Carroll. "So we have been actively focused on that as our first point of growth." Adding value to newly acquired cen- ters, physically and through leasing and management, will get the attention of capital investors in the future. At McKin- ley Crossroads, for example, ShopOne is planning upgrades including new lighting, new parking lot pavement, new pylon sig- nage and façade improvements for an ap- proximate investment of $750,000 of cap- ital to elevate the aesthetic of the property. There are also capital improvements to existing properties to contend with as well. In November, ShopOne closed a $325 million credit facility that will be used to refinance higher-interest-rate maturing mortgage debt and provide working capital, with additional capac- ity to fund new acquisitions. A portion of the new facility was used to terminate existing mortgage debt on 16 properties, which the company says will enable it to maximize value through repositioning and tenant merchandising mix. In March, the credit facility was increased to $400 million. To achieve the company's operation- al-improvement goals, Carroll says there is no substitute for first-hand experience. Since October, ShopOne has been hiring new people, including CFO John Roche, who has 30 years of experience holding many prominent positions at retail REITs. ShopOne utilizes in-house portfolio man- agement and leasing functions rather than outsourcing to third parties. "I'm a big believer that having your hands on leasing and asset manage- ment functions is really how you create value," says Carroll. "We're positioned better today because we have our boots on the ground on a day-to-day basis. In the strip-center space, that's always been important." As ShopOne seeks to grow its portfolio, it is confident about the demand for gro- cery and off-price apparel retailers, espe- cially while malls continue to struggle and development of new retail centers in the company's target markets remains slow. According to JLL's 2018 Grocery Tracker report, investment in grocery-an- chored centers increased by 5.3 percent in 2017 and was one of the only retail sectors to see growth in a year of low transaction volume, the report states. This growth oc- curred even while grocery openings were down 28.8 percent in 2017 from 2016. Consumers continue to be drawn to gro- cers, such as Aldi and Lidl, that offer value as well as grocers committed to growing organic brands and finding new ways to integrate with meal delivery services or online ordering. Still, only 5 percent of people are interested in buying their groceries online, according to Internet Retailer. "We have come out of the box and have been acquiring quickly," says Carroll. "We have equity to put out and an appetite to continue to grow." SCB In December, ShopOne acquired Oak Park Commons, a 139,717-square-foot, grocery- anchored shopping center in South Plainfield, New Jersey. The asset marked ShopOne's entry into the New York City MSA.

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