Shopping center spree

Shoppers are rushing to area stores again this holiday season.

And commercial real estate investors have also been shopping in the area, not to buy things in area stores but rather to buy the buildings the stores occupy. Several shopping centers in southeastern Wisconsin have been sold this year or will be sold in the coming months.

“There’s been an above average amount of shopping center investment sales,” said Dan Rosenfeld, a principal at retail real estate brokerage firm Mid-America Real Estate-Wisconsin. “There’s an above average amount of activity this year over previous years.”

Sendik’s Towne Centre

Most of the biggest deals involve out-of-state investors buying area shopping centers. Major retail real estate sales in southeastern Wisconsin this year include:

  • Tarrytown, N.Y.-based DLC Management Corp.’s purchase of the Midtown Center shopping center in Milwaukee for $47.15 million. Midtown Center is a 408,499-square-foot shopping center located on a 44-acre site at Capitol Drive, Fond du Lac Avenue and North 60th Street on the north side of Milwaukee. It is anchored by Walmart and Pick ‘n Save stores. Midtown Center was a redevelopment of the former Capitol Court shopping mall. The deal did not include the 134,000-square-foot former Lowe’s store, which closed in 2009.
  • Oak Brook, Ill.-based Inland Real Estate Income Trust Inc.’s purchase of the Shoppes at Prairie Ridge at the southeast corner of Highway 50 and 104th Avenue in Pleasant Prairie for $32.5 million. The 232,606-square-foot shopping center includes JCPenney, Dick’s Sporting Goods, PetSmart and Ulta Cosmetics stores. The Target store at the shopping center is owned by Target and was not part of the sale. Inland Real Estate Income Trust acquired the property as part of a 15-property retail real estate portfolio deal.
  • Beachwood, Ohio-based DDR Corp., one of the largest retail real estate firms in the U.S., purchased the Pick ‘n Save-anchored retail property at 1717 N. Mayfair Road in Wauwatosa for $20.3 million. The 5.2-acre site on the west side of Mayfair Road consists of a 60,598-square-foot Pick ‘n Save store, a 3,015-square-foot building occupied by a Mattress Firm store, and a 6,136-square-foot multi-tenant building occupied by Bubon Orthodontics, a Firehouse Subs restaurant and a Supercuts hair salon.
  • Alliance Capital Invest, a New York-based real estate investment firm led by Alex Levin, submitted the winning $16.5 million bid in an online auction to purchase the Shops of Grand Avenue mall in downtown Milwaukee. The property sold in the auction was a four-building complex at 275 W. Wisconsin Ave. with 298,109 square feet of space, and an adjacent 1,748-space parking structure. The auction did not include the Boston Store building at 331 W. Wisconsin Ave., which is separately owned by Wispark LLC.
  • Cincinnati -based Phillips Edison & Co. purchased the 160,533-square-foot Point Loomis shopping center at the southwest corner of South 27th Street and Loomis Road on the south side of Milwaukee from DDR Corp. for $10.35 million.
  • In an online auction, an undisclosed buyer placed the winning bid of $9.675 million to purchase Moorland Commons, a 126,561-square-foot shopping center northeast of Moreland and Beloit roads in New Berlin. Tenants in Moorland Commons include OfficeMax and Michaels. A Dunham’s Sports store will move into a vacant 48,734-square-foot space. The Target store at the shopping center is owned by Target and was not part of the sale.
  • An affiliate of a Singapore-based investment group recently purchased the 135,827-square-foot Racine Centre shopping center anchored by a Piggly Wiggly store and located at Green Bay Road and Washington Avenue in Racine for $9.28 million.
  • Cole Capital, the Phoenix-based private capital management business of New York-based American Realty Capital Properties Inc., purchased the 55,000-square-foot Pick ‘n Save store building at 1405 Capitol Drive in Pewaukee for $9 million.

In addition, another major retail real estate deal is expected to close soon. Sendik’s Towne Centre, a 187,969-square-foot mixed-use retail and office space development southwest of Capitol Drive and Brookfield Road in Brookfield is under contract to be sold, according to sources. It is anchored by a 54,301-square-foot Sendik’s Fine Foods grocery store. Sendik’s Towne Centre is owned by Phillips Edison & Co., which bought the property for $15.4 million from BMO Harris Bank as a distressed asset in 2011. The sale price will presumably be much higher this time.

So many retail properties are selling in the area because owners want to take advantage of higher property values at the same time that the capital markets are hot with investors looking for real estate assets to purchase.

“I think a lot of these owners of shopping centers are taking chips off the table,” Rosenfeld said.

The number of out of state firms buying retail properties in the area demonstrates that the national commercial real estate investor market is robust right now. Many commercial real estate investors have been priced out of the nation’s primary markets and are looking for properties in which to invest in secondary and tertiary markets like metro Milwaukee, real estate brokers say.

In addition, some retail property owners want to cash in by selling their assets so they can turn around and purchase other assets. A perfect example is Phillips Edison, which purchased Point Loomis recently and plans to sell Sendik’s Towne Centre.

“Some owners have to constantly recycle their real estate,” Rosenfeld said. “They need capital to buy more. That’s their business model.”

The region’s retail market has been stung this year by numerous large store closures, including several American TV, Sears, Kmart and AMF bowling center locations. However, retail real estate brokers say retail spaces in well-located multi-tenant shopping centers are hard to find in the region.

“Occupancy (for those buildings) has been very strong,” said Kevin Riordan, principal and retail team leader for Milwaukee-based The Boerke Co. “All of the vacancies that were a problem during the recession have been filled up. It’s very difficult to find good space out there.”

The high occupancy rates for well-located multi-tenant retail space, combined with low interest rates, has helped attract investors interested in buying shopping centers in the area. However, based on the sale prices, some of the deals appear to have slim margins for the buyers, Riordan said.

“(If) a couple tenants go vacant, you are looking at negative returns,” he said.

Rosenfeld predicts the retail real estate buying spree to continue in the area until at least the middle of next year, when the Federal Reserve could increase interest rates, which could slow real estate deal activity.

But for now, “it’s a seller’s market,” Rosenfeld said.

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