Shopping Centers Today

SEP 2018

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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Page 44 of 59

S E P T E M B E R 2 0 1 8 / S C T 45 focused on buying and operating regional malls in the A-minus-to-B-range, says Steve Plenge, the investment firm's managing principal. That particular pool compris- es fewer than 300 U.S. malls currently, and the company seeks dynamic markets exhibiting growth in population, jobs and household income. Mall-owning REITs that have chosen not to invest in the bottom half of their portfolios make up the primary source of opportunities, Plenge says. "REITs are stretched, like everybody else, when it comes to manpower and capital," Plenge said. "Some properties are operating on a shoestring budget: The lights are literally turned off, and nobody is sweep- ing the parking lot." In addition to repositioning the centers with such tenants as grocery stores, entertainment providers, and health and fitness operators, the Pacific Retail strategy includes making upgrades to the rest rooms, food courts, play areas, lighting and security, landscaping and entrances. e firm is also re- lying on the appeal of community events and has employed local artists to paint murals on exterior walls. is year Pacific Retail is finishing up the second phase of a $20 million renovation to the Shops at South Town, a 966,000-square-foot mall in Sandy, Utah, that the firm ac- quired jointly in 2014 with Silverpeak Real Estate Partners and Goldman Sachs. e company installed a high-resolu- tion interactive play wall and a multimedia wall featuring movies, sporting events and other content. Among the new tenants is a 50,000-square-foot Round 1 Bowling & Amuse- ment facility, which will open this year. Meanwhile, the Palm Beach, Fla.–based Sterling Organi- zation, which recently raised some $495 million in its third value-add fund, is concentrated on grocery-anchored assets and street-front retail. e firm is also willing to look at riskier malls and power centers, depending on the strength of the location, the level of challenge and the amount of capital available for turning those assets around, according to Brian D. Kosoy, Sterling's managing principal, president and CEO. is spring Sterling acquired a vacant 10,000-square- foot, street-front retail condominium in Chicago's Magnifi- cent Mile district for $15.1 million. Kosoy says he sees loads of potential for turning that space into a trophy asset, given the right leasing strategy. "We believe that good real estate will always be good real estate, and that there will always be demand for it," he said. "We don't like to gamble and pray. n TYPICALLY, VALUE-ADD INVESTORS TARGET AN INTERNAL RATE OF RETURN IN THE HIGH TEENS OR HIGHER '' '' income may be nonexistent

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