Heading North

Retail sales continue to trend upward in the Northeastern region

EDENS’ redevelopment of Closter (N.J.) Plaza brings in anchor Whole Foods as part of a plan to re-energize the center, the town and the surrounding communities.

Each year, in December, Chain Store Age publishes a retail overview of the northeastern quadrant of the United States and, each year, there’s not a lot of bad news to report, even in recessionary times. This year is no exception; in fact, despite a superstorm that ravaged much of the region, the economic engine continues to chug along.

It’s no surprise that the urban markets are by and large the strongest, with flat to declining vacancy levels in Boston, Philadelphia, Pittsburgh, parts of New York and northern New Jersey. Urban retail demand is particularly high in Boston, New York and Philly.

The shopping center developers, acquirers and retail real estate specialists who transact business in the region seem bullish on their continued prospects — in terms of both acquisition opportunities and maximizing existing assets — in the northeastern United States. Chain Store Age talked with 10 companies, some headquartered in the Northeast and some not, about their area activities over the last 12 months and what they have planned for the coming year.

Multifaceted growth: Cincinnati-based Phillips Edison gets its northeastern growth on by acquiring shopping centers and by redeveloping existing properties toward maximum revenue and profitability. The company operates 15 properties in the region — seven in New York, five in Pennsylvania, two in Maryland and one in New Jersey.
In 2012, it acquired Burwood Village Center in suburban Baltimore, and Northtowne Square in the Pittsburgh MSA.

It also redeveloped three properties, including Henrietta Jefferson Plaza in Rochester, N.Y., for which Phillips Edison secured 42,000 sq. ft. of new leases and raised the occupancy to more than 95%.

At Ridgeview Place — in Irondequoit, N.Y. — bringing in Planet Fitness as a new anchor and introducing a new identity as Planet Fitness Plaza breathed new life into the shopping center.

And Phillips Edison is in the throes of a major redevelopment of its Edgewood Towne Centre property, located in Edgewood, Pa.

“Edgewood Towne Centre exemplifies Phillips Edison’s redevelopment activities involving our grocery-anchored neighborhood shopping centers,” said Eric Richter, VP property management. The 337,678-sq.-ft. center is anchored by Giant Eagle, Kmart, CW Price and Planet Fitness.

“In 2012, we completed Phase I of a comprehensive redevelopment that included expansion of Giant Eagle, addition of a new anchor (Planet Fitness) and a 10,000-sq.-ft. pet store, bringing the center to 100% occupancy,” Richter added. New landscaping and lighting completed Phase I for 2012.

Phillips Edison has more plans for the region in the works, with additional acquisitions on its radar. “We are confident that the region represents substantial opportunities for growth in our targeted property type,” Richter said.

Close to home: DLC Management Co., based in Tarrytown, N.Y., is an assertive acquirer of value-add properties, and its activities in its home region are particularly robust. The company currently owns 22 shopping centers and 3.2 million sq. ft. in the northeastern United States, with plans to accumulate more.

“We acquired Walmart Plaza in Derby, Conn., which brings us to eight assets there, and we are interested in acquiring more,” said Adam Ifshin, president and CEO, DLC Management Corp. “We continue to put capital to work in the region because it has value-add or opportunistic potential.”

DLC has also been building assets in the Northeast over the last year — in Thornwood, N.Y., for example, the company tore down a center, built a new Walgreens, and Thornwood Village Center opened 100% leased.

“We have six additional new-builds for Walgreens in the Northeast, spread out across Connecticut, Westchester, Nassau and a number in northern New Jersey,” Ifshin said. “We continue to build footprint in that space, heavily focused here in metro New York.”

While DLC’s activities aren’t restricted to the Northeast — the company owns and operates properties across the country — it makes sense to jump on opportunities in the region. “Would I do just the Northeast if I could? Sure,” said Ifshin, “because the Northeast compares so well to other regions in terms of the supply-demand dynamic. We’re willing to travel for opportunities, but if you can get it closer to home, that’s certainly preferable.”

Powerful leasing: Brixmor Property Group, based right in the heart of it all — New York City — executed 443 leases, totaling more than 2.5 million sq. ft. in the Northeast states during the most recent 12-month period and, said the company, healthy leasing volumes continue across all tenant sizes and categories.

“Restaurant concepts and medical users continue to show strong interest in new leasing,” said Timothy Bruce,
executive VP leasing and redevelopment for Brixmor. In fact, “the Northeast market as a whole continues to be healthy,” he said.

Brixmor, which owns 138 properties in the region — totaling about 20 million sq. ft. — completed eight redevelopment projects over the last year, and has another eight under way. Two of the completed projects and three of the in-process projects involve grocers (five of which are new to the shopping center), illustrating the power of the supermarket in many of Brixmor’s core properties.

ShopRite anchors the Shoppes at Cinnaminson (N.J.), a 291,000-sq.-ft. community shopping center that is 98.3% leased and also features a flagship Burlington Coat Factory, Ross Dress for Less and Planet Fitness. “This property was redeveloped in 2010, transforming a condemned mall into a ShopRite-anchored community shopping center,” Bruce said. ShopRite is realizing sales of more than $880/sq. ft.

Brixmor’s Roosevelt Mall, in Philadelphia, represents the redevelopment of a major property. The 562,000-sq.-ft. center is anchored by a 313,000-sq.-ft. Macy’s with a new Target located behind the center and generating additional traffic. In 2011, the eastern end of the center was redeveloped from several small-shop spaces into a 32,000-sq.-ft. Ross Dress for Less.

Powering up the coast: Columbia, S.C.-based EDENS has moved up the coast with purpose — with holdings totaling 35 properties and more than 5 million sq. ft. in the Northeastern states of Massachusetts, Connecticut, New York, New Jersey and Rhode Island.

And the company sees continued opportunity in the region. “EDENS has focused on investing in the Northeast sector,” said Ed Senenman, senior VP investments. “We continue to see opportunity for redevelopment and urban adaptive re-use.”

In the Northeast, EDENS has completed, is under way or will be commencing construction on a total of seven redevelopment projects with a total GLA of more than 1.4 million sq. ft. The company has acquired five properties within the region with total GLA of 761,233 sq. ft.

“Among real estate investors, ‘flight to quality’ has continued in 2012, as cap rate spreads between real estate asset classes remain near historical highs and institutional investors are aggressively bidding on high barrier-to-entry projects,” Senenman said, “but they are less aggressive in ‘B’ and ‘C’ markets and assets. This is very favorable to the Northeast sector.”

In 2013, EDENS will be redeveloping Closter Plaza in Closter, N.J. The 210,000-sq.-ft. center will be joined by anchor Whole Foods in 2014 as a key part of EDENS’ vision to re-energize Closter and the surrounding communities with the redeveloped Closter Plaza.

“We want to create a shopping center that becomes an ‘everyday experience’ and functions as a daily gathering place,” said Steve Boyle, managing director.

Closter is designed to feature a collection of best-in-class retailers and restaurants. “It will feel friendly, familiar and intimate,” Boyle said, “and that will spur warm and inviting connections.”

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