In a coast-to-coast retail investment transaction that demonstrates grocery-anchored shopping centers remain in high demand among institutional investors, one very patient investor and a pair of equally patient Colliers International retail investment teams – one from the brokerage firm’s Los Angeles office and the other from its office in Allentown – can finally announce that they have successfully negotiated the $32.3 million sale of a major center in Pennsylvania – after an unusually long one-year escrow.
Totaling some 153,085 square feet and anchored by a Giant Foods Supermarket, as well as a Marshall’s Department Store, the strong-performing Palmer Town Centre in the Lehigh Valley community of Easton, Pennsylvania, was acquired by Phillips Edison (PECO), one of the nation’s largest real estate investment trusts focusing almost exclusively on grocery-anchored centers.
After an initial 45-day marketing period in the third quarter of 2015 that generated over a dozen competitive offers, PECO was selected as the most-qualified buyer.
After PECO removed a number of contingencies that normally would have streamlined the closing, the sale was delayed in order to correct title matters related to the parcel maps that would have negatively affected the manner in which the property’s title was conveyed to PECO.
“PECO stayed with us on this transaction for almost a year despite significant title issues involving land parcels that surround the center,” said Colliers Executive Vice President Tom Lagos, who, with his Los Angeles-based team, led the negotiations. “This deal reminds me of what I once heard Apple’s (late) co-founder Steve Jobs say – ‘Details matter, it’s worth waiting to get it right.’”
Los Angeles-based The Festival Companies, the center’s subsequent and high-profile asset manager, which is among the nation’s leading managers of quality neighborhood shopping centers, was given high marks by both Colliers’ brokerage teams for navigating not only the complexities of the transaction, but also in managing expectations among the 37 TIC owners, Lagos added.
“With such a high number of tenants-in-common, it wasn’t surprising that they were not always aligned and that served to only complicate and prolong the lengthy escrow,” said Lagos. “But The Festival Companies skillfully negotiated and guided all parties through the entire process.”
Despite the long escrow and an overall market correction at the end of 2016 that included escalating interest rates, PECO was rewarded with the ownership title to a strong-performing center with two major national credit companies as anchor tenants.
“At the end of the day, PECO now takes over a strong performing grocery-anchored shopping center with the opportunity to increase NOI by bringing shop rents to market levels,” said Colliers Senior Vice President Derek Zerfass, who served as the teams’ on-the-ground advance man in Easton, providing market intelligence and local knowledge. “PECO can now re-merchandise the site plan and the center with national and regional credit tenants that will vastly improve the value of this high-profile center.”