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H&R RETAIL INVESTMENT PROPERTIES DIGEST [THIRD QUARTER 2017]

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Front Royal Shopping Center Sells for $17.7 MillionThe JCR Cos. of Washington, D.C., has acquired Riverton Commons, a 69,496- square-foot shopping center in Front Royal for $17.7 million from EDENS.

Riverton Commons is located on about 13 acres at the intersection of Interstate 66 and US Route 522. It’s part of a 500,000-square-foot regional shopping center anchored by a 201,000-square-foot Walmart supercenter.

Built in 2007, Riverton Commons is leased to local, regional and national tenants including Valley Health Systems Urgent Care, Great Clips, Mattress Warehouse, Sweet Frog and Anytime Fitness.

JCR plans to lease the existing vacant space and either develop or sell the property’s five pad sites, two of which are vacant land. “With a strategic location on Route 66 and its location within Front Royal’s dominant retail center, Riverton is a perfect fit for JCR,” Joe Reger, the company’s principal, said in a statement.

Situated about 70 miles west of Washington, in the Shenandoah River Valley, Front Royal’s population is growing. Since the 2000 census, the area’s population has increased by about 33 percent to a little more than 15,000. Many residents commute to jobs in or near Washington. JCR said that Riverton Commons is its eighth shopping center acquisition since 2012. “We are continuing our aggressive acquisition of urban and suburban retail properties nationwide, with a concentration in the Washington, D.C. metro area,” Reger said.

Gaithersburg’s Lakeforest Mall Sells at Auction for Fraction of its Former WorthFailing Lakeforest Mall (one million sf) in Gaithersburg, MD (Montgomery County) has been sold at a foreclosure auction, for a fraction of its assessed value by U.S. Bank, the trustee for the noteholder on the property. The winning auction bid: $19.1M. The mall owner Five Mile Capital owed $80M. U.S. Bank was bidding against two other groups at the auction on the steps of the Montgomery County Judicial Center. Bidding opened at $11.34M. The bank’s future plans for the mall are not yet known.

The $19.1 million bid is a long way from the nearly $100 million that Stamford Connecticut-based Five Mile Capital paid for the property in 2012. The company picked up the mall after Simon Property Group, unable to refinance, defaulted on a loan balance of $138.7 million, according to The Washington Post. At that time, Five Mile said it would invest $20 million to improve and reposition the mall. It ended up spending $1.3 million for improvements in 2013. Later that year, it pitched a redevelopment to the city of Gaithersburg in partnership with Hines Interests LP, but that never materialized. Since then, like so many other suburban malls, Lakeforest’s fortunes have turned. In 2005, its appraised value was $218.9M. In March of this year, its appraisal fell to $40.2M, according to financial records.

The mall’s net operating income for 2016 was $6.18M, down more than 50% from when Five Mile purchased the property in 2012. When Five Mile’s loan for Lakeforest was originated that year, the mall’s net income was $14.68M. Occupancy at the mall had fallen to 84% by the end of 2016, down

INVESTMENTPROPERTIES

DIGEST

H&R Retail’s Investment Properties team, led by Michael Gorsage and Kate Howarth, is pleased to present the Third Quarter of 2017 edition of the Digest. The Digest is an edited collection of articles that we gather from various publications. We hope you find the information useful.



from 96% when Five Mile bought it. The loan transferred to special servicing last October after Five Mile “indicated that due to the loss of regional and national tenants… [C-III] will not allow the borrower to refinance at the 2017 loan maturity.

While smaller tenants may be leaving the mall, the property still has all four of its department store anchors in Macy’s, Lord & Taylor, JCPenney and Sears — many of which have faced their own financial challenges. Built in 1978, Lakeforest Mall was a major shopping hub through the 1980s and 1990s, but has suffered in recent years as shoppers buy online or flock to newer, mixed-use developments nearby. The mall has also had its issues with crime: A holiday shopper was stabbed in 2015 and a body was found floating in a pond outside the mall in 2014, among other incidents.

Curtis a Retail Buyer in LaurelCurtis Properties has acquired the 20,000 sf Laurel Pond shopping center on Route 1 in Laurel, MD for $7.1M. The center is located across from Laurel Lakes Center that is fully leased. Located at 140201 Baltimore Avenue, Laurel Pond counts AT&T Wireless, GameStop, Jerry’s Pizza and FedEx among its tenants. The center is of an ‘80’s vintage, but previous owner 14201 Laurel Pond LLC had renovated the complex during its ownership.

Lidl, the Fourth Time - Grocer Buys Mission Drive Site from JemalLidl has made Glenn Dale, MD (Prince George’s County) the site of its latest grocery expansion. Based in Germany, Lidl paid $2.55M to acquire 7500 Mission Drive in Glenn Dale. The 5.71 acre site fronting on Route 193 is part of a corporate park long given over to Goddard contractors but now redeveloping with residential and retail. It’s the fourth location that Lidl has settled on since it made Prince George’s County one of its key expansion nodes. Prior to this, it paid $3.2 million for nearly four acres at 7200 Marlboro Pike in District Heights, and $2.7 million for 4.2 acres at Branch Avenue and Curtis Drive in Suitland. Lidl’s first acquisition was the former Melvin Motors property in Bowie, where it paid $4.42 million for 4.09 acres along Route 450. A number of additional stores are planned, including one at the Andrews Allentown Gateway,’ in Camp Springs, and another at Cadillac Crossing on Route 301 in Brandywine. Lidl is also expected to open a store on Brooks Drive in Capitol Heights, and another is planned to replace

the Clarion Inn on Route 1 in College Park. In Glenn Dale, seller Doug Jemal has revamped the former ‘Greentec’ office park, razing some of the buildings and spurring residential development that NVR and Dan Ryan are now building out as Glenn Dale Commons.

Alexandria’s Mark Center Portfolio Trades for $509 MillionA suburban Philadelphia real estate firm has paid $509M for a large swath of Mark Center in Alexandria, one of several remaining assets The JBG Cos. sought to sell prior to its merger with Vornado Realty Trust’s D.C. business to form JBG Smith Properties. The sale to Morgan Properties, based in King of Prussia, Pennsylvania, includes more than 2,600 multifamily units and the 63,320 sf Shops at Mark Center. The real estate sits on more than 150 acres and boosts the buyer’s portfolio to about 21,500 apartment units in the Baltimore-Washington region. The properties were marketed for sale in February on JBG’s behalf as the Chevy Chase-based developer sought to pare down its portfolio ahead of the Vornado merger. JBG Smith (NYSE: JBGS) went public in July with a portfolio of more than 20M sf. Morgan Properties acquired the property as a long-term hold and plans to focus on renovating the existing multifamily properties, a spokeswoman for the company said. It is not currently planning to pursue the redevelopment plan outlined by JBG. “We’re trying to create a better, holistic experience, as opposed to what’s there today which is very fragmented,” she said.

Edens is Not Leaving Well Enough Alone at Potomac’s Cabin John Shopping Center and MallEdens, which purchased Cabin John from the Carl Freeman Cos. last year for $165M, is planning an initial expansion that could be a first step in a 21st century overhaul of the 47-year-old property. Edens has filed plans with Montgomery County to add 9,999 sf on two stand-alone retail pads at Tuckerman Lane and Seven Locks Road. The 25-acre site is technically two pieces, as the mini mall and strip mall were developed at different times. The property includes 155,544 square feet of retail and nearly 59,000 sf of 2nd story office space.

The development, is the “first phase of a more significant future redevelopment of the 25-acre property.” Cabin John,



located about a mile from the larger Westfield Montgomery Mall, could be allowed substantially more space should the developer seek county approvals. Edens plans to convert the center from its current strip-mall format into something more current. “Over the next several years, we will begin implementing our vision to redevelop the center into an urban, walkable village drawing on the center’s history as the central gathering place for the neighborhood. The center was originally developed by the Carl M. Freeman Cos. in the late 1960s. Tenants include a Giant supermarket, CVS, SunTrust Bank and Starbucks.

These Investors are Buying Up Retail in Prince George’s CountyWhile the investing world seems to be running away from retail, Fortified Property Group is embracing it with open arms. Jared Okun and Michael Rabin, the owners of Fortified Property Group, have purchased three shopping centers in the past 18 months. Their most recent buy, earlier this month, is also their biggest by far: Hilltop Plaza, a 180,000 sf center in Bowie. They bought that site for $50M in partnership with developer Rappaport, which helped spur the deal and remains part owner and management partner for the property.

Shortly after the purchase, Hilltop Plaza Holdings, in partnership with Rappaport, raised $11.6M most of its original $13 million offering, according to a July 14 Securities and Exchange Commission filing. Hilltop Plaza, at Route 450 and Race Track Road, was renovated in 2011. Its more than three-dozen tenants include an Advance Auto Parts, Aldi, Dollar Tree, Kid’s First Swim School, Life Spa, MOM’s Organic Market, Papa John’s, Planet Fitness, Joyful Jumps, SunTrust and Old Town Pet Grooming, as well as a deli, salon, barbershop and bakery, among others. A Caribbean Cafe, Rainbow Apparel and Walgreens are coming soon, according to the center’s website. Included in the Hilltop Plaza purchase were 5 acres next to the center. The owners are looking to develop, likely into something other than retail, Rabin said.

It’s the second shopping center Fortified bought from M. Leo Storch Management Corp., having acquired Lanham Crossing in November 2016 for $15 million. Leo Storch Management, a family-owned commercial real estate company based in Pikesville, had owned both shopping centers since they were built in the 1960s. But after Leo

Storch Management’s owner passed away, the company looked to sell part of its portfolio. Located at 8801 Annapolis Road, Lanham Crossing is home to a mix of retail and fast-casual eateries, totaling 16,000 sf of office space and 69,000 sf of retail. It also has 3,833 sf available for a new tenant with space for an 8,000 sf expansion. Okun and Rabin are also owners of a 14,000-sf center in Lanham, at the corner of Annapolis Road and Finns Lane that it bought for $2 million. That strip is home to a 7-Eleven and a Metro PCS store.

A New Look for AU Park’s Superfresh Development with Fewer Units, Smaller GrocerThere is a new plan for the much-debated residential development that is on the boards for the former Superfresh site in American University Park. In response to community feedback — including a campaign by Citizens for Responsible Development (CRD) to mount a legal opposition — and a shift in the grocery store market, the development team has a new, smaller plan for the project. Valor Development and Torti Gallas Urban presented the newly-amended design — one with fewer residential units, more step-backs and a grocery store that is two-thirds smaller. In the 18 months since Valor first previewed plans for the project with the community, large-format grocers like Giant and Safeway are more reticent to do deals in the city and smaller-format stores are finding more success. Towards that end, the grocery component of the development has shrunk in size from 50,000 to 14,000 sf to accommodate stores like Trader Joe’s, Streets Market and Balducci’s. There will also be nearly 2,200 square feet in additional retail space. The number of residences has also dropped, from 230 to 219 units, with approximately 10% set aside for households earning up to 60% of area median income. There will also be a two-level below-grade parking garage with 370 vehicular spaces rather than 460 spots (73 dedicated residential, 61 dedicated retail, and 236 flexible-use).

If the community doesn’t give the green light to the project, the developer reserves the right to build a by-right project that is all-residential. An all-residential development on the site would likely contain 190 units rather than 219, partially because the building would have to be narrower in order to create a larger interior courtyard. The development team stated that they plan to meet with both the community and the ANC several more times over the next few months



and have a Zoning Commission hearing scheduled for late October. While the ANC didn’t vote at the last meeting, the chair did request that Valor postpone the zoning hearing until November. CRD still plans to move forward with legal action against the development at this time.

Burtonsville: Mixed-Use is the GoalThe Burtonsville Crossing shopping center still sits largely vacant and dark, but there may be movement toward change. Crossing hasn’t recovered from the exit of anchor Giant to the Town Center across Route 29. The state recently named Burtonsville an ‘enterprise zone,’ and Council member Tom Hucker said he believes a meeting held with center owner Edens represents ‘progress’ toward the mixed-use redevelopment the community wants to see. Edens told Hucker at the meeting that it has had difficulty making a town center style project with residential ‘pencil out.’ Hucker agreed to investigate more county options that might spur the development, such as a taxing district. Edens said they would continue to work on a proposal for the site, while Hucker explores how costs could be offset. Edens won an RFP for development of a county Park and Ride next to its Crossing holdings several years ago. Edens first explored mixed-use development but due to the costs of structured parking and storm water management is now looking at a re-positioning plan for the existing center.

INVESTMENT OPPORTUNITIES

FOR SALEDAMASCUS CENTERDAMASCUS, MD

SIZE 142,529 SF

TENANTS Safeway, Dollar Tree, Advance Auto

FOR MORE INFORMATION PLEASE CONTACT

MICHAEL GORSAGE 240.482.3600 (office) | 301.466.7080 (cell)[email protected]

KATE HOWARTH 240.482.3601 (office) | 202.423.5747 (cell)[email protected]

H&R RETAIL www.hrretail.com7201 Wisconsin Avenue, Suite 600 | Bethesda, MD 20814 | 301.656.3030

SHADY GROVE CENTERGAITHERSBURG, MD

SIZE 106,924 SF

TENANTS 7-11, Melting Pot

WESTRIDGE SQUAREFREDERICK, MD

SIZE 252,733 SF

TENANTS HMart, Burlington Coat Factory

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