09/26/2012

Stake in Upscale Florida Retail Center for Sale

Oregon Public Employees is marketing its 50% controlling stake in an upscale shopping center in South Florida that is valued at roughly $300 million.

The offering encompasses 286,000 square feet at the 371,000-sf Waterside Shops at Pelican Bay, in Naples. The open-air center, including separately owned anchor space, is fully leased to upscale retailers.

The remaining 50% interest in the property is divided evenly between Forbes Co. of Southfield, Mich., and Taubman Centers of Bloomfield Hills, Mich. Taubman is viewed as a potential bidder for the pension fund’s stake.

Oregon Public Employees, which is advised by Clarion Partners, has given the listing to Eastdil Secured. The offering is likely to attract mall and other retail investors. At the stake’s estimated value of $150 million, the capitalization rate would be less than 5%. That reflects the property’s status as a “fortress” shopping center, which designates retail properties of the highest quality and with the strongest sales. While the retail sector has struggled since the downturn, luxury stores have bounced back better than most.

Waterside Shops at Pelican Bay was built in 1992. Forbes and Taubman acquired their stakes in 2003 and spearheaded a redevelopment that was completed in phases in 2006 and in 2008. An anchor store previously occupied by Jacobson’s was demolished, adding 73,000 sf of in-line space. Also, a Saks Fifth Avenue store was expanded, and Nordstrom’s was added as the second anchor.

The 207,000 sf of in-line space is leased to 51 retailers, including Apple, Gucci, Hermes, Louis Vuitton and Tiffany & Co. In-line sales average $800/sf, more than double the national average.

The redevelopment also added a three-level garage with 880 spaces and such high-end features as 30,000 tropical plants and flowering shrubs. Forbes, which develops, owns and operates luxury retail centers, manages the property.

The shopping center serves an affluent population, supplemented by tourists visiting Florida’s Gulf Coast beaches and nearby Marco Island. Some 85,000 people live within a five-mile radius. The average household income is $106,000, more than double the national average.

The property’s net operating income was $13.8 million last year, according to a loan-servicer report. The center has $165 million of mortgage debt that would remain in place, limiting the buyer’s cash outlay. The debt, which matures in 2016, encompasses a $120 million securitized mortgage with a 5.38% coupon and a $45 million B-note.

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