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August 02, 2017  

InvenTrust Rolls Out Shopping-Center Bundle

InvenTrust Properties is pitching a shopping-center portfolio as a way to take advantage of the relatively high capitalization rates in secondary markets, where investor demand is muted.

The package encompasses 11 properties totaling 3.2 million square feet, according to preliminary marketing materials. The estimated value is about $440 million. At that price, the capitalization rate would be 8.7%, based on $38.4 million of net operating income. The properties, in eight states across the South, Southeast and Midwest, are 93% occupied.

InvenTrust, a retail specialist formerly known as Inland American Real Estate, is shopping the properties via CBRE and HFF. The nontraded REIT, based in Downers Grove, Ill., prefers to sell the portfolio intact, although the buzz is that a couple of centers could be removed before the formal marketing campaign kicks off this week. It’s unclear if bids on individual centers would be considered.

At the anticipated price, a sale would be the second-largest so far this year in the retail sector, where deals are off to a slow start and portfolio transactions have been scarce (see article on Page 1).

The pitch is that a portfolio acquisition would allow a buyer to quickly scale up in strong secondary markets. The marketing campaign also acknowledges that investor interest outside primary markets has dropped off — and touts the chance to capitalize on that lack of competition and the resulting wide gap in cap rates. A buyer could later sell off centers opportunistically, when and where market conditions improve.

Some 72% of the aggregate space is occupied by anchor tenants, and nearly half of that by investment-grade retailers. Anchor tenants pay an average base rent of $10.81/sf. The remaining 28% of the space is filled by small-shop tenants at an average base rent of $20.61/sf.

Fifteen retailers account for 44% of the portfolio’s revenue, led by Best Buy (7.4%), Ross Dress for Less (6%) and Dick’s Sporting Goods (5.6%). Others include Bed Bath & Beyond, Kohl’s, Michaels, Old Navy and PetSmart.

The properties are:

Sherman Town Center (485,000 sf) at 3606 Town Center Street, Sherman, Texas. Built: 2002. Occupancy: 99%. Net operating income: $5.7 million.

Tulsa Hills (473,000 sf) at 7336 South Olympia Avenue, Tulsa, Okla. Built: 2011. Occupancy rate: 100%. Income: $6.3 million.

Hiram Pavilion (364,000 sf) at 5520 Jimmy Lee Smith Parkway, Hiram, Ga. Built: 2002. Occupancy: 94%. Income: $3.5 million.

Dothan Pavilion (327,000 sf) at 4601 Montgomery Highway, Dothan, Ala. Built: 2007. Occupancy: 87%. Income: $3.9 million.

Lakeport Commons (283,000 sf) at 5101 Sergeant Road, Sioux City, Iowa. Built: 2005. Occupancy: 96%. Income: $3.8 million.

Bryant Square Center (266,000 sf) at 308 South Bryan Avenue, Edmond, Okla. Built in phases: 1974-2017. Occupancy: 89%. Income: $3.1 million.

Rockwell Plaza (255,000 sf) at 8515 North Rockwell Avenue, Oklahoma City. Built in phases: 1972-2002. Occupancy: 77%. Income: $2.1 million.

Grafton Commons (239,000 sf) at 1050 North Port Washington Road, Grafton, Wis. Built 2009. Occupancy: 100%. Income: $3.3 million.

Promenade-Fultondale (209,000 sf) at 3453 Lowery Parkway, Fultondale, Ala. Built: 2008. Occupancy: 95%. Income: $2.2 million.

Siegen Plaza (156,000 sf) at 6700-6800 Siegen Lane, Baton Rouge, La. Built: 2001. Occupancy: 93%. Income: $2.3 million.

Parkway Centre North (143,000 sf) at 1656 Stringtown Road, Grove City, Ohio. Built: 2006. Occupancy: 99%. Income: $2.2 million.