Ramco-Gershenson Buys Clarion Partners’ Stake in 12 Shopping Centers

By Michael Ratliff, Senior Associate Editor

The Shops at Old Orchard – West Bloomfield, Mich.

A major retail purchase in Florida and Michigan is currently in the works. Ramco-Gershenson Properties Trust announced this week that they have entered into an agreement to buy out partner Clarion Partners’ 70 percent ownership interest in 12 of the 15 Florida and Michigan shopping centers they own and operate as Ramco/Lion Venture L.P. These assets (detailed below) were primarily acquired in 2004 and 2005.

The transaction is being funded with approximately $151.9 million in cash and the assumption of Clarion Partners’ pro-rated share of debt of approximately $104.9 million, making the total estimated acquisition cost $256.8 million. The deal is expected to close by the end of the second quarter.

A day after making the purchase public, Ramco-Gershenson announced an upsized public offering of seven million common shares at $15.55 per share with proceeds being directed at the 12-property purchase, though the offering is not conditioned on the completion of the acquisition.

The 12 shopping centers represent 2.2 million square feet and are all anchored by grocery and/or value-oriented retailers. Occupancy is strong, just over 93 percent, and the annualized base rent is approximately $14.51 per square foot. In 2012 the 12 centers generated $27 million in income, which equates to a 7.4 percent cap rate on the aggregate asset value of $366.8 million. Getting the centers to operate at this level took a little work, according to Dennis Gershenson, president & CEO of Ramco-Gershenson.

Cypress Point – Clearwater, Fla.

“A significant amount of the shopping centers saw some strong re-tenanting,” Gershenson told CPE. “There were a number of the assets that had both Circuit City and Linens ‘n Things in them, and we have replaced them all not just with other uses, but with viable destination oriented retailers.”

This tactic, combined with strong local demographics—all the Michigan properties are located in Oakland County, the tenth-highest income county in the United States with a population over one million—has led to particularly strong occupancy.

“Our Michigan assets in total, even in the worst of times, never fell below 92 percent, and at the present time we are at over 95 percent occupied in Michigan,” Gershenson said, adding that Florida assets are in the 92 to 93 percent range.

Things are looking up for retail over the next year on the macro level as well, according to data released by the U.S. Department of Commerce on Wednesday. February brick and mortar retail and food services sales were up 1.1 percent from January, and 4.6 percent above February 2012.

Just because Ramco-Gerhenson is buying out Clarion Partners in this portfolio doesn’t mean that the joint venture is through. The companies have confirmed a mutual desire to buy up to $350 million of additional shopping centers over the next several years, focusing on stable, high-quality assets in leading metro markets.

Hunter’s Square – Farmington Hills, Mich.

“I think that Clarion’s willingness not only to continue the venture with the three assets that are still jointly owned, but to buy back up to the total allocation at the get-go, speaks volumes about our relationship,” Gershenson said. “They are looking for very stable core assets as far as acquisitions are concerned, and we see their desire for those kinds of assets complimenting what we are looking for—properties where we can add value.”

The Florida shopping centers, which represent 58 percent of the acquisition, include:

• Mission Bay Plaza (Boca Raton), 263,721 square feet, anchored by The Fresh Market, Golfsmith, LA Fitness, OfficeMax, and Toys “R” Us.
• Marketplace of Delray (Delray Beach), 238,901 square feet, anchored by Ross Dress for Less, Winn-Dixie, and Office Depot.
• Cypress Point (Clearwater), 167,280 square feet, anchored by The Fresh Market, and Burlington Coat Factory.
• West Broward (Plantation), 152,973 square feet, anchored by DD’s Discounts (a division of Ross Dress for Less) and Save-A-Lot.
• Village Plaza (Lakeland), 146,755 square feet, anchored by Big Lots.
• Vista Plaza (Jensen Beach), 109,761 square feet, anchored by Bed, Bath & Beyond, Michaels, and Total Wine & More.
• Treasure Coast Commons (Jensen Beach), 92,979 square feet, anchored by Barnes & Noble, OfficeMax, and Sports Authority.
• Cocoa Commons (Cocoa), 90,116 square feet, anchored by Publix.

The Michigan shopping centers, which represent 42 percent of the acquisition include:

• Hunter’s Square (Farmington Hills), 354,323 square feet, anchored by Bed, Bath & Beyond, Buy Buy Baby, Loehmann’s, Michaels, Marshalls, and TJ Maxx.
• Winchester Center (Rochester Hills), 314,575 square feet, anchored by Bed, Bath and Beyond, Dick’s Sporting Goods, Marshalls, Michaels, and PetSmart.
• Troy Marketplace (Troy), 217,754 square feet, anchored by Nordstrom Rack, LA Fitness, Golfsmith, PetSmart, and Total Hockey.
• The Shops at Old Orchard (West Bloomfield), 96,994 square feet, anchored by Plum Market, an upscale grocer.