Amid a global pandemic that has shaken the brick-and-mortar retail industry even more, a Baltimore buyer is betting $34 million on the success of a key property across from Oakland Mall in Troy.
Continental Realty Corp., a private equity fund, has purchased Oakland Center and Oakland Square at 14 Mile and John R roads totaling some 392,000 square feet. Tenants in the 87 percent leased shopping center include TJ Maxx, HomeGoods, Kohl’s, Bed Bath & Beyond, DSW, Michaels, and Planet Fitness, according to a press release.
“We were attracted by the opportunity to acquire two high-quality assets below replacement cost in a dense in-fill location.” Josh Dinstein, senior vice president for acquisitions for for Continental Realty, said. “The greater Detroit metropolitan region offers compelling fundamentals to ensure the long-term health of these assets. Favorable financing, a low vacancy rate across the Troy retail market, and the lack of new supply allow us to have confidence in the ability to deliver a strong risk-adjusted yield to our investors.”
According to CoStar Group Inc., a Washington, D.C.-based real estate information service, the Troy retail market — which encompasses both the southern portion of the city and the northern portion — have retail assets valued at about $1.3 billion, with roughly 8.6 million square feet. In the southern sector of the city, retail properties have a vacancy rate of 4.6 percent and lease rates of $30.33 per square foot per year, CoStar says, while in the northern portion of the city, vacancy rates are 4.8 percent and rents are $21.78 per square foot per year.
“The coronavirus’ impact on the market may lead to lasting structural changes within the retail sector,” CoStar says in its market report. “E-commerce has flourished, and spending and shopping habits may be permanently altered, particularly as brick-and-mortar retailers may be unable to adapt to the changing environment.”
That’s strong compared with the metro Detroit region as a whole.
Marcus & Millichap Real Estate Advisors Inc., in a 2021 retail outlook report, said the region’s retail vacancy is expected to fall to 6 percent from 6.5 percent and that rents are ticking upward, with a 1 percent increase to $14.50 per square foot.
Oakland Plaza has three buildings totaling 171,500 square feet and is 71 percent leased, while Oakland Square also has three buildings totaling about 220,200 square feet and is 100 percent leased.
The sale marks Conteninental Realty’s first foray into the Detroit area retail market, although the company says it has spent more than $140 million on shopping centers, with more than 760,000 square feet acquired since the start of the COVID-19 pandemic.
The Chicago headquarters office of brokerage house JLL represented the seller, Boca Raton, Fla.-based Urban Retail Properties LLC.
“We are continuing to see strong demand for well-located, stabilized shopping centers situated outside of primary markets,” Amy Sands, a JLL broker who worked on the deal, said in a statement. “Investors continue to migrate into the Midwest in search of yield and product driving pricing to levels higher than pre-COVID.”
A spokesperson for Continental Realty said the company didn’t have a brokerage firm on the deal. The spokesperson also said the company is in the process of determining who will manage and lease the property.