Phillips Edison Paying CWCapital Near $40M for Hanover Mall In Newmark Exclusive
October 17, 2016 - By Joe Clements
HANOVER—An Ohio-based REIT already active in Massachusetts is growing its Bay State footprint with a purchase of the enduring Hanover Mall in a deal slated to be finalized this week, industry watchers are telling Real Reporter. The 732,000-sf regional shopping center on 105 acres at Exit 13 of Route 3 is a Newmark Capital Markets exclusive assignment conducted on behalf of seller CWCapital in a transaction expected to deliver nearly $40 million.
“They’ve got that,” one source acknowledges of pending buyer Phillips Edison, said to have outlasted a boisterous lineup of competitors enticed by in-place cash flow from an asset 85 percent occupied and anchored by “high-performing” tenants including Macys, Sears and Walmart. Other lures promoted by the brokers via informational materials are a series of capital improvements under CWC’s stewardship, plus the mall’s perceived upside leasing its fallow portion and from improving a pair of development pads.
The infill property at 1775 Washington St. (Route 53) went through a rocky stretch when saddled by an $87.5 million mortgage assumed in its May 2007 purchase for $99.3 million, an albatross which had that owner finally turn the keys back less than three years later, leading to CWCapital’s oversight of the asset. The February 2010 foreclosure deed was priced at $36.7 million, or $52.27 per sf compared to $141 per sf spent a decade ago next spring at the mall’s high-water mark value-wise. The Phillips Edison bid is pegged by market sources between $39 million and $40 million, which would mean a per-sf range between $55 and $57 per sf. “It has held up nicely,” one CRE retail expert says in praising the special servicer for ensuring Hanover Mall remained a viable operation during the turmoil, an aim assisted by “exceptional trade area demographics and traffic counts,” according to the informational materials.
Calls to Newmark Executive Managing Director and retail practice group founder Geoffrey Millerd were not returned by press deadline, but his group’s property brochure explains the single-level assemblage that dates to 1971 was modernized in 2004 while there has been subsequent expansion in the 2012 arrival of Dick’s Sporting Goods into a 59,000-sf stand-alone store and Buffalo Wild Wings going live on another outparcel earlier this season. Newmark further notes in pitching Hanover Mall that all outparcels are fully owned by the shopping center.
Millerd was joined by US Head of Investments Robert E. Griffin Jr. on a team advising CWCapital and procuring the buyer that included Senior Managing DIrector Thomas Dobrowski out of Newmark’s Gotham office and from the Boston office Managing Director Justin Smith, Director Katharine French, Associate Director Paul Penman and Senior Financial Analyst Matthew Waisnor.
The Hanover Mall land sites “are ideally primed for development,” but not necessarily only as a store, Newmark outlines. Whereas one parcel in front of the anchor space could accommodate 5,000 sf of retail, the second site totaling 1.6 acres next to a Patriots Cinema could be pitched as assisted living or another multifamily project. If that were pursued, it would mimic a trend among developers to incorporate other functions into a shopping environment, an offshoot of the Live Work Play mantra now popular in master-planning circles.
For Phillips Edison, the most immediate issue to address would seem to be the 61,875 sf of anchor space left empty when JCPenney departed. The revenue breakdown of Hanover Mall is 44 percent coming from in-line space, 43.6 percent from outparcel tenants and 12.4 percent provided by anchor tenants. Sears has the biggest block at 125,550 sf, Macy’s is in 101,675 sf and the Walmart’s unit comprises 84,250 sf. Other tenants featured are Office Max, Petco, Sleepy’s and Trader Joe’s.
Phillips Edison and the Newmark retail team are quite familiar with each other. The Cincinnati-based REIT that focuses on grocery anchored retail made its foray into Massachusetts in summer 2014 as the buyer of four shopping centers listed by the brokerage contingent that was then at Cushman & Wakefield. That purchase of 279,200 sf for $52.8 million was followed up this February when the REIT bought Carriagetown Marketplace in Amesbury from Invesco Real Estate Advisors for $22.6 million. The Newmark retail team that left C&W last September was agent for that deal as well. As of this past week, Phillips Edison had 151 properties totaling 16.3 million sf in 28 states.
