Ramco-Gershenson Strikes It Rich in Retail

The retail REIT knows how to work around the competition.
Dennis Gershenson

Dennis Gershenson

Ramco-Gershenson Properties Trust knows how to work around the competition. Instead of turning to the open market, the retail REIT will add a 1.4 million-square-foot group of shopping centers to its holdings with the planned acquisition of its partner’s approximately 80 percent ownership interest in seven properties. The price tag: $185.9 million.

It’s a high-quality collection, with each center featuring a grocery retailer on the roster and most of them offering value-add opportunities through development and re-leasing. The assets include the 163,000-square-foot Market Plaza and the 134,000-square-foot Rolling Meadows in metropolitan Chicago, as well as the 253,200-square-foot Olentangy Plaza and the 169,000-square-foot The Shops on Lane Avenue in metro Columbus. Competing in the group are the 154,700-square-foot Peachtree Hill in the Atlanta area; the 252,200-square-foot Crofton Centre near Baltimore; and Millennium Park, a 272,600-square foot retail destination in suburban Detroit. Combined, the shopping centers boast an average lease level of 95.3 percent.

They’re the kind of properties that investors are eager to grab in the current climate but Ramco-Gershenson didn’t have to face a bidding war, as partnership has its privileges. “The acquisition of our partners’ interests affords us the opportunity, in a very competitive acquisition environment, to judiciously invest capital in high-quality shopping centers at an attractive initial return,” Dennis Gershenson, president & CEO of Ramco-Gershenson, said in a prepared statement.

The cost of the portfolio includes the assumption of $48.1 million of existing debt. To finance the acquisition, Ramco-Gershenson will rely on a recent private placement of 10-year unsecured debt and $88 million in borrowings under its line of credit, which the REIT will pay down with the disposition of its 20 percent stake: the 255,000-square-foot Plaza at Delray in Delray Beach, Fla., and other sales involving $60 – $75 million of non-core assets.

Beyond the advantages that joint-venture ownership presents, the REIT is also keeping an eye on marketed opportunities–and the shopping center investment community.  “I think that the private money is the most aggressive bidder for these [high-quality] assets, but you have to appreciate that when we’re looking at an asset that may have a little bit of hair on it, which means that it has some work to occur, then the field narrows significantly and the institutional buyers and the private buyers have a lot less interest at reasonably aggressive cap rates.”

Ramco-Gershenson’s acquisitions from non-partners during the last 12 months include the 810,000-square-foot Front Range Village in Fort Collins, Colo., picked up for $128.3 million, and Buttermilk Towne Center, a 278,000-square-foot property purchased for $42 million. Indeed, the REIT has been racking up the square footage. Ramco-Gershenson also acquired two shopping centers totaling nearly 1 million square feet in Minneapolis-St. Paul and Cincinnati at a cost of $150 million last summer.

The REIT expects to close on six of the joint-venture properties on or before July 15, and the remaining asset by Aug. 31.