David J. Donnellan ()
Dealmakers:David J. Donnellan
The Deal: Donnellan closed two multimillion-dollar deals for Class B and C retail centers in affluent submarkets known for prime retail, securing $10 million for the Shoppes of Weston and $10.55 million for the Marketplace at Tamarac.
Details: Two straightforward listings turned into a complex assignment as investors saw the properties’ strengths as weaknesses and left the broker to figure out how to sell older properties in markets known for Class A retail.
Two fully occupied shopping centers with tenants paying top dollar should have been a major selling point. It should have been easy to sell potential investors on the zero vacancies at the 20,950-square-foot Shoppes of Weston, for example, and its mix of regional and local tenants, like a La Granja restaurant and Pill Box Pharmacies & Medical Supplies.
But that wasn’t the case as Donnellan led the disposition of the plazas for separate sellers willing to hold onto the properties if they couldn’t secure premiums for their high-performing assets.
Investors were interested, but instead of potential buyers valuing the plazas’ stability, they looked at the lack of potential for immediately generating higher income. In Tamarac, solid tenants like Floors Direct Inc., Tamarac Preschool Academy and Sherwin-Williams Co. had leased all 67,202 square feet of the retail center at 6801-6997 W. Commercial Blvd. For potential buyers, full occupancy meant there was no room to improve vacant spaces and increase rents, or to market vacant space to high-caliber tenants.
“Most investors for this quality of retail product are generally looking for value-added propositions,” said Donnellan, first vice president in CBRE Inc.’s Fort Lauderdale office. “But both shopping centers were fully leased at top market rents, so the perception was that the opportunity to add value was not there.”
Plus, the Shoppes at Weston south of Corporate Lakes Boulevard sits behind a retention pond that separates the plaza from Weston Road.
“It didn’t offer the direct access and high visibility you typically look for in a shopping center,” Donnellan said.
CBRE marketers had to focus on other strengths and looked at the big picture.
“Weston in general is considered one of southeast Florida’s prime retail submarkets. It has limited vacancies, high barriers to entry, rents that have bounced back, affluent residents, strong demographics and limited competition,” Donnellan said. “A stabilized retail center in this submarket is a good long-term hold for a buyer in terms of the income stream.”
The pitch worked, even though the deal took longer than expected.
“Many times we can identify a buyer within 30 days of listing. This one took about four months. It wasn’t due to a lack of interest. It was that we were trying to meet a very aggressive price threshold set by the seller,” Donnellan said. The Shoppes of Weston’s owner “was holding out for a price, which quite honestly I thought was challenging to get to, but we got there.”
When the Weston plaza sold June 20, it was priced at $477 per square foot, an impressive price for a “17-year-old plaza in need of rehab,” marketers said. SVS Weston LLC paid $10 million to the sellers, 6767 Sunset Plaza LLC and Aloha Hawaii LLC, for the property at 1908-1952 Weston Road.
Six days later, CBRE arranged the sale of the Tamarac property, with Marketplace at Tamarac LLC paying $10.55 million to seller Joge Investments Inc., an affiliate of Tamarac-based Janoura Realty and Management Inc.
Background:Donnellan has sold retail investment properties with CBRE in South Florida for about 25 years. He’s worked more than $2.4 billion in retail investment-related transactions during his career with CBRE.