COLUMBUS, IN—Retail Properties of America Inc. just decided to sell its 175,934-square-foot Clifty Crossing Shopping Center in Columbus, IN to American Realty Capital Properties Inc. This transaction was completed after a marketing effort that caught the interest of many potential buyers, perhaps a sign that with all the capital searching for deals, investors are now willing to look beyond core and even secondary markets and check out product in the nation's smaller towns.
“We conducted a national sales effort, and the well-leased power center attracted many competitive offers from investors throughout the country, not just from the Midwest,” Janice Sellis, capital markets director at Transwestern, tells GlobeSt.com. Sellis and Transwestern's Paul Barile, capital markets director, represented Retail Properties of America in the transaction.
The property sold for an undisclosed price. Sellis did say that the cap rate was in the mid-sevens. “That's a pretty low cap rate for a small town.”
“There was a lot more interest from investors than you normally see in smaller towns,” she adds, but it was partly due to Columbus' underlying economic strengths. It is about 40 miles south of Indianapolis and has a population of roughly 45,000. But Cummins, Inc., a Fortune 500 company that manufactures engines, has its international headquarters here, and employs about 7,000 people locally, making Columbus more affluent than most towns of similar size.
Still, “it was a surprise how much interest there was,” she says. But there is not enough product on the market to soak up all the demand from buyers and retail centers in the core areas are getting bid up, outside the reach of many investors, many of whom are now willing to look beyond well-known cities. In the past, the cap rate premium you could expect in a small town would not be enough to entice the average investor.
The strength of this particular property may also have had an impact. The power center, which was developed in 1986 and renovated in 2004, is leased to a host of credit tenants. Hobby Lobby, Best Buy, Bed Bath & Beyond, Party City and Petco anchor the center. And the other tenants consist primarily of national retailers such as Chili's, Verizon and Sally Beauty Supply.
This put the property well within the wheelhouse of American Realty Capital Properties Inc., Sellis adds. The company specializes in the purchase of power centers and tends to focus its attention on the quality of a particular property and its tenant lineup. Therefore, “they are not a stranger to buying in smaller towns.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
