A Birmingham-based commercial real estate firm recently paid $8 million for an unanchored shopping center in Altamonte Springs, and the company is looking for two or three similar purchases in the Greater Orlando area.
The firm, Shannon Waltchack LLC, bought the Village Shoppes at Altamonte shopping center at the corner of West State Road 436 and North Westimonte Drive on Jan. 25, according to a deed recorded four days later in Seminole County.
The seller was Pacific West Land, a real estate firm based in Bainbridge Island, Wash. Pacific West Land bought the center in May 2013 for $2.9 million.
Derek Waltchack, one of the founders of the Alabama firm, said Village Shoppes “checks all the boxes,” as far as the company’s current business strategy of buying unanchored shopping centers in densely populated, affluent and highly trafficked areas.
“We think tenants that are typical in these types of center are Amazon-resistant,” Waltchack said, referring to the on-line retail giant blamed for the demise of malls and department stores.
“Hair and nail salons, medical users, insurance offices, and lots of restaurants. Those are retail categories that, at least today, are ones Amazon hasn’t figured out how to take the place of,” he added.
The Altamonte strip center has also benefitted from nearby road improvements generated by the Florida Department of Transportation’s I-4 Ultimate Project.
“This shopping center is at the first light you come to when you get off I-4,” Waltchack said. “The way traffic patterns have changed, it’s made this corner incredibly important.”
Village Shoppes consists of 35,381 square feet of conditioned space sitting on 6.1 acres at 249 W. S.R. 436. The recently renovated center is fully leased. Businesses there include International Diamond Center, Skyra Performing Arts Center, Copacabana Cuban Café, Antica Pizzeria, Cookie Dough Bliss and Spa Touch Dentistry.
Construction started on the strip center in 1980, according to Seminole Property Appraiser records. But the property’s age doesn’t bother the folks at Shannon Waltchack. They like to buy shopping centers that are 10 years old or older.
Dereck Waltchack explained that owners of new centers must contend with high construction costs and often must provide tenant allowances to lure businesses there. Those factors can drive rents up.
“We’ve found that rents decline over the next five to 10 years after construction,” he said. “It takes time to find out where the true market is. We would rather buy a center that has already gone through that process because you’ve established the floor.”
The center is in good shape despite its age, Waltchack said, with “no deferred maintenance.”
Up until a year ago, Shannon Waltchack’s $220 million portfolio was mostly in Alabama. But company executives decided to change course and look for shopping centers in large metro areas around the Southeast. They raised $25 million in cash which they were able to leverage into a $75 million investment fund.
In October the company purchased a shopping center in Nashville, followed by the Altamonte Springs center in January. The company is looking for further purchases in the Orlando area as well as in Tampa and Jacksonville, Raleigh and Charlotte in North Carolina, Knoxville, Tenn., and Atlanta.
“I would say if we could buy another two or three shopping centers like this in Orlando, we’d be pleased,” Waltchack said.
Holliday Fenoglio Fowler L.P. (HFF) marketed the property on behalf of Pacific West Land. The HFF debt team, working on behalf of Shannon Waltchack, also placed an eight-year, non-recourse acquisition loan for $4.8 million with Continental Casualty Co., a subsidiary of CNA Financial Corp.
“The financing of Village Shoppes at Altamonte demonstrates that there remains a wide variety of debt alternatives available for well-occupied retail centers,” said Rebecca Vanreken, HFF managing director, in a written statement.
HFF recently announced the closing of three other Orlando-area retail centers, Marketplace at Seminole Towne Center, The Fountains at Bay Hill and International Drive Value Center in addition to the sale and financing of The Shoppes of Lake Mary last spring.