UPDATED: JANUARY 6, 2016 2:58 PM — Beachwood, Ohio-based DDR Corp. paid more than $100 million within the past two weeks to buy two major retail centers near the Mall at Millenia, giving it three new assets in Orlando's tourism corridor this year, a submarket the company's president and CEO said Thursday will benefit from the continued evolution of retail.
"We've really targeted that (Mall at Millenia) submarket as one we think will be one of the most meaningful submarkets for growth in the next decade," David J. Oakes told GrowthSpotter on Thursday. "Investment decisions for us are submarket driven, and there are places in Orlando like Millenia that we'd absolutely be open to have more of, if the price were attractive."
Of the two Millenia-area acquisitions DDR made just before the holidays, $35.6 million was paid on Dec. 22 to buy two contiguous parcels totaling 11.15 acres that make up Millenia Crossing, which lies at the corner of Eastgate Drive and Conroy Road, just north of Ikea and east of the Mall at Millenia.
Built in 2009, Millenia Crossing features 100,385 square feet of retail property that was fully leased at time of sale. Tenants include Destination Maternity, Ulta Beauty, Yankee Candle, Nordstrom Rack, Z Gallerie, Party City, Casual Male XL and The Vitamin Shoppe.
As part of the deal, DDR took over an existing loan from JP Morgan Chase from December 2012 with just over $23 million remaining owed, taken out by previous owner Prologis Inc., a Maryland-based multinational REIT.
"Prologis is one of the largest owners of industrial assets in the world, but they had acquired a portfolio of industrial assets that also came with some retail, which wasn't a natural fit for them," Oakes said. "Our partners approached them about that, and it was a very easy negotiation."
DDR also bought the Millenia Plaza center on Millenia Plaza Way for $58.1 million, a 411,534-square-foot plaza that includes BJ's Wholesale Club, Ross, Dick's Sporting Goods, Toys 'R Us and The Home Depot.
Deed documents for this sale were only posted by Orange County on Jan. 6. An additional $9 million of untaxed value was included to acquire lease hold interests for the Dick's Sporting Goods and Toys 'R Us tenants, bringing the total acquisition price for that asset to just over $67 million. The four parcels making up Millenia Plaza were bought from Sun Life Assurance Company of Canada.
These are the second and third retail center acquisitions in Orlando's tourism corridor for DDR this year. The company paid $33.25 million in late April for the International Drive Value Center (5295 I-Drive), where 191,885 square feet includes tenants like Bed Bath & Beyond, Ross and TJ Maxx.
"This makes three acquisitions in the past 12 months in that same submarket, which for us was focused on the incredible quality of the dirt," Oakes said. "The retailers there are incredibly important, as is their performance, but as the world of retail evolves, some locations are so incredibly well-positioned to benefit from the evolution of retail.
"We've identified that submarket of Orlando with an exceptional mall, exceptional outlet center, as hubs of retail growth," he continued. "We're making a case that there will be a bigger bifurcation of winners and losers going forward in retail, as (e-retail shopping) evolves. In some ways you have to be closer to the consumer" as delivery from store and pick up in-store become more important.
"It won't just be Class A and B, but true winners and losers in this market," Oakes said. "We think those locations we've bought will gain real market share."
DDR owns and manages 378 retail properties nationwide, representing 116 million square feet in the continental United States and Puerto Rico.
Twelve of those properties are in Greater Orlando. The company could be a seller of some of those assets in less desirable submarkets in the coming year, Oakes said.