With the retail industry still in crisis, local retailers continue to be rocked by challenges such as market volatility and changing consumer habits.
Unlike big chains like Macy’s or Walmart, mom-and-pop stores can’t handle the slow sales growth and faltering margins that have plagued the industry. According to an SBAF survey of small businesses published in March 2022, 60% of small business owners consider inflation to be the main challenge they face.
However, some local malls continue to thrive as there is an audience for in-person shopping despite the shift to e-commerce. According to a US Census Bureau report, retail and food sales increased 10.6% in August 2022 compared to July 2021. Consumers are ready to shop and make up for lost time due to the pandemic.
Natalie Kotlyar, a retail trendsetter for consultancy BDO, thinks there’s a lot of emotional shopping going on. “It’s the need to buy something that will make them uplifting, that will make them feel better,” she said.
As business loan approval rates have slowed due to the pandemic, small and medium-sized businesses have found real estate financiers willing to finance new business developments.
Broadmark Realty Capital, a nationwide commercial real estate lender investing across the capital stack, focuses on a broad range of asset classes, including large-scale residential and urban infill projects. Although it has a diversified portfolio, more than 50% of its investments are in housing. Nonetheless, retail is a priority for Broadmark.
One of the projects he helped fund is the $57.2 million acquisition of Town and Country Square, a 16-acre shopping center in Issaquah, Washington, an affluent suburb of Seattle. . Broadmark provided a $10 million mezzanine loan – behind a $33.5 million senior loan – and was able to close the deal in just 10 days.
“Broadmark has the competitive advantage of being an internally managed REIT, which allows us to be flexible and responsive without relying on secondary capital markets,” said Broadmark loan originator Thatcher Milholland. “Thanks to our clear and proactive process, our clients are able to quickly seize opportunities through our dedicated underwriting, asset management, investment committee and draw administration teams.”
Town and Country Square is close to a new Costco headquarters on Interstate 90, making it an ideal location for redevelopment.
The fully leased property already has a mix of tenants, including Hobby Lobby, 425 Fitness and Rite Aid. The local group that developed the original property in the 1980s was able to close the deal with the help of Dino Christophilis and Daniel Tibeau of CBRE’s National Retail Partners Group in the Pacific Northwest.
“Town and Country Square is a classic example of the long-term potential of shopping malls,” CBRE senior vice president Christophilis said in a statement. “While the property is fully stabilized today with long-term tenants and 100% occupancy, the highest and best obvious use of the property is mixed-use redevelopment.”
Christophilis said the development could support over 1,000 apartments as well as commercial uses. The Town and Country Square downtown redevelopment is part of Central Issaquah’s plan to bring more walkable and affordable spaces to the area to encourage economic development.
Broadmark not only uses its talents locally, but extends them to the self-storage industry – another sector of interest – in other parts of the United States such as Georgia and Tennessee.
According to StorageCafe, the self-storage industry will grow to over 1.6 billion square feet in 2022. Additionally, over the past five years, 258.9 million square feet of storage space has been built, equivalent to 16.1% of the country’s total inventory.
StorageCafe also reports that a third of Americans use a self-service storage facility. The average person moving to a new home or going to college needs the extra space, while retailers need it to secure documents, inventory and office equipment.
Broadmark is providing a nearly $25 million loan to help guarantors acquire The FreeUp Storage Space and its Tennessee portfolio, which consists of eight properties representing 370,000 square feet of rental space. This includes 2,709 air-conditioned and non-air-conditioned storage units.
Additionally, the portfolio includes 12,000 square feet of office and retail space, 268 parking spaces and a billboard. The portfolio as a whole posted an occupancy rate of 95.6% and a net operating income of $2 million. Broadmark describes the acquisition as a value-added portfolio with scale and major upside through site expansion, rate increases, revenue management implementation and increased management efficiency.
Broadmark Senior Vice President Jordan Siao said Broadmark will continue to provide smart, reliable and fast financing solutions across the real estate spectrum in the form of senior fixed rate, variable rate, bridge, mezzanine and other types of loans.
“In a market that fluctuates daily, our clients partner with Broadmark for our agility, enabling them to act quickly and capture opportunistic investments,” Siao said.
This article was produced in collaboration between Studio B and Broadmark Realty Capital. Bisnow press staff were not involved in the production of this content.
Studio B is Bisnow’s in-house creative and content studio. To learn more about how Studio B can help your team, contact [email protected]