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We look at projects not for what they are, but for what they can be. The heart and soul of our organization is to enhance and maximize the value of each property under our control with persistence and uncompromising integrity.
This tired, 119,264 square foot grocery-anchored center in an infill blue-collar neighborhood was acquired in 2001 from an institution at a high cap rate because the anchor tenant, Fry’s Food & Drug, only had 1 ½ years remaining on their lease prior to the purchase. Through a relationship with Fry’s, it was determined that they wanted to remain at the site if certain improvements were made. Arizona Partners went to work to remodel the site and simultaneously work out a long-term lease extension with Fry’s whereby they would also remodel their store.
Several new retailers like Panda Express, GameStop, and Dollar Tree were brought to the site. Eventually, Fry’s wanted to add gas to the site, so additional terms were added to the Fry’s lease and Fry’s made a further investment in the center.
The 93,000 square foot, well-known specialty retail center was purchased in 2012 for $13,000,000 with a joint venture partner, AV Homes. The 30-year-old center was in an excellent location serving the upper-end market of Paradise Valley and Scottsdale, but suffered from high vacancy due to a dysfunctional design and obsolescence.
The purchase was made with a vision to convert the back half of the center – the obsolete portion – into multifamily. Arizona Partners began negotiating with the 50,000 square feet of existing tenancy to relocate them, or to buy them out of their leases, and the partnership put a very qualified team together to begin its rezoning process.
Within 12 months, Arizona Partners had reached agreement with all of the tenants to leave, and the rezoning was approved to allow for 240 high-end units and to allow the front half to operate as a separate commercial parcel. With the rezoning complete, the partnership split the project into two parcels with AV Homes taking the multifamily portion and Arizona Partners taking the front commercial portion, which was comprised of two highly coveted restaurant buildings.
Arizona Partners then made improvements to the commercial portion to add parking, enhance the fascia and add square footage. In addition, we replaced one of the restaurant tenants with a nationally recognized restaurant operator and increased the rent on that building significantly. Upon completion, Arizona Partners refinanced the center, thereby pulling out all of the equity and creating a good long-term cash flow.
This 277,000sf Neighborhood grocery/theater anchored center was purchased in October 2011 for $50,320,000. Although the center was in an excellent location it had been operated by the family that built it in the late ’70s who were not sophisticated in shopping center operations or management.
Since the purchase, AZP has improved the center in a number of areas thereby substantially increasing the NOI. We renegotiated with Safeway to add 20 years to the current lease, expand their store an additional 10,000sf, as well as give them the ability to add a gas pad. We removed an old vacant Restaurant/Bar and have added a McDonald’s drive-thru pad. Also, we renegotiated the theater lease to add 12 years to the lease term and increase the rent by 40%
A new color scheme and updated sign package were used to update the center and give it a fresh new look. Several non-credit tenants have been replaced with credit tenants such as Hallmark, Jimmy John’s, GNC, Sports Clips, and Jason Deli. Many restaurants in the center near the theater have above average per square foot sales which we wanted to capitalize on, so by creating a restaurant district and adding additional patio space and other restaurants we have seen an even bigger increase in their sales and traffic to the center. AZP has had a 90% success rate in the renewal of leases at the center at or above the current leasing rates. This Neighborhood Market / Entertainment Center will be sold in the spring of 2014 at a leveraged IRR of 25%
Surprise Marketplace a 186,000sf multi-tenant entertainment center was purchased in May 2011 as a note from the lender and subsequently was foreclosed by Karlin Real estate group. It was a product of the great recession
When the center was purchased it had many challenges, including a seriously delinquent movie theater and a 50% completed bowling alley that was being built on spec by the original developer. It was approximately 70% vacant with many suites that were not built out.
AZP was able to negotiate a reinstatement of the Ultra Star theater lease, to bring the tenant current and extend their lease. Thru a national marketing effort, we were able to find an operator out of the east coast to purchase the 60,000sf Bowling Alley, Uptown Alley, who finished the build-out of the space and whose success has exceeded their projections. We also brought in several national and regional tenants including Beef O’Brady’s sports bar, Cold Stone Creamery, State Farm, and Rocket Fizz.
Through the restructuring of existing tenants and the lease-up of the center in 2012, only one year’s time, Karlin was able to sell the center for a $7 million dollar profit yielding a leveraged IRR of 37.3%
North Main Plaza, formerly known as Butterfield Stage Square, was acquired by AZP in 2000 for $10,500,000. At purchase, it was a tired, run-down 220,000 square foot shopping center built in the late 1960s. Anchored by Mervyn’s, the center was located in a redevelopment zone in an area that was a major focus to the City of Corona, California.
AZP negotiated an incremental sales and property tax agreement with the City and began work on redevelopment plans and re-tenanting. The center was given a completely modernized look with new facias, parking lot, signage, and tenancies and reopened in 2003. A healthy mix of apparel and restaurant tenants, as well as national tenants like Walgreens, Ross, the Avenue, Sally Beauty, and Jack in the Box, were brought to the site which significantly increased traffic and gross sale tax revenue. The final results were a healthy, functional center that coincided with the City’s redevelopment of the streetscape. At the end of 2004, the center was refinanced returning all equity invested plus an above-average 30% return on equity invested for AZP and its partnership while retaining ownership of the center.
CONCLUSION
For the past 15 years, Arizona Partners has specialized in the redevelopment of retail projects throughout California and the Southwest. Our experienced hands-on approach has allowed us to significantly enhance the assets we’ve chosen thereby creating an above-average return to our partners and ourselves.
As we head into uncertain times for the retail industry, AZP is excited about the plethora of opportunities that will be created. The problems are plenty and for those who can create the solutions and the yields will be high. Risk and opportunity are opposite sides of the same coin but as Warren Buffet so often says, risk comes from not knowing what you’re doing. By investing with an experienced firm like AZP, you can limit your risk and increase your opportunity. Let’s talk about how we can structure a JV partnership that works for you.
Pure Fitness was a 70,000 sq. ft. retail center in a great location on 8.5 acres in Tempe, AZ. The Note was in foreclosure and up for auction on Auction.com. AZP acquired the Note in the summer of 2011 for approximately $4 million and immediately commenced to complete the foreclosure.
Plan A for the project was to empty out the center and sell it as multifamily land. Plan B would have been to renovate and re-tenant. After the foreclosure, Plan A was chosen. AZP went to work to empty out the center of its approximately 10 tenants and began marketing the land to several apartment developers. One of the tenants was a credit tenant with a long-term lease who had vacated the property. AZP was able to negotiate a buyout whereby the tenant paid $1.5 million to terminate the lease. The land was placed in escrow with a high-profile apartment developer within 3 months of Note purchase, subject to zoning, for $8.5 million. The zoning was achieved and AZP closed on the land sale 367 days after its foreclosure of the Note. (It was set up that way to qualify…)
A 79,000 SF retail property conveniently located a mile off the AZ-101 and US-60 freeways, Plaza de Fiesta was built in the 1960’s and was left mostly neglected for the next 50 years. Purchased from the original owner with over 70% vacancy, Arizona Partners undertook a major renovation of the property to refresh and re-tenant. Angry Crab Shack, a now franchised concept, was expanded and signed to a long-term lease. A huge investment was made to split the former indoor amusement park anchor space, and to sign Eduardo’s Banquet Hall and eventually Dollar Tree to get up to 80% occupancy. Plaza de Fiesta is positioned well for the long-term with a strong mix of local retailers, restaurants, and franchise concepts.
160,000+ SF Gratiot Crossing center in Chesterfield, Michigan was Arizona Partner’s first venture in the Midwest. Purchased out of a foreclosure sale in 2014, Gratiot Crossing was sitting with a vacant K-Mart and Jo-Ann and over 70% of vacancy. Significant capital investments were made to split the vacant K-Mart and attract Hobby Lobby and Big Lots. Planet Fitness was recruited to take over the former K-Mart. Gratiot Crossing is all the way up to 95% occupancy with a mix of national and local restaurants and retailers and generates substantial customer foot traffic all days of the week.
Dobson Ranch Center was another addition to Arizona Partners presence in Mesa and was purchased using funds from the sale of the Taco Bell PAD building at Plaza de Fiesta down the street. The center consists of 16,000 SF of shop space connected to a separately owned Albertson’s at the SEC of Dobson and Baseline off the AZ-101 freeway. The center slowly faded after its construction in 2001 and got down to 40% occupancy, along with widespread deferred maintenance. After major capital expenditures and tenant improvements, Arizona Partners signed Vantage West Credit Union, AT&T, along with a few other regional and local concepts to reach 100% occupancy in the span of a few years.
Arizona Partners’ latest redevelopment to be completed before the end of 2021, Encanto Village is a 19,000 SF retail center that was one of the first strip centers built in midtown Phoenix in the 1960’s. Arizona Partners has dedicated significant capital to modernize and improve the functionality of all aspects of the property. Encanto Village was over 60% vacant when Arizona Partners purchased it off-market months before the global pandemic. Despite many challenges, the leasing team is on track to have the reinvigorated center 100% leased by 2022 and once again be a destination spot for surrounding neighborhoods.
132,000 SF across from ASU West Campus and along the I-17 corridor, Deer Valley Center was purchased by Arizona Partners at the end of 2019 in an off-market deal. Outdated and in need of new tenants, Deer Valley Center required a complete overhaul to bring life back to the intersection. Over the course of 12 months and substantial capital investment, the center has been transformed with a new, modern aesthetic and a whole new tenant roster. Led by the brand-new, state-of-the-art Sprouts Farmers Market, the center has been filling up with new restaurant and retail concepts, including a newly constructed Habit Burger drive-thru PAD. Deer Valley is well-positioned to be a thriving neighborhood center for years to come.
Purchased through an auction sale in 2016, 2nd St Hub was a unique and promising opportunity for Arizona Partners to bring a new attraction to the heart of Old Town Scottsdale. The site consisted of a 6,500 SF shell building, connected to an undeveloped lot at the SWC of 2nd St and Scottsdale Rd. After years of planning, Arizona Partners began a complete renovation to modernize the shell building and connect it to the new, ground-up restaurant building constructed on the former dirt lot. 2nd St. Hub is now home to 4 local restaurant concepts and a franchised gym operator and has contributed to the amazing synergy of Old Town Scottsdale, a premier destination for shopping, eating, art, and nightlife.