PacTrust Sells Retail Center to Phillips Edison

SPARKS, NV-Silver State Plaza, a 155,647-square-foot retail center formerly anchored by a Mervyn’s department store has been sold to Cincinnati-based Philips Edison & Co. by Pacific Realty Associates (PacTrust) of Portland, OR. The sale price was $14.7 million, according to Washoe County records.

The center is approximately 50% leased, including a 16,000-square-foot Fresh & Easy that is slated to open in early 2009. Other significant tenants include Big 5, which just renewed its lease, and Dollar Tree. The shop space is well leased. The availability is almost all anchor tenant space, most of it created by Mervyn’s.

Phillips Edison is acquiring Silver State Plaza with its fourth fund, which was capitalized earlier this year with $300 million in commitments. The company started raising the capital for the fund late last year after fully investing its third fund eighteen months ahead of schedule with its $603-million portfolio acquisition from Developers Diversified Realty and 22 other one-off purchases.

In addition to the fund equity, the company has a $208-million credit facility from a consortium of banks led by Bank of America, which is helping the company close deals in an otherwise tight credit market. The financing was used to fund the 65% debt component of the Silver State Plaza deal.

George Garvin, Phillips Edison’s Salt Lake City-based Western States acquisitions officer tells GlobeSt.com the credit line can be expanded to as much as $500 million. “We’re positioned financially to be a serious player,” he says.

As for what kind of deals the company is seeking, Garvin says Silver State Plaza is right in the company’s sweet spot. He describes the asset as “a grocery-anchored necessities-based neighborhood retail center that has a substantial value-add component in the form of lease-up of vacant space and construction of a freestanding pad building.”

When Phillips Edison put the property under contract in June, Garvin says Mervyn’s still had three years left on its 52,000-square-foot lease and he planned on them being there. During escrow, Mervyn’s declared bankruptcy and then opted to close all their stores immediately. Phillips Edison has since budgeted to demise the space “but can go either way” and is currently talking to a tenant that would take half the space, Garvin says.

In addition to the Mervyn’s space there is an 18,500-square-foot sub-anchor space available that used to be part of a larger block that housed a Safeway grocery store. The store, a smaller format than the company currently employs, was shuttered “two or three years ago,” Garvin says. Also available is a 3,000-square-foot restaurant pad. There are three other centers at the same intersection.

“This was an A center when it was built in the 1980s and ‘90s and its going to continue to be a strong neighborhood shopping center,” Garvin says. “Fresh & Easy Neighborhood Market’s entrance will keep it headed in that direction.”

Rather than speculatively finishing the available space Garvin says it will wait for tenant commitments and then tailor the space to their needs. The stabilization of the center could take as long as three years but “a lot of the heavy lifting will be done in the first year,” says Garvin.