The $100 Million Blockbuster

Topics: DLC Management, blockbuster deal, new acquisitions

Transcript:

Chris Ressa 0:00
This is Retail Retold, the story of how that store ended up in your neighborhood. I’m your host, Chris Ressa, and I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC Management.

Welcome to retail retold everyone. I’m your host, Chris Ressa. Today is November 29. It’s a Wednesday. It’s the Wednesday following Thanksgiving week. We’re excited for you to be here today.

Ressa 0:32
No guests today. Just talking some retail real estate in particular. I want to talk about DLCs recent acquisition and give some context around that.

Ressa 0:44
Because I wish it weren’t, but it’s unique in today’s day and age. Before that, let’s talk about Thanksgiving a bit. Seems to be to me that it was a pretty good holiday. Shopping all around. So you know, online was up but brick and mortar traffic seems to be up, and we’ve to get rid of this narrative online versus brick and mortar. I think it’s waning, because they’re symbiotic. Right? You know, I think Adam, CEO DLC, said it best, which is, “can’t make money in clicks without the bricks”. I love that line.

It’s so true. And there’s a good article I just posted on my LinkedIn, everyone should go read it. It’s a, a colleague at DLC, David Orbitz sent it to me. It’s about Fiore, which is an athleisure brand. I’m literally wearing Fiore pants right now. And it’s how they did things a little differently than other DTC companies. The DTC, let’s call it, you know, playbook, at the time was, we go acquire customers at any cost. One day, we’ll get big enough where we’ll get to the other side, the other side being profit.

And in a lot of cases, it never came because the costs keep rising. And they just couldn’t catch up to get to profit. Fiore took a different approach. And now they’re on the frontier of opening stores as a mode to grow brand following and profit. Because as we know, there is a really time tested true way to profit from selling goods. And that’s within the four walls of a brick and mortar physical store. So holiday sales are good. I think if this was any other year, we’d be saying they’re great.

But given inflation and the comps of the last few years, I think it’s, you know, challenging to be great. But I’ll take good. And I think this holiday season is going to go into the good side. Now, I hope everyone had a great Thanksgiving. I think mine was pretty good. If you’ve listened before, you know that I love to host in the winter holidays. If you haven’t listened, yes, I love to host, I have a six and a five year old and I started this hosting bit about oh, I don’t know, five years ago, and it’s great.

So why, right? Because we were doing that, you know, both sides of my family at the time. Mine and my wife’s work in some part of New Jersey. And we were going to both places. And I just said, enough. You want to see the grandkids, your only grandkids? You have to come to me. And it’s great. I don’t have to leave my house on the holidays. It’s fantastic. Or some work that goes in the show, it’s smaller than years past, 10 people, fantastic, food was good. Good food, good drink, good football.

Great holiday. All right. Hope yours was great as well. We’re gonna get ready for a really strong holiday season. Okay, so DLC recently announced that we acquired a blockbuster $100 million acquisition for open air shopping centers. Columbus, Ohio. Aurora, Colorado, Denver, Prescott, Arizona, and soon New Jersey, which is the Philly MSA, very excited about this, obviously a $100 million deal in the climate and the economic climate today with the capital markets, not easy to get done for different lenders.

And it was not easy, it took a long time. Obviously it’s been going on for a while and rates continually moving to tie up $100 million off market portfolio for different lenders and to close in this environment, what should be very accretive returns, super excited. This deal brings us to two new markets in Denver and Prescott, Arizona.

We just hired some brokers out there to, to the subspace. So if you’re looking for space in Aurora or Prescott, Arizona have your retailer or your tenant broker and you have tenants look into those markets. Reach out to me, I’ll put you in touch with our brokers.

Yeah, so two states, and in Prescott, it’s our first Trader Joe’s. So when you are a Trader Joe’s landlord, I’m excited about that. And then one of the properties I’m really excited about is the Columbus property, which was a vacant grocery store. And we had been pre-leasing it, using our relationships with retailers, it’s a redevelopment of a box.

And you know that pre-leasing, had signed LOI’s and before closing really enabled us to have savvy underwriting and to, you know, and talking to the lenders helped with the lenders, and really important in those deals should be done national credit worthy tenants, the market and Columbus, you know, Powell Center is on fire development happening, people moving there, it’s exciting, really great asset.

We partnered with DRA on this deal. And, you know, in the press release, they recorded, they’re super excited about our, you know, this national joint venture. And so I, this is, you know, it’s exciting to go to new markets to buy in different markets, it’s exciting to get some new types of portfolio sites, have new properties to work on. So there’s some excitement, it’s our fifth acquisition of the year, we bought a deal in Bridgeport, Connecticut earlier in the spring.

And that deal is going exceedingly well. You know, that deal was priced at a discount because of the same short term on the grocer. We’ve already extended that grocer for 12 more years. And that grocer does exceedingly well, so the property is stable. And, you know, I think we got it at a discount in Fairfield County, Connecticut.

So overall, given the markets, five acquisitions this year, you know, two different transactions, but pretty exciting stuff, given the nature of capital markets, you know, that doesn’t include some of the refinancing’s, and we did have some dispositions that we got done in this market.

I give a big kudos to our capital markets team, really great job, and big kudos to our leasing team to be able to get these leasing transactions to a point where they got everyone really super comfortable with the underwriting to buy these deals. And in today’s environment, when you can’t predict capital rates, you can’t predict interest rates, your biggest mitigation is driving NOI leasing the space drive rents.

And I think, you know, if you can do that early, it helps get your wings under to keep moving on the deal. Because when we fall behind the deal, it’s tough to catch up, when you get ahead, it’s hard to fall behind. And so, that’s the beauty of, you know, the pre leasing, before the owning, leasing before the meeting, talking those tenants, building those relationships.

Ressa 8:43
Yeah, so I think, you know, and we also add, one of the things I didn’t mention, we added a ton of the existing tenants that we have in our portfolio to our portfolio, you know, there’s Marshalls, Home Goods, Michaels, Staples, Ross, Five Below, Ulta, Sierra, they all add up, it’s our first Nike in our portfolio. So it’s our first Trader Joe’s in Aurora, we got Nike. So like, this is exciting stuff, I’m pretty pumped to have some real new tenants to build relationships with in the portfolio.

So I think it’s a real big kudos to the team here to be able, capital markets, and procuring the debt, the leasing, pre-leasing, setting up our new brokerage relationships out on the west where we have known before us being able to buy off market, so kudos to the acquisition team. Really good stuff, and obviously it’s a deal of size, not many $100 million deals, I can’t wait until at some point when a $100 million deal in the open air retail space is nothing big.

And it’s not something, it needs to be talked about because it’s so frequent, but today it is and so I’m excited to talk about it. If you’re curious about some more details on this, reach out to me. Everyone knows my email, LinkedIn, it’s pretty visible. Happy to chat about it. So anyway, that’s all I got. I wanted to let everyone know. Thanks. That’s some insights on the deal. And, you know, hopefully I’m talking to you about it sometime soon.

Ressa 10:27
Thank you for listening to Retail Retold. If you want to share a story about a retail real estate deal that you were a part of on our show, please reach out to us at retailretold@dlcmgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney Also don’t forget to subscribe to Retail Retold so you don’t miss out on next Thursday’s episode.