Colorado Real Estate Journal - December 7, 2016
Arnie Meranski has had a relationship with the Iliff Crossing Shopping Center in Aurora that dates back to the early 1990s. “I bought it three times and sold it once,” said Meranski, founder and head of Western Centers. Confusing? Not really. That is because in each transaction, the common denominator was Meranski himself. “The Iliff Crossing Shopping Center has always been one of my highest performing properties with a phenomenal location, great traffic, stable tenants and excellent financial performance,” Meranski said. The center at the northwest corner of Iliff Avenue and Buckley Road is 100 percent leased “for the first time in the past 30 years,” he added. The center was anchored by an Alberstons and a Walgreens when it opened in the early 1980s, he said. “I first purchased it from Boettcher Properties, which had different funds to own real estate when it was around, in 1992,” Meranski said. His partners in the deal were New York developer Jonathan Rose and Bruce Heitler. “We paid $3.1 million, I believe,” Meranski said. “Exactly a year later, to the day, we sold it to a Korean investor for $4.1 million, so we made $1 million. That was kind of cool,” Meranski said. The buyer asked Meranski’s Western Centers to continue to manage it, so he remained involved in the center, even though he no longer owned it. Then, tragedy struck the new owner. He lost a child in a Jet Ski accident and he moved back to Korea. “So I bought it back from him. I think I paid him $6 million.” Then, the original Walgreens pulled out, soon followed by Albertsons. “That is how the center kind of morphed into a discount-type of center,” he said. Tenants now include Advance Auto Parts, Angelo’s CD’s & More, Little Caesars, Wing Stop, Baskin-Robbins and Metro PCS. The most recent tenant, Lightshade Labs, is one of a few select retail marijuana stores permitted by the city of Aurora. The largest single tenant is Unique Thrift, which has 41,209 square feet, according to CoStar. “Unique Thrift is part of the Saver family of stores,” Meranski said. The center has a total of 103,126 sf, according to CoStar. When Meranski bought the center from the Korean investor, he did it through ASM Pearl LLC. In a recent transaction, he sold it again, this time for $6.58 million. However, Meranski himself stayed in the deal. In fact, Western Centers is one of the new owners. “When I purchased it from the Korean gentleman, I owned 100 percent of it myself,” Meranski said. “The new partnership that bought it includes about five very loyal family and friends. I still control 50 percent or 51 percent,” he said. “Really, we are recyclers,” bringing in new partners, rather than selling it outright to a third-party ownership group. He noted if he sold it outright, he would have needed to deploy the money elsewhere and given today’s high prices and low cap rates even for unanchored centers, it is difficult to find an investment than would be a better investment. The new ownership group is investing in the neighborhood of $1.5 million to $2 million in upgrades to Iliff Crossing. Improvements include a new parking lot, a substantial façade remodel and new signage. “We put about $1 million into the new parking lot,” Meranski said. “It is going to completely change the look and feel of the center,” he said. Western Centers is headquartered in Aurora and it owns a number of centers in the city, he said. “We have always been kind of an opportunistic and contrarian type of buyer,” Meranski said. “As you know, forever, Aurora was considered a second-class citizen by investors and lenders, but we liked, and continue to like, Aurora,” he said. “We have seven or eight assets in Aurora and we are one of the largest retail owners in the city,” he said. Western Centers has sold a number of centers, some of them outside of the core Denver metro area.
“We like to own a maximum of about 20 shopping centers, otherwise, you can’t achieve the right balance between work and play,” Meranski said. Western Centers has never lost money on any shopping center investment and Iliff Crossing is no exception. “I think our investors are already getting a 9 percent or 10 percent return,” Meranski said. “We’re holding this one for the long term.” Other News A private, California-based group has paid $12.7 million for real estate assets in Serenity Ridge, a 23,801-square-foot retail center at 25791 E. Smoky Hill Road in Aurora. Denver-based Evergreen Development sold the center to the unidentified group for $9.9 million. The buyer was represented by Matthew Henrichs and Brad Lyons of CBRE’s Real Estate Investment Services in Denver. Earlier, the same buyer, also represented by Henrichs and Lyons, paid $2.86 million for a 4,055-sf standalone Kneaders Bakery & Café in Serenity Ridge. “These Serenity Ridge Marketplace transactions are hallmark examples of what is driving the continued inflow of West Coast private capital to the Colorado retail market,” said Henrichs, a first vice president at CBRE. Sixty-five percent of the 82 deals Henrichs and Lyons have completed since 2011 have been with out-of-state investors. “Outside investors are on the hunt for high-quality assets that can offer a yield premium to coastal markets,” Henrichs said. “Brand-new, Class A retail developments like Serenity Ridge with its roster of long-term, triple-net leases and adjacent Kneaders Bakery & Café is just the type of investment to complement their portfolios,” he said. Built in 2015, Serenity Ridge is shadow-anchored by a 120,000-sf newly constructed King Soopers Marketplace. The inline retail center was 100 percent leased at the time of sale to a diverse mix of tenants, including Subway, Papa Murphy’s, Pacific Dental Services, Supercuts and Serenity Dry Cleaners. Kneaders Bakery & Café is adjacent to the center. Its master franchisee, Four Foods Group, operates 37 Kneaders Bakery & Cafes across Colorado, Utah and Arizona with plans to reach 57 restaurants by the end of 2017. Melcor E470 LLC recently purchased 42.23 acres of land at the southeast corner of E-470 and East Sixth Avenue in Aurora for future retail development. E470 & 6th Avenue Realty Partners LLC, an affiliate of Servicestar Capital Management, sold the property for $3.25 million. Melcor is in the entitlement process for development of an approximately 1,100-acre residential property close by and wanted land to be able to provide retail amenities to residents in the future, according to Rick Egitto of Avison Young, who represented the seller. Tom Swan of Amcal Southwest represented Melcor, a Canadian company that does business in the United States as Melcor Developments Arizona Inc. Melcor also owns several office properties in the Denver area, including the Offices at the Promenade, Inverness Office Plaza, Centennial Airport Plaza and Syracuse Hill I. Fuzzy’s Taco Shop, 5280 Burger Bar , and Finley’s Barber Shop have leased the entire 11,200-sf Bradburn Village Central retail center at 4301 S. Main St. in Continuum Partners’ mixed-use Bradburn Village in Westminster. The project recently broke ground and is expected to open next summer. Paragon Fitness USA LLC leased 2,403 sf of retail space for five years at 5894 S. Zang St., Units D and E in Littleton. Matt Kulbe and Heather Taylor of NavPoint Real Estate Group represented the landlord. Astro Tap House LLC leased 2,243 sf of retail space for five years at 3911 Ambrosia St., Building B-1 in Castle Rock. Ian Elfner, Matt Call and Heather Taylor of NavPoint Real Estate Group represented the landlord. Frese Brothers Coins & Collectibles LLP leased 1,704 sf at Broadway Square at 5501 S. Broadway in Littleton, announced Prime Management LLC, a commercial real estate leasing and management firm. Sprint leased 1,500 sf of retail space at 2045 Sheridan Blvd., Unit K, in Edgewater for five years. Ian Elfner of NavPoint Real Estate Group represented the tenant. Sprint leased 1,198 sf of retail space at Block 6B - Space D-130 in Castle Rock for five years. Ian Elfner of NavPoint Real Estate Group represented the tenant.