Prairie Hill Acquires Rillito Crossing Marketplace for $27,525,000
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Insights
The acquisition of Rillito Crossing Marketplace by Prairie Hill Holdings is a strategic move that capitalizes on the current market conditions within the commercial real estate sector. The sentiment in the industry has been bearish, largely due to macroeconomic factors and a shift towards e-commerce, leading to many investors retreating from the market. However, Prairie Hill's move suggests a contrarian approach, leveraging the low competition to secure a property with significant growth potential.
The 'daily needs' tenants, such as grocery stores and health & wellness services, are less susceptible to e-commerce disruption, providing a stable cash flow. The inclusion of undeveloped parcels presents additional value-add opportunities, which could attract national retailers and potentially increase the property's yield. This acquisition aligns with the broader industry trends where investors are seeking properties with a mix of stable tenants and development potential to hedge against market volatility.
From a financial perspective, the acquisition of a 96,424 sqft shopping center for $27.5 million reflects a strategic investment with an eye on long-term asset appreciation and rental income. Given the historically low vacancy rates and above-trend rental growth mentioned by the Chief Investment Officer, the investment could lead to robust returns. The potential for additional development enhances the asset's value proposition, allowing Prairie Hill to diversify its revenue streams and possibly capitalize on the growing demand for retail and quick-service restaurant spaces.
Furthermore, Prairie Hill's planned $50mn+ acquisition campaign signals confidence in the retail and industrial sectors, despite the overall negative sentiment. This aggressive expansion could position Prairie Hill favorably if the market sentiment shifts positively, but it also increases exposure to sector-specific risks.
The retail property market, particularly for 'daily needs' anchored centers, remains resilient despite broader commercial real estate challenges. Prairie Hill's acquisition reflects a deep understanding of market dynamics, where grocery-anchored properties are seen as recession-resistant investments. The low vacancy rates and rental growth in this sub-sector provide a cushion against economic downturns.
The undeveloped parcels offer strategic development opportunities, which are crucial in a market where differentiation is key. The ability to add a quick-serve restaurant drive-through and additional retail space could significantly increase foot traffic and tenant synergy, enhancing the center's competitive edge. The planned capital increase for further acquisitions indicates Prairie Hill's commitment to growth and could signal a bullish outlook for investors watching the retail and industrial segments closely.
Rillito Crossing Marketplace comprises a mix of local and national "daily needs" tenants consisting of grocery, fitness, health & wellness, restaurants and other complimentary uses. The presents Prairie Hill with the rare opportunity to purchase a dominant grocery anchored neighborhood center with multiple value-add components, including two undeveloped parcels.
The backdrop of negative sentiment in commercial real estate is creating some incredible opportunities, according to Matthew Sandretto, the Chief Investment Officer of Prairie Hill Holdings.
"Retail property fundamentals are fantastic, with historically low vacancy, and above trend rental growth. Bearish sentiment in commercial real estate throughout 2023 put most buyers on the sidelines. This sentiment isn't justified in Retail, yet it reduced competition considerably and enabled us to have our choice on the very best opportunities nationally."
Prairie Hill has big plans for Rillito Crossing and is actively presenting the development opportunity to national retailers. The shopping center contains an undeveloped parcel adjacent to LA Fitness that is buildable up to 25,000 sqft, as well as a parcel at the entrance suitable for a quick serve restaurant drive-through.
Prairie Hill is taking on more capital for its acquisition campaign in 2024, with another
About Prairie Hill Holdings
Prairie Hill Holdings (PHH) is a private real estate investment manager that enables institutions and individuals to invest directly in a diversified portfolio of high-quality, high-yielding, yet low risk commercial real estate assets. PHH focuses exclusively on triple net lease (NNN) properties, in markets and in sizes in which it has an informational advantage, enabling PHH to exploit mis-pricing through roll-up of individual assets into a well constructed portfolio. Learn more at www.prairie-hill.com
Contact:
Matthew Sandretto
msandretto@prairie-hill.com
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SOURCE Prairie Hill Holdings
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