America’s Realty, a Pikesville, Maryland-based manager, has lined up $73 million in financing to back the acquisition of seven shopping centers in Ohio, New York, Pennsylvania and Virginia totaling over 1 million square feet. Eastern Union sourced the financing from First National Bank, a regional credit union, community banks and regional banks.
America’s Realty’s long-time focus on budget-conscious retailers like Wal-Mart made the financing a no-brainer for lenders as the US grapples with inflation and economic stagnation.
“We are seeing a tremendous amount of interest in these blue-collar, suburban shopping centers,” Eastern Union senior managing director Marc Tropp told Real Estate Capital USA. “People are looking to save money right now. These aren’t high-end shopping centers where people have a lot of discretionary money.”
For Carl Verstandig, founder and CEO of America’s Realty, tough times are when his company shines. “Fortunately, for us, even the middle class now is looking to save money because of inflation,” Verstandig said.
In addition to more than three decades of leasing budget-oriented retail space, Verstandig has run various stores of his own, which gives him a unique understanding of the day-to-day operations of a retail operation.
“By having [a] background in supermarkets as well as liquor stores and restaurants, I can relate to our tenants,” Verstandig said. “If they tell me they’re having a hard time, I can look at their financial statement and say, ‘Well, I was in that business for 20-plus years.’”
Despite inflation and rising rate pressure, Tropp has had little trouble lining up lenders to work with America’s Realty. It’s high-end shopping centers, whose client base shrinks as economic pressure mounts, that are starting to find capital harder to come by.
“Banks still want to lend,” Tropp said. “Where they are taking a step back are Class A shopping centers that typically only cater to the upper-middle and upper classes. We’re seeing less and less traction there.”
And good lenders will primarily focus on a sponsor’s fundamentals, not secular headwinds.
“This is good real estate,” Tropp said. “Rates are going to go up but they’re going to come back down eventually. So, at the end of the day, stick to your core principles. You can still buy in this market, and the banks are going to finance it.”