Investment Details
  • Location Warwick, Rhode Island
  • Investment Type Equity 506(b)
  • Property Type Retail / Shopping Center
  • Distribution Schedule Quarterly
  • Targeted Hold 5 - 7 Years
  • Targeted IRR 8.00 - 12.00%
  • Targeted Cash on Cash 7.00 - 9.00%
  • Total Transaction Size $16,347,300
  • Minimum Investment $5,000

Marketplace Center Warwick, Rhode Island

 Confidential Private Placement Memorandum - July, 2015

 This property is no longer open for investment. In the future, shares may appear on the exchange.

Photos

Providence Skyline Aerial Siteplan

About This Investment

Acquire Real Estate is pleased to offer an investment opportunity in Marketplace Center, located in Warwick, RI (“Property” or “Shopping Center”).  The Property was recently purchased by an investment syndicate sponsored by The Grossman Companies (“Sponsor”).  Acquire Marketplace LLC (the “Company”) owns 9.02% of the Membership Interests in the Sponsor’s investment syndicate.

Investment Entity  Acquire Marketplace LLC (the “Company”)
Investment Entity Manager Acquire Advisory LLC (the “Manager”)
Offering Type Equity
Offering Amount $425,172
Ownership Interest in Sponsor Syndicate 9.02%

 

Acquire Real Estate Investor Projected Returns

Avg Cash on Cash (average annual cash on cash throughout investment period)  7.8%
IRR 9.0%
Equity Multiple 1.5

Overview

Marketplace Center consists of a fully leased, ±56,176 square foot retail building on ±8.6 acres located in Warwick, RI.  The Property enjoys visibility along Bald Hill Road with tremendous frontage and average daily traffic counts of 44,000.  Additionally, the Property benefits from ample parking (4.3 spaces per 1,000 SF) and a pylon sign with close proximity to the street.  The Property is well-located within Rhode Island’s most robust retail corridor.  Bald Hill Road is anchored by the Warwick Mall and Rhode Island Mall and has easy access to I-95 and I-295.  Marketplace Center is sited near the middle of the retail corridor.  Of note, the Sponsor has a history of property ownership on Bald Hill Road recently selling the adjacent property, 1400 Bald Hill Road.

The Property has one anchor tenant, LA Fitness (46,564 square feet, lease expiration August 2030).  This lease accounts for 83% of the rentable space and 80% of the revenue.  LA Fitness is a new tenant to the Property, recently opened in mid-April 2015 and is a “category killer” in its retail category.

During the economic downturn, retail sales on Bald Hill Road did not suffer the way they did in other areas.  This resiliency is because the Bald Hill retail corridor services the entire State of Rhode Island as well as portions of Southeastern Massachusetts.   The following notable tenants have stores nearby whose sales volume have continually matched or exceeded their national store averages: Best Buy, Target (2 stores, totaling $75 million), TJMaxx/HomeGoods, Dick’s Sporting Goods2, Petco, Babies ‘R Us, Stop & Shop, Bob’s Store, Marshall’s, Macy’s (highest per square foot store sales in New England).

The Property which sits across from Best Buy, Target, Sam’s Club and at the foot of Dick’s Sporting Goods is at the intersection of “Main and Main” for retail real estate for the state of Rhode Island.  It is fundamentally strong in a market that has routinely displayed its strength in terms of quality of retailers and sale volume stability in both good times and bad. 

The purchase price represents an approximately 7.7% capitalization rate.  This investment provides stable and long term cash flow while prudently reducing the outstanding debt balance over time.  This is a unique circumstance where the certainty of the cash flow is high given the contractual term and quality of the tenancy and the outcome of this investment does not rely heavily on the sale price .  

Investment Highlights

Acquisition Basis

At a 7.7% going-in cap rate, the investment is expected to produce ample cash flow from inception.  The Property’s location and long-term stability of tenancy make it particularly attractive to lenders.  Because of the going-in yield and current debt markets, this investment is projected to yield strong current cash flow and the net return is not heavily weighted towards the terminal value of the real estate.

Density

Warwick, RI is a dense, urban retail node with 135,000 people within a five mile radius, and an average household income of $81,000.  

Tenancy  

LA Fitness, the anchor tenant, is the leader in its respective niche. LA Fitness is investing heavily into this location and has committed/opened two other locations in the Rhode Island market.   

Location and Presence on Bald Hill Road

Located at the intersection of Route 2 (Bald Hill Road) and Route 117 along the area's most vibrant retail corridor, boastin major neighboring retailers including Walmart, Target, Kohl's, Dick's Sporting Goods, TJ Maxx, Home Depot, Sam's Club and Stop & Shop amoung others.

Superior Access

Situated adjacent to U.S. I-95 (146,000 vehicles per day) at Exit 10, Marketplace Center has excellent visibility and seamless access with two signalized entrances and prominent pylon signage along Bald Hill Road, which see over 44,500 vehicles per day

Complimentary Unowned Tenants

The site includes three high-volumn, in-line retailers, including Jo-Ann Fabrics, Bed, Bath & Beyond, Michael's and Bob's Furniture Store as well as two outparcels housing Rhode Island's only Chick fil-A and TGI Friday's.

Sponsorship  

The Grossman Companies, Inc. has deep roots investing in retail real estate in New England and, notably, an affiliate of the Sponsor owns the abutting property.  Furthermore, the Grossman Family has committed a significant amount of the equity required for this investment north of 30%.

Investor Returns

This calculator predicts your cash flow based on your initial investment and the targeted returns for the property. The output is based on an investment made on day one of the offering.

Returns
Total Proceeds
Total Profit
Average Cash On Cash
Internal Rate of Return
Equity Multiple
Ownership
Total Basis
Legal Fees
Percent Ownership
* The return of capital fee is only processed once the investor receives a full return of initial capital, excluding operating distributions.

Property Description

Site Description:  
Property Name Marketplace Center
Property Address 1500 Bald Hill Road, Warwick, RI
Total Land Area 8.62 acres
Total Building Area 56,176 square feet (part of 203,613 square foot shopping center)
Year Built Initially built 1993 and renovated for LA Fitness in 2015
Parking 322 spaces (4.32 spaces per 1,000 square feet of rentable area)
Construction Details:  
Foundation Continuous reinforced concrete footings.  4" reinforced concrete slab with vapor barrier on grade.
Structural Frame Reinforced concrete masonry exterior walls and steel columns support the roof framing system.
Exterior CMU block with the combination of brick veneer and EPS Board.  LA Fitness features aluminum and glass storefront.
Roof Consists of mechanically fastened, 45-mil EPDM system with fiberglass shingles.
Building Systems:  
HVAC Systems The small shop spaces are served by rooftop package units.
Electrical Electrical service to the LA Fitness store is 277/480 volt, three-phase, four wire, 2,000-amp service.  Each shop has individually metered electrical service centers.
Life Safety The entire property is protected by an automatic wet pipe sprinkler system and meets NFPA requirements.  Risers for the retail shops are located within the mechanical closets at the rear of the shops.  The riser for LA fitness is located within the store.
Utilities:  
Electricity National Grid
Natural Gas National Grid
Water Kent County Water Authority
Sewer Warwick Sewer Authority

Site Plan

Tenant Roster

Tenant Square Feet LED Base Rent PSF Annual Base Rent
LA Fitness 46,564 Aug-30 $17.25 $803,229
Newbury Comics 4,500 Jul-18 $25.41 $114,345
Great Clips 1,712 Jun-25 $18.00 $30,816
Nail Salon 3,400 Feb-21 $15:00 $81,000
Total  56,176   $17.79 $999,390

 

Lease Expiration Chart

Major Tenant Descriptions

In an industry often equated with fad and fashion, LA Fitness has steadily increased its presence by focusing on the one lifelong benefit valued by everyone: good health. 

Born in Southern California in 1984 by Founders Chin Yi and Louis Welch, LA Fitness continues to seek innovative ways to enhance the physical and emotional wellbeing of their increasingly diverse membership base. Today, their state-of-the-art clubs span the continent and they’re still expanding. LA Fitness’ strong and successful growth stems from a commitment to understanding and meeting the distinct needs of each community they serve. With their wide range of amenities and a highly trained staff, they can provide fun and effective workout options to family members of all ages and interests. Because they know that a healthy society depends on the wellbeing of all those who comprise it, their emphasis is on giving their members the most for their dollars to make the LA Fitness experience accessible to more segments of the community.  LA Fitness has more than 600 clubs across North America with revenues exceeding $1.7 billion.  The original founder grew the business and recently purchased back the outstanding interest from a private equity owner, so that his family could maintain long-term control.

Investment

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Financials

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Market

Location and Market Overview

Providence Rhode Island

As the capital of Rhode Island, Providence is the third-largest city in New England and home to approximately 178,000 residents. Founded in 1636, Providence is one of the oldest cities in the U.S. and considered one of the birthplaces of the Industrial Revolution. Providence has remained a center of innovation and commerce and is now home to 18 hospitals and 12 institutions of higher learning.  These nationally-recognized education and medical institutions have helped to spur the growth of an economy tied to high tech, healthcare and creative industries.

Once nicknamed the “Beehive of Industry,” Providence has experienced a dramatic shift in the city’s economy as the main industries are now health services, education and financial services. Furthermore, the significant public and private investment in downtown Providence over the last two decades has attracted new businesses, residents and cultural activities to the city.

 

Demographics

The Providence MSA, which encompasses Rhode Island and part of Southern Massachusetts, has an estimated population of 1.6 million people. According to the United States Census Bureau Rhode Island has a population of 1,050,292 people, of which 178,432 live in the City of Providence.

 

Providence Economic Overview

With a population of approximately 1.6 million people, the Providence MSA has a thriving economy that is built upon three powerful industries: health services, education and financial services.  Providence is expected to benefit significantly from the strength of its health services and education sectors, which have shown moderate job growth and collectively account for over 117,000 jobs within the MSA.

The economy in the Providence MSA is improving, evidenced by a downward trend in the unemployment rate. As of September 2014, the Providence MSA unemployment rate was 7.5%, which is approximately  a 100 basis points decrease year-over-year. The city has been commended of its progressive tax incentives designed to attract new business and investment, increase employment and promote company creation throughout the Providence metropolitan area. These incentives, coupled with the access to a well-educated labor pool, have led to a burgeoning start-up community within the city. Additionally, Providence is home to the corporate headquarters of GTECH, Textron and Citizens Bank and currently supports a labor force of approximately 91,382.

 

Local Warwick Retail Market

Marketplace Center is located at the intersection of Route 2 (Bald Hill Road) and Route 117, two of Warwick’s major thoroughfares.  The impressive traffic counts of these routes, paired with strong local demographics as made the area immediately surrounding Marketplace Center one of Rhode Island’s most densely occupied retail corridors. 

With Warwick’s central location in southeastern New England, the refurbished T.F. Green Airport, a new Amtrak rail station and U.S. I-95 passing right through the city, Warwick is truly the area’s business and transportation leader.  Warwick – commonly referred to as “The Retail Hub of Rhode Island” – has more than 4.0 million square feet of prime retail space located on a three-mile stretch of Route 2, the area’s most heavily traveled north/south artery.  With a major regional mall, 11 open-air shopping centers and a number of freestanding retail buildings, Warwick has long been a top-tier market for retailers expanding in New England, not to mention the premier shopping destination for local residents.  The exceptional sales performance of stores located in Warwick has made the city a “priority market” for retailers expanding in the region.  Marketplace Center is bookended by two major highways: U.S. I-95 and I-295, giving the center unmatched access to a growing consumer base. 

 

Warwick Fitness Market

Marketplace Center will be home to the second LA Fitness franchise in the state, the first of which is located more than five miles from the center in Cranston, RI.  The gym has also proposed an additional location in Pawtucket.  Meanwhile, the in the immediate are surrounding Marketplace Center there are a number of second-tier fitness franchises and independent centers including Planet Fitness, Curves, World Gym, Anytime Fitness and Gym Source, firmly positioning the newly-constructed LA Fitness as a top-tier health club option for consumers.  

 

Management

The Grossman Companies

The Grossman Companies, Inc. is a real estate investment, development and management company that invests in real estate assets in Southern New England.  Due to the geographic concentration in the region, the principals pursue diversification through real estate assetclass selection (retail, office, industrial, apartments, self-storage) and risk variety.


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