Homosassa Regional Shopping Center Case Study
Homosassa Regional Shopping Center, purchased in 2014, fits the typical Vanguard value-add model. We purchased this 70,000 square foot building from Wal-Mart; it had been operated as a Wal-Mart store for years, until a new Supercenter was built in the trade area. At the time of purchase, the building was approximately 35% occupied, with Tractor Supply as the sole tenant.
Prior to closing on the building, we identified Dollar Tree and Farmer’s Furniture as potential tenants; the former did not have a presence in the market, and the latter had a long-term history in the market, but was located in an inferior location in a project that had significant deferred maintenance. Successful negotiations with these two targeted tenants, both of whom we had located in other Vanguard projects, brought occupancy to approximately 85%.
With the property substantially leased, our next goal was two-fold; first, to secure a tenant for the remaining block of space, and second, to take steps to create additional value via the creation of an outparcel along busy Suncoast Parkway. With respect to the tenant, we approached Florida Sheriff’s Ranch Thrift Store, a regional chain, about relocating an existing store in the market. We had recently placed this tenant in our Ocala property, and our relationship with them was a key factor in securing a relocation, which brought the building to 100% occupancy.
As for the creation of an outparcel, we purchased a small land parcel adjacent to our property; this parcel was not large enough for a typical outparcel user, but when combined with an area of excess parking, there was sufficient land available. We currently have this newly-created outparcel under lease to a fast-food operator; this has boosted property NOI and overall value.
With the property fully leased, we went into the permanent financing market and placed a 10-year, fixed rate loan at an attractive interest rate on the property thru a major insurance company. This loan allowed us to not only retire our existing bank debt, but to return the vast majority of the initial equity investment, leaving our investors with a solid positive income stream, with virtually no risk exposure.