Shopping Center Business
Moonbeam Capital Investments has quickly created a niche for itself in the shopping center business. The company has spent more than $200 million on properties in the last five years. Based in Las Vegas, Moon- beam has quickly become a major player, ranking eighth among the top 10 retail real estate buyers in the last five years, according to Real Capital Analytics.
Most of those acquisitions have been regional malls where Moonbeam has plans to do major redevelopments. It was one of the first companies to acquire ‘broken’ regional malls in good locations and plan them for the future. Moonbeam uses private money that is patient; since most of the centers Moonbeam acquired are non- performing, it has taken its time in studying each center to determine the future use. For some properties, the company realizes, it may take several years to come up with an adequate solution for each center since the retail industry — and other sectors of the U.S. economy — are rapidly changing. The company’s current plans mostly involve redevelopment of some or all of the mall spaces. The changing face of retail has caused Moonbeam to alter its plans from time to time, as it wants to respond to the ever changing needs of retailers and consumers.
“We are learning as we do these re- developments,” says Steven Maksin, the company’s CEO. “The optimal utilization of these underperforming malls is to bring some additional uses to them, such as residential, hospitality, office and entertainment.”
One of its first acquisitions was Burlington Center Mall in Burlington, New Jersey. The company acquired the center in 2012, and has plans to convert it into a 1.3 million-square-foot mixed-use center. “We have put a lot of time and research into what Burlington Center Mall would become,” says Shawl Pryor, senior vice president of Moonbeam. “We are not going to develop mixed-use in the sense that you will have a live-work-play environment, but more of an environment where you have a work environment coupled with the property’s primary use, retail.”
To accomplish that, Moonbeam wants to add a low-rise office product in the property, accumulating between 300,000 square feet to 600,000 square feet office space. One company has already ex- pressed interest in building a build-to-suit office property at the site, which would bring more than 1,000 employees to the center on weekdays, providing an additional shopping base.
The demographics around Burlington Center Mall are extremely established and strong. While the area itself predominantly consists of middle-income households, there are a number of neighborhoods nearby where the home prices average greater than $1 million.
“There are demographics in the area on both sides of the spectrum,” says Maksin. Moonbeam has already leased more than 300,000 square feet to national retailers to anchor the retail component of Burlington Center Mall.
“There is extremely high demand for restaurant users, and that has caused us to redefine some plans at the center,” says Pryor. “We are now bringing in additional restaurants with our strong line up of hard and soft goods tenants.”
The company expects to complete the first phase of the redevelopment process at Burlington Center Mall in late 2016 or early 2017.
In late 2012, Moonbeam purchased West Oaks Mall near Orlando, Florida. The center is anchored by Dillard’s, JC Penney and AMC Theatres. Moonbeam originally planned to backfill two vacant anchors and a number of inline spaces. Over time, it realized that the community did not need another traditional mall. Instead, Moonbeam is now planning to reduce the size of the retail center and add a convention center, with a hospitality concept, office, and a few residential components.
In suburban Atlanta, Moonbeam purchased Gwinnett Place Mall. Originally developed in the 1980s, Gwinnett Place became a victim of its success. The center was 1 million square feet of retail surrounded by more than 3 million square feet of ancillary retail. When a competing mall was built several miles north, it began to falter in the late 2000s. After Moon- beam acquired the center, it stabilized the tenancy. The center is anchored by Macy’s and Korean retailer Mega Mart. Moonbeam has studied the market and determined that it will add some medical and residential uses to the center.
“With Gwinnett Place’s adjacency to Interstate 85 and plentiful parking, it makes an ideal use for medical and residential uses,” says Maksin. Another ideal use is hospitality, which mixes well with medical and retail.
Near Syracuse, New York, the company acquired ShoppingTown Mall. The company plans to redevelop that center in the future. There, the company also would like to add medical users. As at Gwinnett Place and other properties, there are some restrictive agreements that must be overcome to accomplish that goal.
“Challenges excite us,” says Maksin. “We are loud and clear about the fact that we do not have an easy set of tasks in front of us with some of these properties that have restrictive agreements in place. We work together with the adjacent properties’ landowners and the local officials to overcome existing challenges.”
One of Moonbeam’s most complicated projects involves its redevelopment plans for Century III Mall in Pittsburgh. There, Moonbeam wants to demolish some of the 1.3 million-square-foot center and build a hotel and a residential component there. The center’s current anchor tenants include Macy’s, JC Penney and Dick’s Sporting Goods. The project is cost prohibitive without economic support from the community. Moonbeam also plans to bring a hospital to the site, which will bring 1,000 jobs to the area.
In addition to these centers, Moonbeam has also acquired the 1 million-square- foot Columbia Place Mall in Columbia, South Carolina, anchored by Sears, Ma- cy’s and Burlington Coat Factory; Mar- shall Town Center, a 345,500-square-foot regional mall in Marshall, Iowa, anchored by JC Penney, Younkers and a movie theater; Five Point Mall in Marion, Indiana, anchored by JC Penney, Carson’s and Roses; and Cortana Mall, a 1.4 million- square-foot super-regional mall in Baton Rouge, Louisiana, anchored by Macy’s, Dillard’s and Sears.
Finally, in Greeley, Colorado, Moon- beam acquired the 517,000-square-foot Greeley Mall. The center is anchored by JC Penney, Sears and Cinemark The- atres. There, Moonbeam has not had to redevelop the mall. Maksin feels that the local residents redeveloped the mall themselves and Moonbeam was the catalyst in the process.
“The problem with Greeley Mall was the community’s perception that it was not safe,” he says. “We had to regain shoppers’ trust and find out what tenants they wanted.” In less than three years, we have almost put this broken mall back together. The center should be about 95 percent occupied by year-end, and the sales, year over year, are up 30 percent on many tenants.”
By holding focus groups and listening to what the community wanted, Moon- beam turned the results over to its leasing team. After in-depth analyses of the optimal tenant mix, Moonbeam is excited to announce a recently signed lease with At Home as an anchor tenant. With At Home, Moonbeam boosted the interest of existing and future tenants.
“Every opportunity is different, and every mall is different,” says Maksin. “The key strategy is to make sure you understand the demographics and work with the community. Today, you cannot ignore the local residents and the local government. To accomplish all of its development plans, Moonbeam has been hiring more talent from the industry. The company is seeking employees with a strong shop- ping center industry background. Because it acquired so quickly, in 2014, the company focused on building processes, systems and roles to fill its needs.
“We acquired a lot of real estate over the past five years,” says Pryor. “Our company has grown faster than our infrastructure. Over the last year, we have taken a significant amount of time to redefine the roles we have and see where we need people. Our project pipeline feeds a lot into those needs.”
The needs of the company have changed, too. Relatively recently, Moon- beam divested itself of a few non-core assets in a series of internal transactions with certain partners, in order to enable Moonbeam to remain independent and not leveraged.
The company has also ventured be- yond retail. It has developed a strategic partnership with Radisson Hotels and has re-branded its first hotel property. The company has also acquired a number of residential properties, office buildings and non-mall shopping centers. In Cleveland, Ohio, Moonbeam acquired a less than 40 percent occupied 27 story residential building, Lake Park Tower. In less than 18 months since its acquisition, the building is more than 85 percent occupied. With a joint venture partner, Moonbeam is also developing a seniors housing project near Cannes, France.
While the company plans to acquire more properties in the United States, it is also seeking properties internationally. Moonbeam opened an office in Toronto last year. “We’d like to broaden our inter- national experience,” says Maksin. “For now, we are limiting that to Canada and our development in the south of France. We are looking for opportunities in the Benelux — Belgium, Netherlands, Luxembourg — area, Germany and Australia. We want to take Moonbeam to the next level and become a very well diversified global real estate fund.”
Maksin, who is originally from Kiev, Ukraine, has networked with a number of hedge funds and foreign investment funds throughout the United States, Europe and Asia.