RETAIL CASE STUDY
Location: Round Lake Beach, IL
Purchase Date: December 23, 2013
Project Returns: 40.85% IRR / 3.73x EM
Years Held: 5.10 years
The Eagle Creek Shopping Center is a 61,685 square foot center that was owned by a group who originally purchased it through a note sale with a short time horizon due to its capital structure. The rent roll contained a near term lease expiration from its anchor tenant, Big Lots, and various lease expirations in the next three to four period of its small shop spaces. The property also had a residual environmental issue due to a historical onsite cleaner.
Solution & Outcome
MK Asset Investment purchased the Eagle Creek Shopping Center in December, 2013 and immediately inserted its captive management company to handle the centers deferred maintenance and improve tenant relations. In conjunction with bringing its management expertise, MK Asset committed to updating the look of the center, installing a new roof, performing needed capital improvements on the parking areas, updating the color scheme to a more contemporary color palette and ensuring that appropriate maintenance be commenced. In exchange for these commitments, MK Asset was able to significantly extend and increase lease terms while increasing rental income by over 40% during the ownership period for the small shop space. These improved operations also afforded MK Asset Investment to achieve early renewals with its anchor tenants for terms in excess of the next rolling options.
While transitioning the property to professional landlord ownership and approach, MK Asset entered into a remediation plan with Illinois Environmental Protection Agency and subsequently received a No Further Remediation Letter from the Agency.
After an earlier refinancing in 2017, MK Asset sold the property in January, 2019, to take advantage of the low cap rate environment for stabilized assets with significant lease term remaining.