A.CRE

Power Retail Center

A power center is a retail subtype generally around 450,000 SF and larger, where you will find category-dominant anchors, including discount department stores, wholesale clubs, and off-price stores. Among their most common type of anchors are home improvement, discount department, warehouse club and off-price retailers. Power centers serve a trade area of 5 to 10 miles.

Source: ICSC

Putting ‘Power Retail Center’ in Context

Northgate Power Center, a 525,000-square-foot retail property, is located in a thriving suburban market 15 miles north of Minneapolis-St. Paul, Minnesota. Owned and operated by Apex Retail Investments, the property exemplifies the characteristics of a power retail center, featuring multiple category-dominant anchor tenants. These anchors include a major home improvement retailer, a wholesale membership club, and an off-price apparel store. Smaller inline shops and a few outparcel restaurants complement the anchors, creating a dynamic shopping experience.

Acquisition Context

Apex Retail Investments acquired Northgate Power Center as a core-plus investment, purchasing the asset for $72 million at a 6.5% capitalization rate (based on in-place net operating income of $4.68 million). The firm identified potential to increase value through strategic re-leasing of two vacant inline spaces, totaling 15,000 square feet. Additionally, there is an opportunity to modernize the facade and improve lighting in the parking areas, enhancing the property’s appeal to both tenants and consumers.

Performance Metrics

As a power center, Northgate generates steady cash flow due to its anchor tenants’ creditworthiness and long-term leases. However, Apex projects an increase in NOI of approximately $400,000 annually by filling the vacancies at a target rate of $25 per square foot. This would improve the asset’s cap rate and overall return metrics.

  • Initial Cap Rate: $4,680,000 / $72,000,000 = 6.5%
  • Potential Increase in NOI: 15,000 SF x $25/SF = $375,000
  • Revised Cap Rate: ($4,680,000 + $375,000) / $72,000,000 ≈ 7.02%

Market Relevance

Northgate Power Center’s anchors ensure it remains a dominant retail destination, even amid evolving consumer habits. By balancing stable cash flow from anchors with opportunities for value-add enhancements, Apex Retail Investments has positioned the property as a core-plus asset with strong upside potential.

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