The Opportunity

Simi Valley Town Center is a large power center located on the 118 Freeway anchored by Lowes, Best Buy and Babies R Us. In 2006, the anchors, sub-anchors and most of the connected shops of the center were in the final stages of construction and opening for business, and the community was responding very well to this new development.

Milan saw an opportunity to take part in this exciting new shopping center by purchasing the outparcel retail pads in front of the Lowes. Recognizing that significant costs generally required for this type of development had already been assumed by the master developer, coupled with the strong leasing market for retail space in the area, Milan determined that this development should beat expectations for a return on investment compared to other developments.

The Results

Using its experienced construction management personnel, Milan quickly set its preferred construction contractor to work to implement a rapid construction schedule. Meanwhile, Milan’s development team finalized the previously-negotiated leases for the tenants for the space, while marketing the remainder space to the best tenants for the center. The final rent roll included Chipotle, Cingular Wireless, Barbeques Galore, Sterling Jewelers, and Countrywide. Within a year of acquiring the property, all tenants were open for business.

The Return

One of the most attractive elements of this development was the relative pace and surety of return for Milan’s investors. Within the first year of ownership, Milan sold a completed portion of the property to an exchange buyer, paid off its construction loan, and returned 80% of the equity to its investors. The balance of the property was sold in July 2007, just over a year and a half from acquisition. Milan’s investors earned an annualized IRR of approximately 30% during the hold period.