ROUTE 6 PLAZA is a 36,000 square foot newly-constructed neighborhood strip shopping center located on a 6-acre site with 235 parking spaces located in Mohegan Lake, NY. Tenants include CVS, Verizon Wireless, Charlie Brown’s Steakhouse, Emigrant Savings Bank and Subway. The land was purchased in October 2000 for $ .9 million. Total project cost was $8.5 million. Estimated value is over $12 million.
Route 6 is a major east-west artery and shopping area in northern Westchester County. Mohegan Lake is a fast-growing village with limited neighborhood shopping. The former owners had tried unsuccessfully to develop the property for over 10 years. They were discouraged and willing to sell at an attractive price and on attractive terms. As a result, CCGL’s predecessor company was able to obtain control of the property with very little cash or risk. To further mitigate risk, CCGL’s predecessor company agreed to make most of the development team partners in the project, in lieu of fees.
CCGL’s predecessor company contracted to buy the land for $ .86 million in July 1997, making only a modest down payment. Under the terms of the contract, CCGL’s predecessor company had up to five years to close and was required only to pay real estate taxes on the property ($16,000/year) to maintain its rights.
During the contract period, CCGL’s predecessor company obtained approval for a traffic light fronting the shopping center and preleased over 50 % of the leaseable area. As a result, CCGL’s predecessor company was able to obtain a favorable construction loan and elected to develop the property. Had CCGL’s predecessor company not achieved sufficient preleasing, it would not have proceeded with the acquisition. Closing of the land purchase occurred in October 2000.
The shopping center was completed in March 2002 and is now fully leased. The property has been refinanced with a long-term, fixed-rate mortgage and CCGL has received several unsolicited offers to buy it at a substantial profit. However, CCGL expects to hold it for the foreseeable future.
Mark Ellman and his family own a 71.2 % interest in the property. Other members of the development team own the remainder. CCGL projects an effective annual internal rate of return to the investors of over 21 %.
CCGL rarely employs investor capital in development opportunities, since it believes the time horizons and risk profile are inconsistent with the goals of its investors. However, Mark Ellman occasionally undertakes such projects for his own account. Route 6 Plaza is such a project.