|
Feature Article, October 2004
Developing Off The Beaten Path
GK Development looks for overlooked centers — then turns them into gems.
Randall Shearin
 |
GK’s development at North and Sheffield Avenues in Chicago is anchored by Z Gallerie.
|
|
Started by Garo Kholamian in 1995 with the purchase of a 125-unit apartment complex in the Rogers Park neighborhood of Chicago, GK Development, Inc. has been acquiring properties at a steady pace. The company has since moved into the development and redevelopment of neighborhood centers and is now moving in a new direction — the acquisition of regional malls in smaller markets.
After his initial purchase in the multifamily sector, Kholamian wasted no time getting back to retail. The former Homart executive began purchasing strip centers like Quentin Corners in Palatine, Illinois, and added several small strip centers every year. He also began developing properties around Chicago. One of his most notable developments is at North and Sheffield, where he assembled four parcels of land to develop a center with home retailers like Z Gallerie and Restoration Hardware as anchors. After opening that project in 2000, the company has concentrated on grocery-anchored centers. In the last year, the company has moved into regional malls.
“The regional mall sector is one where we think we can add value, especially in a smaller market,” says Gregory Kveton, senior vice president, operations for GK Development.
Shopping Center Business recently met with Kveton and Sherry Mast, GK’s senior vice president of leasing at the magazine’s Chicago office.
 |
GK developed Merchants Crossing, a 213,700-square-foot center in Englewood, Florida, in 2002. The center is anchored by Beall’s and Publix.
|
|
Since 2000, GK Development has been actively acquiring neighborhood shopping centers in Chicago and in Florida. In Florida, the company acquired and redeveloped Merchants Crossing, a 213,700-square-foot Publix-anchored shopping center in Englewood during 2002. Other anchors at the center now include Beall’s department store and Walgreen’s. When GK purchased the center, it was anchored by Kmart and Publix. After Kmart left, Beall’s moved to Kmart’s larger space and became an anchor for the center, renovating the store in the process. About 30,000 square feet at the center is still vacant and GK is in the process of leasing that space.
Across the street, GK purchased Palm Plaza, a 107,300-square-foot center it acquired about 6 months after Merchants Crossing. Scotty’s, a local hardware store and Eckerd anchored the center. Kash n’ Karry, has decided to convert its existing store to its new Sweetbay Foods grocery concept. Scotty’s also left the center and GK has filled that location with Dollar Tree. Utilizing a new, larger format the chain introduced in the past year, the Palm Plaza store will have roughly 29 percent more space than existing stores. The store is scheduled to open this month.
 |
Earlier this year, GK Development purchased Columbia Mall, a 710,000-square-foot regional center in Grand Forks, North Dakota.
|
|
In April, GK purchased Columbia Mall, a 710,000-square-foot regional center in Grand Forks, North Dakota. Columbia Mall was an interesting property: the center had lost one of its anchors, Target, who moved across the street to a Target Supercenter. The opportunity for GK is to fill the 120,000-square-foot Target space. An additional leasing challenge is that there are no restaurants at the center.
“It is a value-added opportunity for us,” says Kveton. “We will pay attention to it in different ways than an institutional investor would. We like markets like Grand Forks, where we know we’ll be the only game in town.”
Columbia Mall is one of only four malls in North Dakota, and the only mall in the second most populous market. The center draws from 15 counties. The trade area extends to almost a 90-minute drive. In addition to locating more food offerings at the center and locating one or more retailers to fill the Target vacancy, GK has long range plans to improve operations and the look of the center. The center, says Mast, is and always has done well. But it can do better.
With the success it has had so far with Columbia Mall, GK Development is looking for further regional malls in small markets to purchase.
“Malls are extremely viable retail locations in smaller markets,” says Kveton. “We see that as an opportunity to add value to the property and the community with high barriers to entry for competitors.”
 |
The Shops at Copley Center is a 65,800-square-foot community shopping center GK Development owns in Schaumburg, Illinois.
|
|
Specifically, GK is looking for viable regional malls and neighborhood centers in smaller markets. While the center needs to have opportunity; it shouldn’t be so badly in need of retenanting that there is no income, says Kveton. In other words, location, demographics and economics of the area should be viable, it’s just that something at the property isn’t working, be it leasing or the attention that management isn’t paying to the center.
The company often redevelops properties that it purchases once new leases have been signed and the center is stable. The company acquired the 116,800-square-foot Lemont Plaza in Lemont, Illinois, several years ago. The center is now successfully leased to Sears Hardware, Chipain’s Foods and Powerhouse Gym. Now, GK is renovating the 40-year-old center, including a new façade, parking lot and signage.
“Once we have a center, we look at it and come up with a plan,” says Mast. “We’re a unique company for our size because we own, manage and lease all of our properties. People get very quick answers from us. Once we have our plan, we execute it over time, beginning with leasing.”
Outside the retail sector, GK owns one industrial and one office property. The company owns Atrium Business Tower, a 138,500-square-foot office building in downtown Las Vegas. In Indianola, Mississippi, the company purchased Indianola Industrial Park, a 345,800-square-foot single-tenant distribution center.
©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.
|
