New Fund Helps WP Realty Grow
Company plans to buy more than $500 million worth of community shopping centers in the next 2 to 3 years.
Susan Fishman

WP Realty has a singular investment strategy: to purchase assets from distressed sellers at values substantially below market value and replacement costs. That strategy includes acquiring assets that do not attract the attention of the larger real estate funds and institutions because of their size, condition and/or negative perception, and enhancing, redeveloping and marketing those assets utilizing value-added techniques. The company then positions the assets for refinancing or sale to institutional investors.

WP Realty has redeveloped Delco Plaza in York, Pennsylvania. The center is anchored by Lowe’s Home Improvement, Giant Supermarket, OfficeMax, T.J. Maxx and Ross Dress For Less.

With the recent closing of its fourth acquisition fund at $75 million, WP Realty has targeted $125 million in equity to acquire $500 million of undervalued community shopping centers in the Northeast and Mid-Atlantic parts of the country over the next few years. The new fund will grow the company portfolio to roughly 7 million square feet.

Bryn Mawr, Pennsylvania-based WP Realty, Inc. is a real estate investment, development, leasing and management company specializing in grocery-anchored centers in the Northeastern United States. Since its founding in 1995, WP Realty has invested and/or committed more than $190 million of equity in 40 retail properties, four apartment complexes and six office buildings with a current market value in excess of $1 billion across 10 states. The company currently owns and operates more than 6 million square feet of shopping center space located throughout the Northeastern United States and 550 apartment units in Southern New Jersey.

The company formed its first real estate investment fund in 1998. The $200 million fund was established to invest primarily in shopping centers in the northeastern part of the United States. It was a co-venture of WP Realty, HarvardPrivate Capital Group, an affiliate of Harvard University’s $14 billion endowment fund (currently managed by BayNorth Capital LLC) and Lubert-Adler Real Estate Opportunity Fund, L.P., a Philadelphia-based real estate investment firm. The fund was fully invested as of April 2000 in 11 transactions totaling 2 million square feet of shopping center space aggregating approximately $175 million of shopping center assets. Of the 11 shopping centers in Fund I, five properties have been sold and six have been stabilized and refinanced.

WP Real Estate Fund II, L.P. was formed with the same co-venture partners in August 2000 with additional equity commitments sufficient to acquire more than $250 million of real estate. The second fund was fully invested as of December 2003 with all of the equity committed to nine transactions totaling 2.2 million square feet of shopping center space aggregating approximately $170 million of shopping center assets. Three of the nine properties have since been sold, one is under agreement for sale and four have been stabilized and refinanced.

The third fund was formed in late 2003 with additional equity commitments of more than $75 million, enabling WP Realty to acquire an additional $300 million of real estate. WP Real Estate Fund III, L.P. is currently invested in/committed to 12 transactions totaling approximately 2.6 million square feet of shopping center space. Fund III has remaining equity commitments of approximately $7 million, which will be utilized primarily for costs associated with the redevelopment and stabilization of properties within the fund. Of the 12 shopping centers in which Fund III made investments, one has reached stabilization, two are currently under redevelopment and the remaining nine properties were recently acquired.

WP purchased West Side Mall in Wilkes-Barre, Pennsylvania. The 452,900-square-foot shopping center is anchored by Price Chopper and AJ Wright. A new Lowe’s is also anchoring the center.

“In the last couple of years with the market so strong, we’ve started selling properties,” notes Weingarten. “We’ve sold five or six in the last year and a half.”

With $200 million immediately available for investment, WP Realty is aggressively seeking investment opportunities in the Northeast and Mid-Atlantic States. Ideal candidates are lease-up or redevelopment opportunities and grocery or discount anchored (or ability to anchor) properties with a minimum of 100,000 square feet.

A typical WP Realty deal is a redevelopment of an old interior mall. Located in York, Pennsylvania, Delco Plaza was 85 percent leased when WP Realty bought it in 2004. The distressed 1970s-era, 396,000-square-foot enclosed mall was anchored by Kmart and Ames and lost most of its other tenants when the two anchors closed. WP Realty demolished everything but the Ames building and has re-built roughly 85 percent of the center. The project achieved 97 percent pre-leasing prior to commencement of construction and is now almost complete. Anchors include Lowe’s Home Improvement, Giant Supermarket, OfficeMax, T.J. Maxx, and Ross Dress For Less.

Another type of redevelopment for the company is Lordens Plaza in Milford, New Hampshire. The 149,000-square-foot shopping center was anchored by Shaw’s Supermarket (with excellent sales) and a Brooks Drugs. Shaw’s store was undersized and the overall property was in need of capital improvement. WP Realty negotiated a new 20-year lease with Shaw’s that provided for a renovation and expansion to 71,000 square feet and a significant increase in rent. The company renovated and redeveloped the shopping center, including the parking lot and signage. The total redevelopment costs reached $17 million, and the current estimated value is $28 million, which equates to a potential profit of $11 million.

A recent WP Realty deal was in Edwardsville, one of the nicer suburbs of Wilkes-Barre, Pennsylvania. West Side Mall is located along Route 11 South, the primary route through the area that lies west of the Susquehanna River and Interstate 81.

“The shopping center had been around a long time and gone through a number of transformations,” says Weingarten. “It was an old mall and has now been de-malled.”

WP Realty bought the shopping center and is redeveloping the entire project, including adding a new façade, a new parking lot and new lighting. The company knocked down the existing Ames department store and bought close to 30 homes surrounding the center to replace them with a 160,000-square-foot Lowe’s Home Improvement store. The 452,900-square-foot shopping center is now anchored by Price Chopper Supermarket and AJ Wright. Other notable tenants include Jo-Ann Fabrics, Rite-Aid and Deb Shops.

“This is more of what we’re doing now,” Weingarten says, “rolling up our sleeves a little bit and getting into the nitty gritty.”

WP Realty credits much of its success to the extensive real estate experience of its principals and key employees, combined with the company’s strong equity base and excellent relationships with lending institutions. Weingarten and Stein collectively have nearly 50 years of real estate experience, and the company’s 10 senior executives have, on average, more than 24 years of real estate experience. The company maintains close working relationships with some of the country’s leading lenders, brokers and institutional investors, including Boston-based Harvard Private Capital, BayNorth Capital, Lehman Brothers and Lubert-Adler Real Estate Funds.