The owner of the Manor Shopping Center has won a recent auction of the struggling Rockvale Outlets with an offer of about $30 million, real estate industry sources said Tuesday.
A spokesman for turnaround specialist Wharton Realty Group confirmed that his company will purchase the ailing complex and pledged to continue operating it as a shopping center.
“We’re going to spend (about $10 million) upgrading the property” with new facades on the buildings, new parking lots and new signage, said the spokesman, who asked that his name not be published.
Wharton Realty also will emphasize “maintaining the tenants that do well, locking them in and trying to make sure they don’t go down the street to Tanger (Outlets),” he said.
In a brief interview, the spokesman denied rumors that Rockvale, on Lincoln Highway East opposite the American Music Theatre, will be converted to another use, such as housing.
“There are no plans to convert it — I think there’s been some rumors about converting it to residential,” he said.
“No, the idea is to go ahead and basically roll up our sleeves and lease up some spaces to retailers that will do well in Lancaster,” the spokesman said.
The spokesman emphasized that plans for the East Lampeter Township property are in “the infancy stage”; Wharton Realty has yet to meet with an architect to figure out specifics.
Township manager Ralph Hutchison said the township office has not been contacted by Wharton Realty.
Asked whether Wharton Realty might raze some of Rockvale’s buildings to erase some of the roughly two dozen vacant storefronts, the spokesman said that decision will hinge on the architect’s ideas.
“We are considering all retail uses,” including a movie theater and a grocery store, the spokesman said.
The property is zoned C-3 (regional commercial), a designation that allows theaters and grocery stores by right, according to the East Lampeter Township zoning ordinance.
Lengthy resume
Wharton Realty, based in Eatontown, New Jersey, owns and manages more than 30 retail and office properties in 12 states, according to its website.
They total more than 6 million square feet — roughly equal to four Park City Centers.
Established more than 30 years ago, Wharton Realty came to Lancaster County by purchasing Manor Shopping Center in 2014 for $35 million, according to LNP files.
Though Rockvale’s $30 million pricetag sounds like a large amount of money, it’s a relative bargain compared to other indicators of the property’s value.
Consider, for instance, Rockvale’s previous owner had a $92.4 million mortgage on the property. The site carries an assessed value of $48.6 million and fair market value of $64.2 million, courthouse records show.
Rockvale is the county’s second-largest shopping center at 565,000 square feet on 64.7 acres along one of the busiest roads in the county. By size, Rockvale trails only Park City’s 1.4 million square feet.
Constructed in phases, Rockvale’s first stores opened in 1986 and its last in 1996. Anchor tenants include Pottery Barn, West Elm, Olive Garden, New Balance, Disney Store, Orvis and Reading China & Glass.
But occupancy at the independently owned center has dropped sharply in recent years as key tenants relocated to Tanger Outlets, a center a mile to the west that has the leverage and resources of a publicly owned company with 44 centers.
Rockvale, with 110 tenants a decade ago and only about 70 tenants now, was 82.2 percent occupied as of June 30, according to marketing materials circulated for the auction.
The auction was triggered earlier this year when Rockvale’s prior owners defaulted on its mortgage.
The default led the prior owners — investors in Fort Washington, Montgomery County — to sell the property for a token $10 to a “special servicer.” A special servicer sells troubled properties to recoup money for the mortgage lender.
Rockvale tenants were notified by letter Tuesday of the pending change in ownership, according to a merchant there.
But the letter only told tenants that the buyer is Rockvale Acquisition LLC, not the identity of the firm behind that name — Wharton Realty.
Settlement to complete the purchase is several weeks away, the Wharton Realty spokesman said.
Two-step process
Real estate industry sources, who requested anonymity to discuss a transaction that did not involve their client, said the auction was conducted in two phases.
At the conclusion of the first phase on Sept. 12, involving an unknown number of bidders, the top bid was $28 million.
For the second phase, in late September, the field was narrowed to the eight highest bidders to that point. The second phase yielded a winning bid of about $30 million.
Two real estate agents from CBRE, who marketed the Rockvale auction, and the auctioneer who conducted the proceeding did not return messages seeking comment on the process.
Though Rockvale’s woes might seem to be a deterrent at first glance, Wharton Realty has built its portfolio by capitalizing on these kinds of situations.
“The corporate strategy entails purchasing sites below replacement cost with the goal of attaining attractive yields for our investors. …,” its website says.
“We take pride in the fact that we have been successful in rehabilitating several of the buildings from financial loss to become very profitable. Our very strong leasing capability has led us to obtain a portfolio with a 98 percent occupancy rate,” it says.