Fourth-ranking acquirer Inland Real Estate Group of Cos. purchased Sherman Town Center in the heart of Chicago’s hottest Lake Shore suburb for development, Evanston, Ill.

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Editor’s Note:Chain Store Age’s 18th annual survey of Fastest-Growing Acquirers measured retail square footage purchased during the preceding calendar year–2006.

With capitalization rates continuing at record lows, and record high prices for retail real estate, a casual observer really might not expect to see companies acquiring more than 30 million sq. ft. of retail space in a year.

Yet the top two acquirers for 2006 did exactly that, helping to consolidate a still-fragmented open-air business in the United States, and extending their reach outside the country.

And the consolidation shows no sign of slowing down, with a parent of top acquirer Centro Watt already agreeing to buy No. 5-ranked New Plan Excel Realty Trust.

No. 1: Centro Watt

2006 Fastest-Growing Acquirers

Centro Watt placed first among acquiring companies in 2006, and now its co-parent, Melbourne, Australia-based Centro, has announced plans to acquire New Plan Excel Realty Trust.

The 2006 numbers were dominated by Centro Watt’s $3.3-billion purchase of Heritage Property Trust, a transaction that added 22 million sq. ft. of retail space at once.

“The market in the United States is very deep and broad,” said Tony Torney, COO of Philadelphia-based Centro Watt.

Centro Watt also is a joint venture of Santa Monica, Calif.-based Watt Commercial, giving the company fund-ing—and motivation.

“We have a lot of money coming out of the Australian capital markets,” Torney observed. In addition, most of the local institutional-grade assets already are held by owners not looking to sell in the near term. So Centro Watt has looked to the United States, and also is looking in the United Kingdom for quality retail assets.

Centro Watt
Property Acquisitions Completed in 2006

The company entered the United States early in the decade, largely on the West Coast, then became a major player in the Northeast with its 2005 acquisition of Kramont Realty Trust. And future acquisitions certainly are possible.

“Who knows?” Torney said. “We try to look at every opportunity that makes sense to our investors.”

No. 2: Kimco Realty Trust

Adding 36 million sq. ft. to a portfolio involved more than just buying Pan Pacific Retail Properties. Though that single $4 billion transaction added 138 properties totaling 22.6 million sq. ft. to its list, New Hyde Park, N.Y.-based Kimco Realty Trust used various transaction types to build its portfolio.

“The company has done a good job over the years of buying multiple portfolios,” said David Henry, chief investment officer. “Pan Pacific was the fifth public company we’ve bought since 1998.”

Developers Diversified Realty
Property Acquisitions Completed in 2006

But over time, its acquisition strategy is changing, essentially turning the company into managers for pension funds, Henry said. Kimco’s purchases in the United States are largely for pension funds rather than for its own portfolio, he noted.

When investing its own capital, the company is pursuing more opportunistic deals, increasing its investments in Canada and Mexico, and acquiring property in Mexico for ground-up development.

No. 3: Developers Diversified Realty

Long one of the major consolidators of open-air centers, Developers Diversified Realty continued to be a major purchaser in 2006. Perhaps most interesting, the company took a 50% interest in Sonae Sierra Brazil, giving the company interests in nine malls. In addition, it plans to acquire and develop throughout Brazil, feeding both its development and acquisition pipelines. Many acquisitions this year will be part of its $3 billion joint venture with TIAA-CREF, giving the company a new role, that of a fund manager, as well as an owner.

“That’s how we’re able to do these deals,” said Scott Wolstein, CEO of Beachwood, Ohio-based Developers Diversified Realty.

Already this year, Developers Diversified has closed on a $6 billion, 43.6 million-sq.-ft. acquisition of Inland Retail Real Estate Trust, yet another joint venture with TIAACREF.

No. 4: Inland Real Estate Group of Cos.

Kimco Realty Corp.
Property Acquisitions Completed in 2006

Inland Real Estate Group of Cos. dropped from first place among acquirers in 2005 to fourth place a year later, but that does not mean its people weren’t working hard. In fact, they’ve been busier than ever.

“Last year was rather unusual in that we had a much higher percentage of acquisitions that came to us through sellers calling us cold,” said a laughing Joe Cosenza, vice chairman of The Inland Real Estate Group of Cos., Inc., and president of Inland Real Estate Acquisitions, Oak Brook, Ill. “And I’d like to thank each and every one.”

But such transactions are harder on Inland’s staff than buying entire portfolios.

“We might do 200 or 300 a year where others do 100 or even 50.” They’re also a testament to Inland’s success, he added.

“The world woke up to what we’re doing, which is good and bad,” Cosenza said. “It means we’re a step up in people’s eyes, and people want to invest with us.” As of Dec. 31, 2006, The Inland Real Estate Group of Cos., Inc. owned 116 million sq. ft. of retail, as well as industrial and office projects, and undeveloped land.

No. 5: New Plan Excel Realty Trust

In a buyers’ market, sometimes the buyer itself can get bought. A case in point is New Plan Excel Realty Trust. At presstime, New Plan was to be acquired by Melbourne, Australia-based Centro Properties Group, a parent of top-ranking Centro Watt, for $6.2 billion.

During 2006, New Plan added nearly 4.4 million sq. ft. in 15 states for an aggregate investment of $515 million, including $336 million of co-investments, despite low cap rates and competition for the best properties.

“Our access to multiple capital sources and capacity to efficiently source, underwrite and integrate assets on a national basis [given our state-of-the-art national infrastructure] has become increasingly important given the highly competitive market for our property type,” said Stacy Slater, senior VP of corporate communications.

Transactions included acquisitions of neighborhood and community centers in Tennessee, Illinois and Texas, among other states, both individually and in partnership.

At presstime, the acquisition by Centro was expected to be completed in the second quarter of 2007.

Inland Real Estate Group of Cos.
Property Acquisitions Completed in 2006

No. 6: DLC Management Corp.

Its niches may be narrow, but they are deep—deep enough for Tarrytown, N.Y.-based DLC Management Corp. to acquire 4 million sq. ft. of retail space last year (at a combined price tag of $355 million), enough for it to rank sixth on this year’s list.

Those niches are open-air centers in older markets with ethnic diversity that need just a bit of help, and centers in university towns.

“We don’t buy the Triple-A’s, and we don’t buy the C centers and down,” explained Adam Ifshin, president. “We’re operating in this space that a lot of people don’t understand, or have the ability to proceed operationally once they get a project.”

Among its transactions last year were a 10-center acquisition from Edens & Avant, and individual projects through the year.

“We look at every asset and ask, ‘Can we do a unique business plan that will get us the returns we want?’” Ifshin said. The company regularly assesses its capabilities, and literally has a playbook for each stage of future growth.

That’s particularly critical now that the company is adding a new focus—ground-up development. The company formed a development division in 2006, and plans more than $100 million in new projects this year.

New Plan Excel Realty Trust
Property Acquisitions Completed in 2006

DLC Management
Property Acquisitions Completed in 2006