Editor’s Note: The 25th annual Chain Store Age survey of Fastest-Growing Acquirers surveyed retail square footage purchased during the 2013 calendar year.
Lenders are lending again, the equity markets are investing again, and buyers and sellers appear to be moving retail real estate faster than last year — which was a relatively good recovery year.
As usual, this year’s Fastest-Growing Acquirers survey include regulars and newcomers. With one exception, the top five acquirers profiled here report significantly more acquired square footage for 2013 compared with 2012.
While few are cheering yet, most agree that the slow recovery is proving persistent and will eventually shift into a higher gear.
Cole Real EstateInvestments
With 2013 acquisitions of 12,265,867 sq. ft., Cole Real Estate Investments more than doubled last year’s total of 5.5 million sq. ft. The company spent approximately $12.5 billion on 317 properties spread across 30 states. About $11.3 billion of the total went for single-tenant retail properties. The remaining $1.2 billion acquired power centers and grocery-anchored centers, according to Thomas W. Roberts, executive VP real estate, American Realty Capital Properties.
Roberts was executive VP with Cole but joined ARCP after the two companies merged late last year.
Notable 2013 single-tenant Cole acquisitions included 27 CVS stores in a $125.4 million sale-leaseback transaction and a Dollar General portfolio of 31 properties for $41.7 million.
Among the shopping centers acquired in 2013, notables include The Plant in San Jose, Calif., a 509,687-sq.-ft. power center acquired for $203.1 million. The big-box lineup features Home Depot, Toys “R” Us, Target, OfficeMax, Ross Dress for Less, Best Buy and Ulta.
Roberts said the capital markets environment facilitating these acquisitions was strong. “It is maintaining a healthy spread between interest rates and cap rates,” he added.
American Realty Capital Properties
ARCP acquired 9,887,442 sq. ft. of retail space during 2013. Perhaps the most notable acquisition was the $11.2 billion merger of ARCP with Cole Real Estate Investments, the top 2013 acquirer.
Reporting separately for 2013, Cole and ARCP occupied the first and second position in Chain Store Age’s Fastest Growing Acquirer rankings. Next year’s activity will be reported as one entity.
Another notable 2013 transaction was the acquisition of a GE Capital Portfolio with 447 properties for $826.3 million.
ARCP’s investment strategy is designed to generate monthly dividends from a durable and predictable level of monthly rents paid by primarily investment grade and other credit-worthy tenants and to provide significant growth potential.
The company places a premium on stability of cash flow for stockholders, and therefore sustains a property portfolio blend of both long-term net leases, which provide stability, and mid-term leases, which provide significant rent growth potential.
Phillips Edison & Co.
As equity capital has returned to the market, it fueled a surge in buying at Phillips Edison & Co. The company acquired over 6 million sq. ft. of retail real estate last year, approximately double 2012 levels.
“We have expanded access to capital and multiple pools of capital to tap,” said Hal Scudder, the company’s chief investment officer. “All of our capital is discretionary, which enables quick executions.”
That discretionary capital provided $1 billion for 39 transactions with a total of 57 properties during 2013. Five of the transactions were portfolios.
“This year, we’re tracking or exceeding our 2013 volumes and expect that to continue,” Scudder said.
Phillips Edison’s transactions are notable for their similarity. “While we’re buying more stabilized properties than in the past,” continued Scudder, “we mostly acquire grocery-anchored properties with leading national or regional grocers — in primary and secondary markets.
“The grocer has to be one of the chain’s stronger performers, and it must be the right size for the market. All told, we have more than 30 grocery banners in our portfolio.” Scudder did note one change: During the recession, Phillips Edison added distressed power and lifestyle centers to its property types.
Inland Real Estate Group of Cos.
Last year’s fastest-growing acquirer, The Inland Real Estate Group of Oak Brook, Ill., bought 4,037,233 sq. ft. of retail real estate in 2013, fewer than half the 9,143,387 sq. ft. acquired in 2012.
“I didn’t see enough good things to buy,” said G. Joseph Cosenza, the company’s vice chairman. “It was a slow year for retail. We were buying multi-family.” Two transactions were notable for their size. The first is a portfolio of 72 CVS drug stores spanning 949,799 sq. ft., acquired for $333,802,796.
The second transaction consists of two properties totaling 73,000 sq. ft. in Lake Geneva, Wis. Lake Geneva Commons is a 55,077-sq.-ft. shopping center on the outskirts of town. Newport West is a 17,962-sq.-ft. retail building in downtown Lake Geneva.
Inland paid about $17 million for both.
Cosenza calls it a cute deal. Lake Geneva, population 140,000, is the weekend home of 50,000 members of Chicago’s wealthiest families.
The town’s year-round residents patronize Lake Geneva Commons. Anchored by Target and Best Buy, the inline tenants include Sally Beauty, Mattress Firm and Maurices.
Weekend tourists visit Newport West for breakfast, lunch, clothing and necessities.
“We got the whole town plus tourists,” Cosenza said.
Phoenix-based Vestar had a big 2013, acquiring 3,856,403 sq. ft. of retail space. By comparison, Vestar acquired less than 1 million sq. ft. in 2012. “It was a good year partly because acquisitions we were working on at the end of 2012 came through in 2013,” said Vestar president David Larcher.
Going into the recession, Vestar was primarily a developer. Post-recession, with no projects to develop, the company tried acquiring distressed properties and using its expertise as a developer to renovate, redevelop, re-tenant, lease and manage the property. It worked, and Vestar has become an owner and manager.
A notable 2013 acquisition was the 1.1 million sq.-ft. Orchard Town Center in Westminster, Colo. Anchored by AMC Theaters, Target, Ross Dress for Less and Life Time Fitness, the regional mixed-use property had seen its occupancy rate fall below 90%.
Vestar is bringing the property back.
“This is a very significant regional project,” Larcher said, “and we’re implementing value-added strategies — with great success.
“We have signed a 20,000-sq.-ft. H&M, and we have about 50,000 sq. ft. of additional leases under negotiation. Those leases could bring the property up over 95% occupied. We expect to get there within 18 months.”
Many acquirers did well during 2013, and CSA has added three honorable mentions to recognize a trio of firms with strong acquisitions last year:
- Rouse Properties, New York City
Rouse acquired 2,337,464 sq. ft. in 2013, made up of three major purchases: the 1 million sq.-ft. Chesterfield Towne Center in Richmond, Va.; the 862,000-sq.-ft. The Centre at Salisbury, in Salisbury, Md.; and the 460,000-sq.-ft. Greenville Mall, in Greenville, N.C.
- Cypress Equities Real Estate Investment Management, Dallas
Cypress Equities acquired 2,284,773 sq. ft. last year, comprised of four major buys. The company acquired the 1 million-plus-sq.-ft. Lloyd Center in Portland, Ore., a mall complex featuring an ice-skating rink and cinemas along with expansive retail and dining options. Other 2013 acquisitions included Tannehill Promenade in Bessemer, Ala.; Eden Prairie Center, in Eden Prairie, Minn.; and Marketplace at Smyrna, in Smyrna, Tenn.
- Kimco Realty Corp., New Hyde Park, N.Y.
Kimco’s 2,262,000 sq. ft. of retail properties acquired in 2013 spanned 12 states, and ranged in size from a 15,000-sq.-ft. parcel in Colma, Calif., to the 317,000-sq.-ft. Atascocita Commons in Humble, Texas.