(Save the dates: RealShare Apartments East comes to the Hyatt Regency in Miami, FL, on February 26, and RealShare Los Angeles comes to the Hyatt Regency Century Plaza in Los Angeles, CA, on March 27.)
WOODLAND HILLS, CA-Neighborhood centers that cater to everyday shopping needs are the most successful retail properties right now, Geoff Tranchina, SVP of Wilson Commercial Real Estate, tells GlobeSt.com. Centers anchored by grocery and drug stores, featuring hair salons, dry cleaners and other “daily-needs” retailers, are commanding the best prices and are in the highest demand by investors.
“The regional market is being led out of this recession by the daily-needs shopper,” says Tranchina. “That asset class is leading the way. There are still struggles in the regional and power-center market, and from an investor perspective, it clouds over lots of those retailers’ business models moving forward.”
Department-store-anchored malls still have the most difficult row to hoe, Tranchina addes. “Mall REITs are definitely doing well, but it’s still a challenging environment.”
Tranchina adds that the multifamily sector is driving development, particularly as developers evaluate how to use properties for mixed use, “but it’s not a broad level of redevelopment like in the last cycle. Developers are picking up prime real estate that was distressed for the last couple of years and reworking it to accommodate the market we’re in today—generally, that means less retail and more multifamily.”
As GlobeSt.com reported earlier this week, WCRE has closed retail investment deals valued at $235 million in the past six months. Among the deals is a portfolio of four Southern California shopping centers, which garnered $114 million, on behalf of buyer Retail Opportunity Investments Corp., on which GlobeSt.com previously reported.
According to Tranchina, who represented ROIC in the transactions, “ROIC was seeking retail properties within Southern California that fit strategically with its growing portfolio. These properties were identified as strong assets with high-quality anchor tenants and superior locations within each of the four trade areas. Wilson Commercial was able to ensure a smooth closing process and satisfy the buyer’s stringent acquisition appetite.”
Tranchina added that the four shopping centers represent a balance of stable cash flow, derived from well-established anchor retailers, and numerous value-added growth opportunities. All four centers are anchored by major supermarket chains and total 440,000 square feet of gross leasable space.
Tranchina tells GlobeSt.com that the streak of retail deals begin in September 2012 with the roughly $100-million sale of Inland Western‘s portfolio, which WCRE leased up from 2008 to 2012. “Then, once we got those assets leased, we sold a big chunk of them to Realty Income and collaborated with our partners at CBRE in that sale. It’s a good story of our firm’s deep roots throughout the retail industry, from leasing on the institutional side to investment sales.”
Soon after that, the firm closed Mayhew Plaza, a Smart and Final-anchored shopping center here, also with CBRE’s help. “This was another collaborative deal,” says Tranchina. “We get their national brands, and in a tough environment we want to do the right thing for our client. We got the right buyer after 20-something offers for a very aggressive price.”
Since that time, WCRE has been working closely with ROIC hunting down assets along the West Coast, resulting in the recent closings. “The actual sale was a rare opportunity to transact off-market on a portfolio of grocery-anchored infill shopping centers in Southern California,” says Tranchina.
He adds that there has been a big shift in the number of deals in the market in recent times. “Whereas a year ago, people were still looking for reasons not to do deals, today you’ve got a handful of groups out there aggressively looking to do deals and looking for ways to get deals done. That shift may be manifesting itself in the number of sales transactions we’re seeing across the retail marketplace.”
As GlobeSt.com reported earlier this week, some larger institutions and private-equity groups are so eager to find deals that they’re partnering up with smaller middle-market players to find them, which is a new trend.
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