SANTA MONICA, CA—Investment sales hit a peak in 2014 with $423.8 billion in total deals, but retail properties in particular saw the biggest gain in volume, with $81.4 billion in total deals. That's a 31% gain in volume over the prior year, according to Real Capital Analytics, but the category saw the lowest price appreciation, with a 5% uptick in prices.
Drilling down deeper into the 7,813 retail properties that traded, RCA discovered an average price per square foot of $202, with a mean cap rate of 6.8%, down 25 basis points over the prior year.
Of course, that total included portfolio sales, one of which has gone down in Real Estate Forum books as a 2014 Deal of the Year. Late last year, more than 6.7 million square feet of retail space across the country changed hands for a total consideration of $1.9 billion, or $575 per square foot.
The transaction was actually a partial-interest sale, with the Ontario Teachers' Pension Plan Board transferring its 49% stake in the five-asset portfolio to its joint venture partner of 15 years, Macerich Co. The locally based REIT met the price tag through the assumption of $673 million in debt and the issuance of $1.22 billion in common stock to Cadillac Fairview Corp., a subsidiary of the OTPB. The deal also gave Cadillac Fairview a 10.9% ownership stake in Macerich, and gave the entity's CEO, John Sullivan, a seat on its board of directors.
The properties include Lakewood Center in Lakewood, CA; Washington Square in Portland, OR; Los Cerritos Center in Cerritos, CA; Stonewood Center in Downey, CA; and Queens Center in New York City. The latter is the highest-grossing of the properties at $1,089 per square foot across 971,000 square feet; the largest of the five, the 2.1-million-square-foot Lakewood Center, is also the lowest grossing at $429 per square foot. The portfolio averages 97% occupancy.
“In a sector in which quality acquisition opportunities rarely present themselves, the opportunity to consolidate our ownership in these highly productive, market dominant centers through a stock-for-asset exchange represents a real opportunity to increase our overall portfolio quality and growth prospects,” says Art Coppola, chairman and CEO of Macerich.
“On a sales per-square-foot basis, Queens Center and Washington Square are currently our two most productive assets, both generating sales of over $1,000 per square foot while Los Cerritos Center, which is currently generating nearly $700 per square foot in sales and undergoing a $45-million expansion, represents the linchpin of our dominant South L.A. market position, along with Stonewood and Lakewood.”
Keep an eye on GlobeSt.com for more previews of the finalists for Forum's Deals of the Year 2014. For more information on the issue, or to participate, contact Gregg Christensen.
Plus, if you have a project that has made its debut in the past decade, check out our Pioneering Projects: Developments That Make a Difference, to appear in Forum's April 2015 issue.
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