Retail REITs Focus on Grocery-Anchored Properties
American Finance Trust completes its $547-million acquisition of 44 open-air US shopping centers, renames itself The Necessity Retail REIT.
Grocery-anchored shopping centers, which were doing well before the pandemic hit, have retained their attraction to real estate investors that are finding prices for industrial and multifamily properties too high.
Acquisitions of grocery-anchored shopping centers are fueling growth in Retail REITs that are focused on “Necessity-Based” retail tenants that offer better risk-adjusted returns and may fare better than other sectors if the inflationary cycle produces a recession.
American Finance Trust, which announced Monday that it has completed its $547-million acquisition of 44 shopping centers from CIM Real Estate Finance Trust, also unveiled a new name that embodies its marketing strategy: The Necessity Retail REIT, which will trade on the Nasdaq as RTL.
“Today’s acquisition of 44 open-air shopping centers featuring necessity-retail tenants makes this the ideal time to complete our rebranding,” said Michael Weil, CEO of RTL, in a prepared statement. “We are well on our way to being the leading REIT that is focused on assets leased to Necessity-Based retail tenants.”
RTL’s full name will include the slogan “Where America Shops.”
Weil said the acquisition, the first tranche of a $1.3-billion deal with CIM to acquire 9.5M SF of retail space that includes include 79 Power, Anchored and Grocery Centers, will strengthen RTL’s holdings—including “a significant concentration of desirable grocery-anchored shopping centers—in high-growth markets, primarily in the Sun Belt.
RTL says its retail portfolio now includes more than 1,000 properties encompassing 29 million SF and generating more than $382 million in Pro-Forma annualized straight-line rent. The addition of new grocery centers will increase the share of RTL’s Pro Forma mult-tenant SLR derived from grocery centers to 22 percent, Weil said.
Regency Centers Corp., which owns and operates 415 neighborhood retail centers with 56 million SF of space, is one of the fastest-growing REITs based on a 50/50 weighting of their most recent quarterly YOY revenue growth and earnings-per-share. Jacksonville, FL-based Regency says 80 percent of its retail centers are grocery-anchored.
Another retail REIT that is one of the leaders in grocery-anchored shopping centers is Cincinnati-based Phillips Edison & Co. (PECO), which has a portfolio of nearly 290 shopping centers comprising 30 million SF in across 31 states. At the end of 3Q 2021, PECO reported a leased occupancy rate of 95.6 percent.
FNRP, a Red Bank,NJ-based real estate investment firm, has been an active buyer of grocery-anchored shopping centers, according to data from Real Capital Analytics. FNRP acquired 11 grocery-anchored shopping centers in 2021 and has up to a dozen deals in its pipeline.