Regency Centers’ planned $1.4 billion acquisition of Urstadt Biddle Properties at an implied cap rate in the low 7% range is an indication that buyers and sellers are seeing eye to eye on pricing in this turbulent market.

Regency Centers announced Thursday it will buy publicly traded family trust Urstadt Biddle in a stock-for-stock transaction valued at approximately $1.4 billion, including the assumption of debt and preferred stock. Urstadt Biddle, founded in 1969, owns and manages 5.3 million square feet of mostly grocery-anchored retail across 77 properties in Connecticut, New Jersey and New York.

The combined company is expected to have a market capitalization of $11 billion and an enterprise value of $16 billion. The combined portfolio of 481 properties encompassing more than 56 million square feet of gross leasable area will be 80% grocery anchored. The centers will average 120,000 square feet and $24 per square foot in annual rent each.

The deal offers Regency a rare opportunity to acquire a high-quality portfolio that would be instantly accretive to its shareholders. It will have little impact on the firm’s balance sheet and will leave it with enough cash on hand to keep reinvesting in existing properties, said Regency Centers president and CEO Lisa Palmer. “We want to grow our footprint and grow presence in strong suburban trade areas benefiting from positive post-pandemic structural trends, including suburban micromigration and hybrid work.”

Regency Centers expects the deal to close in the third quarter. It’s the biggest retail deal since GIC and Oak Street’s acquisition of STORE Capital for $15 billion — of which $7.1 billion was attributed to the retail portfolio, according to JLL — closed last quarter.

From C+CT in March 2022: What’s Behind the Surge of Mega-Mergers

More Digitally Native Brands Are Going Physical

Digitally native retailers have become a reliable and productive tenant category for marketplaces. Since 2015, when online eyewear brand Warby Parker kick-started digital chains going physical, online brands have continued to join their peers in opening brick-and-mortar stores. Notably, that trend has continued since COVID, as well.

Today, most digitally native beauty and home decor and furnishings brands have opened brick-and-mortar stores, whether they be permanent or pop-up, according to Coresight Research. And about half of online footwear, apparel and accessories brands tracked by Coresight have expanded into physical stores. Retailers that started online have a wealth of consumer data on which to base store opening decisions, making their real estate portfolios more profitable and streamlined, Warby Parker co-CEO and co-founder Dave Gilboa said in The Wall Street Journal. “That’s a massive advantage of starting online. We know where all of our customers are ordering home try-ons or they’re making their purchases.”

One of the latest to go physical is two-year-old online menswear company Collars & Co. Last year, the retailer popped up in Tysons Corner, Virginia. After determining that in-store customers spent more per transaction and are more likely to become repeat shoppers, Collars & Co. will open a store next month under a short-term lease at a mall on Chicago’s Michigan Avenue.

Most online-first retailers launched their first physical stores in New York City’s high-traffic SoHo, but rising rents and competition prompted growing digitally native retailers like Brooklinen, Glossier and Gorjana to look beyond New York to Walnut Street in Philadelphia, the Marina District in San Francisco and M Street in Washington, D.C., JLL manager of national research Ebere Anokute wrote in April. He said the larger base of digitally native brands in those cities owes in part to the efforts of Leap, a service that has helped retailers like Naadam, Thirdlove and A Pea in the Pod to make the jump to physical stores.

C+CT’s Q&A with Leap’s Rebecca Fitts: What Small Businesses Should Consider as They Open Physical Stores

5 Retailers Making Headlines

Century 21, New York City’s iconic off-price luxury department store, is back. Forced to close during the pandemic, the family behind Century 21 has reopened the company’s iconic 100,000-square-foot Cortlandt Street location in the Financial District.

The Home Depot expects its annual sales to decline in 2023 for the first time since 2009, as the renovations and relocation market, overheated since the pandemic, continues to cool. Customers who are worried about a recession are doing smaller renovation projects than they had been, resulting in 4.5% fewer individual transactions during the first quarter than in the previous quarter.

Seeking value, apparel shoppers flocked to TJX stores during the company’s quarter that ended April 29, according to executives. Sales from its stores operating for at least one year climbed by 3% year over year. “Going forward, we are excited about the opportunities we see to gain market share in the U.S. and internationally,” said president and CEO Ernie Herrman. Sales at the company’s apparel-focused Marshall’s and T.J.Maxx outperformed its HomeGoods, which reported a 7% year-over-year decline in sales from stores operating for at least one year.

WHP Global, the parent company of Toys R Us, will partner with travel retailer Duty Free Americas to open the first-ever Toys R Us airport store in time for the holiday season. The store will be in Dallas Fort Worth International Airport, 2022’s second-busiest airport in the world, based on passenger traffic, according to Airports Council International. Toys R Us had closed all its stores but, since its acquisition by WHP Global in 2021, has added branded toy departments at all U.S. Macy's stores.

Who Has Installed the Most Solar Capacity?

Brookfield Properties’ retail division is the biggest user of solar energy among retail real estate property owners, according to renewable energy provider Black Bear Energy. Brookfield has a total installed solar energy capacity of 98.56 megawatts.

Retail landlords among the top 20 commercial real estate firms include Simon with 12.5 megawatts of solar energy capacity installed, Brixmor with 10.28, Kimco Realty with 7.5 and Blackstone with 1.59 at its retail properties. While real estate companies with larger portfolios have an advantage in such a ranking, that is not the only explanation, according to Black Bear senior vice president of client operations Victoria Stulgis. “The real estate companies doing well in the leaderboards and especially the ones punching above their weight class are good at execution,” she said, “and as far as we can tell, they are the best-in-class operators at running their core business, as well.”

Black Bear based its ranking on public information and on outreach to companies known to have successful solar programs. “By publishing it, we have already had additional real estate owners come forward with data on their projects to be featured in the next release,” said Stulgis. “We plan to do this quarterly, so over time the data will be more comprehensive.”