Slate Retail REIT’s deal to buy seven grocery-anchored assets, announced in mid-March and then canceled thanks to COVID-19, is back on, though for less money. Slate will pay $90 million, or $144 per square foot, rather than the $106.5 million initially agreed upon. The properties are on the East Coast and anchored by Food Lion, Harris Teeter and Weis. “Our disciplined acquisition approach has enabled us to acquire the portfolio on an opportunistic basis well below replacement cost,” said CEO David Dunn.

As the roiling economy forces properties onto the market, Kimco Realty is raising capital to make opportunistic purchases. The REIT has launched an independent investment vehicle to raise between $50 and $100 million to spend on opportunities arising from market disruptions, including COVID-19. A Kimco subsidiary will earn fees for managing the fund.

A 43,000-square-foot retail condominium in downtown San Diego traded for $22 million. The property — which has a long-term, triple-net lease with Albertsons — was part of a 1031 exchange for an apartment complex in Los Angeles. “This was a once-in-a-generation opportunity to purchase a landmark net leased grocery asset with a long-term triple-net lease in downtown San Diego’s East Village, one of our region’s most rapidly developing and booming neighborhoods,” said Alvin Mansour, executive managing director of investments for The Mansour Group of Marcus & Millichap, which consulted on the deal. “This is exactly the buyer profile we see so frequently, a Southern California private investor exchanging from a large multifamily complex into a passive and generational net leased property.” Marcus & Millichap and Flocke & Avoyer represented the seller, a San Diego ownership group. The property is within walking distance of Petco Park and the San Diego Convention Center.

A different story for casual dining net lease

Net lease transactions in the casual dining sector have, for the most part, been put on hold until the trajectory of the pandemic is more certain, according to The Boulder Group. Economic turmoil drastically reduced the price of such properties during the first quarter, according to the real estate services firm. In the first quarter, national asking cap rates in the single-tenant casual dining sector increased to 6.59 percent, the firm says. That’s a 27 basis point year-over-year increase. “The sector is heavily bifurcated amongst casual dining brands,” said Boulder Group president Randy Blankstein.

Applebee’s properties were hit especially hard, as cap rates rose 25 basis points. Ruby Tuesday, Red Robin and Golden Corral also dragged down the category, he added. “Corporately guaranteed leases or large franchisees with strong financials will remain in the highest demand among private investors due to investors’ flight to quality,” he said.

Before making acquisitions, investors are monitoring how restaurants perform as they reopen with limited seating capacity. Investors will pay closer attention to in-place rents, sales performance, residual real estate and the strength of the lease guarantor and restaurant brand, Blankstein said.