JV has $1.2 billion to spend on net lease retail

RPT Realty is betting big on the future of net lease retail. The open-air shopping center REIT has formed a joint venture with Singapore sovereign wealth fund GIC, hedge fund manager Zimmer Partners and private equity firm Monarch Alternative Capital to invest $1.2 billion in net lease retail that has essential and high-credit-quality tenants. “Retail is a prime driver of the U.S. economy, whether delivered through brick-and-mortar or online, and both require a strong infrastructure to drive results,” said RPT president and CEO Brian Harper. RPT and friends will spend $470 million over the next three years, including $151 million of 42 single-tenant assets that RPT is putting in to seed the JV.

CMBS mall owners’ tough week

Appraisers reassessed 118 retail-anchored properties that had commercial mortgage-backed securities debt and found the total value — after payment delinquencies, defaults and foreclosures — had fallen by 60 percent, or $4 billion, from the previous assessment. Rating services have downgraded hundreds of mall debt bond tranches.

CMBS or not, others are taking hard looks at their mall portfolios, as well. Simon, Brookfield Asset Management and Starwood Capital Group are shedding money-losing properties and rerouting capital expenditures to top-performing malls. Unibail-Rodamco-Westfield said in its fourth-quarter earnings that it’s waiting until “the investment market reopens” in 2022 to sell it 37 U.S. malls. Washington Prime Group, which operates 100 malls, skipped a February interest payment and has hired restructuring advisers for a possible bankruptcy filing. And Macerich reportedly hired a debt-restructuring expert to help rearrange its debt load.

How short can leases get?

Leases on roughly 1.5 billion square feet of U.S. retail space are set to expire in 2021, according to CoStar Group. That’s about 14 percent of the retail market turning over at a time when the pandemic has accelerated the shortening of lease terms. The days of 10-year leases appear to be gone. The industry’s biggest landlord, Simon, is signing more three-year leases at its malls these days. Outlet landlord Tanger Outlets has also been doing more short-term deals. Meanwhile, Best Buy wants shorter leases on new stores and VF Corp. — owner of Vans, Timberland and other brands — said its average lease term of four years is shortening as new agreements are signed.

Best markets for retail real estate investment

The Southeast is the safest place to park retail real estate investment dollars, according to online real estate investment marketplace CrowdStreet, which has identified The Best Places to Invest in 2021. CrowdStreet predicts that markets with above average population growth and below average unemployment will have a rapid recovery, especially if the city was a tourist destination.

Top five markets to invest in retail real estate

1. Austin
2. Charlotte
3. Nashville
4. Orlando
5. Raleigh-Durham

This time last year

A year ago this week, SCT quoted JLL head of national retail agency leasing Chris Wilson as saying, “For institutional owners with a vacant box, the first choice and the path of least resistance … is to find another retailer, but that game is over.” That game may not be over completely, but the idea that nonretail tenants would become a huge factor in backfilling retail space — that turned out to be more true than anyone realized at the time. Revisit that story and more from SCT’s coverage this week last year:

Retail leasing agents' role could involve nonretail tenants, says JLL’s new U.S. retail lead
Restaurant prospects in 2020
Six leasing tips based on restaurant trends
Ethnic restaurants thrive in U.S.
Coronavirus impact on U.S. purchasing behavior
Who’s paying how much for what
What the retailers are up to
Who’s building what, where

8 retailer updates

• Dollar Tree will expand in rural markets with 50 Dollar Tree/Family Dollar stores that sell a mix of Dollar Tree’s typical $1 seasonal items plus Family Dollar’s food and essentials that cost more. The retailer is aiming the concept at markets with 3,000 to 4,000 people and sees the potential for 3,000 such stores. Dollar Tree bought Family Dollar for $5 billion in 2015.

• Disney plans to focus more on e-commerce and will close 60 North American stores by the end of the year.

• Private equity firm Apollo plans to buy crafts chain Michaels, which operates 1,275 stores, for about $5 billion.

• Tailored Brands, owner of Men’s Wearhouse, is asking its lenders for a $75 million emergency loan after exiting Chapter 11 bankruptcy protection in December. The search for new financing follows “unanticipated declines in its business” in December and early this year, the company says.

• Home gym brand Tonal will put boutiques in 40 Nordstrom stores.

• Burlington posted flat year-over-year, same-store sales growth in the fourth quarter, surprising Wall Street analysts who had expected growth to decline by 10 percent. The discount apparel retailer said it could grow to 2,000 stores from the current 740, based on the success of its Burlington 2.0 smaller store format.

• Supermarket chain Hy-Vee is partnering with The W Nail Bar to open nail salons in select stores. The company operates 265 stores in eight Midwestern states.

• Target wants to build on last year’s sales momentum and plans to open 30 to 40 new stores each year. Some will be near college campuses and in major cities like New York, Los Angeles and Portland, Oregon. The retailer also will remodel about 150 stores by the beginning of the 2021 holiday season and more than 200 per year after that.

Résumé updates

Taubman promoted William Taubman from COO to president and COO. He will lead development, shopping center operations, leasing and strategic communications. Taubman has served as COO since 2005 and sat on the board from 2000 to 2018. He joined the company in 1986 and previously served as executive vice president and as vice president of development and acquisitions, among other roles. Taubman also was ICSC chair for the 2010-11 term.

In memoriam

Former Argentine Chamber of Shopping Centers president Gabriel Gonzalez, a longtime proponent of shopping center development in the region, died in June. Gonzalez served as president of the organization twice. “As the leader of an independent architecture studio, with no other intentions than to promote the development of the industry, he gave a big part of his life participating voluntarily in the directive commissions of the chamber for more than 25 years,” said 1Por1 Marketing Integrado president Oscar Piccado. “He will be remembered as passionate about shopping centers, as a partner committed to the activity, but above all as a great person and friend.”

Kirk Krull, vice president of real estate and development for shoe retailer Show Show Inc., has died. Krull began his career with the company 31 years ago as director of construction after making a name for himself opening gyms and healthclubs in the Charlotte area.

The latest retail property deals

Apollo will acquire The Venetian resort complex from Las Vegas Sands for $2.25 billion. Vici Properties then will enter into a 30-year, triple-net lease agreement with Apollo for the property with annual rent of $250 million. Located on the Las Vegas Strip, The Venetian has three hotel towers with 225,000 square feet of gaming space, 2.3 million square feet of meeting space and the iconic Grand Canal Shoppes.

Tricor Financial Corp. sold the 88,456-square-foot, Winn-Dixie-anchored Cobblestone Commons in Boynton Beach, Florida, to Cobblestone U.S.A. for $38 million. Other tenants include PetSmart, Club Pilates, Sport Clips Haircuts and Lang Realty.

In a $30.1 million sale-leaseback, Harps sold 13 freestanding grocery stores totaling 459,525 square feet in Arkansas and Missouri to Essential Properties. CBRE represented the seller. The sale is subject to new, long-term net leases with Harps-operated brands like Harps Food Stores and 10Box Cost-Plus.

Rothenberg-Rosenfield acquired the 64,164-square-foot, Whole Foods-anchored Victory Station in Savannah, Georgia, from Clarion Partners for $24.7 million. Other tenants are PetSmart, Chipotle, T-Mobile, Zoës Kitchen and four local businesses.

Country Wide Mortgage Funding LLC sold the two-building, 97,418-square-foot Shoppes of Oakland Forest in Oakland Park, Florida, to ACS 2901 LLC for $10.7 million. Family Dollar, Peter Glenn and Coco Beauty Supply are tenants.

A 6,447-square-foot center in North Dartmouth, Massachusetts, traded for $3.5 million. Five Guys, Jersey Mike’s, Tropical Smoothie Cafe and Edible Arrangements are tenants. Marcus & Millichap represented the buyer and the seller, both private investors.

The latest shopping center developments

Branch Properties and Merganser Enterprises LLC are developing Merganser Commons at Dogwood Estates in Milton, Florida. The 66,921-square-foot shopping center is slated for completion in April 2022 and will include a 46,811-square-foot Publix, the first in the area; two other buildings totaling 20,110 square feet; and a 1.3-acre outparcel.

De La Vega revised the masterplan for its 27-acre mixed-use development The Central Dallas to include more park space and open-air areas. Leasing agent Falcon Realty Advisors plans to assemble local and national tenants that cater to health and wellness. The project will occupy the site of the famed Leaning Tower of Dallas, which came down on Tuesday. Phase 1 of The Central Dallas includes 350,000 square feet of office, a high-rise featuring 350 apartments, almost 29,000 square feet of retail and restaurant space, a parking garage and a four-acre park. De La Vega plans construction on Phase 2 of by the fourth quarter.

Quannah Partners and Outpost are renovating the 59,000-square-foot Paramount Heights Shopping Center in Wheat Ridge, Colorado, into Gold’s Marketplace, named for the Gold’s Corner Grocery that operated there from 1988 until 2014. Renovations include the facade, parking lot, sidewalks and outdoor seating areas. “We are not marketing to any national tenants,” said Quannah partner Bobby Ghiselli. “We really want this to be supportive of local businesses, local crafts and Denver- or Colorado-based companies.”

Smith’s Marketplace will anchor the 31-acre Cadence Village Center, part of the master-planned Cadence neighborhood in Henderson, Nevada. The $24 million store, which will sell everything from apparel to groceries, is set to open in November.

RD Management is redeveloping Tampa, Florida’s University Mall and much of the adjacent section of Fowler Avenue into Rithm at Uptown with multistory buildings, restaurants and shops. The project has been in the works for more than five years and is expected to be completed within the next five years. Some of the mall’s existing infrastructure will remain, and there’s capacity for 7 million square feet of new development. Construction on the over $1 billion project has begun, starting with the recent demolition of the Sears to make way for a $60 million student housing apartment complex and a two-tower hotel.