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commercial real estate, grocery anchored, grocery anchored shopping centers, investing, real estate investment, regency centers, reit, shopping centers
By focusing on infill grocery anchored shopping centers in areas with household incomes above the national average, this REIT hedged it’s bets by replacing the underperforming portion of it’s portfolio with a high growth factor.
The acquisition strategy is basically one of recycling; selling assets that are non-strategic or that have potential erosion for future net operating income, and reinvesting that into shopping centers that meet high standards, especially as it relates to reliability for future growth in net operating income.
Since the beginning of 2010, Regency Centers Corporation (NYSE: REG) has sold nearly $100 million of properties and acquired more than $200 million. the household income within a three-mile radius of the acquired properties is over $115,000 and the supermarkets average sales are nearly $700 per square foot. ”Most important of all, projected NOI growth on the centers we are buying exceeds 2%, while the NOI from the sold centers was declining by over 10%”, said the Chairman and CEO of Regency Centers Corp, Martin Stein, Jr.
They primarily target major markets and university town. Almost 90% of thier NOI is generated from the top 50 markets, while 70% comes from the top 25 markets. They particularly like coastal California, the Pacific Northwest, Dallas, Houston, Austin, Denver, Chicago, Florida, Atlanta, Raleigh and D.C.
Regency Centers made the decision to focus on grocery-anchored shopping centers. How has that decision helped the company in this market wherer the retail sector continues to recover?
Supermarkets are necessity oriented. As you know people have got to eat. Our super markets agerage about $25 million in sales per year, which translates into over 10,000 customer trips every week.
The second largest category of tenants in our centers is restaurants, and restaurants have also held up fairly well.
The strategy of highly productive grocery anchored shopping centers in trade area with above average household income is one that will produce future reliable growth in net operating income. In that regard, approximately 80% of the portfolio benefits from household incomes above $100,000 or grocery sales above $22.5 million or $500 per square foot. In my view, this strategy has proven to be pretty darn resistant to the impact of recessions and an increase in internet shopping, although we are not immune.
Author, Jason Tropf
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