The Big Get Bigger
Editor’s Note:Chain Store Age’s 18th annual survey of Fastest-Growing Acquirers measured retail square footage purchased during the preceding calendar year–2006.
With capitalization rates continuing at record lows, and record high prices for retail real estate, a casual observer really might not expect to see companies acquiring more than 30 million sq. ft. of retail space in a year.
Yet the top two acquirers for 2006 did exactly that, helping to consolidate a still-fragmented open-air business in the United States, and extending their reach outside the country.
And the consolidation shows no sign of slowing down, with a parent of top acquirer Centro Watt already agreeing to buy No. 5-ranked New Plan Excel Realty Trust.
No. 1: Centro Watt
2006 Fastest-Growing Acquirers| Centro Watt | Plymouth Plaza, Pa. | 37,481,656 sq. ft. |
| Kimco Realty Corp. | New Hyde Park, N.Y. | 36,387,778 sq. ft. |
| Developers Diversified Realty | Beachwood, Ohio | 9,888,836 sq. ft. |
| Inland Real Estate Group of Cos. | Oak Brook, Ill. | 9,683,258 sq. ft. |
| New Plan Excel Realty Trust | New York, N.Y. | 4,358,147 sq. ft. |
| DLC Management | Tarrytown, N.Y. | 4,061,700 sq. ft. |
Centro Watt placed first among acquiring companies in 2006, and now its co-parent, Melbourne, Australia-based Centro, has announced plans to acquire New Plan Excel Realty Trust.
The 2006 numbers were dominated by Centro Watt’s $3.3-billion purchase of Heritage Property Trust, a transaction that added 22 million sq. ft. of retail space at once.
“The market in the United States is very deep and broad,” said Tony Torney, COO of Philadelphia-based Centro Watt.
Centro Watt also is a joint venture of Santa Monica, Calif.-based Watt Commercial, giving the company fund-ing—and motivation.
“We have a lot of money coming out of the Australian capital markets,” Torney observed. In addition, most of the local institutional-grade assets already are held by owners not looking to sell in the near term. So Centro Watt has looked to the United States, and also is looking in the United Kingdom for quality retail assets.
Centro WattProperty Acquisitions Completed in 2006
| Heritage REIT Portfolio | 157 properties in 27 states | 32,500,000 sq. ft. |
| Eagle Rock Plaza | Los Angeles, Calif. | 459,717 sq. ft. |
| Westland Town Center | Lakewood, Colo. | 533,342 sq. ft. |
| Enfield Square | Enfield, Conn. | 798,398 sq. ft. |
| West Park Mall | Cape Girardeau, Mo. | 525,328 sq. ft. |
| Independence Mall | Wilmington, N.C. | 1,021,423 sq. ft. |
| Midway Mall | Elyria, Ohio | 1,110,420 sq. ft. |
| Richland Mall | Richland, Ohio | 533,028 sq. ft. |
| 37,481,656 sq. ft. | ||
The company entered the United States early in the decade, largely on the West Coast, then became a major player in the Northeast with its 2005 acquisition of Kramont Realty Trust. And future acquisitions certainly are possible.
“Who knows?” Torney said. “We try to look at every opportunity that makes sense to our investors.”
No. 2: Kimco Realty Trust
Adding 36 million sq. ft. to a portfolio involved more than just buying Pan Pacific Retail Properties. Though that single $4 billion transaction added 138 properties totaling 22.6 million sq. ft. to its list, New Hyde Park, N.Y.-based Kimco Realty Trust used various transaction types to build its portfolio.
“The company has done a good job over the years of buying multiple portfolios,” said David Henry, chief investment officer. “Pan Pacific was the fifth public company we’ve bought since 1998.”
Developers Diversified RealtyProperty Acquisitions Completed in 2006
| Riverchase Promenade | Birmingham, Ala. | 21,774 sq. ft. |
| Deer Valley Towne Center | Phoenix, Ariz. | 453,815 sq. ft. |
| Paseo Colorado | Pasadena, Calif. | 556,961 sq. ft. |
| Mervyns | San Diego, Calif. | 73,872 sq. ft. |
| Mervyns | Valencia, Calif. | 77,776 sq. ft. |
| Flatacres Marketcenter | Parker, Colo. | 221,520 sq. ft. |
| Turner Hill Marketplace | Lithonia, Ga. | 157,175 sq. ft. |
| McDonough Marketplace | McDonough, Ga. | 22,658 sq. ft. |
| Overland Pointe Marketplace | Overland Park, Kan. | 83,047 sq. ft. |
| Fairplain Plaza | Benton Harbor, Mich. | 222,739 sq. ft. |
| Riverdale Village | Coon Rapids, Minn. | 33,637 sq. ft. |
| Tri-County Mall | Cincinnati, Ohio | 1,336,157 sq. ft. |
| Township Marketplace | Monaca Pa. | 46,470 sq. ft. |
| Frisco Marketplace | Frisco, Texas | 107,543 sq. ft. |
| McKinney Marketplace | McKinney, Texas | 118,967 sq. ft. |
| The Marketplace at Town Centre | Mesquite, Texas | 178,925 sq. ft. |
| 3,713,036 sq. ft. | ||
| 2,748,625 sq. ft. | ||
| 3,427,175 sq. ft. | ||
| 9,888,836 sq. ft. | ||
But over time, its acquisition strategy is changing, essentially turning the company into managers for pension funds, Henry said. Kimco’s purchases in the United States are largely for pension funds rather than for its own portfolio, he noted.
When investing its own capital, the company is pursuing more opportunistic deals, increasing its investments in Canada and Mexico, and acquiring property in Mexico for ground-up development.
No. 3: Developers Diversified Realty
Long one of the major consolidators of open-air centers, Developers Diversified Realty continued to be a major purchaser in 2006. Perhaps most interesting, the company took a 50% interest in Sonae Sierra Brazil, giving the company interests in nine malls. In addition, it plans to acquire and develop