Friday, February 26, 2010

Grocery shopping centers are hot

"Three grocery-anchored shopping centers have traded in recent weeks and a fourth one is set to close for about $50 million in May, highlighting a boost of investor interest in these types of commercial properties.

Although additional centers are expected to hit the market, retail brokers say there are more interested investors than there will be centers in which to invest.

“There’s definitely a strong appetite for best of class, grocery-anchored centers,” said an investment broker. We are preparing to market for sale a couple of these types of centers in the next few weeks. He expects one of the properties will generate a “tremendous” amount of interest. The property, which he declined to name or locate, is a grocery-anchored center that has a long-term lease with a top-tier grocery store.

Last fall, Morrell Plaza set off what has become a boost in sales activity in the region. Morrell Plaza, a 103,244-square-foot center in Northeast Philadelphia was sold for $22 million to Levin Management Corp. of Plainfield, N.J.

“I think it’s a great sign for a couple of reasons. The grocer-anchored center is really the cornerstone for all real estate. Everybody needs to eat and therefore grocery stores and the centers they rest in will always have a place in this world even with the advent of the power center and malls. The good old-fashioned supermarket-anchored centers still represent stability in an unstable world.”

The recent sales have also begun to establish property values for at least that property type. For the last year or so, buyers and sellers have been at odds as to the worth of real estate as values have fallen.

Three of those recent sales:

Bensalem Crossing, a 67,000-square-foot center off Neshaminy Boulevard that is anchored by a ShopRite and a CVS. It’s fully leased. The Goldenberg Group of Blue Bell sold the 10-year-old center to a private investment partnership from New Jersey for $13.6 million, just shy of the $14 million asking price. The property garnered multiple bids and was on the market for fewer than 40 days before going under contract. “Marketing to closing was less than four months."

Lakeview Shopping Center, a 190,000-square-foot center off Route 422 in Royersford is anchored by Giant and has a Marshalls and a Kohl’s, and a TD Bank branch, among other stores, and is fully leased. Reitnour Investment Properties of Phoenixville sold the property for $23.5 million to One Liberty Properties of New York. The center was constructed in 2001 and was on the market for three months. Twenty-seven offers came in on the deal, which included the assumption of a loan. “It was a very competitive process."

Towne Square Plaza, a 123,000-square-foot center on Fifth Street Highway in Reading is anchored by a Giant and has A.C. Moore and PetSmart as other tenants. The property was fully leased and constructed just two years ago. While the asking price was $19.2 million, it traded for $18.85 million. “We marketed for three months and closed within 60 days."

If all goes according to plan, that next deal could close for about $50 million sometime in May.

Investors are looking for properties that are not only grocery-anchored but the grocer must be the dominant player in the market it is serving.

While investors and institutions had been chasing office buildings before the real estate peak in 2007, they have switched their focus to these types of shopping centers as a safe bet.

“The perception is the grocery business is very well insulated from the volatility of the economy. There’s more capital this year that is chasing best-of-class properties. The problem is, in those markets, very few trade. There’s a fair amount of private and [real estate investment owned] assets and they are difficult to get their hands on.”

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