10/10/2012

REIT Carves Big Retail Portfolio Into Pieces

After failing to sell a 7 million-square-foot portfolio of Southeast shopping centers in one bundle, Equity One has begun marketing the properties in smaller, more focused groupings.

As a start, the REIT has put 1.4 million sf on the block in three packages, each assigned to a different broker. All told, they could fetch about $165 million.

Equity One still plans to sell off the other 5.6 million sf — mostly grocery-anchored centers in secondary and tertiary markets. But when it tried this spring to unload the portfolio all at once, investors complained that it was too big and too disparate in quality, property type and location. Bids came in below market expectations of $650 million.

“They were trying to sell apples and oranges,” said one retail pro familiar with the campaign, which was handled by Lazard. Buyers demand bigger discounts “when a portfolio in the retail space doesn’t have a common theme — anchors, geography or similar quality.”

The new listings are:

Nine Atlanta-area shopping centers, totaling 894,000 sf, marketed by CBRE. Could attract bids of $100 million, which would bring a buyer an initial annual yield of 7.5%.

Five Publix-anchored centers encompassing 371,000 sf in Central and Northern Florida, shopped via Cushman & Wakefield. Worth about $45 million, for a capitalization rate of 7.25%.

Publix-anchored centers with strong sales in Alabama and South Carolina, totaling 133,000 sf, listed with Jones Lang LaSalle. At the estimated value of $20 million, the cap rate would be 6%.

Bids on individual properties will be entertained, but the preference is for each package to go to one buyer. The 16 centers are from the middle tier of the original 65-property portfolio.

Eight of the Atlanta-area centers are anchored by groceries — six by Kroger and two by Publix — and the other by Kmart and Academy Sports. The average occupancy rate is 92%. The properties, all in Georgia, are: Butler Creek (96,000 sf) in Acworth; Douglas Commons (97,000 sf) in Douglasville; Fairview Oaks (77,000 sf) in Ellenwood; Grassland Crossing (91,000 sf) in Alpharetta; Hamilton Ridge (91,000 sf) in Buford; Mableton Crossing (87,000 sf) in Mableton; Macland Pointe (80,000 sf) in Marietta; Paulding Commons (210,000 sf) in Hiram; and Shops at Westridge (66,000 sf) in McDonough.

The Florida package is 90% leased. Publix leases 62% of the space and accounts for more than half of the revenue. The properties are: Shoppes of Eastwood (69,000 sf) in Orlando; Lutz Crossing (65,000 sf) in Lutz; Regency Crossing (86,000 sf) in Richey; Publix at Seven Hills (73,000 sf) in Spring Hill; and Oak Hill Village (79,000 sf) in Jacksonville.

The two centers marketed by Jones Lang are the 65,000-sf Madison Centre in Madison, Ala., just outside of Huntsville, Ala., which is fully leased by Publix and Rite Aid; and the 68,000-sf Publix at Woodruff Center in Greenville, S.C., which is 98.7% leased.

Nationwide, Equity One owns 165 properties totaling 16.8 million sf. The North Miami, Fla., REIT is looking to shed relatively small, lower-tier properties in secondary and tertiary markets while acquiring higher-quality shopping centers in top markets such as New York, Los Angeles, San Francisco and Miami.

In trying to sell its Southeast properties en masse, Equity One was hoping to replicate its success last year with a deal that wasn’t quite as large. In that transaction, Blackstone paid $473.1 million for a 3.9 million-sf grocery-anchored portfolio. Lazard advised Equity One.

A flood of other big retail packages hit the block last year, but most were pulled or broken up amid lackluster bidding. Blackstone remains one of the few buyers able to take down big packages. In July, it paid Regency Centers of Jacksonville $321 million for a 2.1 million-sf portfolio made up of 15 centers in California, Florida, Illinois, North Carolina, Ohio and Texas.

Regency is shopping another big retail bundle, worth an estimated $335 million, via Cushman. While bidding for the 1.5 million-sf package has been strong, it appears likely that it will be broken up and sold to several buyers.

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