Many grocers are looking outside traditional food products to draw more shoppers into their stores, such as Lidl, which is launching a fashion line with supermodel Heidi Klum. Kroger sells rugs and linens alongside its grocery items, ALDI mixes up its non-food offerings like curling irons and shower heads each week and Sprouts Farmers Market entices organic food shoppers with yoga mats and beeswax candles.
The market would be receptive to an initial public offering in a nontraditional asset category, such as an industrial REIT IPO or a data-center REIT IPO, says Dirk Aulabaugh, managing director with Green Street's Advisory Group. Retail REITs may be better-suited for privatization targets, as some will require capital to turn around struggling malls "and the public markets might not be the best place for that to happen," Aulabaugh says.
Gramercy Property Trust has acquired a 7.8 million-square-foot warehouse portfolio for $479 million and, separately, is launching a joint venture to focus on new US e-commerce distribution facilities. It has made a $642 million forward purchase for the joint venture, consisting of seven new bulk distribution properties.
Listed equity REITs are sometimes categorized with small-cap value stocks -- the best-performing non-REIT part of the stock market -- but have outperformed them over long investment periods while providing substantially lower volatility and better diversification benefits.
The e-commerce boom has increased industrial properties' valuations, with cap rates falling to 6.66% in the first half of 2017; retail valuations, by contrast, have been adversely affected, with cap rates rising to to 7.31%. Brick-and-mortar landlords are trying to counter this trend by incorporating elements of online commerce into the buying experience.
Despite recent conflicts between REITs and skilled-nursing tenants, there is a future for REITs in this space, experts say. "REITs such as Omega, Sabra, CCP and Quality Care Properties are seeking to expand their SNF base," says Mark Myers of Institutional Property Advisors.
Home prices in the US rose 6.6% year-over-year in the second quarter and increased by 1.6% from the previous three months, according to the Federal Housing Finance Agency. "The tight inventory is a major explanation for why house prices have been increasing every quarter over the last six years," says William Doerner, senior economist at FHFA.
GBT Realty Corp. has delivered more than half a million square feet of new retail space in the Midwest. The three projects it completed are The Shoppes at Mid Rivers near St. Louis, The Shoppes of Benton near Little Rock, Ark., and Silver Lake Village in Bartlesville, Okla.
The Walmart Central Shopping Center in Folsom, Calif., has been sold to Nazareth Enterprises for $39.7 million. The 139,377-square-foot center features Great Clips, 24-Hour Fitness SuperSport Gym and a 99 Cents Only store.
NewQuest is developing an open-air retail area with more than 1.8 million square feet of space in Rosenberg, Texas, and will add a Pet Supermarket location to the property. The Brazos Town Center development includes 620 multifamily units and an office park, along with smaller retail locations.
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