REIT Earnings Report Q4 2023
Earnings Recap & Forward Momentum: Q4 2023 to 2024
The open-air shopping center REITs recently wrapped up their earnings calls for Q4 2023 and issued guidance and expectations for 2024. Leasing demand and property operations remained strong as tenant demand to lease space and open stores has not waned. Brixmor increased total leased occupancy to 94.7% and small shop leased occupancy to 90.3%, both record highs. Kimco said the demand came from anchor boxes and small shop spaces. Anchor occupancy rose 80 basis points sequentially to 98%, the highest quarterly gain in a decade, while small shop occupancy rose to 91.7%, surpassing a previous record high of 91.1%.
Despite continued volatility and uncertainty in the market, many REITs feel well-positioned for transactions and expressed optimism heading into 2024. Kimco is guiding to $300M to $350M worth of acquisitions for 2024 with blended cap rate expectations between 7% to 8%, most of which will be weighted later this year. It also plans to sell between $350M to $450M with blended cap rate expectations between 8.25% to 8.75%. Regency is guiding to $100M of dispositions with an expected blended cap rate of 5.5%. Phillips Edison expects between $200M to $300M of acquisitions net dispositions. For the STNL REITs, Realty Income is guiding to an acquisition volume of $2B. However, both Agree Realty & NETSTREIT did not provide acquisition guidance because they feel cap rates are still moving.
Site Centers led the way in Q4 transaction activity, selling 12 wholly owned shopping centers for a combined price of $736M across Massachusetts, North and South Carolina, Cleveland, California, and Florida. Site Centers’ Q4 dispositions were sold at a blended cap rate of 6.5%, ranging as low as 5% and higher than 7%. On the acquisition side, they purchased four centers for $62M in Charlotte, North Carolina, Cape Coral, Florida, Atlanta, and Phoenix. In addition to Q4 acquisitions, Site Centers also has $750M of real estate under contract or at LOI at a blended cap rate of 7%. Most acquisitions are dominant power centers in primary markets, and around 30% contained a grocer.
Also active with acquisitions was Phillips Edison, which purchased six centers and two outparcels for $186M across Atlanta, Houston, Rochester, Minnesota, Chicago, Orlando, Florida, and Sacramento, California. Average occupancy was 84%, meaning Phillips Edison can leverage lease-up opportunities to hit its 9% unlevered IRR target. Regency Centers acquired two centers, Nohl Plaza in Orange County, California, and Longmeadow Shops in Springfield, Massachusetts, at a going-in cap rate of ±8%. It sold Braemar Village Center in Washington, D.C., for $7.8M and Glengary Shoppes in Sarasota, Florida, for $31M. After quarter-end, Kimco closed on its acquisition of RPT. It was more active in selling during Q4 as it sold five centers and one land parcel for a total of $141M located in Cherry Hill, New Jersey, Philadelphia, and California.
After quarter-end, it sold one of RPT’s properties in Carmel, Indiana. During the first half of 2024, Kimco plans to sell a select group of RPT assets, primarily in the Midwest, and recycle the capital into higher-growth assets. It anticipates these dispositions to sell at around an 8% cap rate. ROIC acquired the Sproutsanchored Foothill Plaza in La Verne, California, for $21.8M, a high-six cap.
Acadia Realty completed its acquisition of Maple Tree Place in Williston, Vermont, for $77.8M and sold 146 Geary in San Francisco for $20.1M. Brixmor was relatively quiet on the acquisition side but sold $2.6M of properties in Charlotte, North Carolina, Chicago, and Des Moines, Iowa. After quarter-end, it sold one of its Detroit, Michigan assets for $12.4M, a mid-six cap. Kite Realty disposed of the previously announced Eastside in Dallas, Texas, for $14.4M. Federal Realty closed on the previously announced disposition of Third Street Promenade in Santa Monica, California, for $17.2M.
Realty Income led the way for STNL REITs by purchasing 134 properties for $1.2B at a WALT of 13.6 years and an average cap rate of 7.1%, 20 basis points higher than the previous quarter. Agree Realty purchased 50 properties for $187M at a cap rate of 7.2%, 30 basis points higher than the previous quarter and 80 basis points higher than the same period the year prior, marking the first time its cap rates on acquisitions were north of 7% since 2019. NETSTREIT acquired 57 properties for $119M at a 7.2% cap rate and a WALT of 10.9 years. It expects acquisitions for Q1 2024 to be another 20 basis points higher than the previous quarter. A common sentiment from all STNL REITS is that cap rates are all over the board, and they’re still seeing volatility in the market due to a lingering disconnect between buyers and sellers.
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