REIT Earnings Recap & Forward Momentum: Q3 2024
Quarterly Insights from Open-Air Shopping Center REITs
The open-air shopping center REITs recently wrapped up their earnings calls for Q3 2024 and gave their insights on what they expect for the remainder of the year. Property operations continue to remain rock solid as occupancy numbers and leasing pipelines remain at record highs. Federal Realty reported its highest quarter ever of FFO per share, driven by its 95.9% leased portfolio. This is a 60-basis-point increase over the prior quarter. Kimco increased its occupancy to 96.4%, which matches an all-time high. They also grew their small shop occupancy to a record high of 91.8%. Kite Realty Group achieved a record leasing volume of 1.7M square feet this quarter. This makes it the highest quarterly leasing volume in the company’s history.
Acadia Realty signed a record $7M in core leases so far this year, which already exceeded their leasing volume for the entirety of 2023. The exceptional leasing numbers have led many companies to raise their earnings guidance for the remainder of the year. Regarding transaction activity, several companies commented that they are continuing to see more opportunities come to market with more realistic pricing expectations. They are expecting this trend to continue, which is why several companies raised their acquisition guidance. Kimco raised their acquisition and structured investments guidance range to $565M-$625M from the previous range of $300M-$350M. Phillips Edison also raised their acquisition guidance range to $275M-$325M from the previous range of $200-$300M. Regency Centers raised their acquisition guidance slightly by $11M.
Standout Transactions
A major highlight this past quarter was Kimco closing on Waterford Lakes Town Center, a lifestyle center in Orlando, Florida for $322M. The sale included the assumption of a $164.6M mortgage at a fixed rate of 4.86%. The property was acquired for a low-7 cap rate. The property has several junior anchors close to expiration without any options, which will provide them with multiple mark-to-market opportunities. Kite Realty Group acquired Parkside West Cobb (Atlanta MSA) for $40.1M. Regency Centers partnered with Brand Street Properties to acquire East Greenwich Square in Rhode Island for $47M ($32M at Regency’s share). The acquisition brings Regency’s blended cap rate on acquisitions for the year to 6.6%. Subsequent to quarter-end, they acquired University Commons in Round Rock, Texas for approximately $14M (at Regency’s share).
Federal Realty acquired Pinole Vista Crossing, a dominant 216,000-square-foot, 19-acre regional open-air, grocery-anchored community center located along Interstate 80 in Pinole, California for $60M. They also stated that they are in deep negotiations for a couple other market-dominant shopping centers that they hope to close in the next few months. Both are larger assets in excess of $100M. Brixmor acquired two shopping centers: The Fresh Market Shoppes in Hilton Head, South Carolina for $23.6M and Acton Plaza in Acton, Massachusetts (Boston MSA) for $38M.
They also currently have over $250M in additional value-add acquisitions under contract or LOI. Phillips Edison acquired five shopping centers, several being in Midwest markets. They acquired: Lemont Plaza, in a Chicago suburb for $16.65M, Rue de France in Minneapolis for $26.4M, Ridgeview Marketplace in Denver for $10.1M, Bethel Shopping Center in Bethel, Connecticut for $30.5M, and partnered with Cohen & Steers to purchase Des Peres Corners in St. Louis for $7.68M (at share).
Transaction Activity Highlights
Site Centers acquired seven convenience centers in the quarter. They also completed the spinoff of their convenient assets into a new convenience center REIT called Curbline. Site Centers led the way on the disposition side as they sold 25 properties in Q3 2024 for $1.4B. Brixmor sold two shopping centers and four partial properties for $73.8M. Regency Centers sold Fenton Marketplace in Flint, Michigan for $12M. Acadia Realty sold Frederick Crossing in Frederick, Maryland for $47.2M. Kite Realty Group did not sell anything during the quarter, but stated they have a disposition on the market they expect to close by year-end.
ROIC sold two properties totaling $68.8M: one in Oceanside, California for $56.6M and the other in Edmonds, Washington for $12.185M. Both properties were sold at a blended cap rate in the low 6% range, and both were sold to private 1031 buyers in separate transactions. There was also big news relating to ROIC subsequent to quarter-end, as Blackstone announced they entered into a definitive agreement to take them private in an all-cash transaction valued at approximately $4B. Blackstone Real Estate Partners X will acquire all outstanding common shares of ROIC for $17.50 per share. This roughly represents a 34% premium to where the stock was trading at the end of July. The transaction is expected to close in the first quarter of 2025.
Activity in STNL REITs
The STNL companies were also very active during the quarter. Realty Income acquired 67 U.S. properties for $267.2M at an average cash yield of 7.4% and a WALT of 10 years. The 7.4% cash yield was roughly 40 basis points lower than the prior period. They sold 92 properties in the quarter for $249.5M. Agree Realty acquired 66 properties for $215.6M at an average cap rate of 7.5% and a WALT of 9.8 years. The 7.5% on acquisitions was 20 basis points lower than the prior quarter. They sold two properties for $7.2M at a weighted average cap rate of 5.8%.
Both dispositions were non-core, Florida-based assets that continue to command a strong bid from 1031 capital. NETSTREIT acquired 33 properties for $151.56M at a blended cash yield of 7.5%, which was the same yield as the prior quarter. This quarter was the highest quarterly investment activity in the company’s history as they also sold eight properties for $24.105M. The dispositions were sold at a weighted average cap rate of 7.3%.
