Retail real estate is attracting the least amount of positive excitement compared to the CRE sector’s other industries. There are some good reasons for that.
Despite that, STORE Capital is going shopping for retail assets. The company plans to spend $1.2 billion or more on properties next year, said Chris Volk, its chief executive officer, at a NAREIT conference in a video.
But STORE, which has an 18 percent exposure to traditional retail, isn’t looking at shopping centers with traditional tenants.
The company is focusing on companies that are “very experiential,” he said, adding: “They could entail just financing. So, you could go into a store, and you’re buying something, and they’re offering financing. Or they could be offering consulting services. Things that you can not buy on the Internet … Retail today is about forcing people to want to get into the store and to be able to have an experience that they would otherwise not be able to get anywhere else.”
Scottsdale, Ariz.-based STORE has a portfolio of just over 2,400 net lease properties that are in the service, retail and manufacturing industries. The REIT, of which Warren Buffet purchased nearly a 10 percent stake in 2017, counts restaurants, early childhood education centers, movie theaters, health clubs and furniture outlets.
The company’s acquisition plans for next year are in step with its current pace. Management forecasts that $1.1 billion in properties will be purchased over 2019. Over STORE’s third quarter, the REIT spent $395.5 million on 85 properties.
It’s strategy of net-lease experiential tenants has served STORE well. Revenues for the first nine months of the year hit $492.3 million, a 24.9-percent jump from the same period in 2018, while net income came in at $225.1 million, up from 2018’s $160.4 million. Third-quarter occupancy came in at 99.7 percent.
Investors who got in on STORE early on are happy. Its share price, which was in the $37-$38 range mid-December, has risen 86 percent in the last five years. Over the last year, shareholders have seen a return of 36 percent.
So, the shopping center arena might be far from perfect right now, but some investors are finding a profitable niche, and wanting more of it.
About GRS Group
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.
Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance. We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies and delivering customized solutions to assist our clients in achieving their investment goals.