Shopping Centers Today

SEP 2018

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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10 S C T / S E P T E M B E R 2 0 1 8 T H E C O M M O N A R E A R E I T S W arren Buffett seems to believe there is a lot of value in Sears' real estate. That, at least, is one way to interpret the legendary investor's decision to lend Sears landlord Seritage Growth Properties as much as $2 billion. Seritage, a national owner of nearly 250 properties totaling roughly 39 million square feet of gross leasable area in the aggregate, announced today the term-loan facility, with Buffet's Berkshire Hathaway Life Insurance Co. of Nebraska. As Sears closes stores in its port- folio, Seritage has been repurposing them for mixed uses. The landlord BUFFET BETS BIG ON SERITAGE GROWTH PROPERTIES Small-shop leasing strong in 2Q, say open-air REITS Strong demand for small-shop space helped offset any vacancies caused by Toy 'R' Us and other big-box tenants in the second quarter, according to open-air shopping center REIT exec- utives. Kimco Realty Corp. posted a small-shop occupancy rate of 90.2 percent, the highest level since the firm began reporting this metric, in 2010. And Brixmor Property Group said small-shop leasing increased by 70 basis points sequentially." DDR Corp.'s small-shop leasing growth is driven by strong macroeconomic trends, according to President and CEO David Lukes. "Shop occupancy is much more correlated to GDP and employment rate than boxes are," Lukes said. Sec- ond-quarter same-center NOI grew by 1.8 percent across the firm's portfolio of 78 properties. Small-shop leasing was key, according to DDR Executive Vice President and COO Michael Maki- nen. "We continue to see strong small- shop leasing volumes and economics, a product of high demand for those spaces and [of] our renewed focus on this inventory in our portfolio," Makinen said. "As a result of our efforts, we've seen a 50-basis-point increase in [the] new DDR shop-lease rate since the first quarter." n intends to redevelop a Sears site in Orland Park, Ill., for instance, by adding an AMC cinema and an entertainment district. "This new financing is a trans- formational step in the evolution of our company, which we started three years ago and positions us to further accelerate our role as a lead- ing retail and mixed-use developer across the country," said Seritage President and CEO Benjamin Schall. "We very much appreciate Berkshire Hathaway's confidence in our team and platform and are energized by our growing opportunities to create lasting value for our shareholders, partners and local communities." The $2 billion facility, which matures on July 31, 2023, provides for an initial funding of $1.6 billion at closing and also includes a $400 million incre- mental-funding facility. The amounts bear interest at a fixed annual rate of 7 percent. Seritage has already used a por- tion of the proceeds from the loan to fully repay an outstanding mortgage loan and an unsecured term loan. Buffett is a top shareholder in Seritage, owning about 5.7 percent of the REIT's outstanding shares. n By Brannon Boswell

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