Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/109754
deal might raise a brow or two: It was reports. By the end of 2011, Kroger a simple comparison of occupancy cost, Publix Super Markets — the anchor tenowned nearly half its 2,435 supermarsources say. "Sometimes it is a defensive ant at both properties. "They've been kets. Kroger estimates that it saves about move, and sometimes it is a strategic pretty active buyers in South Florida," $1 per square foot annually by owning move," said broker Gail Whitfield, presisaid Castillo, who also sold the Publixrather than leasing space. dent of The Whitfield Co., a commeranchored Island Estates Plaza shopping Owning the real estate helps Kroger cial brokerage and investment firm in center to the chain in 2011. Austin, Texas. "If a landlord Publix operates about 1,000 or lender is not keeping up stores across five Southern the property's maintenance Grocery-anchored retail sales volume states and controls nearly or appearance, then they Total Average price 20 percent of the stores or have a high motivation to per square foot shopping centers in which it purchase the property." 2007 $21,931,125,261 $181 operates, according to Maria Safeway has its own de2008 9,059,213,050 192 Brouse, a spokeswoman. velopment subsidiary, called 2009 5,311,681,614 181 Lakeland, Fla.–based Property Development CenPublix is one of several groters, which not only develops 2010 12,230,071,287 205 cery chains trying to get a grocery-anchored shopping 2011 16,754,816,273 212 handle on store occupancy centers for Safeway's various 2012 12,279,170,447 202 costs by purchasing rather brands, but also coordinates SOUR CE: R EAL CAPI TAL ANALY TI CS than leasing. The trend is the management and leasing national and has increased of in-line space at many of its since the recession, according to Kris reduce exposure to the rent escalators owned properties. "And Randalls started Cooper, who co-leads retail investment that increase occupancy costs if sales self-developing in the early 1990s, when sales at Jones Lang LaSalle. "If it is a great exceed certain thresholds, says Andrew it was privately held by the Onstead famstore in terms of sales per square foot, it Wolf, a managing director and research ily," said Whitfield. Randalls is now a really does make a lot of sense to control analyst at BB&T; Capital Markets, in division of Safeway. your own destiny," says Cooper, a manRichmond, Va. "That gets them out of Whitfield handles leasing on behalf aging director in the firm's Atlanta ofhaving rents that might be counterproof Property Development Centers for fice. "It's a smart move for grocers, where ductive to what they're trying to do," he Quinlin Crossing, a 150,000-squarethey are actually purchasing either the said. Property ownership has also made foot, Randalls-anchored shopping cenwhole center or a freestanding store, if it it easier for Kroger to provide a vehicle ter in Austin. She also brokered the is a great location." refueling station outside every store. "A land acquisition for the project upon Depressed real estate values have enmajor part of how they drive customer its launch a few years ago. Whitfield abled some chains to acquire real estate loyalty is by tying food purchases to declines to speculate about the develat good prices in this recession, but Coodiscounts on fuel," Wolf said. "So for oper's plans for Quinlin Crossing, but per says the practice long predates the Kroger it has a very strategic benefit in she did say that most grocery chains current real estate cycle. Like any ownerterms of flexibility on land use. You that self-develop tend to divest those occupier, these grocery chains must still have to get permits, but you're the properties after selling off outparcels determine whether the advantages of owner — you don't have to petition the and stabilizing occupancy of the in-line eliminating rent and in turn potentially landlord to do something for you." space with tenants. collecting rent from in-line tenants will Grocery chains are out to capture the Understanding why a grocer may justify the cost of acquisition. "Do you real estate value their stores create, says choose to develop or own real estate want to spend $10 million or $20 milWolf. "Some of these chains have demay reveal opportunities for inveslion on a center and own it, versus just cided that they want 100 percent of the tors, according to Whitfield. "It offers having a leased interest?" he said. "It's an value on the ancillary businesses that are them either an opportunity to sell some allocation of resources." in the same center with them, that pay product that is grocery-anchored to the Some chains are buying quite aggresmuch higher rents, rather than let the grocer," Whitfield said, "or it can offer sively. The Kroger Co. has been purchasdeveloper get it," he said. investment opportunities, if the grocer ing real estate associated with its stores Indeed, a chain's decision to own the is wanting to dispose of something it since 1995, according to published real estate often reflects motives beyond self-developed." SCT 42 SCT / M A R C H 2 0 1 3