The Necessity Retail REIT, Inc. has completed the acquisition of 77 outdoor shopping centers and two single-tenant retail properties in a portfolio acquisition of 81 properties valued at $1.3 billion dollars previously announced. According to Michael Weil, CEO of The Necessity Retail REIT, Inc., “Where America Shops,” American Finance Trust’s strategic rebranding in February reflects the continued focus on the shopping habits of today’s consumers. today.
And where America does its shopping, according to Weil, is in the suburbs.
“Whether they’re coming home from work or taking the kids to school, it’s really convenient to go to your neighborhood stores and get what you need,” he says. “What we identified was this suburban approach to where America shops.”
Pandemic and eCommerce Resilient Shopping
The new rebrand leaves little to the imagination in terms of what Necessity Retail is aiming for, a point Weil is quite proud of.
“We’re really excited because the name represents what our portfolio is,” he says. “We have seen necessity retail come through the pandemic in a very strong position. We’ve discovered that there are communities across the country that depend on the retail of necessity, whether it’s standalone, anchored in a grocery store or food center, that’s where the America.
One of the reasons Weil loves necessity-based retail is its inherent pandemic-proof nature, though he hasn’t set out to create a portfolio based on it.
“One of our most important tasks was to build a recession-proof portfolio,” he notes. “We have always focused on credit underwriting and tenant business strategies, which of course are important. I never thought I would be tested by a pandemic. However, we have seen how the company and the tenants behaved. The absence of bankruptcies. Almost 100% rent collection. This wallet has been pandemic tested, and it has held up tremendously. »
Weil names pharmacies like CVS and Walgreens, home improvement stores like Home Depot and Lowes, gas stations, drive-throughs, auto parts stores and discount retailers like Burlington, DSW and Ross as retailers that successfully served suburban communities during the pandemic. Add all of these store types and you have a formula for a necessity-based win.
“You can knock out six to eight retailers in one outing,” Weil continues. “You can grab lunch, dry clean, get your hair done or your nails done, then go to Dick’s, Home Depot or Walmart.”
Service-oriented retailers, as well as those that offer the convenience of picking something up quickly along your route, also make an e-commerce resistant hub.
“There are definitely things you can buy comfortably online,” Weil says. “But there are also a lot of things that people have concluded they would rather take on themselves. They prefer to go to the grocery store and choose fruits, vegetables, meat and dairy products, and that’s a good thing to watch. If they get sick, they would rather just go to their pharmacy and get the medicine than wait for it to be shipped to them. If it’s the weekend and they’re working on their car and they realize they don’t have the right air filter or oil filter, they don’t have time to go order it online. It’s easier to go to an O’Reilly or AutoZone, get what they need, then go home and finish their project.
The affair of relationships
Another way to protect your wallet against the pandemic, suggests Weil, is to maintain a good relationship with your tenants. The time to get to know them is long before a problem arises.
“One of the things that really got us through the last two years is that we had a great relationship with our tenants,” he says. “We knew them, they knew us, and everyone understood what that relationship was about: we provide a big space in a safe, clean, well-placed outdoor center, and they pay their rent. For us, the pandemic meant going from asset managers to very active asset managers.
Weil says his team was already familiar with the tenants who were working on renewals, extensions and new locations. He also enjoys getting to know the tenants’ real estate teams at the corporate level (if applicable).
Weil and his team are about to do a lot more handshakes as they learn about the real estate services of the 81 properties that Necessity Retail REIT is about to acquire. As mentioned earlier, the company closed 77 outdoor centers for a total of $1.1 billion earlier this year.
The REIT expects to acquire the remaining two properties by the end of the second quarter of 2022. Once this transaction closes, the Company will be the preeminent REIT focused on necessity retail with a premier portfolio that will include more than 1,000 properties, 29 million square feet and $387.6 million in pro forma annualized linear rent. About half of these assets are in high-growth markets, primarily in the Sun Belt.
“Our portfolio will increasingly be representative of where America shops every day, including a significant focus on desirable grocery-anchored malls,” adds Weil. “When we think of the portfolio, we think of the tenants and the customers they serve. These are the things that line up really well. If our tenants are happy and their customers are happy, we will continue to lease space and grow our portfolio, which ultimately is what our shareholders expect from us. The retail renaissance is in full swing and we are excited to be a part of it.
— By Nellie Day. This article is published as part of Shopping Center Business’ Retail Insight series. Click here to subscribe to the Retail Insight newsletter, a four-part newsletter series, followed by video interviews delivered to your inbox in May/June.