Q1 2025 Shopping Center REIT Earnings Report
REIT Earnings Recap
The open-air shopping center REITs recently wrapped up their earnings calls for Q1 2025. Despite the economic uncertainty surrounding tariffs, there was a significant amount of positive sentiment regarding each company’s leasing pipeline and property operations. Many executives acknowledged that tariffs could disrupt some retailers more than others, but ensured that their portfolios are built to withstand potential economic headwinds.
Phillips Edison stated that 71% of their portfolio is made up of necessity-based goods and services, which could help insulate them from any tariff disruption. Regency Centers mentioned that foot traffic within their portfolio has increased by 7% year-over-year in April, suggesting robust consumer engagement. Federal Realty also mentioned foot traffic at their centers increased year-over-year across key markets, including a 6% rise in Washington, D.C. and 11% in Boston.
Many of the REITs had slight dips in sequential occupancy from the previous quarter, but this was primarily due to recapturing spaces from the recent wave of tenant bankruptcies involving Big Lots, Joann’s and Party City. Brixmor mentioned they have successfully backfilled roughly 75% of their Big Lots locations at leasing spreads of more than 50%.
Transaction Activity
Kite Realty Group
On the acquisition front, Kite Realty Group entered a joint venture with GIC and acquired Legacy West in Dallas, TX for $785M ($408M at Kite’s share). As part of the acquisition, the JV assumed a $304 million mortgage ($158 million at KRG’s share) at a 3.8% coupon. Regency Centers completed $133M worth of acquisition activity in the quarter, which was highlighted by acquiring Brentwood Place (Nashville MSA) for $119M. The weighted average cap rate on their acquisitions for the year is 5.4%. They currently have a high-quality grocery-anchored shopping center under contract within their joint venture platform located in the Northeast and expect to close in the second quarter. They mentioned that they continue to see cap rates in the 5%-6% range for the high-quality assets that they are after.
Phillips Edison
Phillips Edison acquired five wholly-owned shopping centers throughout the Sunbelt and West Coast for $138.4M. The weighted average cap rate on their acquisitions was 6.3%. They also sold Pavilions at San Mateo in Albuquerque, NM for a 7.8% cap rate. Kimco closed on their previously announced 254,000-square-foot Sprouts-anchored center for $108M and also purchased the fee interest of two Las Vegas shopping centers for $24.2M.
Regency Centers
Regency Centers closed on the previously announced Del Monte Shopping Center in Monterey, CA for $123.5M. They also stated that they currently have $250M of assets in the sale process, with $150M under contract in the upper 5% cap rate range. Brixmor was relatively quiet on the acquisition side, acquiring just one land parcel in a NY/NJ MSA for $3.1M. They were net sellers in the quarter as they disposed of $22.75M worth of properties, with Rollins Crossing in a Chicago MSA being the highlight of the dispositions for $14.75M.
Top Activity: Curbline, Realty Income, and Agree Realty
Curbline properties continued to add to their convenience center portfolio as they acquired 11 convenience centers for $124.2M. This included a six property $86.3M portfolio in Jacksonville, FL. Their blended cap rate on acquisitions was around 6.25%. So far in the second quarter, they have already acquired five convenience centers for $14.9M.
Realty Income led the STNL REITs with $1.4B of total investment activity in the quarter at an initial weighted average cash yield of 7.5%. They acquired 34 U.S. properties for $201.6M at an initial weighted average cap rate of 6.9% and a WALT of 12.2 years. 65% of their total investment volume came from Europe, focusing on retail parks in the UK and Ireland. These investments were more compelling than U.S. investments, due to below-market rents and the credit risks associated with higher-yielding investments.
Agree Realty’s Standout Performance
Agree Realty’s total acquisition volume for the first quarter was approximately $358.9 million and included 46 select properties net leased to leading retailers operating in sectors that include grocery, off-price, auto parts, convenience stores, and tire and auto service. The properties are in 23 states and leased to tenants operating in 19 sectors. The properties acquired at a weighted-average cap rate of 7.3% and had a WALT of approximately 13.4 years.
Approximately 68.7% of annualized base rents acquired were generated from investment-grade retail tenants. NETSTREIT made 25 investments in the quarter for a total of $90.68M. The cap rates on their investments were 7.7% with a WALT of 9.2 years. They believe cap rates on acquisitions will continue to be north of 7.5%. They sold 16 properties in the quarter for $40.29M at a 7.3% weighted average cap rate, and successfully reduced its top five tenant concentration by 70 basis points to 28.2% of ABR, including a 50-basis-point reduction in its top tenant, Dollar General.
