B — May 10 - 23, 2013 — New Jersey — Mid Atlantic Real Estate Journal


C entral N ew J ersey

By Kevin O’Hearn, HFF Metropolitan New York Region: Grocery Anchored Centers In Demand


o much has been written about the surging apart- ment market that other

Specifically, in 2012, HFF tracked 10 sales of grocery- anchored centers in the NY Metro region with per square foot pricing ranging from the low $200’s for value added cen- ters to over $700 for a center in the boroughs of NewYork City. In regards to cap rates, the 10 trades in 2012 priced between a mid-5% and low 7%, with a weighted average of about 6.25%. Through the first four months of 2013, several more grocery-anchored centers have traded including a quick flip of one of the 2012 properties and a four-property portfolio,

which included two assets located in both New York and New Jersey. As for a preference for which grocery chain, the trades have been mixed with anchors including A&P/Pathmark, ShopRite, Stop & Shop, Whole Foods and Fairway Markets comprising the majority. Most interesting is that the bulk of the trades have includedA&P/ Pathmark’s with their credit being aggressively underwrit- ten after emerging from bank- ruptcy early last year. Several of the A&P/Pathmark trades have been in portfolios offering

the buyer an immediate pres- ence in the region. Investors have also been purchasing these grocery chains as either free-standing stores or within a larger center, although there is some resistance when the overall size of the center be- comes too large (over 150,000 s/f or so). Additionally, the regional long standing grocers have continued to expand and re-invest in their stores, while new competition continues to enter the market. Most notably are Whole Foods and Wegmans, which continue to aggressively grow their foot-

print in the region. The buyer pool has been a mixture of mostly REIT’s, pri- vate equity funds and private investors including firms such as Inland,Acadia Realty Trust, Equity One, Kimco, Federal Realty and The Hampshire Companies. And in addition to the recent acquisitions by all of these groups, there ap- pears to be a strong demand for more. Furthermore, some of the more value added in- vestors are open to buying grocery-anchored centers in secondary or tertiary locations as long as the grocer has a relatively low (less than 5%) health ratio (occupancy costs divided by tenant sales). This way, the grocer could be easily replaced if they run into any financial trouble. As for the near future, we expect several more grocery- anchored center trades to take place. HFF’s NY/NJ re- gional sales team is currently marketing several including two ShopRite centers – one in southern New Jersey and the other in the Hudson Val- ley region of New York. The firm is also handling a Price Chopper anchored center in New York, a regional portfolio including several A&P/Path- marks, and we are working on the recapitalization of two grocery-anchored portfolios. In light of all of this activity, this sector still seems to be benefiting from a scarcity pre- mium as the strong demand far outweighs the available product. And with interest rates remaining at historic lows, more aggressively priced sales are anticipated. Kevin O’Hearn, Manag- ing Director at HFF, Flor- ham Park, NJ n HFF closes sale of 236,710 s/f office building MIDDLESEX COUNTY, NJ — HFF has closed the sale of 1111 Durham Ave., a 236,710 s/f office building situ- ated on 34.5 acres straddling the border of South Plainfield and Edison. HFF marketed the prop- erty on behalf of the seller, Piedmont Office Realty Trust. M&M Realty Partners pur- chased the property with plans to reposition it. The three-story office build- ing, built in 1975, was previ- ously occupied by Motorola. n

well perform- i n g p r o p - e r t y t ype s ha v e b e en s o m e w h a t overlooked, namely the t h r i v i n g grocery-an- chored seg-

Kevin O’Hearn

ment of the retail sector. Over the past two years, several retail trades have occurred at pricing, which reflects the high demand for this property type.


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