Brixmor and Everview are buying 115 grocery-anchored centers for $2.34 billion

Brixmor CEO Brian Finnegan agreed on Sept. 28 to buy 23 grocery-anchored shopping centers from Slate Grocery REIT for about $636 million, as part of a $2.34 billion deal for all 115 of Slate’s centers ^[1]. A joint venture led by Billy Rahm’s Everview Partners, with a subsidiary of the Abu Dhabi Investment Authority as a strategic investor, is buying the other 92 for $1.71 billion ^[1].

Slate unitholders will receive $13.00 a unit in cash, about 20% above the price on Sept. 23, the last trading day before the REIT suspended distributions ^[2]. They vote on Nov. 25 ^[3].

Brixmor is paying about 50% more per square foot than the joint venture

Brixmor’s 23 centers cover about 3 million square feet, are about 96% leased and are anchored by Publix, Harris Teeter and Kroger ^[1]. We calculate its price at about $212 a square foot, compared with about $143 for the joint venture’s 12 million square feet ^[1].

Bisnow counted 11 of Brixmor’s centers in Florida, seven in North Carolina and three in Georgia, plus one each in Michigan and Massachusetts ^[4].

Brixmor said below-market rents are what it is buying

Rents at Brixmor’s new centers average 32% below its current portfolio, and the company identified about $100 million of redevelopment and outparcel projects, including several potential Publix projects ^[1]. Finnegan said Brixmor sees “meaningful embedded value through below-market rents” ^[1].

Brixmor has been raising rents in its own centers. New leases it signed last quarter came in 42.6% above the prior tenant’s rent, and its small-shop space reached a record 92.8% leased ^[5], which we covered in our shopping center story.

Brixmor will also put about $174 million of preferred equity into the joint venture at a 9% dividend and will manage and lease its centers for fees ^[1]. Its lenders committed up to $988.0 million of term loans for the deal ^[5].

How to use this

For owners of grocery-anchored centers

1. Compare your in-place rents with what new tenants pay nearby before you sell. Brixmor said rents 32% below its portfolio were the value it was buying ^[1], so a seller with below-market leases should show the rent roll by expiration date and price that upside into the ask.
2. Use $212 and $143 a square foot as two reference points from the same deal, which we calculate from the reported prices ^[1]. Ask your broker which group your center resembles by anchor, market and occupancy.
3. Prepare an outparcel or pad plan before you go to market. Brixmor counted about $100 million of redevelopment and outparcel opportunities in its 23 centers ^[1], and a plan with a site sketch and a list of interested tenants gives a buyer something concrete to pay for.

For small-shop tenants in these centers

1. Read your renewal option and its rent formula now. New leases at Brixmor signed 42.6% above prior rents last quarter ^[5], so a fixed-rate renewal option below market is worth exercising in writing before its deadline.
2. Ask the new owner about redevelopment plans for your center before you sign an extension, because new outparcel buildings can change parking and storefront visibility ^[1].

For investors in private retail deals

1. Use Brixmor’s 9% preferred return in this joint venture ^[1] as a benchmark when a sponsor offers you preferred equity in a shopping center deal, and ask what sits ahead of you in the capital stack.