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San Diego REITs grow bigger, stronger

While not perfect, the times appear very good for San Diego REITs.

Rancho Bernardo-based BioMed Realty Trust (NYSE: BMR), celebrating the 10th anniversary of its initial public offering this year, grew exponentially during the decade.

Alan Gold, BioMed chairman and CEO, noted that the firm has grown from a handful of people and a 400,000-square-foot life science portfolio a decade ago to 237 employees overseeing some 17.2 million square feet from San Diego to Boston today.

Gold said venture capital fueled this exponential growth.

"To put this growth into perspective, in 2007 there was just under $40 billion of capital-raising in the life science industry," Gold said. "Six years later, capital investment in the industry grew to almost $90 billion, and the momentum continues."

BioMed may be as well known in the Boston area as it is in San Diego County. On Sept. 29, BioMed announced that it signed a 12-year-lease for 200,000 square feet on Kendall Square in Cambridge for Baxter International.

The work at the Kendall Square property is expected to spawn a separate, independent global company known as Baxalta Inc. in mid-2015.

In August, BioMed announced that it had broken ground on a 122,000-square-foot, state-of-the-art laboratory facility in the South Lake Union area of Seattle. The project is part of an eventual 223,000-square-foot life science complex.

Two months ago, BioMed and the J. Craig Venter Institute’s two companies, Synthetic Genomics and Human Longevity, Inc., signed a 125,000-square-foot, 10-year lease at 4570 Executive Drive. This allowed AstraZeneca (NYSE: AZN), which acquired Amylin Pharmaceutical's business, to terminate a more than $15 million outstanding lease obligation.

Alexandria Real Estate Equities (NYSE: ARE), while headquartered in Pasadena, owns several million square feet of life science space in San Diego County, and is developing more here.

During the second quarter, the firm started construction of 3013/3033 Science Park Road in the Torrey Pines submarket.

The 165,938-square-foot project was 65 percent preleased as of June 30, with the largest tenant being Receptos -- which plans to occupy 42,047 square feet by early next year.

At least five San Diego REITs have retail properties in their portfolios.

The oldest of these is Escondido-based Realty Income Corp., (NYSE: O) which largely focuses on single-tenant retail. It also owns some industrial properties and even a Northern California winery.

"Realty Income just celebrated its 20th year on the New York Stock Exchange. On the company’s first day of trading on the NYSE in 1994, our shares closed at $8 per share," said John P. Case, said RIC president and CEO. "As of Sept. 4, 2014, our shares closed at $44.62 per share."

Case added that this has resulted in a 17 percent annual return to its investors and the growth of its real estate portfolio from 630 properties to more than 4,200 properties, the increase of its total enterprise value from a $400 million to $15 billion.

During the second quarter of 2014, RIC invested $405.1 million in 73 new properties and properties under development or expansion in 27 states.

University Towne Centre-based Retail Opportunity Investment Corp. (Nasdaq: ROIC), which joined the S&P SmallCap 600 Index in May, paid $43.97 million earlier in the year for the 129,000-square-foot Creekside Plaza shopping center in Poway.

A much larger transaction during the second quarter came when University Towne Centre-based ROIC paid $210 million in cash to acquire the 1.12 million-square-foot Fallbrook Shopping Center in the West Hills community of Los Angeles County.

Through June 30, ROIC had secured $357.8 million of shopping center acquisitions, including Fallbrook Center, Stuart Tanz, ROIC president, founder and CEO said in his midyear report. Also as of June 30, ROIC owned 59 shopping centers encompassing approximately 6.9 million square feet.

Fallbrook Center is currently 98.5 percent leased and features three supermarkets, Kroger (Ralph's), Trader Joe's and Sprouts, along with a diverse mix of major retailers including Walmart (NYSE: WMT), Home Depot (NYSE: HD), Target (NYSE: TGT), and Kohl's (NYSE: KSS).

Rancho Bernardo-based Excel Trust (NYSE: EXL) announced Oct. 2 that it had purchased Downtown at the Gardens, a 339,580-square-foot shopping center in Palm Beach Gardens, Fla. The seller was an investment entity that wasn't identified.

The announcement came on the heels of a report that Excel had purchased three retail shopping centers in Utah for a total of $223 million. The combined 1.8 million square feet of centers included Family Centers in Fort Union, Taylorsville, and Orem.

"We believe the progress we made in the second quarter will benefit the company for years to come," said Gary Sabin, Excel chairman and CEO. "In May, we capitalized on our investment grade ratings by issuing $250 million of attractive, long-term, unsecured debt. In June, we successfully raised approximately $161 million in equity to help purchase several high-quality properties currently under contract.”

American Asset Trust's (NYSE: AAT) portfolio, meanwhile, includes 3.1 million square feet of retail, 2.6 million square feet of office and more than 900 multifamily units as well.

In addition, AAT owns one mixed-use property with 97,000 square feet of retail and a 369-room, all-suite hotel in Hawaii.

During the second quarter of 2014, AAT signed 41 leases for approximately 225,800 square feet of retail and office space, as well as 287 multifamily apartment leases.

The firm also saw the opening of a 40,000-square-foot Saks Fifth Avenue Off Fifth store within an old Mervyn's space in its Carmel Mountain Plaza in Carmel Mountain Ranch last May.

PriceSmart (Nasdaq: PSMT) is a local retail REIT focusing exclusively on the Latin American and Caribbean markets.

PriceSmart reported that its net sales in September increased 3.9 percent to $192.6 million, from $185.3 million in September a year earlier. There were 33 PriceSmart warehouse clubs in operation at the end of September 2014 and 31 warehouse clubs in operation at the end of September 2013.

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