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Commercial Real Estate Alliance of San Diego's Deal Makers of the Year

Local REITs acquire assets from across the country

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Some San Diego-area REITs are acquiring other REITs, while others continue to acquire assets from all over the country.

In January, Escondido-based Realty Income Corp. (NYSE: O) altered its deal for its planned acquisition of the American Realty Capital Trust REIT. The revised proposal, which adds a $55.5 million cash payment among other provisions, convinced shareholders of both REITs to approve what is now a $3.1 billion acquisition of American Realty by Realty Income on Jan.16, 2013.

The purchase will give Realty Income 501 additional properties, bringing the total to more than 3,250 under long-term leases to major commercial tenants. The buildings are diverse and include everything from retail stores to industrial properties to medical office buildings.

The Escondido REIT, with properties in 49 states, invested $496.1 million in 87 new properties and properties under development during the third quarter. The fourth quarter figures weren’t ready by press time.

In early January 2013, Realty Income paid $16.5 million for the 259,200-square-foot Herbalife International of America’s Memphis distribution center. Best known for single-tenant retail properties, RIC has been diversifying its portfolio during the past couple of years.

New York-based Mall owner Kimco Realty Corp. (NYSE: KIM) now owns 21 shopping centers comprising several million square feet from the North County to the South Bay to the East County. In early January 2013 the REIT announced it would be paying $49 million to acquire the remaining 50 percent interest in the 311,000-square-foot Santee Trolley Square property.

Meanwhile, Stuart Tanz, who grew the Pan Pacific Retail Properties REIT to become the largest grocery-anchored shopping center REIT on the west coast before selling to Kimco for about $4 billion in 2006, is building up his assets again.

Tanz’s Retail Opportunity Investments Corp. currently owns about 4 million square feet of grocery-anchored in western states, and has plans to expand its acquisitions to the eastern seaboard.

On Dec. 8 ROIC paid $114 million to acquire four shopping centers comprising 444,000 square feet in Orange and Los Angeles counties.

Rancho Bernardo-based Excel Trust (NYSE: EXL) is another shopping center REIT that has been busy. The firm paid $263 million in October to buy six shopping centers comprising more than 700,000 square feet in Florida and Virginia. One of those Virginia centers also contains 339 apartments.

Locally-based American Assets Trust is a multi-faceted REIT whose acquisitions include retail, office, hotel and multifamily properties from Hawaii to Texas.

In December of last year, American Assets, whose local retail properties include the 209,569-square-foot Lomas Santa Fe Plaza and the 246,730-square-foot Solana Beach Town Center, paid $21 million to acquire the 35,000-square-foot Geary Marketplace in Walnut Creek. The firm also sold the 320,000-square-foot 360 King St. building in San Francisco for $93.75 million in December as well.

In another vein, both Rancho Bernardo-based BioMed Realty Trust, Inc. (NYSE BMR) and Pasadena-based Alexandria Real Estate Equities (NYSE: ARE) are major national players in the acquisition and construction of life science space around the country. Both REITs, while owning millions of square feet here, are heavily invested in the Cambridge area around Harvard University with its huge demand for lab space.

Closer to home, BioMed paid $26.5 million for 12.68 acres along Summers Ridge Road in the Sorrento Mesa submarket in July that will be held for future life science/medical office development.

BioMed paid $20 million to acquire a 68,000-square-foot building in the Miramar submarket along Nancy Ridge Drive in April. That building is 100 percent leased to Arena Pharmaceuticals, Inc. (Nasdaq: ARNA).

Alexandria, which paid $128 million for the Nobel Research Center (former Biogen Idec site) in October 2010, managed to get Illumina (Nasdaq: ILMN) to sign a $335 million, 20-year lease for the property the following January. Now Alexandria is constructing a 123,429-square-foot life science building for Illumina at 5200 Research Place nearby.

In Sorrento Mesa, HCP is planning a 121,513-square-foot life science building along Lusk Boulevard in the Sorrento Summit development. A 91,256-square-foot life science building at 12770 El Camino Real in Del Mar Heights is a development of Prudential Real Estate.

Another REIT, San Diego-based American Recovery Property Trust, is just getting started.

American Recovery is a spin-off of locally-based Sovereign Capital — a firm that has helped bankroll, purchase and manage more than $5 billion worth of real estate during the past decade.

American Recovery’s first acquisition was a large one. It was the $34 million purchase of Western Place I & II, a 425,000-square-foot industrial property in Fort Worth, Texas that was consummated last summer.

In October American Recovery announced it had reached an accord with Brookfield Financial Advisors whereby the new REIT will oversee Brookfield’s entire 13 million-square-foot portfolio. A capital and ownership structure plan will now be put in place on a property-by-property basis.

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