Transaction Overview

Blackstone has cut a deal to take publicly traded Retail Opportunity Investments Corp. private in a $4 billion transaction as grocery-anchored properties are attracting investor interest.

Deal Structure

Under the agreement, the private equity giant's Blackstone Real Estate Partners X fund will acquire all outstanding common shares of Retail Opportunity Investments for $17.50 per share in an all-cash transaction, including outstanding debt, Blackstone said Wednesday in a statement.

Portfolio Details

San Diego-based Retail Opportunity Investments' portfolio consists of 93 grocery-anchored retail properties that total 10.5 million square feet and are concentrated in Los Angeles, Seattle, San Francisco and Portland, Oregon. The deal was reported earlier by the Wall Street Journal. Stuart Tanz, Retail Opportunity Investments' president and CEO, declined to discuss the transaction on the real estate investment trust's earnings conference call two weeks ago.

Executive Statements

The agreement "will provide significant and certain value to our stakeholders," Tanz said in the statement. "We are confident that Blackstone will position [Retail Opportunity Investments'] portfolio for continued growth and success."

Market Trends

Grocery-anchored retail centers, with their focus on tenants that fulfill daily consumer needs, have seen investor demand as interest rates have stabilized and with the Federal Reserve trimming borrowing rates even further.

The trend has other grocery-anchored center owners exploring ways to take advantage. Inland Real Estate Income Trust, a nontraded REIT that owns $1.5 billion in grocery-anchored shopping centers, is exploring strategic alternatives, including a sale of the company.

In another example, Cohen & Steers is stepping up acquisitions of open-air shopping centers for its private real estate clients as the investment management firm believes pricing has bottomed in the retail sector.

Market Performance

Landlords have benefited too from supply-constrained markets. The lack of new retail development since the Great Recession and steady growth in demand following the pandemic has helped boost leasing on existing properties, CoStar analysts have reported.

Through the first nine months of 2024, Retail Opportunity Investments reported leasing well over 1.2 million square feet, including over 450,000 square feet in the third quarter alone.

"We continue to capitalize on the demand to enhance tenancies at every opportunity as well as to drive rents higher," Tanz said on his earnings call. "In fact, we are currently on track to post our 12th consecutive year of achieving solid rent growth on both new and renewed leases."

Future Outlook

"This transaction reflects our strong conviction in necessity-based, grocery anchored shopping centers in densely populated geographies," Jacob Werner, co-head of Americas acquisitions at Blackstone Real Estate, said in the statement. "The sector is experiencing accelerating fundamentals, benefiting from nearly a decade of virtually no new construction, while demand for brick-and-mortar grocery stores, restaurants, fitness and other lifestyle retailers remains healthy."

Transaction Headline

Asian grocery chain snags retail center, bolstering its Pacific Northwest holdings. The Hong Phat Group buys most of Eastport Plaza in Portland, Oregon.

Acquisition Details

An Asian supermarket group bought 13 properties in the Eastport Plaza in Portland, Oregon, doubling down on an earlier acquisition it made in the retail hub.

Called the Hong Phat Group, the grocery chain purchased the Eastport Plaza shopping center in Portland's multicultural Jade District from a private trust for $28 million, or nearly $100 per square foot.

Strategic Expansion

The acquisition follows the group's earlier purchase of the former Eastport Plaza Walmart in January 2024, which Hong Phat plans to transform into a flagship marketplace. Now, nearly all of the 16-property retail center is under the same ownership as the anchor-tenant property.

Current Tenants

Currently, Eastport Plaza hosts tenants such as Century 16 Theatres and LA Fitness. The 1957-era center was initially designed as an enclosed shopping mall and renovated in 1999.

Market Analysis

"The Eastport Plaza is ideally located along one of Portland's busiest arterials with elevated traffic counts, and near direct access to Interstate 205 via Exit 19," notes CoStar Director of Market Analytics John Gillem. "Ample parking benefits the asset's strong tenant mix, and the site is accessible to a wide variety of shoppers, including being less than 15 minutes from higher incomes in Mt. Tabor and Laurelhurst to the north. While there may be some infill opportunities in the future, the Lents area isn't likely to be exposed to heavy supply pressures in the coming years, meaning upside rent growth potential could boost net operating incomes. Additionally, recent U.S. Census data indicated the state of Oregon is back on track regarding population growth, with a positive reading during 2024. If trends hold, this will eventually have favorable effects on Portland's retail market, as retailers gain exposure to additional shoppers entering the region."