Competition heating up for high- and low-end properties in many markets

Publish Date: August 11, 2014


Scores of returns-hungry investors are chasing down deals and cap rates at the high and low ends of the value spectrum. “Over the past year we’ve seen a greater amount of competition,” said Andrew Silberfein, president and CEO of Rouse Properties. Private firms seeking high risks and high returns are competing for assets that do around $300 per square foot in annual sales, he says, while institutional buyers are circling trophy properties and assets that do more than $400 per square foot.

“The private market for quality shopping centers is extremely hot, it’s extremely competitive,” said DDR President and CFO David J. Oakes. “There is a reasonable amount of product being listed, but it’s being overwhelmed by the amount of capital that’s looking at the space. And so the acquisition environment is very competitive and very challenging.” Oakes says DDR is focusing its acquisitions efforts on off-market opportunities where the firm has some sort of advantage on the deal. “At this point, quality power centers are trading no higher than the low 6 percent cap range, and we are seeing many, many more deals not just in the beloved coastal markets but in a broader list of markets,” he said.

Weingarten Realty Investors has watched potential buyers swarm the properties it has marked for disposition in the second quarter, said COO Johnny Hendrix. “So far this year we sold $100 million with a cap rate of 7.3 percent,” he said. “Today we have 13 properties under contract for $86 million. We have 13 additional properties with letters of intent for $144 million, and the company is actively marketing another $330 million.” Weingarten is actively seeking acquisitions in primary markets and which can be accretive within a few years with annual growth about 3 percent, he says. The firm expects these assets to trade for cap rates in the range of 4.75 percent to 5.5 percent. “Cap rates have gone down generally in secondary, tertiary markets, probably 50 basis points over the last nine months to 12 months,” he said. 

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