Regency Centers Corporation (NASDAQ:REG) recently announced the acquisition of 258,000 square feet of prime Silicon Valley retail space at The Pruneyard — a mixed-use project. The retail real estate investment trust (REIT) shelled out $212.5 million for the acquisition.
The company purchased the shopping center from a joint venture between Ellis Partners and investment funds managed by an affiliate of Fortress Investment Group LLC. Notably, Ellis Partners will continue to own minority stake in the new ownership and provide operating services, banking on its knowledge of the neighborhood and experience.
The center, anchored by Trader Joe’s, is uniquely positioned in a transit-rich market to capture significant business from the area. Specifically, the property is located at the high-traffic intersection of Campbell Avenue and Bascom Avenue, adjacent to State Route 17. Further, close proximity to the West Valley’s most affluent neighborhoods will enable the property to enjoy a large and diverse demand base.
The property was recently refurbished through substantial renovations and hence, has lower capital expenditure needs. Moreover, The Pruneyard campus consists a mix of unowned uses, including a 171-key hotel and three office towers, spanning 360,000 square feet of space that were not part of the acquisition deal.
The above-mentioned acquisition is a strategic fit, given its appropriate location, impressive merchandising mix and top-class amenities. In addition, it complements Regency’s portfolio and will enhance the company’s foothold in the Bay Area region where it presently owns and operates 28 properties, including The Pruneyard.
Shares of this Zacks Rank #3 (Hold) company have gained 18.7% in six months’ time, while the industry has rallied 9.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, move-outs, store closures and retailer bankruptcies are likely to affect performance of the retail real estate market in the near term. This, in turn, will dampen the performance of retail REITS, including Macerich Company (NYSE:MAC) , Taubman Centers (NYSE:TCO) , Kimco Realty Corporation (NYSE:KIM) and Regency as well.
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