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Federal Realty Acquires Brooklyn's Georgetowne Shopping Center

Zacks Equity Research

Federal Realty Investment Trust FRT recently announced the acquisition of a 147,000-square-foot grocery-anchored neighborhood shopping center — Georgetowne Shopping Center — in Brooklyn, NY. The company has shelled out $83.7 million in cash to buy this surfaced-parked shopping center on 9 acres in Brooklyn's Georgetown neighborhood.

The move comes as part of the company’s growth endeavors through portfolio expansions in locations that exhibit solid demographics and high barriers to entry. Also, the company plans to enhance the property value over time through continued remerchandising and space lease up with the possibility of augmenting square footage.

Currently, 90% occupied and anchored by specialty grocer Fairway Market and Five Below FIVE, the Georgetowne Shopping Center enjoys an advantageous location. It is situated on Ralph Avenue in the Georgetown neighborhood, a sub-division of the Bergen Beach neighboring Mill Basin and Flatlands. With the Bergen Beach located 7.5 miles southeast of Downtown Manhattan and about 6 miles west of the John F. Kennedy International Airport, the property is likely to witness solid footfall.

It also has a strong small shop roster led by Starbucks SBUX and Chipotle CMG, and boasts solid demographics, with 88,845 people and average household income of $102,641 within a 1-mile radius.

The onslaught of e-commerce on physical retailers has made them rationalize their store fleet, while others unable to contend with online giants are filing bankruptcies. Amid these store closures and retailer bankruptcies, retail real estate landlords are witnessing a choppy environment.

However, Federal Realty has been undertaking remerchandising and redevelopment efforts to retain the relevance of its properties. Also, strategic buyouts and particularly expansion of its New York Metro shopping center portfolio augurs well for long-term growth. Moreover, in recent times, the company undertook a number of strategic initiatives, which included the targeted acquisition of the Kmart parcel at Assembly as well as important lease recaptures. These offer future development potential and will likely help the company ride on its growth curve.

Nevertheless, although repositioning and redevelopment are a strategic fit for long-term growth, such initiatives involve considerable upfront costs and tend to drag down near-term profitability. In addition, shrinking footfall at malls, store closures and bankruptcy of retailers will likely keep affecting this retail REIT’s performance.

Federal Realty carries a Zacks Rank #3 (Hold), at present. Its shares have rallied 1.1%, over the past three months, compared with the industry’s rise of 6.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



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