Grocery-Focused REIT Completes $1B Sponsor Buy

Phillips Edison's transaction has created the largest REIT exclusively focused on grocery-anchored shopping centers. The new entity has an enterprise value of roughly $4 billion.

Jeff Edison, chairman & CEO, Phillips Edison Grocery Center REIT I
Jeff Edison, chairman & CEO, Phillips Edison Grocery Center REIT I

In a roughly $1 billion deal, Phillips Edison Grocery Center REIT I Inc. has acquired certain real estate assets and the third-party asset management business of its former sponsor and external advisor, Phillips Edison Limited Partnership.

The result of the transaction is an internally managed, publicly registered, non-traded REIT that focuses exclusively on grocery-anchored shopping centers. The new entity has a total enterprise value of about $4 billion and owns a diversified portfolio of 235 shopping centers in 32 states and totaling about 26.2 million square feet. In addition, its third-party asset management business manages more than $2 billion worth of grocery-anchored shopping centers.

As of the transaction’s closing, REIT shareholders own about 80.6 percent and former PELP investors own about 19.4 percent, of the combined company.

Value creation opportunities

We are now better able to capitalize on growth in the grocery-anchored shopping center industry by gaining scale through our portfolio, as well as our asset management business. We are also better positioned to take advantage of future value creation opportunities, including a potential future liquidity event,” Jeff Edison, chairman & CEO of the REIT, said in a prepared statement.

We continue to believe in the strength of grocery-anchored shopping centers, which take full advantage of heavy and regular traffic generated by the grocer. These assets have proven to be recession and e-commerce resistant, as on average each customer visits the grocery store 1.5 times per week,” Edison added.

As a result of this transaction, a Phillips Edison spokesperson told Commercial Property Executive, Phillips Edison Grocery Center REIT I manages real estate investments on behalf of Phillips Edison Grocery Center REIT II Inc., a non-traded, publicly registered shopping center REIT. The smaller Phillips Edison Grocery Center REIT II owns 83 properties in 24 states, though about half are in Florida, California, Texas or Georgia.