Retail Properties of America Closes on 1 MSF Cost Plus Distribution Center for $63M

Retail Properties of America sold a 1 million square-foot distribution center in Stockton, Calif., to American Realty Trust for approximately $63 million.

Retail Properties of America, Inc., has sold a1.04-million-square-foot distribution center in Stockton, Calif., to American Realty Capital Trust III for approximately $63 million.

“This successful disposition reduces our non-core GLA by approximately 25 percent and further demonstrates our ongoing commitment to shareholder value and continued execution on our strategic plan,” said Shane Garrison, executive vice president and chief operating officer of Oak Brook, Ill.-based RPAI.

RPAI described the site as the Cost Plus Distribution Center, but the tenant in the two buildings for the past several months has been Bed, Bath & Beyond Inc., which bought Cost Plus World Market, a smaller home goods retailer, in May for about $495 million. American Realty Capital Trust III purchased the Stockton distribution center about the same time it bought a Williams Sonoma distribution facility in Olive Branch, Miss., for $52.4 million.  It was part of 54 acquisitions the New York-based REIT made from July through late August for $217.2 million, according to the firm.

The Williams-Sonoma center has 1.1 million square feet of space and is fully leased to a subsidiary of the retailer for 22 years. The Bed Bath & Beyond distribution center in Stockton has a 12-year lease running from July 2012 to July 2024, according to ARCT III.

“We are particularly pleased to have acquired these properties,” Nicholas S. Schorsch, chairman and CEO of ARCT III said of the REIT’s summer purchases. “These acquisitions add significant current income derived from rents paid by 16 credit national corporate tenants and further demonstrate our focus on making purchases that are indicative of the ample buying opportunities that are available to us as we close our offering and enter our operational phase.”

Including the two distribution centers, the properties ARCT III acquired this summer have a total of about 3.1 million square feet of leasable space and are located in 21 states. Six of the tenants are new and add more diversity to the ARCT III tenant list.  In addition to Williams-Sonoma and Bed Bath & Beyond, the new tenants are Bojangles’ restaurants, O’Reilly Auto Parts, Scotts Company, and West Marine.

The acquisitions also include 21 Dollar General stores in Alabama, North Carolina, Arkansas, Louisiana, Michigan, Minnesota, Missouri, Mississippi, Ohio, Tennessee and Texas, which were purchased for $22 million and five Family Dollar stores in Mississippi, New Mexico, Oklahoma and Texas for $4.6 million.

Edward M. Weil, Jr., president of ARCT III, said the company has another $357 million of acquisitions under contract. He did not provide details but stated that they were “consistent with our strategy of acquiring diverse, long duration, strong credit, durable assets with no vacancies.”

For RPAI, the sale of the Stockton distribution center was part of its 2012 strategic plan, which included changing the REIT’s name from Inland Western to Retail Properties of America, Inc., in March to better reflect its core business as an owner and operator of shopping centers across the United States. RPAI’s portfolio consists of 301 properties, both wholly and partially owned, totaling more than 44 million square feet. Most of the portfolio is lifestyle, power and community centers as well as single-tenant net lease properties with tenants like Rite Aid, Hobby Lobby, Kohl’s, Burlington Coat Factory and Academy Sports.

RPAI has announced several new leases this summer, most of them for retail properties. But it did say in early July that it had completed multi-year lease extensions among its wholly-owned subsidiaries and Aon Corp. for approximately 819,000 square feet of Class A office space in Lincolnshire, Ill. Garrison noted that the AON space is the largest tenant in RPAI’s non-core portfolio. The lease renewals may have been in preparation for selling this non-core asset as well. Garrison stated that REIT officials would “continue to execute on our strategic plan by bringing these assets to market in the very near future.”