Finance  ·  Leases

COVID Spurs RPT Realty’s New Net Lease Investment Platform


At the beginning of the COVID-19 pandemic last March, RPT Realty CEO Brian Harper saw the value of investing in properties anchored by essential retailers like Lowe’s and Walgreens.

One year later, RPT Realty, a real estate investment trust (REIT) focused on open-air shopping properties, has teamed up with sovereign wealth funds GIC Private Ltd., Zimmer Partners and Monarch Alternative Capital to launch a new investment platform targeting $1.2 billion of strategic net lease retail assets. The offering features a targeted tenant mix of shopping centers with grocers, wholesale clubs, dollar stores and quick-service restaurants.

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“A large part of this will be [focused] on external growth, but we carefully curated a portfolio focused on a balance of long-term, organic growth,” Harper said. “The word ‘essential’ was really a focus and which retailers were allowed to stay open throughout the pandemic. That shows their resiliency through the good and the bad.”

The partnership involves a commitment to fund $470 million in the new platform over the next three years for approved RPT acquisitions. The platform will seek to acquire net lease retail assets, including properties that have been subdivided from a select set of RPT-owned, open-air centers as well as future RPT acquisitions.

The first targets are 42 single-tenant, net-retail assets valued at $151 million, following the subdivision of certain properties from RPT’s existing open-air shopping centers located in the top 40 metropolitan areas. The initial seed money, which comprises 6 percent of RPT’s fourth-quarter 2020 annualized base rent, is expected to close in phases, with RPT retaining a 6.4 percent stake in the platform while maintaining day-to-day management of the portfolio.

The tenant mix in the $151 million seeding includes Walgreens, Lowe’s, Whole Foods, Starbucks, O’Reilly Auto Parts, Dollar Tree and supercenter chain Meijer, according to RPT’s investor platform presentation released last Thursday. Future acquisitions will focus on other essential big-box retailers Target, Walmart, Costco and Sam’s Club.

Harper said the long-term goal is to one day bring the REIT and the platform public as a triple-net-lease vehicle committed to essential retailers.

RPT, which will earn management, leasing and construction fees, will invest up to $70 million in preferred equity as a component of Zimmer and Monarch’s commitment and not a direct obligation of the platform. The company is planning to use proceeds from the initial seeding to “opportunistically accelerate” its portfolio expansion into higher growth markets to reduce leverage.

Harper said RPT is most committed to investing in “pro-growth, pro-business” areas like Florida; Austin, Texas; Denver; Phoenix and Salt Lake City. He said there is also strong interest in boosting its concentration of assets within the Boston market because of momentum in its life sciences sector coupled with having a strong, higher education presence.

“As a long-term investor, we believe there are opportunities in the retail net lease sector to acquire high-quality assets with strong tenant credit at attractive pricing,” Lee Kok Sun, GIC’s CIO of real estate, said in a statement. “We expect to create value in identifying pricing inefficiencies between different tenant and property types within the retail sector.”

RPT announced Monday the hiring of Tyler Sorenson as a managing director to lead investments for the new platform. Sorenson arrives from Spirit Realty Capital, where he served as vice president of acquisitions. He has more than 16 years of shopping center and net lease experience, including previous roles at GE Capital and Regency Centers.

“I share Brian and RPT’s vision that this platform will be a disruptive force in the net-lease and open-air retail sectors and when this opportunity presented itself, I immediately put my name forward for consideration,” Sorenson said in a statement. “With over a billion dollars in potential buying power and backed by three renowned co-investors as well as RPT’s deep operational and financial expertise, our platform is well positioned to serve as a long-term strategic partner to both best-in-class regional essential retailers and larger national operators, as they face a shifting market environment.”