Federal Pays $37M for Palm Beach Retail

(Crystal Proenza is associate editor of Real Estate Florida.)

WELLINGTON, FL-Rockville, MD-based Federal Realty Investment Trust has acquired Courtyard Shops, a 127,000-sf Publix-anchored shopping center located in the Village of Wellington, for $37.9 million in an all-cash transaction. That price included the assumption of an existing $8.1 million loan. The owner, an institutional client of AEW Capital Management, sold as the property was nearing the end of its projected hold period with stabilized occupancy and maximized near-term value, says Danny Finkle, managing director with the Miami office of Holliday Fenoglio Fowler LP, which represented the seller in the deal.

Federal had just recently entered the South Florida market with its purchase of the 153,595-sf Del Mar Village in Boca Raton for $42 million, as reported by GlobeSt.com in June. That deal was also an all-cash transaction. The company is taking advantage of opportunities available in the area due to the state of the market, says Barry Carty, senior director of acquisitions for Federal Realty.

“Our intent is to grow a portfolio in South Florida consistent with the quality we have in other markets,” Carty tells GlobeSt.com. “Our strategy is, in effect, to try to buy them one at time and find the right pieces to fit our story.”

Courtyard Shops is the company’s first Publix-anchored center, an element that drew Federal to the deal, along with the property’s potential income growth, says Carty. “The rents in the smaller shops and ground leases are well below market, so we believe we’ll be able to reap strong growth income,” he says.Rental rates at those smaller stores are in the low $20s per sf, says HFF’s Finkle. According to a CB Richard Ellis second-quarter market report, the Wellington/Royal Palm Beach submarket enjoys the second-highest average asking rental rates in the county at $28.03. The submarket also has the lowest vacancies in the county at 3.9%, according to the report.

An asset of this quality is rare in today’s market, says Finkle of Courtyard Shops, located at 13880 Wellington Trace in an affluent neighborhood of Palm Beach County. According to Federal Realty, the three-mile radius surrounding the retail center boasts an average household income of over $115,000.

The property was completed in 1990 and besides the 49,000-sf Publix, includes tenants like IHOP, Bank of America, McDonald’s, Washington Mutual, Wachovia and Shell Oil. The center is currently 94% occupied and has just signed two new tenants: Tijuana Flats and Kontiki Wine and Raw Bar.