Net Lease News

B+E Weekly Newsletter

August 15 – August 21, 2023

MARKET

BUSINESS INFLATION EXPECTATIONS DROP TO 2.5% | GlobeSt

• Recently, the Federal Reserve Bank of New York published its monthly survey of consumer inflation expectations, which declined in July 2023 to a median of 3.5% for the one-year horizon, down from 3.8% in June.
• The Federal Reserve Bank of Atlanta has a similar series of surveys, only of businesses, rather than consumers, and on one level, they seem far more optimistic. Firms’ year-ahead inflation expectations significantly decreased to 2.5 percent, on average.
• Approximately 78 percent of firms expect both labor and nonlabor costs to place upward influence on prices. About 50 percent of firms expect sales levels to exert little or no influence on prices over the next 12 months. Approximately 53 percent of firms expect margin adjustment to have little or no influence on prices over the next 12 months.

PRIVATE EQUITY FIRMS TURNING TO SALE-LEASEBACKS TO FINANCE M&A | GlobeSt

• Interest in sale-leasebacks is increasing due to the tight capital market environment for corporate borrowers. Sale-leasebacks generate capital for investment, R&D, expansions, or other uses at an attractive cost to property sellers – typically 7-9% cap rates.
• When looking at potential sale-leaseback partners, the most important considerations are the purchaser’s access to capital, experience, and history of successfully closing transactions and the timing of the closing.
• Furthermore, a potential purchaser should have a history of investing for the long term, with a portfolio to match. They should have the ability to transact in different environments and provide the proceeds a company needs.

RETAIL

CAVA’S LIFE AS PUBLIC COMPANY OFF TO SIZZLING START | QSR Magazine

• The Mediterranean fast casual went public in June and pulsed the market, selling 14.4 million shares, raising $318 million, and getting to a value of $2.45 billion.
• CAVA topped consensus revenue expectations by about $10 million to $171.1 million, 62.4% better than its year-ago measure of $105.3 million, and bested adjusted EBITDA projections by north of 40% to $21.6 million versus $5.9 million last year.
• CAVA guided 65–70 net openings this calendar and at least 15 percent unit growth in 2024 and 2025, including entering Chicago for the first time. Traditionally, CAVA aims to open three to five units within a 12-month period when it crashes into new territory.

ALDI TO ACQUIRE 400 WINN-DIXIE AND HARVEYS SUPERMARKETS | Commercial Search

• Germany-based supermarket chain ALDI is continuing its expansion across the U.S. with the acquisition of approximately 400 Winn-Dixie and Harveys Supermarket grocery stores from Southeastern Grocers.
• The acquisition continues the growth of ALDI, one of the country’s fastest-growing retailers, and supports the company’s long-term strategy to expand across the U.S. The firm had previously announced plans to add 120 new stores nationwide this year to reach a total of more than 2,400 stores by year-end.
• Kroger is dominant in the Midwest, while a fair number of locations for both companies are in the Southwest and Texas. Present in 48 states and the District of Columbia, Kroger, and Albertsons have a total of 4,996 stores, 66 distribution centers, and 52 manufacturing facilities.

SUPERSTORES ARE KEEPING THEIR PANDEMIC-ERA GAINS | GlobeSt

• With many commercial real estate categories showing trends that are normalizing back to a pre-pandemic state, one category is holding on to its gains of the last few years: Superstores.
• Target, BJ’s, and Sam’s Club saw YoY visits fall 1%, 3%, and 1%, respectively. But in July of this year, these same superstores had Yo4Y visits increase a very impressive 7.9%, 6.7%, and 8.5%, respectively, for the same period. 
• Even Walmart is experiencing visit increases in some states, giving it potential for growth. To date, its locations faring best are in the Northeast in Pennsylvania, New York, New Jersey, Connecticut, Massachusetts, Rhode Island, Maine, New Hampshire, and Vermont.

WALMART TO SPEND OVER $75 MILLION TO REVAMP NEARLY A DOZEN STORES IN NEW JERSEY | CoStar

• Walmart, the nation’s biggest retailer, is spending more than $75 million over two years to remodel 11 stores in New Jersey and held a grand reopening on Friday for one of its revamped flagship locations as it looks to cater to more affluent shoppers.
• Walmart made the move after it saw a surge in business from middle- and higher-income shoppers who were looking for bargains on groceries due to soaring inflation. Walmart officials said they wanted to retain those more affluent patrons and coax them into also buying higher-margin discretionary items.
• In total, Walmart operates 35 Supercenters; 27 discount stores; and eight Sam’s Clubs in the Garden State, in addition to three distribution centers and three fulfillment centers.