Net Lease News

B+E Weekly Newsletter

April 2 – April 8, 2024

MARKET

Markets Wonder If There Will Be Only Two Rate Cuts This Year

• The Fed always brings up the dual mandates of controlling prices via inflation and supporting full employment. However, there is an apparent shadow third mandate: don’t spook the markets.
• Investors are now forecasting about 65 basis points of rate reductions in 2024, compared to the 75 basis points signaled by the median estimate of projections released following the Fed’s March 19-20 meeting
• The reassessment is driving investors to demand higher rates of return on US government bonds, noting that yields on Treasury debt maturing in five to 30 years climbed to the highest levels this year Tuesday.

RETAIL

Home Depot Buys SRS Distribution for $18B

• The deal, which Home Depot said would be financed through “cash on hand and debt,” adds a building supply products distribution network with more than 760 branches in 47 states to the industry leader.
• SRS, which serves the professional roofer, landscaper, and pool contractor sectors, has a fleet of 4,000 delivery trucks offering job site delivery capabilities and a salesforce of more than 2,500.
•  Home Depot believes that the acquisition of SRS, combined with Home Depot’s 2,000+ stores and distribution centers, doubles the size of the retail giant’s “total addressable market,” to $1T from $50B.
• Home Depot signaled it was betting big on its professional contractor segment also known as “pro” customers the retailer announced it would open four new distribution centers geared to serving pro customers in Detroit, southern Los Angeles, San Antonio, and Toronto in the first half of 2024.

Walgreens Closing 160 VillageMD Outlets

• Walgreens, which invested more than $6B during the pandemic for a majority stake in primary care chain VillageMD, has now written off most of that bet as it races to close VillageMD outlets across the country.
• Walgreens disclosed that it is closing 160 VillageMD outlets, 140 of which are already shuttered.
• VillageMD has closed stores in Florida, Indiana, Illinois, Massachusetts, Rhode Island, and Nevada.

Dollar Stores Vie to Replace 1,000 Family Dollar Closures

• Dollar Tree is in the works to close nearly 1,000 stores in the next year or so and it can blame recent economic headwinds’ effects on its customer base as a prime reason.
• Major players like Dollar General and the Dollar Tree banner can fill the voids left by shuttering Family Dollar venues. Walmart also may step into some of the newly created gaps.
• Dollar Tree is one brand that has thrived during the segment’s rise in traffic. Visits to the industry increased by 25.4% in Q1 2023 and were up 55.8% in Q4 2023 relative to pre-pandemic Q1 2019.

What 99 Cents Only’s Demise Means for CRE

• The announcement last Friday that 99 Cents Only Stores LLC was going out of business has immediately put into play the company’s 44 owned and 333 leased locations in Arizona, California, Nevada, and Texas.
• The average size of the 99 Cents Only stores is around 21,000 square feet, which is a good junior anchor box size that many retailers looking to expand in the U.S. seek such as smaller-format grocery, soft goods, discount, food, drive-thru and retailers will be interested in these sites.

Delight Restaurant Group acquires 65 Wendy’s units

• Delight, which already franchised 132 Wendy’s restaurants and 29 Taco Bell units, said it acquired the restaurants from Zanesville, Ohio-based Primary Aim LLC, which continues to operate 11 Wendy’s units in Ohio.
• Delight Restaurant Group owns and operates 226 restaurants, which it said generate $500 million in sales in eight states, including Indiana, Michigan, New York, North Carolina, Ohio, Pennsylvania, Virginia, and West Virginia.