Wheeler REIT to Acquire Cedar Realty Trust in Nod to Grocery Stores' Strength

Caldwell-GlobeSt

Originally published by GlobeSt


Cedar Realty Trust this week announced it has entered into definitive agreements for the sale of the company and its assets in a series of related all-cash transactions to Wheeler Real Estate Investment Trust.

The deal includes an agreement to sell a portfolio of 33 grocery-anchored shopping centers to a joint venture between a fund managed by DRA Advisors LLC and KPR Centers for $840 million.

Also as part of the agreement, Cedar Realty will sell the Revelry redevelopment project for $34 million. The REIT is negotiating the sale of the Northeast Heights redevelopment project for $46.5 million.

In the event the sale of the redevelopment projects is not completed prior to closing of the grocery-anchored shopping center portfolio sale, the DRA-KPR joint venture has agreed to acquire these two projects at the aggregate price of $80.5 million.

Cedar Realty is selling its remaining assets to Wheeler Real Estate Investment Trust once these transactions complete, in an all-cash merger transaction that values the assets at $291.3 million.

Sale Reflects $29 Per Share

The transactions, which were unanimously approved by Cedar’s Board of Directors, are estimated to generate total net proceeds, after all transaction expenses, of more than $29 per share in cash, which will be distributed to shareholders upon completion.

The $29 per share of estimated net proceeds represent a 16.6% premium to Cedar’s closing share price on March 2, 2022, and a 70.6% premium to the company’s closing share price on September 9, 2021, the last day of trading prior to the announcement of its dual-track review of strategic alternatives.

Once these transactions close, Cedar will be wholly owned by Wheeler Real Estate Investment Trust, and Cedar’s common stock will no longer be publicly traded.

BofA Securities and JLL Securities are acting as financial advisors to Cedar, and Goodwin Procter LLP is acting as legal counsel to Cedar. JLL is acting as the Company’s real estate advisor with respect to the sale of the grocery-anchored shopping center portfolio and CBRE is acting as real estate advisor to Cedar with respect to the sale of the redevelopment projects.

Strength in Grocery Sector ‘Here to Stay’

Margaret Caldwell, Stan Johnson Company Managing Director & Partner whose focus is multi-tenant retail investment sales, tells GlobeSt.com that grocery-anchored retail centers, as well as shadow-anchored centers, continue to be in very high demand with investors.

“As we saw during COVID, investment sales activity for this asset class was incredibly strong given the essential nature of the tenants,” Caldwell said. “While online shopping and curbside pickup can be convenient, the honeymoon is over for many consumers. Shipping delays, supply chain issues and technology glitches are giving customers a poor experience, which is driving them back to brick-and-mortar stores. The grocery sector is strong, and it’s here to stay.”

The grocery anchored-assets are the absolute preferred product class in retail, agrees Richard W. Chichester, board member, X Team Retail Advisors.

“Investor demand is at an all-time high, cap rates continue to remain compressed, and co-tenancy and shop leasing for grocery anchored assets remains robust,” he tells GlobeSt.com. “The only mild dislocation is in the capital markets as there is still caution in their underwriting (this is both an economic issue as well as an asset segment retail concern).

“As for the grocery tenancy/user landscape, the industry is running on all cylinders as grocers are flush with capital from excellent operating performance, in many cases, due to the pandemic.

“Virtually all grocers are aggressively playing offense to expand and build market share, as well as defense, to maintain relevancy and customer share. Regional grocers are also aggressively expanding, offering a shopping experience and product diversity that competes well against the larger, national grocers. Also, in many instances, regional grocers are not constrained by the same supply chain challenges of the national grocers.”

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