REIT Leaders Are Trimming The Fat From Their Portfolios To Ride Out REIT Downturn

These are trying times for retail, but there are ways to survive. REIT leaders at Bisnow's Retail South event said they are weathering the market reset by divesting of their Class-C and D properties and investing in their A properties as customer preference trends toward unique and interesting experiences.

“Good real estate gets better,” Weingarten Realty Investors President and CEO Drew Alexander said. “Starting in 2011, we started selling a lot of the properties we thought had risk associated with them.”

Kimco Realty has employed a similar strategy. According to President Rob Nadler, the company has divested almost $5B of real estate since 2010, going from 850 U.S. properties to 520. 

Other REITS have followed suit.

“We divested from secondary and tertiary markets and focused on our 10 core markets,” RPAI Western Division President Gerry Wright said. “In 2009 to 2010 we hit about 300 assets. We are down to about 187 now, and we will probably reach about 150 when we are finished with our strategic plan.”

So what are the pros doing with the extra capital from their divestments? Reinvesting it in their proven, primary markets to become even more competitive.

“We have set up a tier one and a tier two strategy within the portfolio," Nadler said. "Everything we call tier one we have reinvested [in], whether it is LED lighting, landscaping, capital investments, etc. It has made a big difference for us.” 

The sentiment among REIT leaders seems to be that, in a bearish market, it is especially important for investors to make sure their properties have what it takes to capture demand. In a tough market, stagnation is not an option.

“Be nimble; watch the trends; try to stay ahead of the trends; have your properties be best in class," Nadler said.