Investors show appetite for big retail deals despite uncertain environment

Retail landlord Kite Realty Group has partnered with global investor GIC to acquire a lifestyle center in the Dallas area for $785 million, one of the biggest deals in that real estate sector this year and coming to fruition despite looming economic uncertainty.

Kite, an Indianapolis-based real estate investment trust, in a joint venture purchased Legacy West, a 344,076-square-foot open-air mixed-use center at 5908 Headquarters Drive in Plano. The property includes stores — including luxury retailers Louis Vuitton, Gucci, Chanel, David Yurman and Tiffany & Co. — as well as multifamily and office space. Kite's partner, GIC, is Singapore's sovereign wealth fund. Kite didn't identify the seller.

Kite Chairman and CEO John Kite on Wednesday called the deal "a landmark acquisition" for the REIT. Kite is expanding its footprint in the Dallas-Fort Worth market, where it already owns several open-air shopping centers, and plans to partner with GIC on other transactions.

"Opportunities to acquire iconic mixed-use assets are rare," Kite said Wednesday. "Given our strong presence in the Dallas [area] and strategic objective to increase exposure to high-caliber assets, we viewed Legacy West as a property that aligns with our investment criteria and long-term portfolio vision. Recognizing the magnitude of the opportunity, we proactively approached GIC to explore forming a joint venture."

Kite is one of several retail landlords reporting first-quarter earnings this week, including New York-based Urban Edge Properties and Brixmor Property Group. They all discussed strong leasing activity despite the threat of tariffs hanging over the industry. But on a Wednesday earnings call, Urban Edge CEO Jeff Olson said he'd begun to see a shift in the investment market.

"Since the tariffs were announced in early April, we have not seen any changes in retailer demand at our properties," Olson told Wall Street analysts. "However, the investment sales market is showing early signs of slowing down. On the debt side, there has been limited [commercial mortgage-backed securities] issuance since April. REITs and foreign investors are pausing. Transactions with private buyers remain active."

By contrast, Kite with its foreign joint-venture partner told a different story.

"I think there’s still some very active acquisition buyers out there," Kite said. "There’s liquidity. Look, I think there’s uncertainty geopolitically, but on the ground operationally, it’s a lot better. So I think we continue to see good demand and [capitalization] rates continue to be very competitive. ... I think it’s a pretty good market and we’ll see how the rest of the year kind of evolves."

And nationally, activity has risen, according to CoStar.

"The retail investment market gained momentum throughout 2024, with annual sales volume climbing 5% year-over-year to $57 billion," according to a CoStar U.S. retail report. "Activity strengthened progressively each quarter, peaking with the highest transaction volume occurring in the fourth quarter. After a slower start to the year, the first quarter of 2025 rose 8% above the same period in 2024."

Kite closed several sales and acquisitions, including entering into the joint venture with GIC to co-invest in high-quality, open-air retail and mixed-use assets. In the Legacy West deal, Kite's share of the purchase price was $408 million. The REIT will act as the operating member of the joint venture and will have a 52% majority interest in the property. As part of the acquisition, the joint venture assumed a $304 million mortgage at a 3.8% coupon.

But the Legacy West purchase is just the start of the joint venture's plans, which include additional growth. Kite and GIC have a nonbinding letter of intent "to seed a second [joint venture] with a handful of the [REIT's] larger format community and power centers," according to Kite's investor presentation.

Those "seed assets" include The Landing at Tradition in Port St. Lucie, Florida; Denton Crossing in Denton, Texas; and Parkway Towne Crossing in Frisco, Texas.

Legacy West is on a 35-acre site that has roughly 344,000 square feet of retail space, 444,000 square feet of office space, and 782 multifamily units, according to Kite. The center's "average retail sales in excess of $1,000 [per square foot] demonstrate dominant retail performance with an opportunity to capture meaningful upside from below-market rent," according to Kite's investor presentation.

According to the REIT, the acquisition establishes relationships with global luxury tenants like LVMH and Kering; leverages Kite's experience in operating lifestyle and mixed-use properties; and accelerates leasing synergies within Kite's lifestyle portfolio, including the nearby Shops at Legacy East.

Kite had previously announced that it had acquired Village Commons, a 170,976-square-foot Publix-anchored center in West Palm Beach, Florida, for $68.4 million. And after the first quarter ended, Kite sold Stoney Creek Commons, an 84,094-square-foot center in Indianapolis, for $9.5 million.

Urban Edge had investment activity in the first quarter.

"Our capital recycling efforts are advancing with $66 million of assets sold or under contract at a weighted average capitalization rate of 5%," Olson said in a statement. "Our team is focused on continuing to execute on our strategic plan, capitalizing on the robust demand in our markets through our leasing, redevelopment, and investment strategies.”

Urban Edge, a real estate investment trust, also saw a slowdown in the retail bankruptcies that put Big Lots, Joann, and Party City out of business.

"We don't really see any big bankruptcy headlines coming down the pipe," Urban Edge Chief Operating Officer Jeffrey Mooallem said on the earnings call. "Obviously, the economic disruption we're all worried about and the potential recession that could cause is on all of our minds. But leaving that aside, we feel like the state of the industry is very healthy right now."

Citigroup Global Markets acted as financial adviser to Kite Realty Group. Greenhill, a Mizuho affiliate, acted as financial adviser to GIC.