Discount giant Walmart has added another retail complex to its real estate portfolio, buying a Connecticut shopping center anchored by one of its stores as U.S. chains increasingly look to own their brick-and-mortar locations.
Bentonville, Arkansas-based Walmart acquired the Walmart Center at 650 Main Ave. in Norwalk for $44.5 million, said Jeff Kintzer, a principal at Royal Properties who represented the seller: Murray & Gaunt Partners of New York, according to CoStar data.
“The amount of interest in this center was substantial,” Kintzer said in a statement. “With several options to consider, Walmart stepped up with the best overall offer.”
With this purchase, Walmart has now acquired three retail properties since late January — with the other two in Pennsylvania — for a total of $118.1 million. The discounter is a tenant in two of these properties: the recently purchased Norwalk center and the Bethel Park Shopping Center in Bethel Park, Pennsylvania. It isn't a tenant in the Monroeville Mall in Monroeville, Pennsylvania, but it is looking to gain entry in the Pittsburgh area where that property is located.
Lately there’s been a surge in retailers buying the buildings that house their stores. Global luxury chains in the past year or so have snapped up properties on sought-after streets like Fifth and Madison avenues in Manhattan, guaranteeing them those locations in perpetuity.
Department-store operator Dillard’s this summer acquired a mall in Texas where it has an anchor store. And Publix Super Markets has been on a bit of a shopping-center buying binge, most recently acquiring the Hammocks Town Center in Miami, Florida, a property where it has a grocery store.
“Walmart seems to have recently discovered what Publix Super Markets has known for many years: that controlling their real estate, creating the right tenant mix and collecting rents from tenants is good business with the added advantage of asset appreciation that comes with owning commercial real estate,” Rudy Milian, president and CEO of retail consultant Woodcliff Realty Advisors, said in an email to CoStar News.
In a way, this trend is a throwback to the past, when retailers such as Sears, Lord & Taylor, Macy’s and J.C. Penney owned much of their retail real estate. Sears and J.C. Penney, in the wake of bankruptcy, have been selling off many of their store locations for years. And Macy’s is shedding some of its retail real estate.
Losing one store in Norwalk
The shopping center that Walmart acquired in Norwalk is just over 160,000 square feet; Walmart is the center’s 118,630-square-foot anchor. The tenant mix includes Ulta Beauty, Aspen Dental, Just Salad, Panera and Qdoba Mexican Restaurant.
Walmart once had two stores in Norwalk, one at 680 Connecticut Ave. as well as Main Avenue. But its discount rival Target took over that location this summer. Buying the other shopping center in Norwalk will ensure that Walmart has at least one permanent spot in that market.
“I’m a big believer if a retailer can afford to buy the property that they’re leasing, they should go and do it,” Kintzer told CoStar News. “I think over a long term, it makes a lot of business sense. I also think for a company like Walmart, why not put the money up and control your destiny?”
Walmart’s broker on the Norwalk deal, Barry Milberg, president of Treeline Real Estate, declined to comment. The retailer didn’t respond to an email from CoStar News seeking comment on Wednesday.
The shopping center that Walmart bought in Norwalk is similar to the one it acquired in Bethel Park, in that both are anchored by the retailer.
“We were in a lease agreement at Bethel Park so purchasing the property provided the best opportunity for us to serve our customers in the long-term,” Mark Rickel, Walmart director of corporate communications, said last week.
The company said it has no plans to make any changes to the Bethel Park property.
The mall game plan
The situation is very different with Monroeville Mall, where Walmart doesn’t have a store. The retailer has filed an application to get a state grant to demolish that 1.2-million-square-foot property and redevelop it. It would have new retail, restaurant and entertainment space, with a Walmart and Sam’s Club on its tenant roster.
Walmart had previously failed to get local approval to open a Walmart in Monroeville. The mall acquisition gives the company a way into the market.
“Thus far, Walmart’s acquisitions this year appear to be very selective. If Walmart wants to move full throttle into commercial real estate ownership, we would see the company acquiring a national shopping center company along with its underlying real estate assets and the management company to help manage the business,” Milian said. “Is that a possibility? Maybe and maybe not.”
Walmart keeps nearly $9.4 billion in cash equivalent on hand and could acquire real estate “on a massive scale if its board felt this is a way to diversify and grow its holdings,” according to Milian.
But so far, Walmart’s priorities for investing cash have just included spending on automation, its supply chain, artificial intelligence and technology, improving its Sam’s Club warehouses and remodeling Walmart stores in the United States and abroad, Milian said.
For the record
Jeff Kintzer, principal of Royal Properties, represented the seller. Barry Milberg, president of Treeline Real Estate, represented Walmart.