After 40 years of investing in apartment communities, Hawthorne, N.Y.-based GDC Properties Inc., the investment arm of GinsburgCorp., is switching to retail.
GDC plans to spend $500 million bulking up on grocery-anchored shopping centers, from six properties now to 20 in the next few years. It's honing in on the metro areas of New York, Atlanta and central and southern Florida. The company plans to divest $300 million in apartment assets by offering them as condominium conversions.
“We are moving our investment portfolio out of apartments to retail,” says William Ingraham, GDC chief investment officer, citing cap rates as a reason.
For decades, the company built luxury rental apartments with state-of-the-art fitness clubs, heated swimming pools and tanning beds. But continued low mortgage rates have made condos more viable and cap rates on apartments are at historic lows, says Suzanne Mulvey, real estate economist with Property & Portfolio Research Inc., a Boston-based market research company.
Grocery-anchored shopping centers net from about 6.4 percent cap rates in the New York metro area to 7 percent in south and central Florida, says Mulvey, citing Real Capital Analytics. Lingering concerns about Wal-Mart's squeeze on grocers, including Winn-Dixie in the Southeast, haven't stopped sales activity in Southeastern markets, industry experts says. Ingraham says GDC is focused on picking up quality centers with anchors such as Walgreens and Publix.
“People always need to eat and get their nails done,” says Ingraham. “They are stable investments insulated from the economic downturn.”