Our Mission

Learn who we are and how we serve our community


Meet our leaders, trustees and team


Developing the next generation of talent


Covering the latest news and trends in the marketplaces industry

Industry Insights

Check out wide-ranging resources that educate and inspire

Government Relations & Public Policy

Learn about the governmental initiatives we support


Connect with other professionals at a local, regional or national event

Virtual Series

Find webinars from industry experts on the latest topics and trends

Professional Development

Grow your skills online, in a class or at an event with expert guidance

Find Members

Access our Member Directory and connect with colleagues

ICSC Networking Platform

Get recommended matches for new business partners

Student Resources

Find tools to support your education and professional development

Become a Member

Learn about how to join ICSC and the benefits of membership

Renew Membership

Stay connected with ICSC and continue to receive membership benefits


What’s Behind the Surge of Mega-Mergers

March 30, 2022

Marketplaces landlords that weathered COVID-related disruptions are shifting into growth mode. The retail industry has seen a surge in M&A deals and portfolio-level acquisitions over the past six months. One of the most recent is Cedar Realty Trust’s announcement that it had agreements lined up to sell the company and its assets, including a portfolio of 33 grocery-anchored centers, for nearly $1.2 billion. Other billion-dollar retail deals that have made a splash in the headlines include:

• CIM Real Estate Finance Trust announced in December it had entered into an agreement to sell all 81 of its shopping centers to American Finance Trust for as much as $1.27 billion in total cash consideration.

• Realty Income completed its merger with VEREIT Inc. last November, resulting in a post-merger portfolio estimated at about $50 billion.

• Grocery-anchored landlord Donahue Schriber Realty Group reportedly is close to being acquired by First Washington Realty and CalPERS for more than $3 billion.

Such megadeals are part of a bigger wave of M&A activity sweeping the REIT sector. According to JLL, U.S. REIT M&A volume soared to $140 billion in 2021, marking one of the strongest years on record. A number of factors contribute to dealmaking, including strong liquidity, low interest rates and strong real estate performance. REITs that underperformed the market came roaring back in 2021. Retail REITs, in particular, led the market with positive returns of 88% in 2021, according to JLL.

RELATED: Expect More Retail Portfolio Deals as Investors Pursue Opportunities of Scale

Operators across property sectors, including retail, are recognizing the premium of scale in the current marketplace. Larger REITs tend to perform better, they can leverage their platforms to reduce costs and they have better capitalization, noted JLL Capital Markets managing director Sheheryar Hafeez. “That is compelling if the environment is right, and 2021 was sort of the perfect storm of all of the stars aligning, both for private buyers and for REITs to acquire scale,” he says.

Plenty of Dry Powder

Digging into U.S. REIT M&A activity shows that half the deals done last year involved one REIT acquiring another REIT. The other half were private equity players or financial buyers taking REITs private. “What that says is that both sides of the M&A world were equally prolific: roughly $70 billion each,” said Hafeez. The average annual volume of REIT M&A activity over the past decade is less than $50 billion, he added.

M&A activity is a product of strong liquidity across the board in private equity, public REITs and sovereign wealth funds, agreed Tim Bodner, PwC real estate partner and U.S. Real Estate Capital Markets & Accounting Advisory Services leader. “What you’re seeing is that there is just a significant amount of capital available in the marketplace.” And capital raising is not slowing down, particularly in private nonlisted REITs being sponsored by private equity firms. In 2021, private nonlisted REITs raised $37 billion. In January 2022, they raised $3.7 billion, and in February, early indications are that the top two nonlisted REITs alone have raised $3 billion, noted Bodner. “There is just a lot of money going into the sector.”

Even though interest rates are moving higher, they’re relatively low and real estate is yielding favorable returns on a relative basis, noted Bodner. Some sectors of real estate did quite well during COVID, and performance is now incredibly strong across industrial, multifamily, self-storage, grocery-anchored retail and net lease. “That’s why we’re seeing a lot of M&A activity in the real estate sector, whether it’s single assets, portfolios or whole businesses,” he said.

Growing Confidence in Retail

Retail has benefited from a recovery that is providing more clarity around performance, tenant credit and property valuations and pricing. It’s good time to attract capital to a product type when underlying fundamentals are strong, and that is certainly the case in retail, noted CBRE U.S. Retail Capital Markets managing director Christopher Decoufle. Open-air retail centers, in particular, are enjoying excellent performance, he said. “COVID paused retail transactions, as well as office transactions. Office is still largely in some level of pause mode, while retail transactions are in full activation mode based on the underlying performance.”

An important part of the story for retail is that it has been “pressure tested” twice, noted Decoufle, first from e-commerce and second from COVID-related shutdowns. Cash flows for many different types of retail properties have proved to be very durable and strong. Although there are greater risks associated with enclosed malls, even many of them have come back strong, he said. Some of the larger transactions that are occurring are part of strategies that have been planned for some time, and market conditions are now more conducive to executing those plans, he added.

Pricing in some retail transactions also reflects the “knowledge premium” that exists in successful platforms. Over the past five years, there was so much headline risk associated with retail that capital allocators felt that they should get a risk premium for retail assets, noted Decoufle. Rather than paying a 3% cap rate for industrial, they expected a 5.5% or 6% yield for retail. Once informed investors dig into the facts, though, they realize that there is no risk premium associated with retail and that it’s really a knowledge premium, he said. Retail is arguably the most complex product type that requires operational and merchandising expertise. “Those that have the most knowledge of the product can get outsized returns without taking more risk,” he said, “so we’re at a moment in time where this knowledge premium is very, very valuable.”

Brick-and-mortar retail has proved its “COVID resiliency,” agreed Hafeez. What COVID did, he said, was push retail further in the direction the world already was moving: omnichannel and options for customers. Brick-and-mortar retail also proved that it’s relevant. People still need retail services like haircuts, gyms and the opportunity to pick out produce in person. Malls had a bigger hole to climb out of, but they did climb out and are now performing well, he added. Leasing activity and rent recovery have been good. “All of that leads to the belief that physical retail has a place in the retail ecosystem, and investors agree with that thesis,” he said.

Despite volatility in the stock market and uncertainty related to geopolitical issues, a strong pipeline of megadeals continues. As of mid-March, more than $25 billion in REIT M&A already had been announced across property sectors, according to JLL. “No one has a crystal ball on whether the war between Russia and Ukraine is protracted or if interest rates rise to a point where the numbers don’t make sense,” said Hafeez. “However, activity is still there, and I have no reason to doubt that it will continue in the near term.”

By Beth Mattson-Teig

Contributor, Commerce + Communities Today

Small Business Center

ICSC champions small and emerging businesses in getting from business plan to brick-and-mortar.

Learn more