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  • Writer's pictureRealFacts Editorial Team

Federal Realty Sells Third Street Promenade Portfolio for $103 Million


Santa Monica California

In a strategic move to optimize its portfolio and enhance its financial position, Federal Realty Investment Trust (FRT) has finalized the sale of its remaining assets on Third Street Promenade in Santa Monica, California. The transaction, valued at $103 million, included eight buildings encompassing 185,000 square feet of space. This sale completes the disposition of the entire Third Street Promenade portfolio, bringing total proceeds from the sale to $120 million, including a prior transaction.


The Third Street Promenade portfolio, located just a quarter mile from Santa Monica Beach, comprised 147,000 square feet of retail space and 60,000 square feet of office space across both transactions. This successful sale underscores Federal Realty's commitment to dynamic portfolio management and strategic capital allocation, focusing on enhancing financial flexibility and targeting key markets for growth.


By divesting these non-core assets, Federal Realty is able to concentrate on strategic investments that align more closely with its long-term growth objectives. One such investment is the recent acquisition of Virginia Gateway, a prominent 110-acre retail hub located in Gainesville, Virginia. This acquisition added approximately 665,000 square feet of prime retail space to Federal Realty’s portfolio, reinforcing its strategy of owning and operating high-quality, high-traffic retail properties in affluent markets.


Virginia Gateway, situated at the intersection of Route 29 and I-66, is roughly 95% occupied and ranks as one of the top retail and entertainment hubs in Virginia. It attracts visitors from a wide regional trade area and was ranked third in the state for annual visits in 2023, according to Placer.ai, just behind Tysons Corner. The high foot traffic at Virginia Gateway translates into robust tenant sales, particularly in the food and beverage sector.


Gainesville, Virginia, is a thriving community with strong economic and demographic fundamentals. The area benefits from an influx of higher-paying jobs and has an average household income within a three-mile radius of Virginia Gateway exceeding $184,000, which is above Federal Realty’s portfolio average. This affluent consumer base, coupled with job growth driven by the nearby Dulles Technology Corridor, positions Virginia Gateway for sustained high performance and growth.


Federal Realty's shift towards high-growth assets in key markets demonstrates its proactive approach to portfolio management. The company’s portfolio of premium retail assets in affluent communities with favorable demographics positions it well for future growth. A diverse tenant base and a focus on essential retail ensure steady cash flows. Furthermore, Federal Realty's efforts to diversify its portfolio and develop mixed-use assets are likely to yield long-term benefits.


However, challenges such as higher e-commerce adoption and potential tenant bankruptcies, coupled with a high-interest rate environment, may impact Federal Realty. Despite these concerns, the strategic sale of the Third Street Promenade portfolio and the acquisition of Virginia Gateway highlight Federal Realty’s ability to adapt and thrive in a dynamic real estate market.

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