Publix is buying up property in Florida

Publix has spent $86 million in the last year to buy six local shopping centers, including this one at 8300 Bee Ridge Road in Sarasota.

STAFF PHOTO / MIKE LANG

By John Hielscher

Published: Monday, March 16, 2015 at 10:36 a.m.

Last Modified: Monday, March 16, 2015 at 10:36 a.m.

Publix Super Markets went on a buying spree over the past year, bagging six shopping centers in Southwest Florida for $86 million.

Facts

RECENT PUBLIX PURCHASES

Recent purchases by Publix in Southwest Florida

• Publix at Lakewood Ranch, $17.45 million
8330 Market Street, (University Parkway and Market Street), Lakewood Ranch

• Lakewood Walk, $26.3 million
11205 State Road 70 E., Lakewood Ranch

• Publix at Bee Ridge, $8.4 million
8300 Bee Ridge Road, Sarasota

• The Shops at Silver Leaf, $11.25 million
11245 U.S. 301, Parrish

• Merchants Crossing, $17.9 million
1500 Placida Road, Englewood

• Port Charlotte Crossing, $4.70 million
4265 Tamiami Trail, Port Charlotte

But the state's largest grocery-store chain is hardly finished — it has earmarked $1.3 billion this year to buy more centers, build new stores and remodel others.

The cash-rich company has become a major player in shopping center acquisitions, betting on the revival of the commercial real estate market here and across Florida.

“Publix has deep pockets, so they can really afford to do this,” said Stan Rutstein, a commercial specialist with Re/Max Alliance Group in Bradenton. “It protects their competitive position. It dramatically lowers their occupancy costs over time. It's an opportunity to lease out the smaller shop space and have some additional income from that.”

Last month, Publix paid $17.45 million for the shopping center it anchors at University Parkway and Market Street in Lakewood Ranch.

It was the company's second major deal in the booming Ranch area. In November, Publix spent $26.3 million for the Lakewood Walk shopping center it anchors on State Road 70 East.

In the past year, it also acquired centers where it operates stores in Sarasota, Parrish, Englewood and Port Charlotte.

Lakeland-based Publix now operates 1,098 stores, and roughly 20 percent sit in company-owned real estate, spokesman Brian West said.

“We're very fortunate to be in good financial health — no long-term debt and significant cash reserves, enough to allow us to invest in real estate when the situation makes sense,” West said.

“Buying shopping centers, when the investment looks good, is not unique to any one area of our footprint,” he added.

Strategy

The buying strategy is indeed statewide.

In the past few weeks alone, Publix has spent nearly $60 million on centers where it has stores in Tampa, Fort Myers and Miami.

“We're always considering the opportunities that will help us to best serve our customers,” West said.

The company has owned centers where it operates stores for years, but it became a more aggressive buyer over the past two years.

“Publix is always open to buy, they are always out there looking,” Rutstein said.

Buying the centers rather than leasing them makes sense because their cost of capital is cheaper than a landlord's, so their occupancy cost is less than it would be for renting.

“The mathematics to purchase these properties works,” Rutstein said. “And they want to control their street corners.”

The privately owned grocer is coming off a stellar financial performance in 2014, one that analysts said was particularly impressive in light of heated competition from expanding rivals like Trader Joe's, Whole Foods and Walmart.

Publix rang up $30.6 billion in sales last year, a 5.7 percent increase from 2013. Comparable store sales rose 5.4 percent.

Net earnings gained nearly 5 percent to $1.74 billion, and earnings per share jumped from $2.12 to $2.23.

The company's stock price rose from $33.80 to $39.05 as of March 1. The stock is not publicly traded and is sold only to its 175,000 employees and directors.

In a recent report, commercial real estate brokerage Colliers International said Publix had purchased nearly half of the shopping centers it anchors that sold in the first nine months of 2014 in Tampa Bay and Southwest Florida.

“Because Publix has the first right of refusal on acquiring centers where they lease space, other investors interested in Publix-anchored centers have been frustrated with the acquisition process, given the possibility that even the top bidder could potentially be out-positioned by Publix,” the firm said.

Those other investors are clearly attracted to properties where Publix is the main tenant.

Last month an Ohio-based real estate investment trust paid $10.8 million for the Publix-anchored Twelve Oaks shopping center in Bradenton.

It was the initial investment for Devonshire REIT Inc., which has $475 million in assets under management.

“We are excited to add our first property in Florida, and our first Publix-anchored center,” said Mike Denman, executive vice president of real estate operations.

Private investors also recently bought the retail portion of the Broadway Promenade complex at North Tamiami Trail and 10th Street in Sarasota for $11.3 million; and the Paradise Plaza center at U.S. 41 and Bee Ridge for $26.7 million.

But those investors will continue competing for deals with Publix, which spent $1.3 billion last year to open 32 new stores and buy shopping centers, and has set aside an equal amount to invest in 2015.

“As the old expression goes, 'You can't grow dirt,' ” Rutstein said. “If it's a great street corner, why not take advantage?”