Federal Realty (FRT - Get Report), the oldest REIT in the nation (and celebrating its 50th anniversary) this year, has witnessed five decades of retailing and the success of the "best in class" REIT has been its ability to provide innovative opportunities for its tenants. As Don Wood, Federal Realty's president and CEO explains:
"Online shopping is here to stay and will continue to get better and evolve in terms of another attractive and convenient way for consumers to consume. As I see it, the effect is to effectively 'raise the bar' for retail landlords to provide a brick-and-mortar product that is complementary to online alternatives. A shopping center that is well-maintained and safe with convenient parking in a good location isn't nearly enough to ensure success any more. The mix of retailers in that center -- We call that the process of 'merchandising the center' -- is more important than ever and needs to be far more 'experiential' to consumers than in the past. Unique and well-run food uses are playing a bigger and bigger part in the mix as are tenants serving changing consumer habits in a faster-paced and highly technology-driven world. Further, more flexible shopping center configurations, such as fewer deep spaces that can only house one type and size retailer, allow for today's, and tomorrow's, more efficient retailer. This is extremely important to ensuring a center's long term success."
Retail REITs That Outperform
According to NAREIT, the retail REIT's own more than $137 billion in properties (based on market cap as of Oct. 31, 2012), and the average dividend yield for the sector is 3.27%. The mall subsector has a market capitalization of $84 billion and the shopping center subsector market capitalization is around $41 billion (free-standing REITs total around $11 billion).
My large-cap shopping center REIT picks include Kimco Realty, Weingarten Retail Investors (WRI), Regency Centers (REG) and Federal Realty. Some of the small-cap retail REITs, including Excel Trust (EXL), Retail Opportunity Investment Corp. (ROIC) and Whitestone REIT (WSR), all provide a higher risk-adjusted dividend yield.