Federal Realty Expands West Coast Presence with Acquisition of Del Monte Shopping Center

Rhea-AI Summary

Federal Realty Investment Trust (NYSE:FRT) has acquired Del Monte Shopping Center in Monterey, California for $123.5 million. The 674,000-square-foot, 47-acre grocery-anchored lifestyle center is currently 83% leased and serves a trade area of over 225,000 residents.

The property, anchored by Whole Foods and featuring retailers like Apple, Sephora, Lululemon, Pottery Barn, and Anthropologie, ranks in the nation's top 5% for annual foot traffic. Located on Highway 1, it serves as the dominant retail destination on the Monterey Peninsula.

Federal Realty plans to create value through strategic lease-up, merchandising, and placemaking enhancements, comparing the opportunity to their successful properties like Barracks Road and Virginia Gateway in similar affluent markets.

Positive

• Strategic acquisition in affluent market for $123.5M
• Property ranks in top 5% nationally for foot traffic
• Premium tenant mix including Apple, Whole Foods, Sephora
• Large 674,000 sq ft property with 17% leasing upside potential
• Serves substantial trade area of 225,000+ residents

Negative

• Current 83% occupancy rate indicates vacant space to fill
• Significant capital investment needed for property enhancements

Insights

Financial Analyst

Federal Realty's $123.5 million acquisition of Del Monte Shopping Center represents a strategic expansion into the affluent Monterey Peninsula market at an attractive $183 per square foot - well below replacement cost for premium retail space in high-barrier California markets.

At 83% occupancy, this 674,000-square-foot property offers substantial near-term NOI growth potential through lease-up of approximately 115,000 vacant square feet. Based on comparable properties in FRT's portfolio, full stabilization could add $4-6 million in annual NOI, potentially generating a stabilized yield of 6-7% - attractive in today's cap rate environment for premium retail assets.

The acquisition aligns with FRT's post-pandemic strategy of consolidating ownership of dominant retail destinations in high-income, supply-constrained markets. Monterey's affluent demographics (significantly above national median income) and tourist traffic create a resilient customer base that supports premium retailers like Apple, Sephora, and Lululemon already in place.

FRT's expertise in placemaking and tenant curation should drive value beyond simple lease-up. Their ability to attract aspirational retailers to their properties typically commands 10-15% rent premiums versus local market averages. This acquisition represents just 1.4% of FRT's $9 billion market cap but provides an attractive growth vector in a market with institutional ownership and high barriers to new development.

Retail Industry Expert

Federal Realty's acquisition of Del Monte Shopping Center represents a textbook example of the "flight to quality" trend reshaping retail real estate. As a dominant center in an affluent market with competition, Del Monte fits the profile of retail assets outperforming in the post-pandemic landscape - grocery-anchored, lifestyle-oriented properties in high-income areas.

The current tenant roster (Whole Foods, Apple, Sephora, Lululemon) already establishes a premium positioning, but the 17% vacancy presents significant merchandising opportunities. Based on Federal Realty's playbook at similar properties, expect targeted tenant additions focused on three categories:

• Experiential retail concepts that drive repeat visits
• Food and beverage operators that extend dwell time
• Digitally-native brands seeking physical touchpoints

The Monterey location offers a compelling proposition for retailers: a consolidated destination capturing both affluent year-round residents and seasonal tourists without significant competing retail nodes. This "retail consolidator" model has proven resilient against e-commerce pressures when properly merchandised.

Federal Realty's placemaking expertise typically involves modernizing common areas, enhancing outdoor gathering spaces, and creating Instagram-worthy moments that drive foot traffic. The JLL executive's comments suggest Federal Realty's involvement will likely attract premium tenants that previously overlooked this market - particularly restaurant concepts and specialty retailers that target high-income consumers but require sophisticated landlords who understand their positioning requirements.

Market-Dominant Retail Destination in High-Income Regional Market

N. BETHESDA, Md., Feb. 26, 2025 /PRNewswire/ -- Federal Realty Investment Trust (NYSE:FRT) has acquired Del Monte Shopping Center, a 674,000-square-foot, 47-acre, grocery-anchored lifestyle center in Monterey, California, for $123.5 million. As the dominant retail destination on the Monterey Peninsula, Del Monte Shopping Center is uniquely positioned on Highway 1—the region's major commercial and commuter spine. The property serves a trade area of over 225,000 residents and is the region's most visited retail center within a 15-mile radius. It ranks in the nation's top 5% of all shopping centers for annual foot traffic, according to Placer.ai.

"Del Monte Shopping Center is the premier retail destination of the Monterey Peninsula, an area characterized by strong incomes and home to one of the most affluent leisure destinations in the US," said Jan Sweetnam, Executive Vice President, Chief Investment Officer at Federal Realty. "This acquisition aligns with Federal Realty's strategy to expand into affluent but underserved markets. We look forward to capitalizing on our deep relationships with aspirational retailers looking to expand and enter new markets with a partner who has a history of delivering great places and strong sales."

Currently 83% leased, Del Monte Shopping Center is anchored by Whole Foods and features high-performing retailers such as Apple, Sephora, Lululemon, Pottery Barn, and Anthropologie. With a proven track record of owning, managing, and transforming market-dominant centers, Federal Realty anticipates creating value at Del Monte through strategic lease-up, merchandising, and placemaking enhancements. The Monterey market and the company's property enhancement strategy align with assets like Barracks Road and Virginia Gateway—highly successful and dominant retail destinations in smaller markets, serving affluent customers in expansive trade areas as their regions' "consolidator" shopping centers.

"Federal Realty has an elite reputation among retailers and intermediaries like us, particularly when it comes to delivering an exceptional retail experience that appeals to the more affluent customer in search of elevated brands and offerings," said Naveen Jaggi, President, Retail Advisory Services at JLL. "Their acquisition of Del Monte in Monterey will undoubtedly pique the interest of restaurants and retailers that wouldn't have been as enthusiastic before."

About Federal Realty

Federal Realty is a recognized leader in the ownership, operation and redevelopment of high-quality retail-based properties located primarily in major coastal markets from Washington, D.C. to Boston as well as Northern and Southern California. Founded in 1962, Federal Realty's mission is to deliver long-term, sustainable growth through investing in communities where retail demand exceeds supply. Its expertise includes creating urban, mixed-use neighborhoods like Santana Row in San Jose, California, Pike & Rose in North Bethesda, Maryland and Assembly Row in Somerville, Massachusetts. These unique and vibrant environments that combine shopping, dining, living and working provide a destination experience valued by their respective communities. Federal Realty's 102 properties include approximately 3,500 tenants in 27 million commercial square feet, and approximately 3,100 residential units.

Federal Realty has increased its quarterly dividends to its shareholders for 57 consecutive years, the longest record in the REIT industry. Federal Realty is an S&P 500 index member and its shares are traded on the NYSE under the symbol FRT. For additional information about Federal Realty and its properties, visit www.federalrealty.com.

Investor Inquiries: Leah Andress Brady Vice President, Investor Relations 301.998.8265 lbrady@federalrealty.com

Media Inquiries: Brenda Pomar Senior Director, Corporate Communications 301.998.8316 bpomar@federalrealty.com

 

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SOURCE Federal Realty Investment Trust

FAQ

How much did Federal Realty (FRT) pay for Del Monte Shopping Center?

Federal Realty paid $123.5 million for the Del Monte Shopping Center in Monterey, California.

What is the current occupancy rate of FRT's Del Monte Shopping Center acquisition?

The Del Monte Shopping Center is currently 83% leased, indicating a 17% vacancy rate.

What are the key retail anchors at FRT's new Del Monte Shopping Center?

The center is anchored by Whole Foods and features major retailers including Apple, Sephora, Lululemon, Pottery Barn, and Anthropologie.

What is the size and reach of FRT's Del Monte Shopping Center?

The center is 674,000-square-foot, spans 47 acres, and serves a trade area of over 225,000 residents.

How does Del Monte Shopping Center's foot traffic compare to other centers nationally?

According to Placer.ai, the center ranks in the nation's top 5% of all shopping centers for annual foot traffic.