These retail landlords (REITs) are likely to be most affected by Hurricane Florence

2 months ago by James Mattone in Facts

Hurricane Florence made landfall, and as it hits the coast of North Carolina, catastrophic freshwater flooding is expected over portions of the Carolinas.

While we can't predict the exact damage Florence will cause when it moves on next week, we do have the data on what major Carolina commercial real estate landlords will feel the hurt.

Whether it is malls or office buildings, these locations could be affected by hurricane-force winds and potential flooding, causing issues for both the property owner and its tenants. When looking at the biggest real estate trusts in the area, Raleigh-based Highwoods Properties, Inc. ($NYSE:HIW) has the most pieces of commercial property in the Carolinas. In fact, it has more properties than the next four real estate trust companies combined.

Entity Name Number of Properties (NC/SC)
Highwoods Properties 121
Wheeler Real Estate Investment Trust 33
DDR 30
Brixmor Property Group 29
CBL & Associates Properties 26
Kimco Realty 26
Regency Centers 21
Lexington Realty Trust 19
VEREIT 16
InvenTrust Properties 9
Tanger Factory Outlet Centers 7
Simon Property Group 7
General Growth Properties 4
Equity One 3
Retail Properties of America 3
Federal Realty Investment Trust 2
Pennsylvania Real Estate Investment Trust 2
Urban Edge 1

What's even more concerning is that Highwood Properties not only has the most-owned properties in the Carolinas, but nearly 50% of its portfolio is based in those two states.

Entity Name Number of Properties (NC/SC) Number of Properties (U.S.) % of Properties in NC/SC
Highwoods Properties 121 263 46%
Wheeler Real Estate Investment Trust 33 82 40%
Tanger Factory Outlet Centers 7 38 18%
CBL & Associates Properties 26 196 13%
VEREIT 16 151 11%
Lexington Realty Trust 19 194 10%
InvenTrust Properties 9 94 10%
DDR 30 318 9%
Pennsylvania Real Estate Investment Trust 2 22 9%
Brixmor Property Group 29 502 6%
Regency Centers 21 432 5%
Kimco Realty 26 539 5%
Simon Property Group 7 232 3%
General Growth Properties 4 144 3%
Equity One 3 125 2%
Retail Properties of America 3 127 2%
Urban Edge 1 100 1%
Federal Realty Investment Trust 2 220 1%

Mapping out the five companies with the most North and South Carolina locations against its overall portfolio shows Highwood's holdings are essentially concentrated around its founding city of Raleigh and nearby Greensboro. For the remaining four, its real estate is scattered around the Carolinas, with some in line with areas for high flash flood potentialTanger Factory Outlet Centers ($NYSE:SKT) has the majority of its outlet malls on or near the coast, with one mall located in Nags Head where waves from the storm were coming in at 12 feet high.

The tenants that could be most affected by Florence

In terms of tenants, the second, third and fourth companies on the list each have unique data footprints.

For Wheeler Real Estate Investment Trust ($NASDAQ:WHLR), its top-three tenants  as of Sept. 14 are supermarket companies. Specifically, it's Bi-LO ($PRIV_SOUTHEASTERNGROCERS), Food Lion ($NYSE:DEG), which we covered in our previous Hurricane Florence piece, and Piggly Wiggly ($CSWG). It also has a fair amount of vacant storefronts and other real estate space, which may seem like a lot, but only accounts for less than 15% of its real estate.

Wheeler Tenant Name Count
BI-LO 10
Food Lion 8
Piggly Wiggly 6
Subway 5
Family Dollar 5
Grove Park Pharmacy 4
Pizza Hut 3
T-Mobile 3
Top Nails 3
H&R Block 3
Boost Mobile 3
Dollar Tree 3

CBL & Associates Properties ($NYSE:CBL) has a three-way tie for tenants between department store Belk ($OTCBB:BLKIB), Bath & Body Works ($NYSE:LB), and young women's jewelry and accessory retailer Claire's ($PRIV_CLAIRESSTORES).

CBL Tenant Name Store Count
Belk 11
Bath & Body Works 11
Claire's 11
Foot Locker 10
Chick-fil-A 10
LensCrafters 10
Kay Jewelers 9
Sunglass Hut 9
Hickory Farms 9
The Children's Place 9

And at the Tanger Outlets, excluding its "Shopper Services" locations operated by the company to help customers, its big tenants in the Carolinas are Polo Ralph Lauren ($NYSE:RL), Kitchen Collection ($NYSE:NC), Banana Republic ($NYSE:GPS), Rack Room ($RACKROOMSHOES), and Sunglass Hut ($SUNGLASSHUT).

Tanger Tenant Name Store Count
Polo Ralph Lauren Factory Store 7
Kitchen Collection 7
Tanger Shopper Services 7
Banana Republic Factory 7
Rack Room Shoes 7
Sunglass Hut 7
LOFT Outlet 6
Talbots Outlet 6
J.Crew | Crewcuts Factory 6
Gymboree Outlet 6
Carter's Babies and Kids 6

For all of these three real estate trust companies, the most common tenants are part of national chains and only represent a small piece of their respective companies' footprints. For example: those Polo Ralph Lauren Factory Stores at Tanger Outlets only represent 13.5% of its 518 brick-and-mortar Ralph Lauren stores. This, combined with its online sales and the fact that those are only outlet stores, should be taken into account when determining the impact of Hurricane Florence on the business, if any.

Still, having even one store damaged by a storm is tough on any company, as it would divert resources or tap into any funds to fix up the store and restock products.

James Mattone

James is a recent Boston University graduate who calls the world of esports and video games his home. As a young journalist, he has already covered two E3 expos a...

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