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Retail Opportunities, Local and Abroad, Spur Revenue Growth

San Diego’s PriceSmart Inc. is among several of the region’s large public companies paying close attention to the performance of consumer retail markets.

In the case of PriceSmart (Nasdaq: PSMT), which operates warehouse club stores, the particular focus is on regions outside the continental United States, where all of its 32 stores are located — primarily in Central America, the Caribbean and the U.S. Virgin Islands.

The company recently opened its sixth store in Costa Rica, and Chairman Robert Price said a priority later this year will be building on its budding presence in South America — specifically Colombia.

PriceSmart has three stores in Colombia and plans to open three more by year’s end. It’s an opportunity to serve a fast-emerging consumer class in that country, but it also comes with the traditional challenges that have prompted the company to maintain a cautious approach to its growth.

“It’s a big step, because you’re up against some strong competitors in these markets,” Price said.

The retailer landed at No. 4 on this year’s San Diego Business Journal ranking of the region’s largest public companies based on revenue, moving up from sixth place on last year’s list after racking up $84.3 million in net income on sales of $2.3 billion in its fiscal 2013.

This year’s list of locally headquartered public companies also has real estate investment trusts focused principally on shopping centers in the United States, since those properties constitute large portions of their portfolios.

That includes Escondido-based Realty

Income Corp. (NYSE: O) at No. 13, up from No. 20; San Diego’s American

Assets Trust Inc. (NYSE: AAT) at No. 23, up from 28; and San Diego-based Excel Trust Inc. (NYSE: EXL) at No. 36, up from 43. At No. 37 is Retail Opportunity Investments Corp. (Nasdaq: ROIC), a new arrival on the list after moving its headquarters from White Plains, N.Y., to San Diego in late 2012.

Another large local REIT is San Diego-based BioMed Realty Trust Inc. (NYSE: BMR) — at No. 17, up from 19 last year — which is focused solely on offices, lab spaces and related research properties tied to the life-sciences industry.


Avoiding Bidding Wars

All of the local REITs were active nationally in acquiring new properties during 2013. At Excel Trust, which posted 2013 revenue of about $112.5 million, President Spencer Plumb said the company has stood by its strategy of seeking existing shopping centers anchored by grocery stores, drugstores and other necessity-

based retailers known to generate steady traffic. With new retail development remaining rare in San Diego and most major U.S. markets, Excel aims to avoid bidding wars for properties by approaching owners directly, before the centers it seeks are officially listed for sale.

“We prefer to go off-market,’’ Plumb said. “There are times when we are able to address a very specific situation that the seller might be in, where the owner either needs to sell or wants to sell under certain conditions.”

The company’s $1.3 billion national portfolio is focused primarily on the East and West coasts, along with the Southwest and Southeast regions. In the local market, where its portfolio totals about $100 million, Plumb said Excel is looking to move ahead later this year on a long-planned redevelopment of La Costa Towne Center, a Carlsbad property it acquired in 2012, where new elements could include multifamily as well as retail additions.

While Excel officials have been disappointed by flatness in the company’s stock price growth over the past year, Plumb said favorable investment-grade ratings — most recently from Moody’s Investors Service — have given the company opportunities to finance acquisitions via unsecured debt markets.

In issuing an investment-grade rating with a stable outlook, Moody’s in January cited Excel’s generally high-quality portfolio, sound liquidity and moderate leverage, among other factors.

Equity analyst Jason White, who tracks REITs including American Assets Trust and Retail Opportunity Investments, said the retail property companies have generally capitalized on an environment of still-low interest rates, ample sources of debt and equity financing for investments, and limited product supply relative to rising demand nationwide.

“There’s still very little construction of new product,” said White, a research analyst with Green Street Advisors in Newport Beach. With current supply fundamentals slow to change, he said owners of well-anchored centers will have the ability, for the foreseeable future, to raise rents as retail and restaurant tenants seek out expansion spaces.

One impact of competition among investors, however, is that some REITs have slowed down the pace of acquisitions in recent months, in order to focus on properties that meet their specific investment criteria, White said.


$800M in Property Closed On

Also receiving positive investment-grade ratings in the past year was BioMed Realty Trust. The REIT in 2013 became the nation’s largest holder of life-sciences real estate, after closing on a $640 million acquisition of Baltimore-based Wexford Science & Technology LLC.

BioMed Chairman and CEO Alan Gold said the Wexford deal significantly boosted the company’s profile in the realm of academic research, adding to its existing strong slate of corporate tenants. He said further benefits will come from recent moves by two companies, both founded by genomics pioneer J. Craig Venter, to significantly boost their footprint at BioMed-owned properties in University Towne Center.

On the development side, BioMed is scouting tenants to fill its upcoming Center for Life Science San Diego, a three-building campus it plans to build at UTC. Construction could begin later this year, although Gold said an exact start date has not been determined.

BioMed closed on about $800 million in property investments during the past year. The company’s 17.3 million-square-foot portfolio now includes properties in all of the largest biotechnology and pharmaceutical research hubs, including Boston, San Francisco, Seattle and the United Kingdom.

In San Diego County, its 2 million square feet is the second-largest portfolio of local life-science properties. BioMed in 2013 had revenue of about $637.3 million in 2013, with net income of more than $46 million.

Company officials said the REIT continues to see benefits from rising nationwide venture capital investment in life sciences, which in turn is helping to boost demand for office and lab space.

Even if the biotech sector doesn’t retain the heat generated by a string of high-profile initial public stock offerings during the past year, Gold said there is still plenty of venture funding that has already been committed but is yet to be deployed nationwide.

“There’s a lot of private equity looking to put its money to work out there,” Gold said.

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