Federal Realty pays $508 million for Birmingham's Summit lifestyle center

Federal Realty has acquired The Summit, an 870,000-square-foot open-air center at the intersection of Interstate 459 and U.S. Route 280 in Birmingham, Ala., for $508 million. Across that footprint, the price works out to roughly $584 a square foot for what the sale coverage calls the Birmingham metro area's primary shopping, dining and entertainment destination.

More than 110 retailers, restaurants and entertainment concepts are in place, among them Trader Joe's, Apple, lululemon, Restoration Hardware, Nordstrom Rack and Alo Yoga. The roster leans on tenancies that exist nowhere else nearby: more than 40 retailers operate their only Birmingham-area store at The Summit, roughly 30 brands have their only Alabama location there, and recent commitments include Vuori, Reformation, LoveShackFancy and Brandy Melville.

Newmark Group represented JDJ, a privately owned retail investor, in the sale, according to IREI. That account of the sell side differs from this publication's Oct. 2 coverage of the same deal, which identified Bayer Properties — the firm that built the center more than 30 years ago and had held it since — as the seller. The material available here does not reconcile the two, and it does not say what JDJ paid, when it bought in, or how the center came to market.

The Summit was approximately 95 percent leased at the time of sale, leaving little vacancy for a new owner to lease up. The rent case sits in the existing leases instead: in-place rents remain below those achieved at comparable lifestyle centers nationally, per the sale coverage, which makes mark-to-market on renewals and rollover the likely source of growth. That is an underwriting of the trade area's affluence and traffic as much as of any single tenancy.

Nine-figure single-asset retail trades have been clearing steadily this fall, among them Primaris REIT's Oct. 1 agreement to buy Newmarket's Upper Canada Mall for $411 million. This page has argued that grocery anchors set the clearing price for retail capital, with pricing following the anchor covenant ahead of the mall around it. The Summit suggests a second bid in that market: value assigned to a roster built on exclusivity and depth — more than 40 Birmingham-only tenancies — in an affluent, heavily trafficked trade area.

That leaves a nearly full center in a metro where roughly 30 of its brands have no other Alabama address. The number to watch is the spread between in-place rents at The Summit and the national lifestyle-center comps; the recent signings are the first evidence of which way that spread moves.