For all the concern of sequestration and federal budget woes, people in Washington are still buying groceries, going to the dry cleaners and stopping at the pharmacy on the way home.
The strength of the region’s retail market prompted Principal Financial Group to make a $600 million commitment to a local shopping center developer and manager, the Rappaport Cos. Headquartered in McLean, the company was founded by chief executive Gary Rappaport and does all of its work locally.
Principal and Rappaport agreed to the joint venture at the end of last year and in the past few months the joint venture has purchased about $150 million worth of stakes in four shopping centers in Northern Virginia.
“Principal really knew Gary very well and his company very well and wanted to business with him as a sponsor for a long time,” said Patti Earnest, managing director at PRC, a financial consultant to Rappaport. “And their belief is that the Washington area will do well for a long time, particularly when it comes to necessity retail.”
What’s necessity retail? The kind of things people buy even when the economy isn’t good. The necessities. “Your grocer, your drug store, your dry cleaner, the services you use every day. It’s not necessarily fashion…it’s all the good stuff you need every day,” Earnest said.
Principal and Rappaport issued a joint statement in which Jim Halliwell, managing director of Principal Global Investors, called the Washington-Baltimore market “the most desirable market in the U.S.” and said Rappaport was the perfect partner.
“They have broad, deep and unique relationships with national, regional and local retailers,” Halliwell said.
The joint venture has already closed on stakes in four shopping centers: Bristow Center, in Prince William County; Potomac Festival I, in Woodbridge; Davis Ford Crossing in Manassas; and Smoketown Plaza, also in Woodbridge.
Rappaport had previous ownership positions in those centers, but with another $450 million or so left in the arrangement is now primed to acquire a string of other properties.
Rappaport said in the statement that he was “particularly interested in properties that need renovation or that have potential for improvement, which has been our model for more than 25 years.”
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