 |
 |
 |
 |
 |
 |
 |
 |
Shopping Centers Today -> March 2002
 PRINT THIS STORY: |
  CHANGE TEXT SIZE: |
SOUTHERN EXPOSURE
Inland Real Estate’s strategy highlights region’s growing retail market
By Dave Bodamer
 |
| Inland has been expanding heavily into Florida, where Chickasaw Trails Shopping Center in Orlando is but one of its recent purchases. |
The Southeast will offer some of the country’s richest opportunities for retail growth in the coming years, according to the Oak Brook, Ill.-based Inland Real Estate Group of Companies, which has been buying shopping centers there.
“We see the Southeast as one of [the largest], if not the largest, growth areas in the entire country during the next 15 years,” said Joe Cosenza, Inland’s vice chairman.
The region is expected to have, among other things, the greatest population influx in the United States over that time period, he said.
Inland, arguably one of the quieter players in the industry, made a move in early January to strengthen its position in the Southeastern United States market when it purchased eight centers from Smyrna, Ga.-based Thomas Enterprises in a $316 million deal.
The company, which began a concerted effort to buy more shopping centers in 1995 (for most of its 33 years it has focused on a wide range of real estate areas, including property management and brokerage), first concentrated on building a retail portfolio in the Midwest.
But something in the Southeast caught its eye. From 1990 to 2000 Georgia and Florida saw their populations grow 26 percent and 23 percent, respectively, according to the U.S. Census Bureau.
“My gosh, here in Illinois we only had 9 percent growth during that same time,” Cosenza said. “You take that growth, and what comes with it? Housing, for one, but we’re not in that down there. But you certainly need to shop. That’s where we’re at.”
South Florida, a key Inland target, has been a site of solid growth for years.
“You can get better yields on your money here than you could in other capital markets,” said Gene A. Berman, a first vice president and regional manager for Marcus & Millichap Real Estate Investment Brokerage Co., Fort Lauderdale, Fla. “Over the course of the last five years there has been a mass migration of between 75,000 and 85,000 new residents coming into the Dade County, Broward County and Palm Beach County areas. There’s been an explosion of development.”
Inland consists of separate real estate and financial companies offering brokerage, mortgage financing, property management, syndication, land development and other services. The firm has a 33-year history, from its modest beginnings as a side project of four teachers (see story From after-school project to class act) to a company with a 16.7 million-square-foot shopping center portfolio, a collection of apartments and condominiums in the Chicago area and interests in mortgage services, securitized exchanges and banking.
“Even though throughout the years we had done some shopping centers, in 1995 we decided we needed to get into the business in a big-time way,” Cosenza said.
The company has the distinction of being Wal-Mart Stores’ largest private landlord by virtue of its triple-net leasing business, which owns leases on more than 150 Wal-Marts.
Inland has several deals in the works at the end of which it will own close to 200 shopping centers divided between two REITs. Subsidiary Inland Real Estate Corp. controls the company’s assets in the Midwest and operates about 121 centers with a combined gross leasable area (GLA) of 10 million square feet in a portfolio worth $1 billion. The Thomas acquisition was completed by Inland’s other REIT, the Inland Retail Real Estate Trust, which the company started just over two years ago. That REIT now commands a portfolio worth $678 million, consisting of 44 centers with a total of 6.7 million square feet. To provide an idea of how much the company has grown in a matter of months, the combined portfolio, with a GLA of 16.7 million square feet, ranks it among the 25 largest U.S. shopping center owners, according to ICSC. Only last November, the REIT was ranked 44th.
Four of the properties acquired in the Thomas deal are in Georgia: Douglas Pavilion Shopping Center, Douglasville; Newnan Pavilion, Newnan; Southlake Pavilion, Morrow; and Venture Point Shopping Center, Duluth. The others are Fayetteville (N.C.) Pavilion; Sarasota (Fla.) Pavilion; Turkey Plaza in Knoxville, Tenn.; and Westside Pavilion in Huntsville, Ala.
The transaction also demonstrates how grocery-anchored retail properties have come into strong favor amid the current economic slowdown. According to the Morgan Stanley REIT index, publicly traded REITs that own community centers reported total returns of 11 percent, while mall owners reported returns of 8 percent.
“We’ve been saying it all along: Discount and grocery-anchored shopping centers are more resistant to recession,” Cosenza said, alluding to recent holiday sales figures that show discount chain stores such as Wal-Mart outperforming mall-based stores.
Several other large REITs are also competing for the Southeastern market. Equity One, North Miami Beach, Fla., owns 86 centers, about 45 of which are in Florida; Jacksonville, Fla.-based Regency Centers has a presence in every Southeastern state, especially in Florida, where it has 54 centers; and Weingarten Realty Investors, Houston, has recently made a series of acquisitions within the Florida market and now owns six centers in the state.
Inland’s goal when it founded the Southeast REIT was to expand its value to $1 billion within five years. But with a portfolio that is worth almost half that already, the company is now aiming for $2 billion.
 | Current Issue November 2008 |