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Shopping Centers Today -> July 2001
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LACK OF DEALS CHALLENGES SMALL-CENTER OPERATORS
By Donna Mitchell
 |
| Talking small centers: Drew Alexander, left, Norris R. Eber, center, and R. Michael Goman. |
LAS
VEGAS — Small-center operators should be prepared to ride out
a dry spell of property acquisitions and sales, according to a panel
of experts, who also said they should place as much importance on
marketing and maintaining their properties as they do on developing
new centers.
Shopping
center professionals attending the Spring Convention sat in on a
well-attended general session on small centers chaired by Drew Alexander,
former ICSC chairman and president and CEO of Weingarten Realty
Investors, Houston.
Two major topics emerged as priorities for the diverse audience, the first of which is the growing dearth of purchase and acquisition transactions. Panelists also told attendees that keeping up their properties in an aging shopping center market is just as important as developing new centers.
When talking about the declining number of transactions, Alexander said money is available, but "there is a flight [of buyers] to quality equity of between 20% and 25%." That helped push spreads on retail real estate financing wider relative to U.S. treasury rates, said Alexander. Stephen C. Hopkins, president of Newport Beach, Calif.-based Hopkins Real Estate Group, said banks have changed their lending criteria, and that for the next period, whether months or weeks, they will put a lot more scrutiny into financing projects.
Gary D. Rappaport, SCSM, SCMD, CLS, president of Vienna, Va.-based The Rappaport Cos., noted that shopping center owners looking for financing might want to line up debt and equity partners as a way to ensure the availability of capital.
The commercial mortgage securitization sector of the bond market has provided lots of liquidity to the retail real estate business, said Brad M. Hutensky, president of Hartford, Conn.-based turnaround specialist The Hutensky Group. "But a lot of retail properties that were securitized have gone bankrupt, and now they are going back to lenders." And given that banks are intensifying their due-diligence efforts before loan approval, Norris R. Eber, SCSM, CLS, and executive vice president, asset management and acquisitions for Wheeling, Ill.-based Joseph Freed and Associates, told attendees that if they’re considering refinancing, they should be vigilant maintaining their portfolios and financing.
That eventually led to discussions on maintaining older properties. "Retail has taken a bad rap for the last 12, 18 months. But we see tremendous opportunities, especially for functioning, obsolete properties," said Hopkins. "If you find an opportunity to add a pad, there are a lot of high-octane sideline investors, and private capital out there. We don’t have to compete with the Nasdaq anymore."
But before doing that, owners should keep a well-maintained property, Eber stressed. "You’ve got to take care of what you’ve got. Are you going out and personally inspecting every space? The customers are the retailers and investors. You cannot leave the potholes and weeds," he said.
"In a lot of the small centers we are still seeing interest, more so, from the big boxes, for us to be fee developers," said R. Michael Goman, SCSM, CLS, president and COO of Farmington, Conn.-based Konover & Associates. "They don’t want us to be the owner and then option the land out to them. They want us to deliver to them an approved site, and we flip it to them for a fee," said Goman. "And we might see the smaller-box retailers come to us to do the same work for them."
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