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THE SECOND TIME AROUND

JOHN DIGIOVANNI, CSM, IS BUILDING A NEW PORTFOLIO AFTER SUCCESSFULLY SELLING OFF HIS LAST ONE

By Joel Groover

Inland Atlantic Development Corp. is technically only about six months old. Nonetheless, John DiGiovanni, CSM, its president, is confident the company will develop millions of square feet of productive retail space in the Southeast within three years. And why not? DiGiovanni pulled off such a feat once before — and as part of the same five-member team he works with now.

The 47-year-old Bronx, N.Y., native did so in his former post as director of the Atlanta-based development division of Inland Retail Real Estate Trust, founded in 1999 as part of The Inland Real Estate Group of Cos., an Oak Brook, Ill.ébased investment consortium. During his three-year tenure at Inland Retail Real Estate, DiGiovanni added to its portfolio by overseeing the development of a 1 million-square-foot retail pipeline valued at up to $500 million. Heavy on such tenants as Lowe’s, Publix, Target and Wal-Mart, the pipeline included new community centers in growth markets throughout the Southeast, several redevelopments and expansions and some planned mixed-use developments in Atlanta and Brandon, Fla.

DiGiovanni’s work on that pipeline ended midstream, however, after Developers Diversified Realty Corp. acquired Inland Retail Real Estate’s 307-property, 44.2 million-square-foot portfolio in a $6.2 billion deal that was the second-largest retail REIT acquisition to date, according to NAREIT and Thomson Financial. (General Growth Properties holds the record, with its 2004 acquisition of The Rouse Co. for $12.6 billion.)

One consequence of the huge deal, which closed in February, was that DiGiovanni and his colleagues needed new jobs. They were not forced to spend hours clicking through the want ads on Monster.com, though.

“As a group we wanted to stay together and try to keep doing what we had done before,” DiGiovanni said. “Fortunately, Inland was open to that idea, and so we commenced having discussions with them about re-forming the development division as a freestanding entity within the Inland Group of Companies.”

The new venture, Inland Atlantic, launched in May with former Inland Retail Real Estate chief Barry Lazarus, who works out of Deerfield Beach, Fla., as CEO. Rejoining DiGiovanni in their former office at Colony Square, in midtown Atlanta, are his colleagues Randy Josepher, executive vice president; and Christi Karp and Joel Murovitz, vice presidents. These reunions notwithstanding, Inland Atlantic is not a REIT at all, as are Inland Retail Real Estate and its Midwest-focused sister, Inland Real Estate Corp.

“We are an independent, freestanding development company within the Inland Group of Companies,” DiGiovanni said. “We’re not associated with any of the [Inland-sponsored] REITs. So our ‘charter’ is to do smart deals that ultimately are profitable.” Moreover, Inland Atlantic’s focus, at least for now, will be narrower than its predecessor’s. Because Inland Retail Real Estate had built up a substantial portfolio, the redevelopment of aging assets was a basic part of its operations. This new entity will focus 100 percent of its efforts on ground-up development. In the near term it will concentrate mostly on Georgia and Florida, whereas the previous incarnation had begun to cast a wider geographic net — with 66 properties in the Carolinas and 14 in Virginia, for instance.

But though Inland Atlantic may differ in important ways, for DiGiovanni and his colleagues it does indeed represent something of a continuation. Keeping the former team together enabled Inland Group, a massive enterprise with a total of $17 billion in properties under management and some 100 million square feet of commercial real estate assets in North America, to maintain a foothold in the fast-growing Southeast. It also allowed the consortium to preserve a retail development system DiGiovanni fine-tuned through the creation of about a dozen projects.

DiGiovanni was senior vice president of development in the Atlanta office of Munich-based BVT, which raises equity in Germany for grocery-anchored shopping centers in the U.S., before he joined Inland in 2003. His arrival coincided with the first major capital infusions into the REIT’s development pipeline. “When we started development within [Inland Retail Real Estate], we started it from scratch,” DiGiovanni said. “We developed all the procedures and protocols as we went along. So we had built up this body of work and this whole organizational framework. You would hate to have to re-create that again.”

With DDR’s acquisition of Inland Retail Real Estate, did DiGiovanni feel as though the fruits of those labors had been whisked away? The whole culture at the consortium centers on working hard to get results for investors, he says. Thus, the prospect of a major “liquidity event” that could do precisely that for Inland Retail Real Estate backers, and in a historically big way, was welcome news, he says.

That certainly jibes with the view of Inland Group’s corporate culture that Paul Adornato, a senior REIT analyst at BMO Capital Markets, holds. The consortium caters to individual investors through independent broker-dealers, rather than through global investment banks like Merrill-Lynch, he says.

DiGiovanni says the 35-year-old enterprise, which has a 1,000-person payroll, also does well by its employees, especially those who work hard to protect the interests of Inland and its shareholders. “All of the core people that I know at Inland have been there 20 years or more, some 30, some from the very beginning,” DiGiovanni said. “They have a very loyal employee base. … The founding fathers are extremely approachable. They show up to work every day just like everybody else and know everybody’s name. It is a family sort of atmosphere.” Those founding fathers include Daniel L. Goodwin, the chairman and CEO of the Inland Group; Robert H. Baum, director and executive vice president of the Inland Group; G. Joseph Cosenza, president of Inland Real Estate Acquisitions; and Robert D. Parks, the chairman of Inland Real Estate Investment Corp.

This entrepreneurial atmosphere is nothing new to DiGiovanni, who grew up watching his parents work for the American Dream. “My family came to this country in the 1950s from Italy,” he said. “They worked hard and in difficult conditions. My father was a construction worker and my mother a seamstress. … They were an entrepreneurial family, and that has really helped me in the development end of the business. Development itself is a very entrepreneurial endeavor.”

DiGiovanni clearly inherited that penchant for hard work, says Karp. “He is one of the strongest, hardest-working individuals I have ever worked for or with,” she said. “Not a day goes by where he is not approachable, or where there is an issue that he can’t fix. He’s the backbone of our team.”

DiGiovanni’s family moved from New York to Orlando, Fla., in 1972. He went into the restaurant business at 24 and eventually owned eight delis at various Florida malls. He was 34 when he made the transition to commercial real estate, after Atlanta-based BAITA Properties hired him as a property manager. DiGiovanni was first exposed to development in 1999 when he went to work at BAITA’s sister investment and property management company, Agora Developments, in its development division. He joined BVT in 2000.

At press time Inland Atlantic had two projects under development — a 300,000-square-foot power center in College Park, Ga., and a 100,000-square-foot HH Greggéanchored center in Seminole County, Fla. — and several more on the drawing board.

Within the next three years, DiGiovanni says he aims to build a pipeline of at least 2 million square feet in metro Atlanta and elsewhere in the Southeast. Likely target markets include Tennessee, particularly Knoxville and Nashville, and the North Carolina cities of Raleigh and Charlotte.

This sounds a lot like the pathway taken by Inland Atlantic’s predecessor, which focused on Georgia and Florida before branching out to other Southeast markets. It may be, then, that Inland Atlantic’s investors can look forward to yet another eight-figure cash-out somewhere down the road. After all, “back to square one” may be a penalty in certain board games, but retail real estate is all about return on investment.