Real Estate Journal — Shopping Centers — ICSC PA/NJ/DE Conference & Deal Making — August 28 - September 10, 2015 — 9C
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S hopping C enters
O R T H P L A I N - FIELD, NJ —The re- tail real estate invest- Despite growing demand, many opportunities continue to fly under the radar Levin Management: The market for smaller retail property trades heats up N selling? ers to vet potential invest- ments thoroughly and with a healthy sense of caution.
example, earlier this year Levin Management took on leasing for a small shopping center in central New Jersey. At the time, one, 7,500 s/f va- cancy represented 20% of its GLA. We successfully secured a desirable tenant to fill the space and recently began to selectively look for a buyer. Interest has been robust. What are the challenges in this investment niche? Lowry: Bringing sellers and buyers together can present the biggest hurdle in these smaller-center scenarios. A significant percentage of
properties in this class are privately held, family-owned real estate. While they may not want their properties out on the market publicly, they are interested in selling if the right buyer comes along. On the flip side, investors need to be more careful than ever before when it comes to buying properties. The retail industry is changing, and challenges facing bricks-and-mortar prop- erties – such as the reduction in number, or right sizing of stores by national and regional tenants as well as the growth of e-commerce – require buy-
Lowry: Interest rates remain historically low (for now), cap rates have compressed con- siderably and credit is readily available once again. As such, leasing, investment demand and pricing all are quickly returning to pre-recession levels, presenting an ideal time for owners to stabilize or reposition their properties and test the market. There is a huge inventory of solid smaller shopping centers in the Northeast that are highly marketable to private inves- tors within this context. For
ment mar - ke t in the No r t h e a s t has heated up in 2015, with demand for well-lo- cated shop- ping center p r o p e r t i e s returning to
What advice do you have for sellers and buyers of smaller retail assets? Lowry: An increasing num- ber of small-asset sellers and buyers are reaching out to companies like LevinManage- ment in an advisory capacity, to assist in alleviating some of the concerns and complexi- ties of the trading process. For sellers, advisors can help im- prove the position of properties prior to their sale. As with the continued on page 12C
Joseph Lowry
pre-recession levels. Accord- ing to Levin Management ’s Joseph Lowry , director of acquisitions/business develop- ment for the North Plainfield- based retail real estate ser- vices firm, this ideal investing environment has re-fueled the market for both smaller and value-add assets, following several years dominated by institutional-grade trades. At the same time, Lowry notes that many opportunities to buy and sell neighborhood and convenience centers con- tinue to fly under the radar. In the following interview, he dis- cusses the market for smaller retail properties, the related challenges and the value of working with an advisor. Which smaller proper- ties are catching investors’ eyes? Lowry: Class A, grocery- anchored shopping centers in established retail hubs remain the “darling” of the institutional investment com- munity. However, recently we are seeing more private-player interest in smaller proper- ties – those assets under and around 50,000 s/f that may be unanchored or have a drug store or junior anchor tenant. And because leasing velocity has improved markedly over the past 12 to 18 months, value-add opportunities in this niche also are attracting more attention. However, flight to quality rules regardless of as- set size and type. The proper- ties that are trading well are set in more prominent retail locations with strong demo- graphics, and have histories of high occupancy and longer- term tenants. Higher barrier to entry markets with lower retail supply are preferred. For value-add plays, investors are also being highly selective, focusing on under-retailed, in- fill locations and markets with high barriers to entry. Why is this a good time for owners to contemplate
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