Shopping Center Business

MAY 2016

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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COVER STORY 122 • SHOPPING CENTER BUSINESS • May 2016 Recession, sitting on the sidelines with ac- quisitions. He was well capitalized with strong connections to more capital from companies eager to take advantage of his track record. Levin knew he hadn't grown Centennial to its full potential and wanted to take advantage of the recovering com- mercial real estate market. "We were very conservative," he says. "I was 32 years old when real estate crashed in the 1980s. I came out of that with a cau- tious outlook. We have always operated very prudently. We exercise tremendous discipline in underwriting our acquisi- tions. The capital partners we partner with, and how we structure these deals, are conservative. In 2008, we were posi- tioned with strong assets, yet we stood aside until the timing was right to buy." In late 2010, that time came. From 2010 to 2015, Centennial Real Estate bought three malls, several community centers and a number of smaller retail properties, all of which had some level of financial or operational distress. One of the properties that Centennial purchased in 2010 was located in Col- leyville, Texas, anchored by Albertson's and Kmart. The center had four sepa- rate owners. While Centennial originally purchased one parcel, over the next 18 months the company purchased the re- mainder of the center. It brought Whole Foods Market to replace Albertson's and redeveloped the project to a Class A neighborhood center. At 225,000 square feet, Village Park at Colleyville also in- cludes Petco and Ace Hardware anchors. Centennial sold the property to Kite Real- ty Trust in April 2015. "These type of deals are in our DNA," explains Levin. Centennial purchased other centers during this timeframe that were similarly challenged. After being purchased at the height of the real estate market in 2006-2007, many properties were back on the market. Several of the centers Centennial bought were only 50 percent leased due to existing ownerships inability to underwrite leases at market rents. Among those properties Centenni- al purchased were five projects in Santa Monica, California. In 2011, the company, in partnership with GEM Realty Capital, acquired Chico Mall in Chico, California, from General Growth Properties. The 528,000-square- foot center is anchored by Sears, Forever 21 and Dick's Sporting Goods with JC Penney as the shadow anchor. Centenni- al remodeled the center's common area and made other improvements. Like the Westfield centers, Chico Mall is the dom- inant retail destination for a large trade area of Northern California. The acquisi- tion positioned Centennial for something much larger. Levin realized that if Centen- nial could successfully operate properties halfway across the country, the company could take the next step and acquire a large portfolio. INCREDIBLE OPPORTUNITY In 2013, Levin sought out the oppor- tunity to acquire the majority interest in the portfolio of centers by Westfield. While the portfolio was marketed quiet- ly, Centennial was at the table from the beginning. "It seemed like I had been searching for this transaction forever," Levin says. "Occasionally in life, you get hit by the lucky truck. The stars were aligned for us to seize the opportunity." Among these stars was the capital to see the deal through completion. Since Levin started in the commercial real estate business, he has had capital partners and continued to build strong relationships with each of them. His relationship with Montgomery Street goes back for years. Centennial originally went to a number of investment firms to partner for the West- field deal. One of those firms was USAA, where Levin had an existing relationship. After an initial meeting, Levin realized that USAA's outlook on the mall business fit what Centennial and Montgomery Street had in mind — long-term ownership cou- pled with lasting value creation. "We wanted a certain type of partner with this deal," Levin says. "We wanted a partner that had a longer term horizon where we could take the time needed to execute our plan. We knew we would need at least five to seven years, and that is too long for many investors. We knew our partner also really needed to under- stand the business of retail and how it is changing. USAA understood that; they Centennial Real Estate has owned Brazos Mall in Lake Jackson, Texas, for a number of years. The company believes in continually improving its properties. Steven Levin, CEO of Centennial Real Estate.

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