Shopping Center Business is the leading monthly business magazine for the retail real estate industry.
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INSTITUTIONAL INVESTORS 122 • SHOPPING CENTER BUSINESS • December 2016 cery-anchored centers in primary markets are still seeing decreasing cap rates while holding stable in secondary markets. Pow- er centers are seeing increasing cap rates in both primary and secondary markets due to continued concern about the im- pact of the internet on big boxes. Cap rates on lifestyle centers are holding stable for core product and increasing for core plus and value add in both primary and secondary markets. SCB: As you look at your company, how much more is internal growth — through capital expenditures, re-leasing, redevel- opment — than through acquisitions? Dykstra: With lower yields, there is tremendous pressure to grow revenue. The obvious pressure is on your rent roll and rents, but there is also pressure on a company G&A.; We are in the revenue generation business and we are measured on top line revenue growth and distribut- able cash flow. Allocating more G&A; to retention and leasing is more important than ever, but finding the right operating company financial balance and commit- ment to your revenue generation team is a challenge. We are bolstering our leasing team in an ever changing and intensely competitive leasing environment and positioning our properties to be of the highest quality ensuring we are always a viable option for retailers. The better the real estate, the more talented your leasing team, the more likely the properties will produce the desired revenue growth and the G&A; commitment will pay off. Holden: We are focused on asset man- agement, whether that comes from with- in our company or with our third-party operators to drive revenue and create value at our properties. We have been trying to hire people who have operator experience, because they have experience creating value at the bottom line and expe- rience/relationships with tenants. Wheeler: We focus on ancillary and spe- cialty income. We like to create $25,000 or $50,000 worth of unscheduled revenue from our parking fields each year. We might delineate an outparcel for a build- to-suit. You can create a lot of money in a parking lot. Senenman: We have a value-add fund that is our largest bucket for acquisitions. That fund has to create the value over five to seven years. We are vertically integrated as we have construction and redevelopment departments, as well as leasing and asset management. All of us work together to accomplish the goal to add value. Ragland: We have also had a focus on hiring people with REIT experience. I worked at The Rouse Company for 23 years on the development and asset man- agement side. TH Real Estate has hired asset managers who have deep experi- ence in terms of operating retail proper- ties. With dominant centers, you need to continually deploy capital. We have done redevelopments that cost anywhere from $30 million to $100 million and they have consistently produced that 7 percent to 10 percent return on cost. Fryer: As an advisor, we have had retail asset management in a dedicated group for 22 years. We see the pace of retail evolution has accelerated. It is so dynamic that we have had to further ramp up our capabilities — and our creativity — as well. We look back to the creativity that the in- dustry founders showed back in the 1950s and '60s. How do we grow our business if our acquisition pace doesn't accelerate? We strive to demonstrate the best in oper- ating performance. Not everyone else will keep up with the pace of change, so we hope we are well-positioned to continue to receive successor asset management assignments, a specialty where we have a long and deep track record. 'Give us your tired, your poor…' Carty: We have a focus on asset man- agement as well over the past few years. Our staff gets very close to our real estate and we have been active with adding val- ue. You have to continue growing. Our strategy as of late has been to do that by having more people on the ground and in the local markets with the real estate. We have added pads and reconfigured space to grow NOI for example. SCB: We have seen a number of people who have owned assets for years, and they may not know how to evolve them, simply because the center has performed so well for them for years. Some owners are ven- turing with equity to reinvest and make their centers successful. Do you view this as an opportunity for growth? Harvey: Most good operators constantly reinvest in their assets. The opportunities typically occur when the owner is a lender. Just about everything that we are buying today is something that is held by a lender. Lenders generally don't become the own- er because they want to be owner; they be- come the owner because they had to step up to protect their position. When we are making the decision on whether we are going to buy something, we are going through hundreds of asset management scenarios regarding 'where do we need to make improvements?' Cooper: As we see retail, and real estate in general, evolving, we have been dipping our toe in the mixed-use market. We are Jon Wheeler, Wheeler Real Estate Investment Trust. George Fryer, AEW.