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5Qs for Aaron Wu on retail real estate’s recovery

Al Urbanski
Aaron Wu

Retail real estate is hot, and we found one of the people warming up the market.

Five months ago, AmCap veteran Aaron Wu joined DLC Management, which owns and operates more than 60 open-air centers that spread from Maine to Florida and west to Texas. Always highly acquisitive, DLC did no deals last year. But in Wu’s first five months as VP of acquisitions, he closed a deal for one center and has two more in the pipeline at a total value of around $200 million. We thought, therefore, there was no better person to ask about the quickly accelerating market for retail properties.

What’s fueling the surge in retail property leasing?
When COVID hit we were on the sidelines, but the surge kicked off last summer and I closed my first deal in December. We’re very optimistic there’s going to be more. The pipeline is robust. Leasing is at an all-time high. Debt financing is available and this is a generational window of opportunity. The retail sector went through some tough years. There was the retail apocalypse and then COVID, but strong centers and retailers are thriving now.

Did COVID in effect provide the circumstances that set up this rebound?
If you look at grocery-anchored centers, where essential retailers thrived during the pandemic, they are now surpassing pre-COVID peaks. Good retail is good retail, and COVID accelerated the demise of bad retail.

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“It’s as good a time as ever to buy vacancy.”

Do you see any potential risks on the horizon as variants like Omicron continue to circulate?
Omicron is clearly a risk, but I like to think we’re getting out of this. Inflation is another factor, so there will be some interest rate increases. Still, the economy is now doing pretty well and, beyond this year and next year, I think there will be many opportunities. Investors and lenders all want to play in open-air centers. The Class A assets are pretty frothy, but I still think there are values in secondary and tertiary markets.

What are some of the factors you look for in acquiring properties in smaller markets?
One of the things I like to look for is markets where there are colleges and universities. We just bought in Winston-Salem. Schools there are an economic driver. The economic fundamentals are very healthy and the community is pretty much the main retail corridor in that region.

What’s the prevailing attitude of your tenants? Are they as optimistic as you are?
Yes. Many of them are saying, ‘We want to expand, so keep us in mind when you are buying new centers.’ We’re getting a lot of interest in the Winston-Salem center from national tenants, and we’re very encouraged by their level of interest. It’s as good a time as ever to buy vacancy.

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