5Qs for DLC’s Adam Ifshin on the rise of the landlord
For the past three years, with backing from eager capital lenders, DLC Management Corp. has been on an open-air center buying spree. Earlier this year, it received a $2.3 billion capital commitment from Temerity Strategic Partners to keep the acquisitions flowing.
At the recent ICSC show in Las Vegas, we asked DLC’s CEO Adam Ifshin to explain why his Elsmford, N.Y.-based company remained so eager to snap up as much Class A retail real estate as it possibly could.
Adam, for three years you have been actively acquiring quality open-air centers nationwide. Why so aggressive? Are these the halcyon days of landlords? Do you have the upper hand in space negotiations?
At the ICSC show in Las Vegas, a lot of people thought we were being a aggressive and a little overly confident about today’s state of play, the relative strengths and weaknesses between landlords and tenants. If anything, we probably understated the strength that landlords now possess at the bargaining table.
[READ MORE: ICSC Las Vegas: Real estate execs moving forward despite global uncertainty]
Have negotiations with top expanding brands become adversarial?
Actually, our discussions with tenants are not adversarial. They are realistic. Top brands are coming to us and saying, “Look, we had it good for a long time, and now we have to deal with the current market conditions."
Overwhelmingly, what we hear from top brands is that their stores are the drivers of their top lines and bottom lines. No brand comes into our booth at the show and says, “I’m going to meet the customer demand on e-commerce.” We used to hear that all the time back in 2015 and 2016. That narrative is so dead and gone. The unbelievable thing we hear is that the store is the driver for the retailer. Retailers at the tops of their games — Ross, Nike, Burlington, Target, Walmart — every one of them was in our booth saying, “I need more stores.”
How are retailers handling rapidly escalating rents?
Everybody’s trying to figure out, if the rent’s going up 40 or 50 percent and, if the rent’s going to go up dramatically, can they get a 22,000-sq.-ft. space instead of 27,000 square feet.
Retailers all learned their lessons about their over-reliance on third parties and off-shoring and they’re strengthening their supply chains. The stronger the supply chain gets, the smaller the back of the house can get. And that’s where everybody is trying to save space. Because I may not be able to shrink my selling floor so much, but if I can shrink non-selling space. That’s a win-win-win.
Has online shopping and in-store shopping coalesced into a new shopping dynamic in America?
Remember how Starbucks used to talk about being the third place? The third place in American retailing now is the parking lot. The first place is the store, the second place is the mobile app, and the third place is the parking lot. Because if you’ve got two or three kids in the car and it’s five o‘clock and one of them has to time-out at 7:30 and you’re out of diapers, you’re going to run in and get them no matter what they cost. You’re going to have way more price elasticity.
Last mile delivery is brutally expensive and incredibly inefficient. Everybody loses money on it.
How did things flow for you at the Las Vegas ICSC show this year?
The market is better than I’ve seen it in 20 years.This is my 33rd convention and the market is better than it’s been in all those years.
When Painted Tree went bankrupt, we had two of their stores in centers in Ohio. In just two weeks, we signed a replacement lease with a new tenant for this 42,000-sq.-ft. space in under two weeks. Fully executed, no contingencies.
Today, when we have a weak retailer go out, we can have a replacement tenant done at a speed that I could never have envisioned before.
