RECon Revisited

The nation’s biggest shopping-center convention wasn’t as big this year. But it was better.



In the June/July print edition of Chain Store Age, we provide our own recap of the International Council of Shopping Centers RECon show, held in Las Vegas May 23-25. Following is our continuing online coverage of the annual convention.



Said to be attended by about 30,000 retailers and shopping center developers, compared to upwards of 50,000 in years past, the 2010 iteration of RECon was nevertheless upbeat.



The shopping center developers we spoke with were focused on face-to-face meetings, and on making deals.



“Similar to previous years, my focus was on meeting with all the right people,” said Jason Baker, co-founder and principal of Houston-based Baker Katz, a retail brokerage firm. “About half of my meetings were with existing retailer clients. The other half were with prospects either considering making a broker change or looking to enter our market (Houston) for the first time.”



Making the most of those meetings was paramount to a successful show.



“Activity level among brokers and retailers is certainly greater than last year, but the big question is, ‘Is it sustainable?’, said Kenneth Katz, co-founder and principal of Baker Katz. “Everyone is hopeful that the recent increase in activity will result in more deals, but it’s just too soon to know if they will materialize.”



It is that kind of cautious optimism that flooded the aisles during the convention.

“There is no question that the overall sentiment of the people we met with at the show was more upbeat than last year,” said Al Williams, principal of Excess Space, a real estate advisory firm based in Lake Success, N.Y. and Huntington Beach, Calif. “Retailers are slowly beginning to selectively look at opportunities to fit into their expansion/relocation plans. That said, it is our opinion that the industry and the country still have tremendous challenges ahead.”



The cities were out in full force at RECon, and many saw real hope that leasing in their various townships would begin to loosen.



“Although the show was smaller in stature, for us it revealed some glimmer of optimism from developers and retailers that the economy is on its way to recovery,” said Steven J. Lantsberger, deputy director of economic development for the City of Hesperia, Calif.



Brokers found the same budding optimism. “I would describe the mood as one of guarded optimism, with a trace of wishful thinking,” said Peter Framson, X Team International partner, Washington, D.C. “The retailers are saying the right things about new stores in the coming years, and developers and owners seem to have stabilized their retail leasing portfolios. But, just below the surface there are nagging questions still to be answered.” Questions such as consumer debt (both credit card and mortgage), which isn’t improving, and commercial loan portfolios and lending, which are still very much in flux with no true answers available. “Also, unemployment is still too high,” said Framson. “Until the job market rights itself and the housing market stabilizes, no one can be certain of sustained recovery.”



Another X Team International partner, Stan Bobowski of Chicago, said that he devoted his hours at RECon to discussing the above-mentioned issues and on honing his industry relationships. “I spent time reconnecting with those people I’ve known for years to see how they’re doing, what they’re doing, what they’re planning to do and what we could learn from each other,” Bobowski said. “If you understand what is working or has failed elsewhere, you can either copy the successes or learn from the mistakes.



Richard Dube, president of Chicago-based TriLand Properties, said what is working is repositioning necessity-based assets -- and that is precisely what TriLand is focused on in 2010 and 2011. “There is more money looking for real estate opportunities than most people would have expected at this point,” said Dube. “The spigot isn’t fully open, but more money is definitely there.” TriLand is focused on recapitalizing its business, and that was a focus at RECon.



“When I talk about recapitalizing, I’m not talking about troubled assets, but rather a tactical move -- with a financial partner -- to reposition necessity-based assets in strategic markets around the country.” TriLand currently has five new projects coming under construction in the next 12 months -- all are anchored by either the number-one or number-two grocer in the market and “all are major repositioning of the asset,” said Dube.



Some developers used RECon as a launching pad to return to the acquisition market. BH Properties, based in Los Angeles, is one. “We haven’t bought anything in two years, and now we are returning to the market,” said Bill Hardy, VP asset management and leasing. BH Properties is looking toward a new category for acquisitions -- unanchored strip retail in secondary and tertiary markets.



“I will be very curious about what our first deal looks like,” said Steve Jaffe, executive VP and general counsel for BH Properties. “It will be very educational!” BH operates a mixed portfolio -- 1/3 retail, 1/3 industrial, and 1/3 office. A couple of major bankruptcies -- GI Joe and Sportsmans Warehouse – hit the company hard, leaving it with large-space vacancies in tertiary markets. But leasing is loosening



“We are seeing activity on spaces not seen in two years,” said Hardy. “It’s significant.”



The Sembler Co., based in St. Petersburg, Fla., is seeing more activity as well -- but its CEO Greg Sembler is seeing something else too.



“While it is still difficult to make deals, delinquencies are down,” he said. “That means that the fundamentals are getting better.”



With improving fundamentals comes cautious optimism, said Sembler. “In 2011 we will be focused on development opportunities in Puerto Rico, including shopping centers and build-to-suits.”



Build-to-suits has been a focus for Sembler -- one that is slated for continuation. “We are working to get involved in some one-off development opportunities,” said Jeff Fuqua, president of Sembler. “And we will be getting back to basics – neighborhood centers, fast food, banks, c-stores. No high-risk, mixed-use in our future,” he said. “We are still working with anchor tenants that we used to put in power centers, but we are working with them in one-off projects.”



Meeting tenants’ needs has been key to moving forward in a tightened economy. Irvine, Calif.-based Passco Cos., has been employing grassroots marketing to further its leasing activities. “Retail is very micro-market,” said Todd Siegel, VP asset management for Passco. “One corner of the country performs differently from another.”



Added Howard Wong, Passco’s director of retail leasing, “That means that leasing today is largely grassroots. What has been most important is understanding the business models of our tenants,” he said.



According to Siegel, there is one key takeaway from RECon 2010: “The world is not coming to an end. Retail will survive.”