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RECon Revisited, a Series: Part 1


As part of our ongoing coverage of RECon, the annual retail real estate convention conducted by the International Council of Shopping Centers and held May 22-25 in Las Vegas, Chain Store Age talked with Adam Ifshin, president and CEO of Tarrytown, N.Y.-based DLC Management Corp., to get his take – post-convention – about the state of the industry.

What are your key takeaways from RECon 2011?

Clearly, the mood and tenor of the industry are much improved. Tenants increasingly have open to buys. Value-oriented tenants remain our focus, and more and more of them are looking for space to open in. The continued dearth of new development is driving tenants to take a second and third look at second-generation space they might have previously passed on. Tenants remain selective, however, and rents remain in check.

Tenants still have more options than they need and it is unlikely that rents in most markets will appreciate significantly any time soon. Rent roll-downs from previous cycle highs continue in many markets although the spread is narrowing in many markets. The financing markets continue to heal but still only for A and B+ assets. The financing of B and C assets remains a challenge, and lenders are still picking and choosing assets and borrowers selectively.

Many more CMBS 2.0 programs continue to announce, but the overwhelming bulk of the originations are being done by a handful of megabanks. Construction financing remains non-existent except for the best borrowers and the most well thought-out, conservatively structured projects. Lenders are increasingly getting constructive on new loan originations but appraisals remain a major stumbling block in most financings.

Finally, the transaction market is heating up as late 2010 and early 2011 sales results prompt owners to come off the sidelines and bring product to market. The market remains awash in equity for Core assets. Will that equity venture away from core in the coming months? Many sellers and their investment sales brokers hope so because they are bringing increasing amounts of that product to market. A number of large portfolios are poised to enter the market including portfolios from several major REITs.

What about the activity in the DLC booth during the show … were you making deals?

At our booth we had over 450 leasing meetings, and over 600 meetings in all! We were quite busy in our booth, at our leasing networking events (four held over four days), and at other venues. Deals were started, advanced and made over our stay in Las Vegas. Of course, the real measure of the result is how many additional leases get made in the succeeding months as a result of those 450 meetings. Deals literally ranged in size from 1,100 sq. ft. to 158,000 sq. ft. Tenants were definitely saying, “How can we get this done?” At the same time, we concluded terms on several financings, equity commitments, and new third-party assignments. Overall, the mood was that people were there to deal.

What projects were getting the most traction?

It’s hard to say, but what was markedly different this year was how tenants were open to far more ideas in a portfolio review than they were a year ago. Many of our projects garnered increased interest from a year ago, including our current re-development projects in Garland, Texas, and Elgin, Ill. We left many meetings wishing we had more product to offer our tenant relationships.

Do you think the mood at RECon bodes well for the rest of the year? What will your priorities be between now and the end of 2011?

I do. We have been waiting for fundamentals to improve along with the capital markets. It seems like RECon set in motion a wave of new leasing momentum that should carry us into the fall. Of course, we need the economy to continue to improve to help sustain that. Our priorities are always the same: lease, lease and lease! Seriously, adding value through lease up and re-development are always priorities 1 and 1A at DLC. In addition, we continue to look for opportunities to put our equity and human capital to work on new value-added and opportunistic projects.

Finally, we remain laser focused on delivering value to our retail customers and partners. The future continues to improve in our view.

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