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From the mouths of the top REIT execs during REITWeek in NYC: Retail REITs are refocusing their portfolios, redeveloping, and re-tenanting while industrial hits the top of its game.
Sandeep Mathrani at New York Hilton on June 12, 2012
General Growth Properties continues to hone its focus on Class-A regional malls (which account for 80% of its income and 100% of its Auntie Anne's consumption), disposing of $2.5B and over 30M SF of Class-B malls, strip centers, and office space in 2011, says CEO Sandeep Mathrani. Now it’s all about leasing; it has 86% permanent occupancy with a stabilization goal of 92% by 2014. It’s also started $450M of redevelopment this year. All types of retailers are expanding footprints or the number of stores, particularly international ones like Zara, Topshop, H&M, and Uniqlo. GGP will continue shedding office and strip space and plans to let go of eight to 10 non-core malls while growing its Brazilian platform.
Reznick (Investor) MBALT
Brian Smith and Hap Stein at New York Hilton on June 12, 2012
Regency Centers prez Brian Smith and CEO Hap Stein say that for the past three years, the REIT has been cleansing its portfolio of smaller retailers that weren’t good operators (is there a special soap for that?) and replacing them with best-in-class national, regional, and local tenants that will attract other strong retailers. The last three quarters of 2011 were Regency's best ever for leasing, and that has continued into Q2. Regency, owner of 16 Maryland shopping centers like Festival at Woodholme, is valuing good operators over credit tenants; for instance, it recently replaced a Safeway concept in Chicago (good credit) with a Mariano’s Fresh Market (good operator), and sales increased $14M to $50M.
Gene Reilly, Hamid Moghadam, Tom Olinger, and Walt Rakowich at New York Hilton on June 12, 2012
Considering the global economy, the US is doing well and continues to improve, according to (clockwise from top left) Prologis Americas CEO Gene Reilly, CFO Tom Olinger, and co-CEOs Walt Rakowich and Hamid Moghadam. In fact, industrial is the strongest since early ’08, with annual absorption north of 150M SF. But we’re still in recovery mode. Coastal areas like LA and South Florida are the strongest, some parts already exceeding peak occupancy levels. Large companies with strong balance sheets are taking advantage of the market, so buildings 200k SF and larger are virtually full, something that didn't happen even during the peak.
They also say expansion of the Panama Canal may mean more throughput to ports on the East Coast, including NY, NJ, Norfolk, Savannah, and Miami, but it doesn’t mean there'll be a wholesale exodus from LA and Long Beach. The big take-away: industrial will thrive in places where people are like Atlanta, New Jersey, and Baltimore/DC.