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Retail: The Safer Bet

Retail: The Safer Bet

It took Inland Real Estate Group vice chair Joe Cosenza a while to learn to love retail, he confessed to 300 attendees at Bisnow's Chicago Retail Summit Tuesday. (It's kind of like strong French cheese that way.) But now our keynote speaker, who works for the metro's largest shopping center owner, says retail assets in good locations are one of CRE’s safer bets.

Inland Vice Chair Joe Cosenza, moderator, Pircher Nichols & Meeks’ David Pezza
Moderator David Pezza of Pircher Nichols & Meeks with Joe. Joe and his Inland partners got into retail in the late ‘80s, when changes in federal tax law dimmed the appeal of some of their multifamily investments. By the time the ‘08/’09 financial crisis hit, Inland had retail properties in 1,300 US locations, and some tenants were decamping. Joe told his staff not to panic: If he, as prez of Inland Real Estate Acquisitions, had bought in the right locations, they’d be fine since there was not much new development in the pipeline. Sure enough, the retail space owned by Inland is 93% leased, and all of the large-box retail bankruptcies are now 85% to 90% leased.
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Heitman’s Jennifer Boss
David joins Heitman’s Jennifer Boss, who says that her firm is buying shopping centers in Chicago as well as core retail assets in secondary markets. Chicago is fortunate because major national retail tenants want to be here and have the access to financing. But local tenants are quieter because store owners continue to have trouble getting credit. Overall, she says, there’s concern about the food sector; traditional supermarkets face competition from a variety of players, including Walmart and Mariano’s.
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Stockbridge Capital Group’s Andrea Pauls Backman with Jones Lang LaSalle’s Mark Hunter
Stockbridge Capital Group’s Andrea Pauls Backman with Jones Lang LaSalle’s Mark Hunter. Andrea says that most investors are focused on core retail properties. Good news: CMBS pools are starting to form, and once they’re issued in significant volume, we’ll see a broader recovery take place. She’s cautiously optimistic that nationwide rents will stop falling this year. By the second half of ’12, she expects rent increases that are modest, but going in the right direction. Mark says that’s because occupancy rates are rising, especially among top-tier landlords like Simon. Chicago retail has stabilized, although Mark says it’s not back to '05 to '07 levels.
Bond Co prez Robert Bond, here with McCaffrey Interests prez Ed Woodbury,

Bond Co prez Robert Bond, here with McCaffery Interests prez Ed Woodbury, says he’s confident about the 200k SF retail his company is developing (with 460 rental apartments and parking) on four acres around the Maxwell Street open air market. The location’s high population density is key. Also, Cook County’s high sales tax is more relevant for collar county residents than for those in Chicago, who aren’t likely to travel far for routine purchases. A bullish Ed expects niche opportunities and niche rewards this year. McCaffery likes high-quality assets in infill locations. With some modest redevelopment and a major leasing campaign, he says The Roosevelt Collection will shine. He also expects to start construction on the Children’s Memorial Hospital site in Lincoln Park in early '13.

Sperry van Ness’ Colin O’Malley and Crosstown Real Estate Advisors’ managing director Matthew Baumann.
We caught up with Sperry van Ness’ Colin O’Malley and Crosstown Real Estate Advisors managing director Matthew Baumann. Matt finds acquisitions, syndicates deals, and sources debt and equity for assets that Crosstown buys. He also works with third-party tenants and investors. He recently purchased a 5k SF space vacated by Blockbuster in Schaumburg (at Schaumburg and Roosevelt roads), which he leased to Coldwell Banker for five years.
Retail: The Safer Bet

Event sponsor DDP Roofing national accounts manager David McCaffrey tells us that the full-service national roofing contractor is expanding into Chicago. Based near Philadelphia, with operations from Boston to South Florida, DDP is working with several clients that have a Chicago presence, including: U-Haul, KTR Capital, and the Brinker and Darden restaurant groups. Dave tells us that DDP specializes in 24-hour service to repair and maintain roofing. Heads up!