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Golden Anniversary

BY Debra Hazel

Relocating a business and a family from Memphis, Tenn., to St. Petersburg, Fla., is a short distance in miles, but for The Sembler Co., which celebrates its 50th anniversary this year, the journey has been much longer.

“We have developed 350 projects, including 125 or 130 shopping centers,” said Mel Sembler, recently named chairman emeritus. “It’s been an interesting career.”

Mel came to the retail business through his in-laws, who were related to the owners of Shainberg’s women’s clothing stores in Memphis. Persuading his father-in-law to relocate stores to the growing suburbs, he formed The Sembler Co. in 1962. In 1965, the company opened its first center, Green Village Shopping Center in Dyersburg, Tenn., around a Shainberg’s store. Two more centers followed, but by 1968 it was clear that real growth was farther south, and Sembler relocated to St. Petersburg.

The move was prescient, said son Greg Sembler, recently promoted to Sembler Co. chairman.

“There were 5 million people in Florida then,” Greg said. “There are 19 million now.”

Years of development ensued. After building a portfolio of shopping centers with some of the dominant tenants in the Southeast, such as Publix, Walgreens and Target, the company expanded into Puerto Rico in 1996, bringing retailers such as Home Depot and Costco to the island.

Mel also pursued other interests, launching a controversial drug treatment program and becoming involved in politics. He eventually served as the finance chairman for the Republican Party, supporting such candidates as Presidents George H.W. Bush and George W. Bush. The results were stints as the U.S. Ambassador to Australia under the senior Bush and Ambassador to Italy under the younger President.

Meanwhile, brothers Greg and Brent Sembler (a third son, Steve, split off from the family firm to become a housing developer) kept growing the company.

“My sons had to step in, and Craig Sher [now executive chairman] did an outstanding job,” Mel said. “Thank God I have very talented sons.”

Through several cycles, The Sembler Co. remained, and remains, resolutely a private, family-held business, even as other firms became REITs.

“We have looked at going public,” Greg acknowledged. “But we like the flexibility of being private.”

The company even experimented with mixed-use development, only to pull back during the recession.

“We’re very, very focused on management,” as well as redevelopment and bringing the Wawa convenience stores to Florida, Greg said.

Challenges continue in the industry, noted Mel, a past chairman of the International Council of Shopping Centers. Yet it remains fun. “I’m sure the industry will continue to change,” he said. “Where else can you look at empty dirt and from sweat, intellect and contacts create something that will be so good for the community?”

Fifty years later, The Sembler Co. remains active in the business, and Mel Sembler remains active in both politics and the company he founded — when his sons need him, he said. “I still have an office and still consult,” Mel said. “I still have contacts that are helpful to the company. The boys have been very generous.”

Eventually, the plan is to have the next generation (now in college) at the company, Greg said. For now, he and Brent are continuing the family’s legacy into its next 50 years. “It’s a passion. It’s my father’s passion, and my brother Brent’s and my passion,” Greg said. “We love to come to work every day.”

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All About Strategy

BY Debra Hazel

Editor’s Note: Chain Store Age’s 23rd annual survey of Fastest-Growing Managers measures new domestic and international third-party management and leasing contracts obtained during the preceding calendar year (2011).

Now more than ever, retail real estate is not a business to be conducted without forethought. The days of gut instincts and seat-of-the-pants decisions have been replaced by the need to plan far ahead to guarantee a company’s continued growth.

That is the hallmark of Chain Store Age’s Fastest-Growing Third-Party Managers of 2011. From top-ranked CB Richard Ellis, with more than 48 million sq. ft., to virtually tied Vestar Development Co. and Mid-America Asset Management, their success came from decisions made years earlier to expand or refocus their businesses.

1. CB Richard Ellis

There are numbers, and there are NUMBERS. And CBRE’s grand total of 48.8 million sq. ft. of new management assignments worldwide (12.8 million sq. ft. in the United States), leading it to top our list, certainly counts as major growth.

Which leaves one basic question — how can a company possibly keep track of it all?

“It’s really very, very difficult,” acknowledged Todd Caruso, senior managing director of CBRE’s Retail Agency Services/the Americas. “We have a presence in almost every major and secondary market in the United States. But our sales and professional team are retail pros.”

The firm also has strict structures to ensure the best possible service, he added, forming Strategic Accounts and Asset Services divisions.

“We have the ability to be attentive to different client types and provide services when asked,” Caruso said.

And Caruso said he is committed to three main objectives: expanding CBRE’s large retail portfolio; providing additional services to existing clients through its Asset Services, Capital Markets and Project Management divisions; and recruiting more professionals in markets where he feels CBRE still needs an additional boost. That leaves plenty of room for future growth, despite an uncertain economy.

“I believe we will grow in a measured way — we don’t expect to have off-the-charts growth,” he said. “We do think the markets are loosening and that investors have opened their eyes to secondary markets.”

2. Jones Lang LaSalle Retail

Jones Lang LaSalle’s second-place ranking, with 15.4 million sq. ft. of new assignments, comes through both recommendations and diversification.

“Our best development team consists of our current clients,” noted Greg Maloney, retail CEO of Jones Lang LaSalle, Atlanta.

The growth also is a testament to the wisdom of expanding into managing open-air centers, which JLL began several years ago and continues to grow. Expansion is limited in its traditional regional mall category: Some 70% of regional malls are managed by REITs, and others are managed by their owners, Maloney pointed out. JLL manages 60% of the remainder. Now, in fact, JLL is restructuring itself to accommodate the potential of the open-air subsector.

“We’re moving toward becoming more local,” Maloney said. “Even in malls, we’re finding the local connections to be more important.”

Restaurants, in particular, require a local touch, as do ethnic markets.

“Our customer is changing. We have basically two generations below the baby boomers, and we need to adapt to that,” Maloney observed.

Perhaps the biggest misperception is that all of this is easy for a global firm such as Jones Lang LaSalle. But the company can’t take growth for granted.

“We don’t necessarily want to be the biggest,” Maloney said, “but we want to be the best as we continue to grow and expand into other areas of the retail sector.”

3. Fameco Real Estate

Persistence, flexibility and consistency: These are the keys to Fameco’s regular appearance as a Fastest-Growing Manager in the annual Chain Store Age survey. Part of the company’s 5 million sq. ft. of new management contracts came from the assumption of several centers originally built by Stanbery Development.

“It was Class A premium product, in a portfolio we’d been looking at,” said Larry Zipf, president of Fameco Management Services.

In fact, Fameco’s growth comes from leasing-only assignments, management-only contracts, and deals that include both services. In the last year, the company has taken on the management of projects as large as 570,000 sq. ft. (The Shoppes at Camden Town Center in Camden, Del.) and as small as a 2,700-sq.-ft. former KFC in Marlton, N.J.

“Our business is blocking and tackling,” said Adam Kohler, partner and head of Fameco’s Landlord Leasing/ Owner Representation division. “The company questions, ‘Can we do the best possible work for our client? And is it worth allocating our people and resources?’ Our business requires a lot of windshield time.”

And an increasing amount of business will come from Philadelphia, the result of allocating people and resources locally.

“In June 2011, we opened a physical office in Center City. In the final month of 2011, we landed 20 net new listings in Center City,” Zipf reported.

That has continued with 11 new listings in the beginning of this year, with more growth to come.

“Center City Philadelphia has been on an upswing,” Zipf said. “This is not a brand-new renaissance.”

4. Bayer Properties

How do you acquire 3.7 million sq. ft. of new management contracts? By cutting back on development projects. Ask fourth-ranked Bayer Properties.

Perhaps best known as the developer of the upscale Summit lifestyle centers, Bayer’s current growth came from a prescient decision in 2007 to focus less on new construction.

“We took that due diligence money to build our leasing staff. We thought we would become more diverse. We didn’t see the train wreck it became, but we did see a softness,” said Jeffrey Bayer, president and CEO of Bayer Properties.

While other companies were cutting back, Bayer was taking on seasoned pros to help them grow their existing third-party division.

“We were very aggressive in trying to staff ourselves with tried-and-true veterans,” Bayer said. “And it was not hard for us to talk to people and say, ‘We do it for ourselves.’”

The result has paid off with a diverse group of new assignments, including a 1.1 million-sq.-ft. turnaround opportunity at The Citadel Mall in Colorado Springs, Colo. In fact, the company has created a separate division for challenged properties, which can have a 75% different tenant mix from its Summit projects.

“I think we have some uncertainty in front of us still,” Bayer said. “The first thing people say is, ‘Do you really have the infrastructure in place?’ The truth is that we have the infrastructure in place to continue to grow.”

5. Vestar Development Co.

After an economic battering of its real estate sector, Metropolitan Phoenix and Southern California’s shopping center industries are alive and well, said Vestar Development Co., which last year signed 3.4 million sq. ft. in new third-party management contracts to rank fifth.

The longtime developer in Arizona and California saw the market bear the brunt of the housing bubble collapse, and now is helping institutional and other owners manage their properties.

“We are seeing an uptick in transactions, which leads to opportunity,” said R. Patrick McGinley, VP property management for Phoenix-based Vestar.

Institutional owners, in particular, were a major source of discussion for Vestar over the past 18 months. Those talks bore fruit toward the end of last year, when the velocity of new business picked up dramatically.

“When it rains, it pours,” McGinley said. “But we’ve been talking to our people for a long time and building our reputation.”

Those observers who believe the area is filled with nothing but distressed property couldn’t be more wrong. Vestar is focusing on managing properties that do not require a major turnaround, but perhaps need one or two tweaks or deals to bring it to full success, McGinley said.

“We’re very good at creative, innovative solutions to leasing problems. We take mildly challenged assets and make them successful,” he said.

6. Mid-America Asset Management

Take a look at a name like Mid-America Asset Management, see a concentration of centers in some of the same markets, and you might think that the company was given a major portfolio assignment for its 3.1 million sq. ft. of new management contracts, placing it in a virtual tie for fifth place.

But you’d be wrong. Each assignment was obtained individually and continues a long-standing tradition of growth, said Michelle Panovich, a principal of Oakbrook Terrace, Ill.-based Mid-America.

“I’ve been here for nearly 25 years, and we’ve never had a year where we didn’t grow,” she said.

What has changed, however, are the sources of the assignments. Mid-America is doing much more work with foreclosures and distressed properties.

“The workout business will come for companies like us who have made it a focus,” she said.

Geographic expansion also is a factor. The company established an office in Michigan in late 2010, and the effort paid off last year, Panovich said, with 445,000 sq. ft. of assignments.

“Michigan was just ripe to have a company with strength in the Midwest,” she said.

Also a potential source for future assignments will be projects with relatively recent loans — many centers that were financed just before the market’s collapse will see their five-year loans mature this year.

“That’s the next wave we’re in,” Panovich said. “This is the new normal now.”

For a breakdown of new third-party contracts obtained during 2011 for each of the companies in this article, visit chainstoreage.com/community.

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Growing by Leaps and Buys

BY Debra Hazel

Editor’s note: Chain Store Age’s 23rd annual survey of Fastest-Growing Acquirers measured retail square footage purchased during the 2011 calendar year.

For some companies, being among the top acquirers of shopping centers almost is business as usual — top-ranked Inland Real Estate is a perennial leader, largely through avidly scouring daily for possible deals, while Kimco maintained its focus on top projects in top markets.

For others, though, their ranking is a return to the top. DDR Corp. (formerly Developers Diversified) regained its place among the leaders with a new name and focus on acquisitions, while Cole Real Estate Corp. returned in part by closing deals other companies can’t. And Westfield ranked fourth through the most dramatic strategy of all — entering new continents through joint ventures.

1. Inland Real Estate Group of Cos.

Volume and research are key for top-ranked Inland, which acquired 8.9 million sq. ft. of space last year. The company scans 200 opportunities a day looking for the right investments for its portfolio.

“We are like piranhas when it comes to deals. Nobody closes more individual deals than Inland,” said G. Joseph Cosenza, vice chairman and a director of Inland Real Estate Group and president of Inland Real Estate Acquisitions, Oak Brook, Ill. “We will do anything and everything to make sure we get it, as long as we do due diligence to make sure it is right for Inland and its investors.”

That due diligence has become more difficult throughout the market recovery, even for a company that has always researched potential acquisitions thoroughly.

“I’ve seen things in the last six or eight months I’ve never seen before,” Cosenza said, including utility demands for certain easements that would leave landlords at risk.

The result of the company’s aggressive growth is a presence in all 48 continental U.S. states. But predicting the future remains a mystery.

“Every year, I’m always asked, ‘What do you think you’ll be doing?’ ” Cosenza said. “I never know. I don’t know how much money we’ll have in the bank. And how would I know what’s going to be on the market?”

2. Cole Real Estate Investments

Class A centers in major metropolitan areas have been the major target for real estate companies and financial institutions looking to enter or re-enter the retail sector. Phoenix-based Cole Real Estate Investments, however, achieved its second-place ranking, with more than 4 million sq. ft. in acquisitions around the United States, by looking a little more broadly.

“All of the REITs want to be in the top-tier MSAs,” said Scott Holmes, senior VP acquisitions for Cole, a non-traded real estate investment trust. “But we have been successful at finding great deals in secondary areas, as that traffic hasn’t picked up yet.”

Cole has been a big player in general, Holmes said, but acquisitions are not getting any easier. As the market recovers, Cole is finding that it’s bidding against more players for quality properties. However, that can be an advantage.

“Toward the end of last year, we picked up six or seven deals on the rebound,” Holmes said. “They came back to Cole, because we close deals all-cash.”

The market will be even more competitive this year, Holmes added.

“We won’t see the cap rate compression we did last year,” he said. “We’re not seeing interest rates rise.”

3. Kimco Realty Corp.

Kimco Realty Corp.’s 3.7 million sq. ft. of acquisitions last year — placing it third — are a sign that the sector remains a safe haven for investors, said David Henry, vice chairman, president and CEO of the New Hyde Park, N.Y.-based company.

“Real estate increasingly is in favor again,” Henry said. “It is a hard asset, and an alternative investment, as Treasuries yield next to nothing. That said, it’s still a tale of two cities.”

Investors still prefer primary and gateway markets, and capitalization rates continue to drop, Henry said. Meanwhile, secondary and tertiary markets, as well as Class B centers, are less in demand, with high cap rates and prices still compressed.

“That also extends to the area of financing. Nobody wants to lend [on lesser product and locations],” he said.

Would the upside on such properties attract Kimco? Probably not — conscious of its obligation to its shareholders, the REIT maintains its criteria of acquiring top properties in major markets. There’s no lack of quality out there, Henry contended.

“We have narrowed our acquisitions, identifying 25 core markets where we have offices and properties,” Henry said. “There are 100,000 shopping centers in the United States, so it’s not a question of having nothing to buy. We’re trying to be more careful, more disciplined.”

4. Westfield

Fourth-ranked Westfield acquired 3.5 million sq. ft. of space by continuing to pioneer the globalization of the industry.

The Australian developer, which also has projects in New Zealand, the United States and the United Kingdom, last year acquired developments in Brazil and Italy in joint ventures with other companies, with the transactions literally occurring within a week. Both deals are a direct result of the company’s successful development of Westfield Stratford City, its regional mall opened as part of the London Olympic Village, said Peter Lowy, co-CEO of Westfield Group.

“We did a business restructuring in November 2010,” Lowy said.

The company acquired a 50% interest of a development site for a 1.8 million-sq.-ft. mall adjacent to Milan’s Linate airport in a joint venture with Gruppo Stilo. Plans call for the project to be complete in 2015 or 2016.

“Gruppo Stilo did a lot of the approvals on the site,” Lowy said.

Less than a week earlier, Westfield had acquired a 50% interest in Almeida Junior Shopping Centers, entering South America for the first time. The deal created Sao Paulo-based Westfield Almeida Junior.

An emerging market, “Brazil is very different for us,” Lowy said. “But we found a middle class that will grow by 20 million people and has a stabilized government. It’s a commodity-based economy with high tariffs, high taxes and high barriers to entry. It’s a well-developed retail world, very similar to Australia.”

5. DDR Corp.

After two years off the list, DDR Corp. (previously Developers Diversified) returns to rank No. 5 with 1.9 million sq. ft. acquired and a new name.

The shortened name reflects the company’s focus on acquisition rather than new construction, and on one sector, the firm said in 2011.

“We target select acquisition opportunities that can be enhanced by inclusion in our leasing, operating and redevelopment platforms, with a focus on owning prime power centers populated with high credit quality tenants,” said David J. Oakes, CFO of DDR, in an email to Chain Store Age.

The market is becoming more competitive, Oakes said, but in the third quarter of last year alone, the company acquired Cotswold Village and The Terraces at SouthPark in Charlotte, N.C., for $85 million, and Chapel Hill East in Colorado Springs, Colo., for $25 million.

The deals continue in 2012. In January, DDR announced a joint venture with Blackstone to acquire 46 shopping centers owned by EPN Group for $1.43 billion (including $640 million of assumed debt).

“Over the course of the year we expect to continue our stated strategy of investing the proceeds of the disposition of non-prime assets into the acquisition of prime assets with higher and longer-term growth potential,” Oakes said.

For a breakdown of properties and portfolios acquired during 2011 for each of the companies in this article, visit chainstoreage.com/community.

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