Stuart Tanz has a proven track record of producing impressive results for public investors in shopping center real estate. In 1997, as CEO, Tanz led Pan Pacific Retail Properties in its initial public offering. In just under a decade’s time, Tanz and his team expanded the company from approximately $447 million in shopping centers at its IPO to more than $4 billion in 2006, when the company was sold, generating a total return for IPO investors of over 600 percent.
At his current company, Retail Opportunity Investments Corp. (NASDAQ: ROIC), CEO Tanz is once again on his way to producing impressive results. Starting from scratch in 2009, focusing on grocery- and drugstore-anchored shopping centers in coveted West Coast markets, ROIC has already amassed a portfolio totaling $1.4 billion. Looking ahead, Tanz and his team hope to double the size of the company over the next three years.
In a recent interview with CPE, Tanz shared his insights on the landscape for shopping centers, his operating philosophy and more.
CPE: What brought you out of retirement?
Tanz: After the success we had at building Pan Pacific into the largest shopping center REIT on the West Coast, I was approached by the board of ROIC about transforming the company into a shopping center REIT. At the time, ROIC did not own any real estate, but they did have roughly $400 million in cash to invest. Needless to say, I was excited about the opportunity to build another successful REIT. When we started at ROIC in 2009, there were a large number of undercapitalized shopping center owners in our core markets as a result of the recession, with very few bonafide buyers in the marketplace. We saw this as an incredible opportunity—unlike any we have ever seen in our 25 years in the business—and we worked very hard to capitalize on this. Since 2009, we have been steadily amassing an irreplaceable portfolio of shopping centers. Today, we own 53 shopping centers totaling over 5.4 million square feet. And we’re just getting started.
CPE: Where on the West Coast have you invested?
Tanz: Importantly, our strategy is to build a geographically diverse and balanced portfolio focused in demographically strong markets. Accordingly, we focus in four key regions: 1) Northern California, primarily in the San Francisco Bay Area and Sacramento; 2) Southern California, in Los Angeles, Orange County and San Diego; 3) Seattle, Washington; and 4) Portland, Oregon.
CPE: What do you notice when you go to a shopping center as a consumer—not a property in which ROIC has invested?
Tanz: In the neighborhood shopping center sector, we believe what matters most to the consumer is convenience. When looking at shopping centers that we are considering acquiring, that’s our primary focus: convenience. I think that is one of the keys to our success in terms of what we bring to the consumer with our shopping centers—convenience for basic retail necessities that are always in demand, regardless of the economic cycle. Our centers are frequented by our core customer base two to three times a week on average. Why? Because of our convenient locations and because of the daily-necessity retailers that we bring to our properties as key tenants. And this very consistent, repeated consumer traffic at our properties, in turn, helps to drive our ability to generate very stable, reliable income and dividends for our shareholders.
CPE: Consumers don’t need to buy groceries or pharmacy products by visiting a physical store now if they don’t want to. Why does investing in this type of retail still work?
Tanz: If your shopping centers are well located, as our portfolio is, at major, heavily traveled intersections in the heart of densely populated communities and feature well-known retailers providing basic goods and services, consumers will opt to go down the street and purchase what they need immediately, as opposed to exclusively shopping online. Conveniently located shopping centers, with the right tenant mix, are the cornerstone of our continued success.
CPE: What are some best-practice priorities for ROIC’s shopping centers?
Tanz: Always maintaining a balanced and diversified portfolio—not just geographically but also with our tenant base. Given that the retailing industry is constantly evolving, maintaining a well-balanced, diverse tenant base is a top priority for us.
CPE: How do you handle property management?
Tanz: Unlike many of our competitors that utilize third-party property managers and leasing agents, all of our management and leasing personnel are employees of ROIC. We focus on carefully building the right chemistry and culture with our staff. Most of our team today has worked together for the past 15 years, dating back to our days at Pan Pacific. Having the right team and culture has been instrumental to our ability to keep our properties well leased and running at peak performance.
CPE: What draws your investors to ROIC?
Tanz: I think there are four key attributes to ROIC that help set us apart with investors: 1) our management team, which has been together dating back to Pan Pacific, so as a team we have a well-established, proven track record with investors; 2) the balance sheet of the company—we have one of the strongest balance sheets in the REIT industry; 3) the quality of our portfolio; and 4) our market focus—being the West Coast, which is considered by many to be among the most fundamentally sound in the country in terms of demographic profile, rent growth and barriers to entry.
CPE: You serve on the board of the Southern California Lusk Center for Real Estate. What’s your focus there?
Tanz: I’m a graduate of USC, and remain very close to the school. The Lusk Center for Real Estate is one of the top real estate schools in the country. Along with striving to provide the board with support and insights, based on my 25 years in the business, I particularly enjoy and value mentoring the students as they come through the undergraduate and MBA programs.
CPE: What other causes or philanthropies are important to you?
Tanz: Outside of the real estate industry, I am heavily involved in the Tanz Neuroscience Center at the University of Toronto, which my family established some 20 years ago. TNC has become one of the leading research centers in neurodegenerative diseases, including Alzheimer’s and Parkinson’s diseases. Closer to home, in the San Diego area, I’m also involved in and support the Sanford-Burnham Medical Research Institute, which is another vitally important, leading research institution.