Leaders Talk Deals & Strategy
- May 19, 2015
Dealmakers by the thousands dashed through the cavernous halls of the Las Vegas Convention Center on Monday during the first full day of RECon, the International Council of Shopping Centers’ annual spring event. ICSC expects more than 35,000 real estate professionals from around the globe to attend before the convention concludes on Wednesday.
A sampling of opinions from attendees on Monday indicated a mood that was at least as positive as at the 2014 edition of RECon. “The vibe to me is that it feels even busier,” said Mark Garside, who was recently promoted to CFO of EDENS after serving for 10 years as the Columbia, S.C.-based company’s managing director & head of capital markets.
Some executives also sensed a new tone of commitment from attendees. In 2014, some participants appeared to be interested primarily in listening and learning, recalled Rick Chichester, CEO of Faris Lee Investments. In 2015, the mission is changing from education to action. “There’s a lot of definition on display in today’s conversations,” Chichester said.
Leading industry owner/investors also paused from dealmaking to offer glimpses of their strategy while taking the measure of the market. “Most of the new development you’re hearing about is the grocery-anchored stuff” ranging in size from 200,000 to 250,000 square feet, said Matt Lougee, senior vice president of finance for DDR. Like several other leading retail REITs, the Beachwood, Ohio-based REIT has departed from the Las Vegas Convention Center and holds its meetings at a Las Vegas resort—in DDR’s case, the Bellagio.
DDR is continuing its transition to a power-center specialist and expects to be a net seller this year, Lougee explained. DDR has sold some 500 properties since the recession and would like to dispose of about 75 more in its current portfolio. The buy side is proving somewhat more challenging than the sell side; the inventory of available power centers is smaller than might be expected, Lougee reported. Moreover, “We miss out on a lot of deals because we’re not willing to pay a 5-cap,” he said.
Some companies will be testing the waters at the first RECon since the completion of a watershed event. EDENS wrapped its $825 million acquisition of AmREIT Inc. only three months ago. The deal expands the firm’s footprint to Atlanta, Dallas, Houston, San Antonio and Austin. As it completes the integration of AmREIT, EDENS also plans to focus on investing in its existing portfolio. “There’s opportunity in our existing portfolio to redevelop our assets,” explained Garside.
Some veteran executives took the occasion to raise concerns about proposed policy changes that they contend could stifle growth. Joe Cosenza, vice chairman of the Inland Real Estate Group Inc., pointed to a proposal by the Obama Administration to eliminate 1031 exchanges as a way to raise revenue. Such a step, he noted, would affect homeowners, small private investors and REITs alike.
“This is completely opposed to what Congress enacted in 1921,” Cosenza noted. Eliminating the option to defer taxes on profits from sales would discourage investment and hurt the economy, he argued, pointing to a recent study by Ernst & Young that estimates an $8.3 billion reduction in gross domestic product would result from eliminating 1031 exchanges.