NewMark Merrill Cos. is a firm that will have a lot to share on Thursday and Friday at the ICSC Western Division Conferece at the San Diego Convention Center (booth 1136). Their redevelopment pipeline is strong in this environment. Among those are Twin Peaks Mall, in Longmonth, CO.; Park Plaza on Maine, in Baldwin Park, CA; and Winston Plaza, in Melrose Park, IL. Sandy Sigal, the firm’s president and chief executive officer spoke with us about the acquistiion market, California and strong tenants. What is the acquisition market like out there right now?

Sandy Sigal: It’s been competitive, it’s stayed competitive and it’s gotten even more competitive. The market is really broken into two pieces: “A” and “F” properties. If it has real cash flow and stability to it, it’s trading at almost record caps. If it’s a workout or there’s a real flaw in it, it just doesn’t trade period. There’s no more grayness right now, no more “B,” “C,” or “D.” Value-add trade properties a trading at the value that you could potentially create, minus 25 or 35 bps. It’s amazing. If you put value-add as the description of a property, the bidders come out of the woodwork. You have plenty of value-added funds that want to buy value-added properties, even if they aren’t value add. Are you seeing tenants filling up vacancies that were left a few years ago and are still there?

Sigal: Blockbusters are sitting there maybe a little longer. The rents that were associated with the Blockbusters were so high, that I think it’s hard for the landlords to take that hit. Those seem to be hanging out. The bigger box stuff got absorbed pretty well. It’s not like there’s a huge overhang of vacant boxes. There’s a round of vacancies by some Best Buys and Albertsons and Blockbusters, and there’s going to be some lag there. If it’s not an “A” property, it’s going to take some time to fill up. But if it’s a good property, there’s still great demand. How has the relationship between landlords and tenants changed? Are rent concessions over?

Sigal: The main round of concessions is spoken for. That wholesale repricing has taken place. The other round that is taking place right now is tenants that are really in distress, like the medium or small-sized chains that do need concessions. These won’t be the last concessions which you saw which were repricing. This is for survival, and a lot of those chains won’t be hanging around even then. You do see some repricing taking place, but it’s not wholesale. It’s more reflective of an area that has been badly affected with an anchor that has left, but it’s not anywhere near the level it was before. Frankly, the requests that we got on the last go around were not really needed, they were just insurance against the market that was cratering at the time. What makes the West Coast unique to other markets?

Sigal: It’s much more difficult in California. If you compare our California to our Illinois experience, California has got to be one of the toughest place to do business. The cities want to do business, but they can’t do any redevelopment. The state has a very unfriendly set of codes, and the legislature is not business friendly. They think they are, but they are way off. It’s just a very difficult place to do business.

The cities are great. They generally know they need a good retail base to grow a sales-tax base which funds the cities’ services, but they don’t have the tools. California is one of only two states in the entire country without a redevelopment agency. It’s just terrible.

The tenants want to be here. One thing they have going for them is that they have huge density. Tenants perceive California as more affordable than it was 10 years ago. There’s very little new construction, so most of the space is reuse, and that’s going at a pretty attractive rate. Are there any expanding tenants out there that you are excited about?

Sigal: There are a couple supermarket concepts that I see that I absolutely love. I love Mariano’s in Illinois, and they do an incredible job as a grocery store being an exciting place to shop. It’s a cross between a Whole Foods and a Safeway with good value. Meijer, in the Midwest, does an incredible job. It’s like a Target with very good grocery products, daily needs and soft goods needs.

Out here, what you’re seeing are more developed concepts just getting better at what they do. We have gym operators, such as a Gold’s Gym operators, who is a fabulous operator. A lot of food operators are doing a great job of providing value, service and entertainment. It’s a very evolving scenario in retail right now. In the next five years we’re going to see a real evolution. What are your objectives this year at the ICSC Western Division conference?

Sigal: This year we’ve got some development and redevelopment projects. We’re tearing down a lot of a mall in Colorado and doing ground up, so we’re marketing that. We have a new Walmart Supercenter that’s coming out of the ground in Rialto, CA. We have the redevelopment of a shopping center in Baldwin Park, CA. We are actually marketing, for a change, newer product. We’re pretty well leased across the board, but we’re looking to see if we can’t upgrade some of the space.