"Historically, I guesstimate that approximately 60% to 65% of retail sales occur in the final four months of any given year." He says, "I think that will again hold true this year."

Michalak predicts "mall product transactions in general are purportedly going to pick up dramatically in terms of number of transactions." He says he has "noticed a definite upturn in offerings over the past few months."

Unconfirmed published reports put the number of mall transactions in Central Florida in 1999 at 56 compared to a total 21 in 2000 and 2001.

Michalak has a track record to back up his projections of a fourth quarter market rally. In the last 14 months, he has closed 13 single-asset shopping center deals totaling 1.66 million sf valued at $128.4 million and averaging $9.88 million per deal.

But his pace has slowed this year. In four transactions, the broker sold properties totaling 473,163 sf for $29 million or $7.25 million per deal.

In his nine deals in 2001, Michalak closed on a total 1.19 million sf for $99.4 million or an average $11.04 million per sale. Michalak has three pending closings and two deals in the execution stage.

He says interest rates at 40-year lows are a key factor in the slowdown because they allow retail owners to refinance their properties at attractive terms instead of selling them.

Capitalization rates, or the amount of return a buyer expects to receive, for class A investment grade retail, are also down.

"Necessity retail (grocery anchored properties) have experienced a reduction of 60 to 75 basis points over the course of the last three to five months," Michalak tells GlobeSt.com. "This is an incredible pace of reduction in cap rates."

The broker says he has "never witnessed this dramatic decrease in cap rates for retail product over my 17-year real estate career."

To cope with the expected upturn in the retail investment sales market, Michalak is advising his clients "that if they have a six to 18 months exit strategy for any of their retail product, to get it out to the market immediately."

He says, "In my opinion, anticipated pricing will be much greater in this environment than over the next few years, as well as when the country gets out of these volatile stock market conditions, these recessionary times and this period of white-collar corporate corruption."

Michalak says "when stock investors become more confident and the economy stabilizes, the fed will increase interest rates and correspondingly, cap rates will increase and market values will deflate somewhat."

In his four deals this year, the broker sold the 161,000-sf West Colonial Oaks center (owner West Orange Associates, Orlando) for $11.4 million or $70.78 per sf; Marketplace at Cypress Creek (Demetree Brothers, Orlando), 75,100 sf for $4.8 million or $63.91 per sf; Terrace Ridge Plaza (MGI Properties, Tampa), 100,491 sf for $7.8 million or $77.61 per sf; and North Lake Plaza, Altamonte Springs, FL (Dean Witter Morgan Stanley, New York), 136,512 sf or $36.62 per sf.

In the past five years, Michalak's retail sales production totals 31 properties comprising 4.69 million sf valued at $299 million or an average $8.3 million per deal.

Instant Insights /

Cushman's Big Hitter Expects Retail Investment Sales Surge in Final Quarter

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