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PALM HARBOR, FL-National and regional investors see the west coast of Florida as an under-retailed growth area, one that favors sellers and buyers at this time, John M. Crossman, senior vice president of retail and principal in Trammell Crow Co.'s Orlando office, told members attending the International Council of Shopping Centers' annual West Florida Idea Exchange at the Westin Innisbrook Resort here.

"We believe the growth in the retail investment sector of commercial real estate will only continue to expand in 2006," Crossman said. "From Crystal River through Tampa-St. Pete down to Naples, and over to Lakeland and Orlando, this year could be the strongest yet for retail and retail investment."

Sellers, especially, are in a favorable position as the retail market continues to sizzle, Crossman said. "Remember the old adage, buy low, sell high?" he asks. "Well, we are a record high, so it is time to consider selling." He saids he is seeing "several owners who had long said they would never sell, are selling, so it is something to strongly consider."

Crossman noted "other issues will be created if you sell, like what to do with the money, but keep in mind: if you don't sell that center for the super cap, you just bought it at that super cap. And if values swing the other way, you just lost that money."

However, if owners plan to hold their properties, Crossman advised to "make sure you put the right kind of debt on your property that gives you the best flexibility," such as non-prepayment and assignable loans. He also told owners "now is a great time to prepare your center for potential tough times. Make sure you have an aggressive leasing plan. The last 10% of vacancy is where you find a ton of income."

A "big key" in successful leasing activity is to negotiate "landlord-friendly leases," Crossman said. "Get tenant sales information for all tenants and have relocation clauses" in the leases. He said owners should also check to see if they are allowed to redevelop any part of the center; add mixed-use components; check on the roof's condition; reseal the parking lot; trim the landscaping; and re-paint the entire property.

For buyers, the retail market in west Florida is also hot because of "what seems to be an unlimited amount of capital" available for acquisitions, Crossman said. "For the so-called easy deals, there is an endless list of buyers, but when the deal has 'hair', the buyer pool can often decrease by 90%." The Trammell Crow executive emphasized "it is important to keep in mind that the harder deals quite often provide much larger returns."

Crossman told potential buyers, "If you are looking for A-quality properties, make sure they have 'good bones.' That is to say, it has several very strong components attached to it. You should ask yourself, what if I lose my anchor? Is the area strong enough to support the center without an anchor? How long will it take you to retenant? Make sure you are truly buying an A property."

Class B and C properties are regularly available for sale but buyers for those assets are not. "There simply is not enough of you," Crossman told the shopping center group's members. "It is funny to me because I meet people that tell me they are value-added buyers but they want me to bring them the problem and the solution all in the same conversation."

Crossman added, "It is typically not that easy. The best value-added people I know have a very strong leasing component and are very assertive about getting in front of retailers. Having said that, they are equally not afraid of risk and thus make a better return."

Crossman wound up his presentation by reminding his audience "the key threat to all of this [buying and selling] is the fundamentals. We need to watch for tenants' ability to pay rents; the impact of discretionary income with increased energy prices; and a rise in interest rates." He added, "The way to deal with these [factors] is to sell now or strongly prepare for the future."

Instant Insights /

West Florida Retail Market Sizzles

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