OAK BROOK, IL—It was 18 months ago, or six quarters ago, as Shane Garrison expresses it, that Retail Properties of America, Inc., launched a tightly focused strategic plan. As the REIT prepares to swing into its second full year under the plan, Garrison, the company's EVP, COO and CIO, expresses optimism about the plan's outcome and the value it will deliver to investors.

The plan, launched when the REIT had properties in more than 75 markets, will reposition the portfolio and create a streamlined focus on 10 to 15 target markets over the next decade. RPAI plans to own approximately three million to five million square feet in each market. Garrison recently sat down with GlobeSt.com to fill in the details.

GlobeSt.com: What is the rationale behind the strategy, Shane?

Shane Garrison: We believe that the path to maximizing same store NOI performance lies in optimizing our local and regional operating platforms. This is a local business, and to drive significant shareholder returns over time, we believe we need to be in a finite set of markets, in this case 10 to 15 markets, with considerable local knowledge, relationships and presence to drive long term value. It is a 10-year plan for a reason. We want the flexibility to make the right capital-allocation decisions and the ability to take advantage of prevailing market conditions as they change. This thesis also allows us a lot of flexibility, and the years that the market favors sellers, we'll concentrate on dispositions, and the years that are more compelling for buyers, we can focus more on acquisitions.

GlobeSt.com: What are these target markets?

Garrison: As of today we have identified 10 markets, Seattle; Phoenix; Chicago; four cities in Texas: Dallas, Houston, Austin and San Antonio; Atlanta; Washington, DC, and Baltimore, which we look at as one MSA; and the New York metro market. As we get closer to our scale in these markets it will continue to spur the conversation about other cities. But we don't plan to go beyond 15 markets.

GlobeSt.com: Are any of these new markets for you?

Garrison: No. In each of the markets I mentioned we already have a presence of more than 800,000 square feet. So we are already familiar with how these markets perform and operate and have local operating knowledge and expertise, which is paramount to our long term success. The scale number we're looking to achieve is approximately three to five million. We already have about four million square feet in Dallas, so we're right in our sweet spot there.

GlobeSt.com: What defines a target market?

Garrison: There are a few things we look at. The most important elements are diversity of the employment base, long-term discretionary spending ability and patterns, as well as, educational attainment and barriers, whether its topography, density or entitlements.

GlobeSt.com: You mentioned market conditions. Ten years is a long time, especially in US real estate. How do you intend to adjust the plan for bumps in the economic road?

Garrison: We don't intend to adjust it, for the simple fact that we have local knowledge and that's one of the big differences in the plan. You can play offense and defense through your market knowledge. We have people who were born and raised in those MSAs, as opposed to a national portfolio where sometimes, by the time you figure what's happening locally or economically, your assets have diminished in value. This long-term plan allows us to be patient and prudent with respect to execution, considering both the strategic direction of the assets and the market.

GlobeSt.com: You aren't planning to make downstream changes if one type of retail should falter?

Garrison: We're unique in the strip center space in that we are agnostic in terms of what type of retail real estate we buy. We don't have one target for what the pie should look like. We're more focused on the quality of the real estate. I don't know that any type of property is totally safe in a downturn. That's why I say it is about the real estate first. The best real estate will always win. We look for the ability to drive value through simple rent growth or added density or, ideally, both. We're not buying based on fixed configurations such as grocery or power centers as retail is a very dynamic asset class and configurations evolve.

GlobeSt.com. We talked about defining target markets. How do you define disposition targets?

Garrison: We underwrite and update our properties on a quarterly basis. We're very high touch and focused on maximizing value for our shareholders. The properties we have recently sold or that are for sale next year are largely stabilized and high quality assets, for us it is not a quality issue but a simple geography issue. That's the dramatic difference when you look at this REIT's repositioning versus other public companies. This is about geography and refining our focus. Since we launched the strategic plan, we are really starting to see the benefits of focus and local knowledge bear fruit. If an asset is outside the 10 markets we've targeted, or it's in the market but two blocks off of where we want to be, we don't even look at it. We stick to the plan and I am very excited about our acquisition prospects in some of our highest barrier markets for 2015.

GlobeSt.com: So what does 2015 look like?

Garrison: 2015 will be a very transformational year from both a geographical and portfolio standpoint. We think we can come exit an additional 10 to 15 markets in 2015 and five to six states through dispositions and be out of single tenant office and industrial portfolio but for Zurich Towers, which is located near us in Chicago, IL by the end of 2015. We also believe that we have a robust pipeline of compelling acquisition opportunities in some of the tightest markets including Seattle, Washington DC and New York, so 2015 should be very exciting and start to demonstrate considerable progress toward the plan.