Photo of John O'Connor

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NEW YORK CITY—Although it has spanned the compass of propertytypes since its founding in 1983, O'Connor Capital Partners startedout as a retail specialist and remains bullish on the sector amid aspate of negative prognostications on the future ofbrick-and-mortar stores. The company recently completed its secondjoint venture with mall REIT Washington Prime Group on ownership ofseven open-air properties valued at $600 million. It recently begandevelopment of Vineland Pointe, a 450,000-square-foot regionalpower and lifestyle center in Orlando, in a JV with LaSalleInvestment Management, and acquired the Shops at Canal Place, a260,000-square-foot shopping and entertainment destination in NewOrleans. At present it has about 28 million square feet of retailspace under management.

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GlobeSt.com caught up with John O'Connor, SVP and head ofacquisitions with O'Connor Capital, for insights into the outlookfor retail and what his firm seeks out when investing or developingin the sector.

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GlobeSt.com: Where do you see strengths in retailthat would encourage investment activities such as your second JVwith Washington Prime?

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John O'Connor: We really focus onretail centers that offer consumers multiple reasons to visit them,rather than just apparel or clothing shopping. The traditional mallused to be 90% apparel shopping and a food court, along with fourbig department stores. Now, we focus more on open-air lifestylecenters that offer dining, fitness and entertainment, and a lot ofthem also offer a grocery component.

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GlobeSt.com: Are these centers that not only offerthat tenant mix but also are moving away from the department storeanchor model?

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O'Connor: Yes. One example is ashopping center we bought in Charlottesville, VA a few months ago.It's anchored by a Trader Joe's grocery store, a Regal Cinemastheater, numerous fitness concepts and numerous dining concepts aswell as the best in class among today's retailers, Lululemon amongthem. It's key to have all of those components, and the departmentstore is certainly not one of them right now.

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GlobeSt.com: Longer term, is the department storeformat in eclipse, or is it a concept that has stood the test oftime but must go through a process ofreinvention?

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O'Connor: I don't think the categoryis going to be eclipsed, but there is certainly going to be morereinvention. The better department stores are still finding reasonsfor people to come to the physical store; the lesser ones are not,and are becoming more and more irrelevant.

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GlobeSt.com: Is constant churn and evolution one ofthe real keys to success in the currentenvironment?

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O'Connor: The key is having the rightlocation within the submarket and, in addition to that, having theability to transform the center to meet today's needs. People oftendon't realize that when a Sears or Macy's or JC Penney closes at amall and that mall is in a good location, the landlord is generallyable to reposition that anchor box, get much higher rent and drivemuch more traffic to the center.

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One of the Sears locations in our portfolio was bifurcated intoa Whole Foods and a Dick's Sporting Goods; the rent was five timeswhat it was previously and the traffic was probably five times whatit was previously. In a lot of ways, it can be highly accretive tothe landlord if one of these anchor boxes goes vacant.

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GlobeSt.com: In the Washington Prime JV, there's astrong emphasis on regional lifestyle centers, but at the sametime, you recently acquired Shops at Canal Place in New Orleans,obviously more of an urban setting. Do you find that many of thebasic characteristics of what drives traffic are comparable in bothtypes of settings?

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O'Connor; Yes. What intrigued us aboutCanal Place was that it was right at the heart of downtown, at thecrossroads of where the French Quarter and the business districtmeet. In every city around the country, there has been a lot ofemphasis on younger, more affluent people moving into thesedowntown centers. Canal Place is really more of a luxury retailcenter, and that segment of the market is performing very well.

|

In the regional centers, the type of property that we like tobuy serves as a downtown in a lot of ways. People will go there todine, go to the movies, go to the gym and go to the grocery store.At the center we own in Charlottesville, there's a green marketevery Thursday and Saturday from May through October. So even ifyou weren't planning to shop at the center, we find reasons tobring you there.

|

Photo of John O'Connor

|

NEW YORK CITY—Although it has spanned the compass of propertytypes since its founding in 1983, O'Connor Capital Partners startedout as a retail specialist and remains bullish on the sector amid aspate of negative prognostications on the future ofbrick-and-mortar stores. The company recently completed its secondjoint venture with mall REIT Washington Prime Group on ownership ofseven open-air properties valued at $600 million. It recently begandevelopment of Vineland Pointe, a 450,000-square-foot regionalpower and lifestyle center in Orlando, in a JV with LaSalleInvestment Management, and acquired the Shops at Canal Place, a260,000-square-foot shopping and entertainment destination in NewOrleans. At present it has about 28 million square feet of retailspace under management.

|

GlobeSt.com caught up with John O'Connor, SVP and head ofacquisitions with O'Connor Capital, for insights into the outlookfor retail and what his firm seeks out when investing or developingin the sector.

|

GlobeSt.com: Where do you see strengths in retailthat would encourage investment activities such as your second JVwith Washington Prime?

|

John O'Connor: We really focus onretail centers that offer consumers multiple reasons to visit them,rather than just apparel or clothing shopping. The traditional mallused to be 90% apparel shopping and a food court, along with fourbig department stores. Now, we focus more on open-air lifestylecenters that offer dining, fitness and entertainment, and a lot ofthem also offer a grocery component.

|

GlobeSt.com: Are these centers that not only offerthat tenant mix but also are moving away from the department storeanchor model?

|

O'Connor: Yes. One example is ashopping center we bought in Charlottesville, VA a few months ago.It's anchored by a Trader Joe's grocery store, a Regal Cinemastheater, numerous fitness concepts and numerous dining concepts aswell as the best in class among today's retailers, Lululemon amongthem. It's key to have all of those components, and the departmentstore is certainly not one of them right now.

|

GlobeSt.com: Longer term, is the department storeformat in eclipse, or is it a concept that has stood the test oftime but must go through a process ofreinvention?

|

O'Connor: I don't think the categoryis going to be eclipsed, but there is certainly going to be morereinvention. The better department stores are still finding reasonsfor people to come to the physical store; the lesser ones are not,and are becoming more and more irrelevant.

|

GlobeSt.com: Is constant churn and evolution one ofthe real keys to success in the currentenvironment?

|

O'Connor: The key is having the rightlocation within the submarket and, in addition to that, having theability to transform the center to meet today's needs. People oftendon't realize that when a Sears or Macy's or JC Penney closes at amall and that mall is in a good location, the landlord is generallyable to reposition that anchor box, get much higher rent and drivemuch more traffic to the center.

|

One of the Sears locations in our portfolio was bifurcated intoa Whole Foods and a Dick's Sporting Goods; the rent was five timeswhat it was previously and the traffic was probably five times whatit was previously. In a lot of ways, it can be highly accretive tothe landlord if one of these anchor boxes goes vacant.

|

GlobeSt.com: In the Washington Prime JV, there's astrong emphasis on regional lifestyle centers, but at the sametime, you recently acquired Shops at Canal Place in New Orleans,obviously more of an urban setting. Do you find that many of thebasic characteristics of what drives traffic are comparable in bothtypes of settings?

|

O'Connor; Yes. What intrigued us aboutCanal Place was that it was right at the heart of downtown, at thecrossroads of where the French Quarter and the business districtmeet. In every city around the country, there has been a lot ofemphasis on younger, more affluent people moving into thesedowntown centers. Canal Place is really more of a luxury retailcenter, and that segment of the market is performing very well.

|

In the regional centers, the type of property that we like tobuy serves as a downtown in a lot of ways. People will go there todine, go to the movies, go to the gym and go to the grocery store.At the center we own in Charlottesville, there's a green marketevery Thursday and Saturday from May through October. So even ifyou weren't planning to shop at the center, we find reasons tobring you there.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.

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