George Smith Partners' Mozer

GlobeSt.com: How is the economy impacting retail financing?

Mozer: You can still get deals financed. I'm not saying it's easy, but there is still financing out there. Is it as aggressive as it used to be? No. You can't get a 95% non-recourse construction loan, but you can still get some recourse. And they're underwriting the take out, which is more of a 70% or 75% loan to value instead of an 80% to 90%. People are saying, "How am I going to pay if off?" Things are getting done, but most of my retail clients are telling me the tenants aren't signing up as fast.

GlobeSt.com: Are cutbacks in retailer expansion impacting any of this?

Mozer: Home Depot supposedly bought out of two leases in buildings they were supposed to open on the East Coast, and they had four or five deals they dropped. One of my other clients said that Target isn't signing any leases for openings in 2009, they're only going to open 2010. We're hearing Target, Office Depot, and Home Depot, major, major retailers that you expect to constantly be opening, are all cutting back drastically. Those are the anchors of the centers. Tesco is doing one of the biggest expansions in California, and now they've stopped building stores. You're starting to get back to fundamentals that we didn't have a year ago, like the ingress and egress and parking ratios. Are you on the going-home side of the street? What are the co-tenancy clauses? What is the credit of the tenant? We're going back to basics.

GlobeSt.com: Are municipalities friendlier to development right now?

Mozer: They're more lenient as far as the hoops they make someone jump through. But Los Angeles recently approved that all new buildings will have to be green, and that's going to add costs.

GlobeSt.com: Is any of this fallout a result of overbuilding?

Mozer: I think it's more about consumers being leveraged up to the teeth. You look at the credit cards and that incremental money that they spend on groceries, and they're worried about job security and the economy. The consumer is just getting a little smarter and price sensitive. And instead of buying two they buy one.

Infill in coastal California is still doing well. The retail in the Inland Empire and Sacramento, where there's job loss because of real estate, some of those centers are doing poorly. A client of mine says it's really hard to find the shop tenants. But good, infill and strong markets with good parking and not a lot of competition will have retailers open and do well. Those deals will get financed.

GlobeSt.com: Are value-added centers still popular?

Mozer: There's still demand for people buying it, but nobody's selling a product unless they're motivated. Transactional volume is off 60%. When you take two-thirds of the capital markets away, prices are going to have to go.

GlobeSt.com: How is retail faring compared to other sectors?

Mozer: Apartments are much more liquid because you have Fannie and Freddie. The high-end, institutional offices are doing OK, but the B stuff is having problems. Industrial, if it's in a gateway city, is doing well, but incubator space is having problems. A credit crunch affects everybody. It's credit-card receivables, student loans, small-business loans, corporate debt. It's hard to get financing.

GlobeSt.com: Are there any regions performing better than others?

Mozer: Look at job creation. Seattle has good job creation, and there's a limited market where people can build things, so they're doing well. Coastal California is doing well. If you go to Phoenix and Vegas it's not that bad, but if you go out into the areas where they've overbuilt housing, it's a tougher market.

GlobeSt.com: What do you think the climate will be like at the ICSC convention in Las Vegas later this month?

Mozer: I think what you'll see at ICSC is cautious optimism. A lot of people are saying it's a write off because the market's not in equilibrium. I say it's a coin toss because I'm seeing deals just now starting to trade at the new paradigm. They're far and few between, but at least there's some action. There was no action two months ago. We're starting to see life in the market. Is it sustainable? I can't tell you that.

GlobeSt.com: So do you have any predictions on when things could normalize?

Mozer: I'm hoping for the third quarter, but you have to bring more capital in the marketplace, and it's very sparse right now. But deals are getting done. They're just taking more equity, pre-leasing and recourse.