REIT Retail Execs See Market Balance Return

CHICAGO-The retail market is coming back from the recession-caused trough, with tenants interested in expanding again, according to many of the attendees at National Real Estate Investment Trust’s REITWeek here. However, development will be considerably off from the past 10 years, they said.

“I’d say we saw about 40 new regional malls built in the past decade, with us doing nine of them,” said Robert Taubman, chairman, president and CEO of Farmington Hills, MI-based Taubman Cos. “I’d say you’re only going to see 15 new malls in the next 10 years. We want to build almost half of them.”

Taubman was joined by other retail REIT executives in saying that retail is starting to see a return to a tenants market. Other REIT presenters included Macerich, Simon Property Group, Regency Centers, Agree Realty Corp., Kimco Realty Corp. and Hammerson plc.

There is a large group of consumers who, in fear of losing jobs were afraid to make purchases, feel better enough about their job security to start spending again, Taubman said. “That’s part of the comeback. However, to see real growth, we need jobs, and that’s not going to be a leap to the top of the ‘V’. It’s going to be a slow and steady growth.”

David Simon, chairman and CEO of the large Indianapolis REIT, agreed. “Patience is the order of the day. We have to be patient as to where we allocate capital,” he said during his company’s presentation.

Simon took some hard classes in patience this past year, as his firm doggedly pursued the takeover of bankrupt General Growth Properties. Instead, GGP went with Brookfield Asset Management, based in Toronto, for a reorganization plan.

Simon said Thursday that the pursuit was a “major, major, major transaction for us, on a risk scale,” but he was cavalier when talking about the rejection. “We learned that, really, the company was not for sale. At the end of the day, they chose to sell 75%. We would have liked to have known sooner...” he said.

After being asked if there’s any chance of another offer being sought before the GGP reorganization begins, Simon said he stands by his statement that enough is enough. “We have moved on,” he said.

Arthur Coppola, chairman and CEO of Santa Monica-based Macerich, said equity that had been waiting on the sidelines to purchase GGP properties is now looking for good financing deals. Also, tenants have retooled and been able to survive on fewer sales. With the return of consumer spending, this efficiency and available money promises to show profit, he said.

“We’re still not getting big leases, but I think starting this year, and showing more in the next two-three years, rents will rise and we’ll see a return. Our primary tenant base is healthy. Retailers are adjusting to the new normal,” Coppola said during the conference’s luncheon presentation.