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LAS VEGAS-Open-air shopping centers have been a hot topic in the industry, especially given the dearth of new enclosed mall projects across the county, and at the forefront of the issue has been the so-called lifestyle center. That was indeed the case for a panel at ICSC’s Spring Convention, addressing the topic, “Open-air Centers 2005.”

Asked by panel moderator Brad Hutensky, president of the Hutensky Group of Hartford, CT, to define a “lifestyle center,” Daniel Hurwitz, EVP of Developers Diversified of Beachwood, OH, told attendees that such a property is “defined by its tenancy. They are moderate-priced to upscale tenants usually found in an enclosed mall, but are now in an open-air environment.”

“They’re working, and people keep doing them,” said Rebecca Maccardini, president of RM Resources of Ann Arbor, MI, a consulting firm. “Shoppers like them because of their accessibility, and for a sense of nostalgia” for old-time Main St. shopping.

“Tenants are under pressure to grow, but there are not many enclosed malls being built, so they’re looking for alternatives,” Hurwitz said. “They’re trying to grow by exploring new venues.”

From a tenant’s perspective, “they provide a comfortable environment for shoppers,” said Elise Jaffe, SVP of Dress Barn, Suffern, NY. “For tenants, they are less expensive than being in an enclosed mall. They are, however, more expensive than being in a strip because of CAM issues.”

Martin Mayer, president/CEO of the Covington, LA-based Stirling Properties, tossed residential into the mix, as in mixed-use. “People want to shop where they live. These properties will continue to grow because of where people want to live.”

How are open-air shopping centers faring in the investment sales market?

“This is, today, the most favored asset,” said Stephen H. Bittel, president of Terranova Corp., Miami Beach. “As interest rates continue their slow rise, I expect the pricing to remain high for the next 18-24 months, at least. And the pricing makes sense in high-growth markets.”

But there may be some storm clouds. Relative to the high pricing, Mayer called TIC and 1031 deals “dumb money. People are doing these deals just to save on taxes, but some of these properties don’t make sense for the prices they get.” He predicted that in the effort to avoid paying taxes, “some of these people will end up having real problems.”

Tony Fuller, vice president of Wal-Mart Realty, Bentonville, AR, termed the current market “a good one” for buyers and sellers alike. “That trends across all property classes and markets.”

And as it gets tougher to find good properties to invest in, Hurtwitz suggested that those looking to buy should “stick with the tenants. They can take you to a property, and they can help you turn a non-institutional property into an institutional property.”

But each property has a life cycle, and panelists addressed the issue of redeveloping open air centers when that time comes. Fuller, whose company redevelops existing Wal-Mart stores that become obsolete when the retail giant replaces them with superstores nearby, said that one of the keys is, “understanding what you have, what this property is going to be and the value of the property.

“The advantage is to those people who can get there quickly in determining what the property can and will be,” he added. Fuller’s perspective is that not all former Wal-Mart stores have been redeveloped as retail properties. A number have been converted to distribution, back-office and other uses.

Mayer said that new ground-up development is riskier, but offers potentially higher returns. Against that backdrop, “our company likes to redevelop properties. We see the upside potential of increasing the value of a property.

“The key is being able to re-tenant the property properly,” he continued. “Redevelopment can actually be harder, and a lot of companies don’t like to do them. Doing it right takes a certain expertise.”

From the retailer’s perspective, “tenant mix is the key,” Jaffe said. “And a good location is important to both new and redevelopment.”

Hurwitz noted that it’s often “easier to get a redevelopment done in terms of approvals, entitlement and public assistance. People just want to get a bad site cleaned up.”

And a key, in Fuller’s view, is “communication. When we’re going to build a superstore and redevelop the existing property, we go to the community early on. They’re usually very receptive.”

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