Equity One, based in North Miami Beach, FL, is one of the largest shopping-center owners in the state, with about half of its 198 assets in its borders. The company made news earlier this month when it hired Jeffrey Olson, president of the Eastern and Western shopping center divisions at Kimco Realty Corp., as chief executive officer and president, effective Jan. 1. Chaim Katzman, the current chief executive, is relinquishing his title but will remain chairman of Equity One’s board. Katzman has said Equity One plans to focus mainly on development, spending an average of $100 million annually over the next few years. One of its biggest recent deals was the sale of interests in 29 Texas centers to EQYInvest Texas LLC for $387.2 million. Katzman spoke with GSR Ticket about trends in his firm as well as the Florida market.

GSR: How does adding Jeffrey Olson change the company’s direction?

Katzman: Whenever you bring a new CEO in, he has action items and an agenda. It won’t be dramatically different than what we have done before, but clearly he would add a lot. He brings in a wealth of expertise in the business, from both a ground-up aspect as well as a capital markets familiarity. He will have new initiatives. He will spend more time increasing our development and redevelopment activities, as well as intensifying asset management.

GSR: Where in Florida are you seeing the most growth?

First of all I think we are going to keep growing in our traditional markets in South Florida, the Tri-County area. I see a lot of growth on the West Coast of Florida, from Naples to Tampa and further north. Orlando is not a bad growth bet. St. Lucie county is growing dramatically, and we’re making big strides there. Vero Beach as well. The growth is in the coastal lines.

GSR: What is different about doing business in Florida compared to other states in your portfolio?

Katzman: It’s not dramatically different. What is so exciting about Florida is the exponential growth. The rooftops that are getting added are mind boggling. This is clearly different in Florida than, say, Massachusetts. In that way, I think, when doing business in Florida you need to look at the demographics differently than you would in Boston because over there it is very much what you see is what you get, with limited exceptions here and there. Whereas in Florida, you really need to understand the growth patters. So that would be the major distinction.

GSR: Then is there a lot of competition for sites in the state?

Katzman: Yes. The Florida market is saturated with investors of all kinds. You have the foreign investors, other REITs, private equity and private individuals all seeking product in Florida that are willing to accept ever-diminishing cap rates.

GSR: Other than that, what is the biggest challenge you are facing in the state?

Katzman: I believe coping with hurricane-related issues, like insurance and others. We are less exposed to it because we have a sizable portfolio, so I believe we are still faring favorably. But if you look at the industry, it is really suffering, and many deals have hiccups because of insurance-related issues.

GSR: Most of your properties are grocery-anchored, and contrary to what was predicted in the recent past, supermarket chains seem to be doing pretty well? Have you found that the case?

Katzman: The news about the death of the grocery business was greatly exaggerated. A lot of the magic has gone out of the Wal-Mart story. I know it anecdotally, but I know it from talking to other grocers that people do not like the shopping experience, and they’re going back to the supermarkets that are more value-oriented instead of going to the Supercenters. People don’t wont to go to a 220,000-sf box to look for a can of beans. So that’s one phenomenon that people are becoming more and more aware of in the industry, and it helps enhance the situation in the grocery business.

Katzman: There has also been quite some consolidation. Albertsons is gone. Not all Albertson stores are going to be open. Winn-Dixie closed 500 stores in the last year and half. Bi-Lo closed quite a few as well. If you add up the numbers, you’ll see there’s been some major consolidation in the industry, which helps the survivors in the industry. The regionals are doing extremely well. If you look at somebody like Ingles, for instance, they’re going bonkers. Same-store sales are growing, and they’re just adapted to their own niche markets, and they do very well because they better understand the markets. Look at Roche Bros. in Boston. Look at Wegmans. All of those regionals are doing very well. The whole phenomenon that we’ve seen in the last 50 years is that people shop for their groceries at the store that is usually the closest to their homes, and convenience goes a long way to convince someone to go into a store and shop there. That’s exactly the business we’re in. They help to keep the whole center alive, and our centers are doing well.

GSR: Is your firm taking part in the trend of adding mixed-use components to strip centers?

Katzman: Our portfolio lends itself toward mixed-use component. What happened is that shopping centers like the ones Equity One owns in some cases were built 10 or 15 years, and sprawl caught up with them. If I owned a shopping center in North Miami Beach, and it was built 30 years ago, the population almost tripled. All of a sudden land became scarce and everybody realized that the best way to use infrastructure is to intensify the use. I believe that we are sitting on a very big treasure that is getting unlocked as we speak. For example, we have a shopping center in Hollywood, FL, on which we have the zoning to do 400 apartments. We are working on a shopping center in St. Petersburg, FL where we are adding 170 apartments right on the water. We are working on similar situations in Boston, and we just bought a shopping center in the Buckhead section of Atlanta that will definitely will become a mixed-use development. We are going over each property in our portfolio in an effort to identify those situations where we can add a mixed-use component. Also when acquiring new properties we look at them with an eye to mixed-use development.

GSR: Have you seen the acquisition climate improve, or is pricing still too high to encourage major transactions?

Katzman: I think it is still highly challenging and quite competitive. Cap rates have not moved dramatically.

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