Kenneth Bernstein, president & CEO, and Jon Grisham, senior vice president and chief accounting officer, are presenting for Acadia Realty Trust at NAREIT's REIT Week.
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Below are notes from the session.
3:48: Bernstein: From a product perspective, we tend to own retail and urban mixed-use in higher barrier to entry metropolitan markets—Washington, D.C. through Boston corridor and assets in Chicago. About one-third are urban mixed-use. One-third are supermarket-anchored. And one-third are discount or value. As we think about, “how are we going to grow,” there are a host of challenges—the issues of technology, the issues of multichannel retailing—the goal is to own the best retail real estate in the markets in which we operate. … The way we fuel this growth is … both from the lease-up and re-anchoring of our existing assets. … We will recapture underutilized anchor space and re-tenant it. We have done that over the past 12 years at very attractive leasing spreads.
3:50: Bernstein: Adding core assets to our wholly-owned portfolio. Selling assets that are not consistent with our strategy. … More importantly, adding assets to our core portfolio. … Our goal is to add $100 million in assets to our core. That's not a game-changer. But it will provide increased stability and enable us to take our portfolio to the next level.
3:53: Bernstein: The other way we drive growth is through our series of funds, which is the vehicle we use to invest opportunistically, either value-add, new development or acquisitions. … We did not see as many distressed sellers as we thought we would. … But we seeing opportunities at the … street retail redevelopment area. We've made four investments and street retail has been the largest component of that. … We are vacating buildings and retenanting. For example we have 2 million square feet of urban developments in New York City. … Another interesting play out there is buying well-located properties that are anchored by troubled supermarkets. … The supermarket industry is going through its fair share of challenges. … That doesn't mean that the location isn't high quality. … We've done two of those transactions.
3:59: Bernstein: (In response to question about RECon.) First of all, Las Vegas and the ICSC and the dialogue that occurs with the tenants has changed. It's less about specific negotiations—although we spend time trying to get them focused on the projects we're thinking about. It's really more about where is there business going and where is our business going? … They are not talking about the latest jobs reports. They are thinking one, two, three, five years out. … We should not be in denial about the Internet as well. There are going to be factors how books are sold. But it's also going to impact how a bunch of other retailers are selling their merchandise. … For the most part, our tenants have completed the distressed negotiating cycle. There was that lovely period of time and you'd see your telephone list and it was your tenants and they wanted rent reductions, reliefs and a whole bunch of things we preferred not to face. I don't think our leasing people had any of those types of meetings. … It doesn't feel nearly as adversarial or distressed as it was.
4:09: Bernstein: (In response to question about downsizing of larger tenants.) It is across the board. You're hearing it from the department stores. You're reading about it and how they're using technology to improve distribution and improve the point-of-sale. … So whether we think of retailers immediately exposed to e-commerce or those that feel more e-commerce resistance, what retailers are saying is that they are thinking about their existing stores—in terms of size and location. … There's something about the brand that gets better by having the bricks and mortar. … Retail as a brand. Retail a flagship. Retail as fulfillment—pick-up, drop-off, showroom, warehouse. … In terms of shrinking footprints, it's going to vary. … The big-box power centers are now going to have to rationalize. … The truth is we don't know what it's going to look like five years ago.
4:11: Bernstein: As our occupancy gets better along with housing, jobs and GDP, counter to that will be a rationalization of real estate. … But in spite of that, there are spaces with record high rents. Good luck finding distressed real estate on Madison Avenue. … There will be haves and there will be have-nots. Our job as a landlord is to keep moving into the haves.
4:15: Bernstein: In the good old days, we'd make open bids to take back space. … Crisis hits and we announce two major reanchorings and we announced they were all pre-leased. … It was a riskier time. The list of retailers will a lot shorter. … Now in the last earnings call we announced we bought back one of our A&Ps. … Now we probably have to take that lease-up risk, but we'll do it when we are more confident.