Retail Traffic

Heard on the Floor:

Andre Johnson, son of Magic Johnson, was working the ICSC for Canyon Johnson Urban Properties, the development group that has invested in a series of inner-city projects. The company has just nailed down another $600 million in funds, which Johnson says he will have no trouble deploying. … Bobby Turner, managing partner of the Canyon Johnson Urban Fund, reminded attendees at the Marcus & Millichap Investment Trends briefing that opportunities in real estate arise when you find markets that are overlooked and misperceived (and therefore not fully priced). Urban properties fit that bill and continue to offer far greater upside potential, he says. “These neighborhoods have 40 percent of the U.S. population and their population is growing seven times faster than the overall population, yet they have attracted only 2 percent of private equity investment,” he says. “And on a risk-adjusted basis, urban stores outperform suburban stores.” … The soaring cost of land is a frequent topic of conversation at this year's ICSC. Drew M. Barkett, president of retail development and real estate for Turnberry Associates, says that's one reason behind the love affair with mixed-use. “Land values have increased so much that you have to go vertical,” he says. “These costs are creating new uses for the land.” Barkett is currently building a sprawling $530-million Town Square project on a site south of the Las Vegas Strip that is strategically located to catch tourists on their way in and out of town. Barkett says he is beefing up the office component of the project, which will also have a luxury hotel. But, he adds, “At the end of the day, it's a shopping center.” … Richard Walter, president of Faris Lee & Associates, says he's been seeing a spate of deals in recent months where developers are putting projects on the market even before build-out is completed. In one instance, the developer had only just finished grading the site when he decided to get the sale process started. … Similarly, several lenders commented on a spike in the last three to four months in the demand for construction-to-perm financing packages from developers looking to hedge their interest-rate risk. For example, E.J. Burke, executive vice president of Key Corp. and head of KeyBank Real Estate Capital, cited a recent deal in Phoenix where the bank originated an $82-million construction loan and committed to $82 million in permanent financing as a blend of senior debt and mezzanine financing. … Taubman Co.'s Asian strategy continues to come into focus. In addition to its involvement in the New Songdo City project in Korea, the company is also pursuing opportunities in China. However, it lost out on its bid with Harrah's to build Singapore's first-ever casino (which could ultimately be the largest casino project in Asia) when the government instead opted for Las Vegas Sands. Lately, the company has begun scouting India. “It's our second horizon,” says Morgan Parker, president of Taubman Asia. Parker sees the biggest challenge in the country's tax structure and the state of its banks. “They don't know how to underwrite risk in development. Until they get that, it will be hard to get the returns we need,” Parker says. … Urban Retail Properties is getting back into development in a major way. In addition to the projects being developed in conjunction with MGM — in Korea, China, Branson, Mo., Tunica, Miss., and two other locations in the U.S. — the firm announced 13 other projects in its pipeline, its first development since breaking free from being jointly owned by Simon Property Group, General Growth Properties and Westfield Group. … Jones Lang LaSalle's Greg Maloney says the company is now willing to put some equity in projects it manages, as a way to show its commitment and grow its third-party management business. “We're increasing our flexibility and will put money in, whether that be a sliver piece or a major stake,” Maloney says. … Colliers International has quietly built up a core of retail brokers throughout the country as it makes retail real estate a bigger part of its business. In 1996 it had just 100 retail brokers nationally. The number has grown to 350 today. Retail now accounts for 14 percent of the brokerage's business, up from 3 percent 10 years ago. Its eventual goal is to build its retail practice to account for 25 percent of its business. … Many companies were showcasing mixed-use projects, but few are as comprehensive as Kane Realty's North Hills in Raleigh. It is just beginning the second phase of the complex now. But when it's said and done, the project will feature retail, restaurants, office space, a hotel, apartments and condominiums and even a continuing-care retirement community — in addition to public space.

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