GLOBE STREET – By Natalie Dolce
Jay Rollins, founder and managing principal of JCR Capital, tells GlobeSt.com that there is a herd mentality to escape retail right now and that will lead to opportunity for those with a deeper perspective.
As Sears, K-Mart and other longtime titans of retail continue to shutter locations across the country, the retail sector’s prospects might appear bleaker than ever. That is according to Jay Rollins, founder and managing principal of JCR Capital. He—along with others we recently spoke with at the ICSC RECon conference last week—agrees that the situation is almost never so simple.
“Retail is being painted with too broad of brush. While there are, of course, obvious issues (e.g. tertiary malls, big box retail), the industry as a whole is not going away,” he tells GlobeSt.com. “There is a herd mentality to escape retail right now and that will lead to opportunity for those with a deeper perspective and experience in an out-of-favor asset classes.”
At JCR Capital, the most important factor the firm considered when selecting assets to invest in—whether in retail or other commercial segments—is the circumstances under which they are being sold. “Often, we search for those being sold off due to life events—such as retirement or recent inheritance—rather than at what may appear to be an advantageous point in the market cycle,” he says.
For example, JCR went into Las Vegas housing in 2010, when he says many thought there would never be another home built in Vegas. “JCR did very well on that investment and we suspect this current move away from retail will present opportunities as well.”
According to Rollins, retail faces multiple unique, long-term challenges that may ultimately leave some investors exposed. “For those able to look closer and select the right assets, however, the sector is still capable of presenting attractive investment opportunities.”
Opportunity was among one of the biggest topics we talked about with ICSC RECon attendees and retail experts.
Joseph Coradino, CEO of PREIT, for example, talked about the mall industry being in a state of major transformation. “Apparel and accessories retail is oversaturated; department stores are losing some of their consumer relevance; and overall the traditional mall tenant mix is not satisfying today’s consumer,” he tells GlobeSt.com. “But contrary to common perceptions, malls are not dying. In fact, a new model is rising and fueling a revolution of the mall and the shopper experience.”
He says that the changes in today’s mall landscape represent abundant opportunities to diversify tenant portfolios and redefine what we think of as malls. “A unique blend of retail across segments, dining and entertainment can help shift traditional shopping centers to lifestyle and tourism destinations – where consumers can shop, eat, socialize, work out, pick up groceries, be entertained and beyond,” Coradino explains. “With this new type of model, a department store closure can be an opportunity to bring in a new and innovative concept that reflects the evolving behaviors of consumers. In fact, according to PREIT’s Shopper Survey,
62% of consumers like to shop around and participate in other activities – including dining, seeing a movie and socializing – while at the mall.”
By repositioning portfolios to include a dynamic and diverse tenant roster, malls can drive traffic, create a differentiated environment for shoppers, and truly redefine their future, he concludes.
His company, PREIT, has been focused on evolving its portfolio over the past several years, inclusive of asset dispositions, redevelopments and remerchandising initiatives across properties. Since 2012, PREIT has sharply reduced its presence of Sears and Kmart stores in its portfolio from 27 to 9½ today. In that same period, the company has added more than 1 million square feet of dining, entertainment, health and wellness, fast fashion and off price tenants – an increase of more than 70% of space committed to these tenants.
Today, he tells GlobeSt.com, 17% of its current portfolio is dedicated to dining and entertainment, and that figure is growing. “With these results, PREIT is still thriving and well-positioned for continued growth – and as the mall industry at large continues to adapt to market changes, it too will continue to thrive.”
Disclaimer: This article was prepared by an unaffiliated third party and not pre-approved by JCR Capital, and we have not independently verified any claims made herein. Any opinions are attributable to the author and not to JCR Capital. We have reviewed the article for material misstatements and there are none to disclaim. Nothing herein is an offer to sell any security, including an interest in any JCR Capital private fund, which can only take place after JCR Capital provides a prospective investor with an offering documents package and relevant brochures.