As an Atlanta-based vice president and regional officer of Regency Centers, a Jacksonville, Fla.-based shopping center REIT, Andre Koleszar is one of the most prominent members of the Atlanta retail real estate community. We were fortunate enough to catch up with him recently on get his take on the improving retail sector, his company’s strong recent performance and what constitutes a relaxing day.
(Note: in the picture below, Koleszar, left, and Hartman Simons Bob Simons are pictured at a spring Bisnow event.)
HS: How would you access the retail real estate sector's performance so far in 2012? Any surprises good or bad?
Koleszar: I’ve heard nothing but optimistic reviews from my peer group and can say that as a whole, the positive momentum of 2011 has continued in 2012.
To back up a bit, strong tenant demand nationally equated to nearly 7 million square feet leased by Regency Centers in 2011, including almost 2 million square feet of new deals. This is the most leasing we’ve ever done as a company — nearly 40 percent higher than our average of the last five years. Absorption for all of 2011 was the best we’ve ever had as a company.
Year to date for 2012, we’ve executed more than 300 new deals nationally totaling just under 1 million square feet. In the Atlanta region, we’ve executed 33 new leases totaling 110,000 square feet. That’s a pretty blistering pace of new deal activity that outpaced even the second quarter of last year.
A good friend at The Shopping Center Group shared his insight with me the beginning of last year: the lack of new supply will bode very well for existing, quality centers. Similar to the transactional market, the flight to quality has proven to be a strong motivator for retailers looking to secure the premier locations. As a result, we are 94.5 percent leased as a company and 92.3 percent leased in my region (Georgia, Alabama and Tennessee), the latter being 280 basis points up over July of last year.
As for surprises, let’s hope there are none! I think the second half of the year will provide a bellwether for things to come. There’s a natural lull in the summer months that we’re probably feeling a little bit of in our region. The bigger question were asking ourselves is, “Is it just simply the summer doldrums or is there more at play to suggest a slower second half of the year?” Whether it’s the election, economic worries or Europe, I think the jury is still out.
Uncertainty is never a good thing for growth. The election is an inevitable occurrence we have to engage in as a country, but it is just one aspect to weigh. Tax hikes, the national debt debacle, credit downgrades, health care, housing, jobs — the list goes on.
Further, U.S. retail sales fell for the third straight month, down 0.5 percent in June. Sales of building materials, sporting goods, home furnishings, electronics, appliances and personal care items were all down. The only retailers to report higher sales were clothing outlets, grocers, liquor stores, and Internet sites, but the increases were small.
That said, the consumer confidence Index was up for the first time in five months in July. In my portfolio, all but two grocers experienced strong sale increases year over year for 2011, and I would expect the same in 2012. Restaurants have also made a big comeback.
HS: Where is the Atlanta office of Regency Centers focusing its energy right now – acquisitions, development, redevelopment of existing properties?
Koleszar: Yes, yes and yes — we will continue to pursue dependable NOI growth.
In 2010, we started our capital recycling program. In 2011, we sold on a pro-rata basis more than $90 million of non-core assets (13 in total), and recycled it into $110 million of dominant grocery-anchored centers with much better prospects of future NOI growth. We are continuing this trend in 2012 with the recent 15-center disposition to Blackstone and are currently eyeing several compelling acquisitions in core markets. We also continue to be very active pursuing acquisitions here in Georgia and Tennessee.
Regarding redevelopments, you don’t need an education in supply and demand to clearly recognize the need to maximize value and preserve every ounce of a center’s competitive edge in the marketplace. In our region, we’ve completed the redevelopment of Cornerstone Square, anchored by ALDI, in Sandy Springs, Ga., and we are currently well underway with the full redevelopment of Powers Ferry Square in Buckhead. Our next project will be forthcoming in Nashville, Tenn.
As for ground-up development, we have started $95 million in new developments in core markets, at attractive returns north of 9 percent. With our proven track record and seasoned development team, we continue to pursue these high-yield developments in core markets.
HS: How did you get into commercial real estate, and what it is about the industry that is so satisfying to you?
Koleszar: I’m the third generation of my family to be in the real-estate business. My grandfather started a multifamily residential development company in Norwalk, Conn., more than 50 years ago. I grew up around development and management of multifamily but wanted my career to be outside the residential arena. After working in the wholesale and retail lobster and seafood business, I caught the retail bug, and it was simply a marriage of the two disciplines that led me down the career path.
HS: When you're not working, what do you do to relax?
Koleszar: With a four-year-old daughter and a two-year-old son, weekends are a mix of all of life’s greatest pleasures as referenced in the Oscar-worthy movie “Old School”! In reality, just spending time with my family is the best relaxation in the world. No matter how bad a day you might have, being flanked by dueling hugs is all one needs to melt away one’s worries.
Oh, and anytime I can get 60 miles out into the Gulf Stream to wet a line, enjoy a cold one, and bring home something for the grill, that’s a relaxing day as well — until I check my emails!