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The 2009 Southeast Retail Roundtable was printed in edited form in the October issues of Shopping Center Business and Southeast Real Estate Business. The following is Part One of the full transcript.

Recently Southeast Real Estate Business hosted its annual Southeast Retail Roundtable at the offices of Arnall Golden Gregory at Atlantic Station in Midtown Atlanta. The attendees at the 2009 Southeast Retail Roundtable were Christopher Decoufle, CB Richard Ellis; Hazel Dennis, Fickling & Co.; Steve Gunning, SRS Real Estate Partners; Alan McKeon, Alexander Babbage; Robert Mimms and Brad Shoemaker, Mimms Enterprises; Bill Read, Developers Diversified Realty Corp.; Abe Schear, AGG; Reece Stead, Stead Retail Group; and Marc Weinberg, Shopping Center Group.

SREB: Chris [Decoufle], give us an update on the investment market here.
Christopher Decoufle: There are certainly trades out there. We’ve traded a couple deals this year. We’re working on about $400 million in deals which we think have an opportunity to trade, but in the current climate, even if you have a willing buyer and seller, it can be challenging. The activity is driven by pricing that investors can start to sink their teeth into. If you look at the seller pools, it’s not developers. That group is not going to be a seller anytime in the near future, primarily because of where their basis is. The larger groups that are transacting are groups that are solving a balance-sheet issue. Everyone is waiting for this wave of distressed assets, and that has its own set of circumstances that will play out differently this time than the last time.

SREB: Do you see activity on one end of the market or the other?
Decoufle: The triple-net guys, the lower their price, the better liquidity they have. They still seem to have some velocity. Looking at all the teasers I receive in e-mails, it seems like the prices have crept up a good bit this year, or at least the offer rates have. The same thing goes for selling shopping centers. The smaller the transaction, the easier it is to get some traction. If the transaction has existing debt and we can get it assumed, that’s a pretty big help to making the transaction happen.

SREB: Are you finding investors coming in from outside the country?
Decoufle: You’re starting to see the Germans gear up — you’re starting to see those guys through U.S. Bond services. You’re also starting to see a little Middle Eastern capital, again through U.S.-based bond servicing. I wouldn’t say it’s a crowd of capital, but it’s there.

SREB: Are you seeing any funds getting more aggressive in wanting to dive into the retail sector?
Decoufle: If you talk to some of the historically very active retail investors that really have been very disciplined about buying, they’ll tell you something along the lines of, “We’ve not bought anything this year. In fact, we’ve not bought anything for 18 months.” There is a significant amount of capital that’s out there — it’s not this phantom capital, it’s real capital that’s ready to go — but they haven’t really seen the product that makes sense for them. A lot of the product that’s come out, it’s not quality product.

SREB: Are buyers looking for any specific type of shopping centers? Is there any specific type of property that’s still king?
Decoufle: As you might expect, it’s the grocery-anchored center with a No. 1 or No. 2 grocer, excellent sales and shop space rates that are reasonable and sustainable. The Publix with sales of $500 a square foot that has 20,000 or 25,000 square feet of shops is going to fair much better right now and be very much pursued over a Winn-Dixie in Jacksonville with 40,000 square feet of shops. We’re seeing it very difficult to keep 40,000 square feet of shops filled up, 30,000 square feet of shops filled up.

SREB: How does the Southeast compare to other parts of the country?
Decoufle: The Southeast is positioned very well. It’s still a sunbelt area; it’s still considered to have excellent fundamentals. With the exception of Florida, there’s a feeling that the residential market is not as overcooked in the southeast as some of the western states. There’s a feeling that the Southeast will rebound a little quicker than some of the other areas of the country. The Southeast still sells very well, and I think the Southeast’s story is very, very compelling. It’s really a matter of the product being there for the investors.

Schear: The conversation has changed in the past few months. Some months ago, we talked about distressed assets. Now I think we’re spending a lot of time talking about distressed sellers. There’s a lot of debt that needs to be refinanced. There’s a lot of capital on the sidelines. International investors are very interested in getting into this market, they just want to get into the market at the right price. We just closed a deal a couple weeks ago where an Israeli investor came in and purchased some properties outside of Atlanta. There are a lot of people internationally who are looking to invest. That’s going to be a really big story in the next year or two. They’re looking to buy from distressed sellers and are really focusing on whose loans are going to roll forward and what’s going to happen with those assets. They’re looking to buy a lot of properties from the banks as well because the banks don’t want to foreclose right now. They don’t want the property back. The reason there’s not as many foreclosures is because the banks don’t want to foreclose.

SREB: Are investors looking at actual shopping centers, or are they looking at single-tenant properties? Have they changed what they were looking at in the past 18 months to 1 year?
Schear: It doesn’t matter quite as much to the international investor what it is as much as whether or not they’ve got a relatively good credit tenant. The A properties are going to hold their value a lot longer than the C properties, and the cap rates have changed a good bit. They want to know how long the leases are going to be. You can get a lot of people to bid on a government lease. You can sell those properties, but there aren’t a lot of those properties out there.

Decoufle: The whole notion is that there’s a lot of landmines in these retail deals that over the last 3 years have been glossed over; the co-tenancy provisions and weak tenants and not weak tenants, those are much more visible to every investor now. To the extent you have a lifestyle center or a power center that has these landmines, even unexploded, those are in the forefront to every investor now. Either they’re glossing over it on purpose or because they didn’t realize it. Every investor has a much better flow of information and access to where the issues are and is pricing accordingly.

Marc Weinberg: What’s the next stage in the cycle? You’re saying that there’s only distressed properties that are readily available now, there’s not the really good properties or you’re not seeing as many of them as you’d like to see, so where do you go in that cycle to where you start seeing better properties really come av

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