Two New Tri-Land Investment Funds Hungry to Acquire Grocery-Anchored Retail Assets in Midwest, Southeast
In today’s volatile retail real estate climate, there is ample need for redevelopment or value-add acquisitions. Tri-Land, a Chicago-based owner and operator, is one such company known for repositioning underperforming retail centers. Established in 1978, the company is launching two new investment funds beginning in July. The two funds — which combined total $30 million — seek to purchase between four and eight properties over a 30-month period.
The strategy of the investment funds will be to acquire properties located in Midwest and Southeast markets, including Chicago, Milwaukee, Minneapolis, Kansas City and Atlanta. More specifically, the funds will target grocery-anchored retail centers where the supermarket requires an on-site expansion, repositioning or relocation.
During the past five years, Tri-Land has focused on the redevelopment of 10 legacy assets in Minneapolis, Kansas City, Indianapolis and Chicago. The company has sold each project upon completion of the redevelopment. This year, redevelopment of the 10 assets will be complete. This will enable Tri-Land to concentrate on new redevelopment opportunities. Against that backdrop, REBusinessOnline spoke with Richard Dube, the company’s president, at the ICSC RECon show in Las Vegas, which attracted more than 30,000 attendees. What follows is an edited transcript of the conversation.
REBusinessOnline: How big is your portfolio today?
Richard Dube: We are down to eight centers, totaling about 1.9 million square feet. At its high point, the portfolio included 17 centers totaling approximately 4 million square feet. We are ready to expand.
REBO: Where are the centers within your portfolio concentrated geographically, and what drives your decision-making process as to which markets you will enter?
Dube: We expanded from Chicago. We are now also in Atlanta, Kansas City and Indianapolis. I never felt that being exclusively in one city gave us the best opportunity. We’re primarily supermarket-based. That’s our preference — to have a supermarket in the center. Back in the day 25 years ago, Jewel-Osco and Dominick’s were the dominant grocers (in Chicago). That’s completely changed today.
What we did back then was ask ourselves the following question: Of the towns we liked, which retailers would be willing to be a tenant in our properties? We went to Kansas City and liked the Price Chopper product a lot. It was the No. 1 grocer. We liked Kansas City as a growth market. Overland Park was where we concentrated a lot of product.
We sent out three analysts. Because they were analysts for grocery chains, they could speak our language. We inventoried every supermarket and took a picture of it. They would come back with this massive map and we would plot all the stores on it and get all the numbers and establish various trading areas. They would give us their top 10 sites that they thought we should buy. Then we did our own internal research. We did that in Kansas City and Minneapolis-St. Paul. We liked SuperValu.
We went down to Atlanta because of Kroger and Publix. They are both great operators. We liked the growth story of Atlanta and the substance of Kansas City.
Kansas City is a solid town and a bit like Minneapolis, but you get much more for your money in an acquisition. It’s a very livable place. We went to Indianapolis because Kroger was again the No. 1 food chain with which we had a great relationship. Each one of our real estate decisions has been driven by the ability to align with high-performing supermarkets.
Then the question became how many centers can we find and reposition in those great markets that we have gotten to know well? If additional shopping centers were not for sale for five or 10 years, it didn’t matter as long as we could buy something today and have an inventory of centers that we could pursue in the future. We branched out to the Southeast because the growth story was so great. We didn’t go to Texas because we weren’t as familiar with the markets and didn’t have relationships with the top supermarket players.
REBO: Given the intense competition in the grocery-anchored space in the Chicago market, is it fair to say that property owners in this niche of retail real estate are no longer guaranteed success, whereas in the past being successful may have been a slam dunk? (Woodman’s Food Market is the latest supermarket entrant in metro Chicago. A 240,000-square-foot Woodman’s opened in Buffalo Grove in September 2018.)
Dube: Let me tell you about Chicagoland. About 25 years ago, there were two food chains — Dominick’s and Jewel-Osco. Between them they had about 225 stores. They controlled about 55 to 70 percent of the market. By the time Dominick’s was sold to Safeway in 1998, it had grown the chain to 100 stores.
Dominick’s was always known as the ethnic grocer in town. It catered to the Italians and eastern Europeans and there were always significant sections of its stores dedicated to different ethnic products. Safeway came in and brought in its own labels. Sales immediately went down 20 to 25 percent. Safeway hung around for 10 years remodeling the Dominick’s stores, but never could do it. Finally, Safeway closed the whole chain.
When Safeway left town in early 2014, it created a plethora of new independent grocers. What’s come out of that? Pete’s Fresh Markets with 14 stores, Tony’s Fresh Markets with 14 stores and Cermak Fresh Market grocers with 14 stores. What you have is now one of the more dynamic markets. We didn’t really add any more supermarkets. What we added was a new way to sell food through Pete’s or Tony’s, which have built remarkably interesting stores and put them into diverse neighborhoods.
Woodman’s stores are 180,000 to 220,000 square feet. The chain only sells food, except for some health and beauty products. Woodman’s doesn’t take credit cards because those cost 1.5 to 2 percent of sales and that’s real money to a grocer.
REBO: Is there anything you want to add about what Tri-Land is up to these days?
Dube: You’re going to hear more from us. We have a project in Smyrna, Georgia called The Crossings at Four Corners. A 96,000-square-foot Kroger anchors the center, which generates about $55 million per year in sales. Atlanta has been good to us.
Atlanta’s a big town. It took us almost six months to figure out what we wanted to do in that market. We picked Smyrna partly because we like the town and what is happening demographically. The key was we bought a Class C property in 2006 that was fully leased and kitty-corner to a 35,000-square-foot Kroger, which we expanded. The city of Smyrna was excited to upgrade the corner. It was the right piece of real estate.
— Matt Valley and Kristin Hiller