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TRC Blog

November 10 , 2011

Collaboration

Collaboration

By Steven A. Lieberman and Alan P. Shor We clearly know how fortunate we are to have our terrific team, exceptional clients, great business partners and have our business concentrated around the strongest markets in the country. The pillars of our success are built on such and the strategic relationships we maintain with all our retail partners. Our alliances with our retail clients, property owners, financial partners and governmental entities are the invaluable cornerstones of TRC’s business platform and in 2011, our collaborations with each are once again leading to exceptional activity and productivity across all our business lines. On a macro level, the economy remains unpredictable at best. The country continues to work through a high unemployment rate and the overhang of the U.S. housing market, as well as significant debt challenges abroad. At the same time, TRC has continued to enjoy significant growth. Our team, now almost 80 strong, always puts our clients first, enabling them to extend the reach of their real estate programs and maximize the value of their respective pursuits. Our synergistic alliances with our 200 plus retail clients and third-party owners of over 22 million sf of retail space, provide us invaluable insight and knowledge of the retail and real estate world and enable us to consistently deliver superior results for their programs. Whether it is tenant representation, project leasing, management or the investment side of our business, this is our primary focus. In 2011, we partnered with some of the most successful equity and real estate firms in the U.S., including joint-ventures with Invesco, Fidelity Real Estate Group, Lincoln Property Company and North American Development Group, to acquire and redevelop significant properties; and we look forward to teaming up with these and other partners as we continue to invest in our core markets. Our expanded team, the state’s economy, continues to provide our clients tremendous home field advantage. Texas accounted for over 50% of all U.S. jobs created in 2011. With its low cost of living, no state income tax and a trained, affordable work-force, more companies - and the people they employ - are relocating to the state. Propelled by some of the lowest interest rates in history, institutional investors are extremely focused on Texas. While the economies in most cities throughout the U.S. are generally sluggish, Dallas and Houston are two of the top performing metropolitan areas in the country. DFW shopping center occupancy was up slightly by the end of September of this year. Overall retail occupancy in the DFW area was at 90.3% a significant increase over 2010’s year-end occupancy of 87.9%. Approximately 1.4 million sf of additional retail space will be added in North Texas this year — up from 1.2 million sf of shopping space added in 2010. Large box users and department stores including JCPenney, Walmart and Sam’s Clubs account for the greatest share. Construction under way includes the 420,000 sf Paragon Outlets retail center in Grand Prairie and several new grocery stores and discount retailers. Construction is starting to pick up, with approximately 1.5 million sf of retail space being built in North Texas. However, still only a fraction of the almost 16 million sf of retail space constructed during the peak of the third quarter of 2007. Houston continues to improve in many areas as reflected in its current retail occupancy rate at over 93% - a significant jump over 2010’s 88.9%. Retail job growth is the highest in the country, and the unemployment rate for Houston fell 0.3 percentage points in August 2011 to 8.6%, well under the national rate of 9.2%. With its diverse economic base and structural strength in technology, healthcare, oil and gas, Houston is experiencing tremendous activity. Likewise, San Antonio and its vibrant surrounding areas, have fed the Texas economy with consistent upticks in jobs, housing, retail, and overall consumer confidence. As we forecasted last year, we are seeing the banks start to take back properties after “kicking the can” for an extended period of time, which combined with the equity and credit markets firming up, has led to their putting these assets on the market, providing investors the opportunities to purchase these properties well below replacement cost. With the increased flow of capital into the market and continued investor demand providing predictable exits for these assets as they are fixed, or otherwise stabilized, value-add investors with said capacity are enjoying great success. This is the core focus of TRC’s Connected Development and Acquisition teams. As such, we have acquired 650,000 sf of retail space year-to-date and expect to close on another 200-300,000 sf of centers by year-end. In March of this year, TRC partnered with Lincoln Property Company and Fidelity Real Estate Group on the purchase of Village on the Parkway, a 380,000 sf lifestyle center located at Beltline Road and the Dallas North Tollway. Village on the Parkway has been an important part of the retail and restaurant landscape in North Dallas since 1981, yet no significant redevelopment of the center has taken place, despite the changing nature of the sub-market. This is where collaboration at its best comes in. Now 30 years later, we have very exciting plans underway to execute a major redevelopment of this property into a first class regional retail center. Closely following the purchase of Village on the Parkway, we teamed with Invesco Real Estate in July to acquire Shackleford Crossings, a 271,000 sf newly constructed retail shopping center development in Little Rock, Arkansas. The center, which is one of the largest open-air centers in Arkansas, is ideally located in the western part of Little Rock, a high growth corridor of the city. With strong leasing and additional build-out, this is going to be another very solid value-add for our partners. With these acquisitions, TRC joint ventures currently own over 2 million sf of shopping centers including the 820,000 sf Arlington Highlands - in partnership with the Mathes family, Weatherford Ridge - in partnership with North American Development Group [NADG], Mansfield Point and Quorum Plaza II - in partnership with Granite Properties. While Texas remains a vibrant retail market, significant changes will continue to impact our industry with the advent of technology, smart phones and social media. The most successful and savvy players will provide an immersive, customer-centric, and superior shopping experience on all channels - digital and in-store. We see these shifts as a tremendous opportunity - as our retail partners are some of the most innovative in the country and find ways to augment growth every year by focusing on their strengths and deeply entrenched relationships with their customers. TRC’s primary objective is to always create value for our clients and partners by helping them maximize the connection at every point where retail and real estate connect. We look forward to our future collaborations ahead and the results that will follow.
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