Broad Reach Retail Mike Castellitto quote from article + headshot

Broad Reaching Strategies for Maximizing Value in Retail Properties

by Sarah Daniels

No matter the economic climate, the formula for creating value in properties will always be a retail property owner’s best friend. That’s why Broad Reach Retail Partners uses a multi-faceted approach that includes data-driven key performance indicators (KPIs) to drive their plans of action, strategic redevelopment and ongoing budget updates that optimize net operating income (NOI).

“Through focused management, leasing and discipline, we create value, and we are able to return those dividends to our partners, properties and people,” says COO Mike Castellitto. “We have seen time and time again that those who are able to make changes, explore new ideas, methods and solutions can thrive.”

Adding Value

By focusing on management, leasing and discipline, Castellitto believes the Annapolis, Md.-based company will remain successful at returning dividends to its partners, properties and people.

“Through strategic management and redevelopment, we can harvest the value created at each property from acquisition through our exit strategy,” he adds.

An example of this strategy is Henderson Pointe, a 188,647-square-foot grocery-anchored neighborhood center in Henderson, N.C., that Broad Reach is currently revitalizing. The company acquired the asset in April 2021 after identifying it as a “compelling value-add opportunity” due to its anchors, including Food Lion, Harbor Freight and Badcock Home Furniture & More.

At the time, a 50,000-square-foot tenant was vacating Henderson Pointe and another 40,000-square-foot vacancy persisted. Broad Reach’s redevelopment efforts commenced immediately upon acquisition with the goal to secure national and regional tenants to add value to the surrounding stores and serve the needs of the community. The firm has signed Ross Dress for Less, Burlington, Five Below and Mattress Warehouse, which will occupy the vacant space after the aggressive renovation schedule is completed by the fourth quarter of this year.

By securing nationally recognized tenants and leveraging aggressive renovation plans, Broad Reach aims to elevate the center’s appeal and bolster its contribution to the local community. To do this successfully, the company turns to its KPIs.

Data to Drive Strategy

Analyzing tenant sales at the property level allows Broad Reach to make certain decisions in terms of renewals and driving rents, Castellitto explains. As this value is created, the company can then set a market rate for comparable vacant spaces within its portfolio.

“We can then adjust, take our vacant spaces based on similar tenant performance and predict what that space can do,” he adds. “This information will drive rents higher or lower, and we will use it to create a focused leasing approach.”

Saving Money, Protecting Value

Part of any successful discipline strategy will inherently involve the budget. That’s a factor Broad Reach keeps a close eye on. So close, in fact, that the budget is continuously refreshed based on real-time data, in concert with macro- and micro-economic factors.

For Castellitto, all of this budgeting and re-budgeting is essential because he views planning as one of the most effective strategies for creating value. “We are reforecasting monthly. We look, at minimum, one rolling year out for budget purposes at each property,” he says.

The goal is to ensure each property has the dollars it needs to continue improving, to continue to attract top tenants and keep adding value.

Broad Reach also reviews how well each tenant is performing. “We take tenant sales and relate them to an operating expense ratio, and it really shows the ‘health’ of that tenant,” Castellitto says.

And no details are too small as Broad Reach partners with tenants to keep expenses low to preserve budgets for property improvements. For example, the company regularly sends emails to tenants with updated facilities maintenance contact information, asking them to call as soon as they notice a maintenance issue. The company also sends out friendly reminders to check windows and signage for indications of wear and tear, HVAC systems for any signs of distress and dumpsters to ensure waste doesn’t pile up.

What’s the Bottom Line?

“Cash flow for each property is a factor in our short- and long-term decisions,” Castellitto notes. “What immediate needs we have — whether it’s loan terms, leasing velocity (new and renewals), tenant installations that require cash or fund distributions. One of our biggest lessons learned is that we must have an availability of dollars at a property to be able to maintain our leasing velocity, as well as flexibility to execute our business plan for each property.”

Broad Reach focuses on “ensuring our teams have the resources available to execute whatever they need and increase NOI.”

Across its portfolio, Broad Reach is constantly innovating. This inventive philosophy includes fine-tuning its acquisition strategy and capital stack, evaluating targeted merchandising plans, as well as updating the services available at its properties to provide the conveniences retailers and customers want.

By prioritizing both revenue enhancement and cost containment strategies, the company cultivates resilient and high-performing assets.

— By Nellie Day. This post is posted as part of Shopping Center Business’ Retail Insight series. Click here to subscribe to the Retail Insight newsletter, a four-part newsletter series, followed by video interviews delivered to your inbox in May/June.

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