Of all the commercial real estate sectors, retail has inarguably been through more challenges over the last decade with the advent of online shopping and the concurrent influx of people to cities — leaving suburban shopping centers and malls to struggle for tenants — and then, of course, the pandemic. Many retailers, developers and owners simply gave up. Heritage Partners CEO Terry Richardson saw opportunity.
“We have developed, owned and managed my own properties, constantly strategizing for the best location, tenant mix, financial returns — and monitoring trends,” says Richardson. “We are always prepared to pivot because we understand retail has always been fickle, driven by changing tastes, lifestyles, technology, and product ingenuity.”
While Richardson and his team have enjoyed developing and owning retail and medical office property, they are equally interested in third-party management and related services as it gives the company an opportunity to exercise skill and experience, since it has been a developer and manager with turnarounds and reimagined centers under its belt.
The company’s reinterpretation of the former City Place Mall to Ellsworth Place, a now-edgy 350,000-square-foot mall in Silver Spring, Maryland, is a prime example of his vision for an overlooked opportunity. Responding to the densification and urbanization of the submarket, the team executed a significant overhaul to the entire property — both interior and exterior with an industrial chic vibe — which resulted in a sale to current owner, a partnership led by GBT Realty Corporation.
“Terry and Heritage Partners literally turned this center on its head as they renovated the interior space, added new escalators, brought in more light, created an edgy new design, and therein attracted higher-quality tenants,” says Scott Porter, managing director of GBT. “Their expertise and the aesthetic employed continue to support our ability to attract and retain our retailers and restaurants, as well as increase our visitors to Ellsworth Place.”
In Prince George’s County, Richardson’s partnership was the master developer on the 245-acre Woodmore Town Centre, securing entitlements on the mixed-use development, approval for the residential development, and the construction of the internal roads on the property. Upon completion, the partnership sold the residential portion to DR Horton and the retail interest to partner PGIM who retained Heritage to manage the property. Eventually PGIM sold Woodmore Towne Centre to Urban Edge Properties, who also retained Heritage for management of the property.
Urban Edge valued what Richardson and Heritage had created and steadily improved, noting his commitment to frequent onsite visits, a hands-on approach to the property managers, and a keen eye for the “right” retail mix.
“Working side-by-side with Terry and his team during our acquisition, we felt it was a win-win to maintain the level of diverse and deep expertise that Heritage Partners brings to the table,” says Danielle De Vita, executive vice president of Urban Edge. “They are a nimble team that understands the challenges of development and construction, management, leasing, and the need to consistently monitor the day-to-day to insure a solid NOI. To us, he is not a vendor, but a true partner.”
Exemplifying the strength of their network and relationships across retail, Heritage successfully secured and then constructed a 60,000-square-foot medical office and ambulatory care center on the Woodmore property which it sold to Children’s Hospital National Medical Center for an outpatient facility.
At its core, the mix of their strengths in understanding how to work with local governments to secure permits and maintain tight cost constraints while ensuring quality in construction. From there, it is pre-empting the challenges that come with realizing the highest and best use for each property, identifying in real time both what the profile of the submarket is and where it is growing — while interpolating the national trends of the consumer. These include online competition, the imperative to provide entertainment and dining, access to parking and public transportation, the target demographics and age group. And then relentlessly continuing to monitor these variables in order to maintain a vibrant, fresh and desirable destination.
“Terry and I often meet to discuss how we can best keep the consumers’ interest in returning to a dynamic retail and dining environment,” says Chris Duffy, president and founding partner of Heritage. “We enjoy a great perspective from being in the field and feel that is key to curating a property. You need to be onsite weekly, seasonally, and annually — and constantly review what you are learning. From there, you need to be able to pivot, to be agile and decisive. I think that’s our key to success.”
One of the company’s current challenges currently is managing the Lakeforest Mall in Gaithersburg, Maryland, as it is being repositioned by WRS Real Estate Investments. The owner will soon be sharing the plans for the next generation of the site. In the meantime, Heritage was charged initially with maximizing NOI during the transitional period, then shifted to implement the strategic vacancy of the property.
“At the end of the day — and especially after the strong cultural and systemic changes that retail writ large faced over the last decade — being hands-on is imperative,” Richardson acknowledges. “My team and I visit all our properties on a tight, rotating schedule in order to monitor what’s doing well or not, check in with the onsite managers, integrate solutions from what we see at other properties, and always seek ways to retain or improve the tenant mix in order to create the most value. To do this, you need to keep a constantly updated, global view.”
In a word, like partners to the clients, Heritage wants to be partners with its onsite team, enhancing the vision, ironing out challenges, and essentially seeing the landscape with fresh eyes each visit. This applies to strip centers, large malls, grocery-anchored centers and single-tenant properties.
A new chapter of lessons to learn came by way of the pandemic and — in keeping with its core philosophy — Heritage embraced the unprecedented challenges and reassured its clients that, based on the multiple cycles the team has experienced independently or collectively, there will be a solution.
“After decades of working on different properties and with different clients across the region, you understand that value creation is key and there can be more than one way to improve a property,” says Richardson. “Our success is all about market research, being nimble, and knowing how to pivot.”
—Randall Shearin
This article was originally published in the March 2023 issue of Shopping Center Business magazine.