New York City — Andrew Graiser, co-founder of new real estate company, talks about long-term investment approach to retail and development.
New York City — Andrew Graiser and Emilio Amendola are introducing A&G Realty Partners, a new commercial real estate advisory firm based in New York City. The two men plan to build on their previous real estate experience as co-founders of DJM Realty to launch a company that offers new capital. Shopping Center Business recently spoke with Graiser to understand the importance of “patient capital,” applying funds to medium or long-term investments, which allows for unconventional deals. Grasier also shares his view on current retail trends.
SCB: Why is patient capital so important to the industry right now?
Graiser: Patient capital is an incredibly differentiating feature for us. As we look to make various investments into transactions and to help clients, we’re creating opportunities to fix problems. Retailers can’t worry about capital having to be returned in a six to nine-month period of time. It’s important, especially in this marketplace that you’re patient. And patient capital is important whether it’s buying a piece of real estate, buying a debt or buying a shopping center that fixes a problem for a big box retailer. We’re also working with developers who have great pieces of real estate but just need patient capital to avoid lender problems.
SCB: What trends are you seeing in the retail market right now?
Graiser: We’re continuing to see growth in the outlet centers that are close to urban locations. In the past, they were 40 to 60 miles away from those markets. We’re seeing very little development, yet we’re seeing a lot of retailers needing to grow. The only way they can grow is by taking over second-generation space. There’s a lot of growth in many sectors of retail. We are seeing growth and lots of redevelopment in power centers. You’re also seeing good growth with high-end retailers, and this is creating big demand for the “A” malls. Some of these luxury brands are paying big rents right now to get those spaces.
SCB: Why is redevelopment and adaptive reuse so prevalent over new construction?
Graiser: First of all, if you’re a lender, the risk is with ground-up construction. Once you start putting a shovel in the ground, the risk level rises. With redevelopment, you basically have managed your risk. You know who is going to come into the space before you redevelop it, and you know what rent they’re going to pay. Financing for redevelopment is much more accessible to landlords. Too much equity is required by landlords to do new ground-up development.
SCB: How has e-commerce had a growing effect on the industry?
Graiser: You’ve got to look at companies like Amazon. You also have to look at the economy. We’re not in a growth economy right now. If the money is going toward online retail, other retail sectors are not picking up those sales. You saw what happened with Amazon and books and now they expanded to other areas like food, etc. Those absolutely do have an impact on sales of other retailers. A lot of these retailers are smart and have made changes to their own e-commerce departments, but some of the mid to small size retailers who are behind in e-commerce and online retailers are in trouble.
SCB: What trends do you think will be popular in the next five years?
Graiser: You will continue to see more redevelopment. You’ll start seeing more single-tenant properties as the sale-leaseback markets continue to grow again. I think you’ll see more redevelopment in the malls that’s going to include more entertainment and family-oriented type activities to draw people back into the mall. I think you’ll see more multi-use concepts to create more diversity for those “C” and “D” malls. I also believe you will see more international retailers come to the United States and also more U.S. retailers going to Canada, which is under-stored. We may start to see new development since the economy is still growing in population. All this being said, the wild card is still the impact of e-commerce, which is growing at a very rapid pace.