Lightstone Group'sDavid Lichtenstein

“The consumer has continued shopping. There’s not much vacancy and it’s a very stable product.” So said David Lichtenstein, chairman and principal of the Lakewood, NJ-based Lightstone Group in an UpClose interview with GlobeSt.com two years ago. Those were prophetic words, especially in light of the executive’s late-2003 purchase–with two other investors–of Prime Retail. The threesome, working as an affiliate organization to Lightstone, purchased the Baltimore-based Prime for roughly $640 million. The purchase brings assets in excess of $271 million into the investors’ control, and Lichtenstein promises that a new Prime will emerge as a result of the deal. Many of those changes will be evident, the Lightstone executive promises, at ICSC, taking place in Las Vegas this week. Before Lichtenstein took off for Sin City, he sat down with GlobeSt.com to update us on the latest development in Lightstone’s trajectory. GlobeSt.com: How do you see this buy fitting in with Lightstone’s growth pattern? Lichtenstein: We’re really a diversified real estate company, and as such we already own retail. I think we’re the fifth largest privately held retail company in the country. We own residential–we’re probably the sixth largest residential company in the country–and we own office and industrial as well. We’re a privately held company, so unlike a lot of REITs we can’t be buttonholed into any particular industry type or any geographic area. We buy whenever we think we can add some sweat equity and value to the purchase. So it wasn’t like we woke up all at once and determined to go into the outlet mall business today. We saw some excellent assets in Prime and we thought they were reasonably priced. GlobeSt.com: So should we expect that similar purchases will be coming forth soon in the other food groups? Lichtenstein: Absolutely, and we have a large pending acquisition now, although it’s not in the outlet industry. GlobeSt.com: But it is in retail? Lichtenstein: This happens to be retail. It could have been office, but it happens to be retail. GlobeSt.com: In terms of your Prime strategy, will the existing business model remain? Lichtenstein: You can expect to see a few changes at Prime. For one, we obviously plan on investing some capital into the company. While Prime hadn’t done any new centers in the past five years, they’re probably going to start a new program where they will be rolling out one to two new centers a year. Additionally–I have to be careful how I say this–we do plan on making the centers a bit more upscale, more premium, and as a result you’ll see new tenant names. By the end of the year everyone will admit there’s an edge to the Prime centers. GlobeSt.com: How soon can we expect to see the first of those changes take place? Lichtenstein: At the Vegas show the attendees will see a difference. GlobeSt.com: So, given the hints at growth you shared, where do you expect Lightstone to be in a year? Lichtenstein: Last year we did about $1 billion in acquisitions, and I can see us doing half of that amount this year. GlobeSt.com: And how will that break down among the various product types? Lichtenstein: Probably half will be retail, and the other half could come from residential. But we could also do a billion in new acquisitions. You know, when you go fishing, sometimes you catch a tuna, sometimes you catch a mackerel and sometimes you come back empty. We’re more driven by the opportunities that come to us. We sit by the phone and we wait. Sometimes it’s only a wrong number. GlobeSt.com: So Prime came to you? Lichtenstein: We actually own shares in a lot of REITs. We were probably the single largest shareholder. And we decided to become proactive. GlobeSt.com: When we last talked for this space two years ago, you were very bullish on the retail market. Clearly you still are. Lichtenstein: It’s really healthy, the healthiest real estate market, and since we own across all sectors I can speak with a little certainty here. Residential is really getting hammered by the low interest rates; office stocks have gotten clobbered, even though they may be hitting bottom; and industrial, while better than office, is relatively flat. But US consumers seem to be addicted to shopping.