IRVINE, CA-Core retail assets can benefit from rising interest rates in the long run, as long as they're well capitalized, Reza Etedali, head of REZA Investment Group tells GlobeSt.com. “There seems to be a lot of uncertainty among investors about the potential for rising interest rates and rising cap rates, but our feeling is that well-located assets in core markets that have good long-term capital behind them will weather any kind of macro market challenges that come.”
Another factor impacting retailers is box downsizing. Etedali says that space downsizing in well-located properties in core markets creates an opportunity to reduce a credit tenant's space and charge higher rent for the reduced square footage, combined with putting a good tenant with higher rent in the space next door. “The net effect has been good in stronger markets, although it could be a challenge in inferior locations.”
As GlobeSt.com reported earlier today, REZA recently sold six shopping centers in California and Arizona markets on behalf of clients, totaling approximately $190 million, and has weathered several real estate cycles. “We're experienced in dealing with difficult situations and deals, and we know how to respond to the challenges,” Etedali tells GlobeSt.com.
Among the deals REZA recently closed for clients are:
- City Heights Retail Village in San Diego, a 108,801-square-foot center in a highly dense location.
- Tampa Plaza in Northridge, CA, a 249,745-square-foot center in the San Fernando Valley
- Bay Plaza in National City, CA, a 127,374 grocery-anchored community shopping center
- Oaktree Village in Mission Viejo, CA, a 79,014-square-foot grocery-anchored neighborhood shopping center
- Vineyard Plaza in Oxnard, CA, a 64,421-square-foot neighborhood center
- Village at the Boulders in Prescott, AZ, a 320,000-square-foot Wal-Mart Supercenter-anchored neighborhood shopping center
The boutique investment brokerage company is “very focused on shopping-center sales transactions on the West Coast,” says Etedali. “We've been doing over a billion dollars in transactions and have a very well-established group of institutional and large private investor clients that we've dealt with over the years.”
REZA is very hands-on, with an “extremely experienced” team, according to Etedali. “Things are rapidly changing” in the shopping-center arena, he says, what with tenants wanting to downsize and the financial markets shifting rapidly. “We're really constantly trying to anticipate some of these changes, and finding the right buyer for each deal is very important. There's a lot of uncertainty in this market, which creates a lot of challenges for deals. Being able to quantify those challenges and uncertainties and find solutions to move the deal forward is our goal.”
Etedali is seeing great demand for core assets in the marketplace. “The cap rates for core assets have compressed to historical levels where many investors are now concerned about getting real yield out of the properties, and single-tenants also have a significant level of interest from investors.”
He adds that he expects interest in secondary markets to increase as investors chase yield. “Until recently, all the interest has been in top money centers and cities. But we're getting double-digit offers for a shopping center in Las Vegas we're selling for an institutional client. Investors are moving to markets like Las Vegas to get better yield.”
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
