GlobeSt.com: What strategies do sellers have to maximize the value of their property's sale price?

Coo: With a market that is showing movement in favor of sellers, it is important to price forward and to establish a value or strike price based on current and forward market conditions. That may mean pricing an asset 50 basis points lower than cap rate data suggests for the previous six-month period. In addition, sellers can extract value today that the overall market would not have handed three years ago. Shop space rent guarantees are a great example of this – whereby the seller delivers a return based on a stabilized occupancy which incudes a seller rent credit. With the economy improving, we are seeing the market respond favorably to this strategy which is enabling sellers to get more for their property.

GlobeSt.com: Tell me about pricing retail property sales these days?

Coo: Pricing is as important as ever. It is important to analyze where the market is going since we are moving in an upward manner relative to cap rates and pricing overall. A main contributor to pricing is the supply side constraint which we analyze as a factor contributing to our final pricing recommendation – which is less of an emphasis on previous comparable sales. The retail market has evolved into a rather efficient market compared to other product types mainly due to the internet and the sophistication level of the marketing campaigns. If asking prices are too aggressive you can risk labeling the project as undeliverable or economically prohibitive.

GlobeSt.com: With the market moving at a renewed and brisk pace, what lessons can you apply from the previous downturn that help you analyze projects today?

Coo: One of the main lessons learned from the previous downturn is to manage debt carefully. Whether underwriting the debt service coverage or the refinance scenario, overly optimistic assumptions lead to an underperforming investment or worse yet, one that is taken back by the lender. The psychology of the market to keep projections realistic tends to influence this greatly. I have found this to be especially challenging with clients that have been disciplined for several years and are beaten out by buyers who are overly aggressive. It takes a toll on investors and the urge is to jump in without regard to what has kept the capital safe … which is prudent and realistic underwriting.