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(This guest edition of Counter Culture features Don MacLellan, senior managing partner at Faris Lee Investments, for ICSC New York National Deal Making 2015. The views expressed herein are his own.)

NEW YORK CITY—The key to a successful marketing program when it comes to anchored retail investments is to understand where a center is positioned within the market asset classes and how to price accordingly. I have broken this market into five distinct categories with a goal of explaining key differentiations, buyer profiles, strengths, weaknesses and pricing parameters.

1. Core: The most sought after retail asset class is core, institutional-quality product—specifically grocery anchored centers. Core can be defined as being in an affluent community with significant barriers to entry and/or high density, infill primary trade areas. There is an extremely limited supply with an abundance of aggressive capital chasing this product. Core product commands the lowest cap rates and overall returns. Pricing thresholds today look to achieve unleveraged IRRs in the mid-to-high single digits over a 10-year holding period.
2. Large Price Point: The next asset class is retail centers in excess of $30 million located in dominant locations within strong primary and secondary markets. There is typically an upside component along with the cash flow return. These opportunities are in limited supply and the buyer profile tends to be operating/equity partnerships (either institutional and/or private equity fund, depending on the expected yields). Institutional capital doesn't typically require the yields of a private equity fund, but it prefers to work with a smaller base of partners. A number of large regional developers have evolved into this sector based on the limited real development opportunities over the last several years.
3. Mid-Price Point: The largest supply of anchored retail today falls into the mid-priced range of roughly $10 million - $25 million, and is typically non-core anchored and shadow anchored in secondary locations. Supply in this category currently exceeds demand. There are higher yield expectations from the private capital chasing this asset class. A center in this class must be positioned in a way that differentiates it from the market, focusing on its strengths and the stability of the income stream. The ability to place debt at historically low interest rates is critical to increase the cash flow required by today's private investors.
4. True Value Add: The definition of "value add" is has evolved since the CMBS and banking REO crises have reached resolution. In the heart of the recession there was an abundance of true value add product on market, and the shortage of available capital required corresponding returns in the low 20s leveraged IRR. As the economy recovered and less true value add was available, investors adjusted their returns to account for less risk and less product, resulting in returns in the mid to high teens on a leveraged IRR basis. In today's market, it is critical to determine whether the state of a value add deal is due to the overall weakness of the trade area and deficiencies of the center, or if it is a case of inexperienced operators without the capital needed to convert into a successful center.
5. B Malls: The final category consists of the "B malls" in primary and secondary locations. Experienced operators have had success using a strong infrastructure and creative capital to turn around underperforming B malls. Most success stories incorporate an entertainment and lifestyle focus with multi-screen theaters and restaurants as a major draw. Big box discounters such as Target and Walmart, among others, have also been successfully added as new anchors. There seems to be a defined buyer pool for this category and depending on location, yields can be 100 to 200 basis points higher than core.

In conclusion, there are three keys to a successful marketing program for any anchored retail product today: understand where your center is positioned within the market and price accordingly, brand and position a center to its unique strengths to differentiate it from other opportunities, and finally, know and proactively pursue your optimum investor type.