First and foremost, we carefully assess the collateral; despite the recent narrative in the media propagating the demise of retail, property fundamentals are still paramount to an asset's performance. This assessment includes, but is not limited to, the asset's location and positioning within a market/submarket and any corresponding demographic trending in the area that the shopping center serves, the strength and financial wherewithal of the underlying tenancy, the tenant sales performance and trending within the property and the going-forward strategy of the collateral's tenant base. How are the tenants competitively positioned, and what current and future competitive threats may erode their market share moving forward?

In addition, with power centers, a careful assessment of the embedded co-tenancy clauses is critical. The potential impact of any “weak links” and the corresponding downside/erosion of NOI are important to address up front, since the prospective investor pool will evaluate these scenarios carefully and adjust their underwriting accordingly.

GlobeSt.com: What are power-center investors looking for in the properties they acquire?

Barsoum: Although there has been a great deal of negative publicity of late surrounding the retail asset category and retail tenants, there are still a number of tenants and categories that continue to thrive in the current market environment. In our opinion, some of the negative publicity has been overblown.

Retail, by nature, is constantly evolving, with new concepts that appeal to the consumer's evolving preferences and spending patterns replacing older retailers that may be heading toward the end of their life cycle. This has always been and will continue to be the nature of retail. Investors still value and place a premium on dominant locations in primary markets. To that end, we are not seeing a marked softening in power-center pricing in these “core” markets. However, we are observing upward pressure on capitalization rates with power centers in secondary markets/locations.

Beyond location, investors evaluate the strength of the tenancy within the collateral, their going-in basis in an asset (i.e., where rent structures are relative to current market rates in the event of a rollover/re-tenanting scenario) and, as previously mentioned, an understanding of co-tenancy implications and the corresponding effect on the property's income stream.

GlobeSt.com: How do you view the power-center market?

Barsoum: We believe that there are absolutely opportunities for investors to realize strong risk-adjusted returns in acquiring power centers in the current market environment. There are still many well-performing assets within this category, which are occupied by tenants who are continually evolving their business models to remain competitive and to thwart current and future competitive threats. Many power centers house dominant retailers that are still healthy performers within their respective categories, many of which are still categorized as investment grade.

GlobeSt.com: What else should our readers know about these last four dispositions?

Barsoum: Our team recently handled the sale of four power centers in separate transactions, each of which was unique and presented its own challenges/hurdles. One common theme across these four assets was the buyer profile. Specifically, we're seeing private equity in the form of high-net-worth individuals/family trusts, syndications, private entities with joint-venture equity investment partners and other non-institutional investors being the most active investors within this space, especially in secondary markets. The upward pressure on cap rates in secondary markets, combined with continued liquidity in the capital markets, has created an environment where these investors are able to achieve attractive risk-adjusted returns.

Within core markets, the assets in dominant locations are still generating interest from institutional equity, including REITs, pension funds and privately held large real estate platforms