Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
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of it," Goodwin said. "When you're young, you have enough energy for moonlighting." And yet at nearly 70 this trim and bespectacled executive still has enough energy to oversee the Inland Real Estate Group on a fulltime basis as chairman and CEO. And he has energy left over to describe the complex evolution and structure of these companies in detail, as if he has never really given up his first vocation as a teacher. "I always liked explaining things to people," Goodwin said. That aptitude enabled him, a product of the Chicago public schools and the Illinois state university system himself, to teach science in the 1960s. But the prospect of making extra money through real estate intrigued him too. "I took a real estate class and started looking for a suitable property," he said. "In some ways it was an ideal time to jump into real estate in the United States, though I don't think any of us appreciated that until much later. For one thing, the economy and population were growing. There was strong demand for real estate of all kinds, and rents were increasing. Owning income properties involved a lot of work, as it always had, but once we got into it, the rewards were clear." It would be exceedingly difficult for a young person today to do what he did then, Goodwin concedes. Today's economy is hardly in full-throttle growth mode as it was in the 1960s, but there is more. "Real estate wasn't nearly as sophisticated in those days," he said. "No one thought in terms of cap rates or due diligence — not, at least, for the kinds of properties we bought or built. Licensing was simple. You found investors, gathered some money, bought the property and worked on it for your returns." After Goodwin and those with him made money on that first property, they naturally were interested in making more. So they bought and built a series of other properties, mostly residential, in the Chicago area. At the end of five years as a teacher, Goodwin knew that real estate would be his career. Six former teachers eventually came to work at Inland — and went into real estate full time. In the early years, Inland focused primarily on residential properties. "We Goodwin affirms Inland's continued interest in retail properties. "Retail is part of the American way. That isn't going to change." tried a number of approaches, made some mistakes and stuck with what worked," Goodwin said. Later Inland expanded into retail in a major way, especially in the late 1980s, when a difference in cap rates favored retail over residential, he says. "I couldn't explain it, but I knew it wouldn't last forever," he said. "We were able to buy retail at higher cap rates and offer returns of 7 to 8 percent on those properties, instead of the 5 to 6 percent we were getting on some of our other holdings. That really launched us into retail, which in some ways is easier than residential. Provide a space with no roof leaks, and a retailer is generally happy." Over time Inland's corporate model evolved from limited partnerships, which are appropriate to small-scale holdings, into a series of investment vehicles that propelled Inland into a much larger playing field. Eventually, the firm's mainstay became the REIT, especially the nontraded variety, though its first REIT — Inland Real Estate Corp., established in 1994 and fo- cused largely on retail — traded on the New York Stock Exchange. All told, Inland Real Estate Group has so far sponsored six REITs. "We found the nontraded REIT to be the most effective way to raise money," Goodwin said. In contrast to listed REITs, which sell shares through an IPO, nontraded REITs rely on a network of broker-dealers to sell shares over time, which can be two or even three years. Compared to listed REITs, nontraded ones are relatively illiquid. Building on early successes in creating such investment vehicles, Inland grew prodigiously. Through today the firm has raised over $19.2 billion for real estate investment from some 475,000 investors. Until the recession, all its investment vehicles made money for investors. The recession was difficult for Inland. The previously nontraded Inland Western Real Estate Trust, now known as Retail Properties of America, caught criticism for a sharp drop in value after its conversion to a publicly traded REIT in the spring of 2012, though share values have since risen. Also, the SEC is currently holding a formal investigation of Inland American Real Estate Trust, but Inland American has not been accused of any wrongdoing by the SEC and is fully cooperating with the SEC. Headaches from the real estate crisis of the late 2000s clearly remain. Unsurprisingly, Goodwin calls 2009 and 2010 Inland's worst years, but he insists that the recovery is well under way. "2013 will be the best year for us in five years," he said. "The real estate recovery is here, and we're poised to benefit from it." Goodwin also affirms Inland's continued interest in retail properties. Indeed, Retail Properties of America received its new moniker to reflect its holdings in that segment: Currently, it owns 275 retail properties. "Retail is part of the American way," Goodwin said. "That isn't going to change." SCT M ay 2 013 / SCT 277