Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/654213
THE FOREIGN BUYER Israel is a small country, and thus any expansion-minded corporate entity there must be as much a player overseas as at home. Such was the situation with publicly traded Big Shopping Centers, which set up some overseas subsidiaries, most notably in the U.S.: Big Shopping Centers USA operates out of Beverly Hills, Calif., usually as an equity partner with developers and investors. "Being in a small market, the parent company needed to grow, and one of the opportunities was to expand in the United States," said Stan McElroy, president of Big Shopping Centers USA. "So the parent company has been sending capital to its U.S. subsidiary." In Israel Big Shopping Centers is a fully integrated development, leasing, management and marketing company — "the gold standard in Israel," in McElroy's words. In the U.S., though, its business model is different: The U.S. subsidiary forms partner- ships with developers and operators of quality shopping centers across the country. Among its partners in the U.S. are New Hyde Park, N.Y.–based Kimco Realty Corp. and Marietta, Ga.–based Columbia Properties. Last year the company formed a joint venture with RED Development, of Phoenix, to acquire community, lifestyle and power centers across the country. The venture's inaugural investment included four shopping centers, at an aggregate 1.5 million square feet, in Omaha, Neb., and Phoenix. Big Shopping Centers has been operating in the U.S. through this model for about five years and recently surpassed roughly $1 billion in assets across 25 shopping centers and some 6.4 million square feet. "The Israel parent looks for ground and builds a center; in the United States we look for existing cen- ters in trade areas that offer long-term viability," McElroy said. "The capital that is com- ing from Israel is long- term capital, so we aren't just trying to get in and get out. When we put out capital, we expect to be there for a long time." Because of this strategy, Big Shopping Centers USA has been willing to look at smaller markets, as long as certain funda- mentals are in place with regard to job creation, quality of life, and medical and educational facilities. Besides Omaha and Phoenix, the company has also invested in Green- ville, S.C., Pittsburgh and Salt Lake City. "We like to have a daily-needs component to our centers," said McElroy. "We generally look for larger centers than the prototypical neighbor- hood shopping center. We really want a larger asset that has a lifestyle or entertainment component. That's because the shop- The 2,000 to 3,000 grocery-anchored shopping center deals there are in a given year may be a consistent flow, Edison says, but not evenly spread: In the top 10 markets, competition is extreme, but beyond those, things ease up, he asserts. "In the major markets, competition has meant a meaningful compression," said Edison. "The secondary markets have also seen compression, but it has not been as significant. We have to be selective and disciplined in what we are looking for. There's a voracious appetite for the top five or top 10 markets in the country; that will be a difficult place for us to buy. From our perspective, there will be more opportunities in less frothy markets." The Phillips Edison deal flow has not slowed as of the be- ginning of this year. Through the first month, the company closed about a half dozen deals, including a Publix-anchored shopping center in the Florida market. "When we look at the necessity-based nature of the grocery-anchored shopping center business," Edison said, "we think it is one of those real estate products that is more resistant to recession, and that is why it has been such a good mix for the nontraded REIT investor." "When we put out capital, we expect to be there for a long time." s t a n m c e l r o y