Shopping Centers Today International

APR 2016

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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January the firm entered into contract to buy a suburban Detroit shopping center from a big retail REIT. And last year Viking Partners bought roughly $150 million worth of assets, nearly twice the amount it purchased in 2014. Miller says the firm would like to acquire about $80 million to $120 million in assets this year. "Our goal is to achieve attractive returns for our in- vestors," he said. "We'll be active buy- ers, but we try to remain disciplined to our geography as well as our ability to create value. We are cautiously opti- mistic for 2016." THE DEVELOPER Ron Krausz proudly recalls that his father, Amos, founded the San Fran- cisco–based Krausz Cos. some 40 years ago. The business began as a development company that focused on projects near regional malls. The company has grown to large, institu- tional projects, such as the redevel- opment of the Puente Hills Mall, in City of Industry, Calif.; the ground- up development of downtown Ki- hei and a 30-acre, mixed-use retail, entertainment and hospitality cen- ter on Maui (both in Hawaii); and the 500,000-square-foot Gramercy mixed-use project, in Las Vegas. The company regularly disposes of and acquires assets based on its judg- ment of market conditions. Last year it purchased a portfolio of 81 small par- cels occupied mainly by convenience stores. "We bought the ground leases and fee interests from different owners and combined them into one deal," Krausz said. "This is much more of a value-add situation, because of the op- portunities we saw in the properties." Krausz says there is little competition for the convenience stores. "There was a great deal of complexity to the 81 properties, which sort of defines what we end up buying," he said. "We have five key principals who are very good at complex projects. We look for things where the principals are hands-on." When the company makes a pur- chase, it usually looks at the under- lying real estate, Krausz says. "We certainly try to buy real estate that we think is strong on fundamentals re- gardless of whether it is a reposition opportunity or a stabilized situation," said Krausz. "We usually buy things that have moving parts. For example, a couple of purchases we made a few years ago were good, quality assets but needed backfilling, or some pieces needed to be repositioned. They were good, strong community centers that needed something done." Krausz expects that the firm will stay busy with those 81 properties through this year. "The intention is to improve the quality and tenure of the leases," he said. "If something re- ally good came up, well, we are always looking for opportunities." Recently, Krausz Cos. was more on the seller side than the buyer side — divesting an unnamed but well-anchored, 100 percent leased shopping center that was distressed with leasing challenges at the time the company acquired it in a foreclosure. Krausz says he expects this year to be fairly even with last year for the firm in terms of new purchases. "We don't do a lot of transactions, because we have ex- isting developments that we put a lot of effort into," he said. "I don't think we will be busier than in 2015, because we will be digesting what we purchased. In addition, our downtown project, which we are doing on the island of Maui, took many years to get entitled, and Las Vegas will take a lot of attention." Still, one can never really say never, Krausz notes. "If buying op- portunities are presented to us, or if selling activity is generated by an- other investor's interest in our port- folio, we will take a look," he said. "There is the combination of things that affect the market, such as cap rates or the availability of appropriate capital. Our decisions start with the question: 'Is there a fundamental op- portunity for us?'" SCT A p r i l 2 0 1 6 / S C T 53 R O N

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