Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.
Issue link: https://westernrealestatebusiness.epubxp.com/i/818922
www.REBusinessOnline.com Western Real Estate Business • May 2017 • 61 Fund V, which was raised in the first quarter of 2017, is solely for RCG's western acquisitions. Fund V antici- pates acquiring a similar $200 million to $250 million of assets over the next two years. In the meantime, RCG's earlier funds — Funds I, II and III — have completed their investment peri- od, leading RCG to sell many of those assets. "We are nearly as active in selling assets today as we are in acquiring them," says Garner. "This has really helped us in terms of market pricing knowledge and future exit model- ing." The company's Fund III is an exam- ple of what one of RCG's funds looks like as it is moving through the com- pany's ownership cycle. The fund's equity has been fully deployed into 59 separate shopping centers and RCG's redevelopment and leasing teams are hard at work creating value on the portfolio. "Fund III is in what we call the 'har- vesting' stage," says Garner. "We are creating value in the assets and then we will sell them over the next few years." It is also important to note that RCG does not trade centers between funds, meaning all of its assets are sold to other owners when the funds mature. As well, the company spends a lot of time evaluating properties. Before it goes under contract, RCG has already done some level of due diligence. When examining markets and cen- ters, the company does a detailed void analysis of which retailers or types of retailers are missing from the market, and who might be interested in locat- ing in the market. "Sellers and brokers know that we are not a group that will just put a property under contract and not move forward," says Worley. "We spend a lot of time before we go under con- tract to make sure these are assets we want." A majority of sellers RCG has pur- chased centers from over the years have been public or private REITs and special servicers, who need certainty of execution. RCG sees a lot of expir- ing debt coming due in 2017, much of which will not be able to be refi- nanced. As a result, the company be- lieves there will be more opportunity for them to acquire financially dis- tressed centers from special servicers over the next few years. "Sellers know we have a capable team, we have the resources to com- plete a deal, and when we say we are going to close, we close," says Garner. "We tend to get a lot of repeat sellers because of those characteristics." Centered In-House One advantage RCG has over com- petitors is not using third-party ser- vices to manage and operate its prop- erties. The company is fully integrated with the following departments: prop- erty management, leasing, legal, and accounting. All redevelopment and construction management is also done in-house. It is also extremely hands-on when it comes to creating value for its properties. At Turner Hill Marketplace in suburban Atlanta, the company has already begun to create value on one of its latest acquisitions. Shortly after acquisition, RCG signed Burlington Coat Factory to lease space formerly occupied by Best Buy. The construction department works hand in hand with the tenant's team to make sure all delivery timelines are met. "Our thought is that with RCG hav- ing control over the day-to-day opera- tions we are better suited to get the cost of operations down," says Wor- ley. "More importantly, it allows us to execute a leasing plan from start to finish under our own control." Vacancy and under market rents are two characteristics that RCG examines heavily when looking for a center. Be- cause RCG has deep tenant relation- ships, it knows which tenants should be interested and who should perform well in the proposed markets. RCG is not afraid of centers where leases are expiring or contain significant vacan- cy. Working early lease extensions and new store formats are other ways the company has to create value. Another opportunity for property improve- ment comes in the form of outparcels — either selling them to other entities or developing them. "Because of the amount of centers we own, we have great relationships with tenants which enable us to know where those tenants want to be — in new markets and in terms of changing store footprints in existing markets," says Garner. Some tenants that RCG has key rela- tionships with include Hobby Lobby, TJ Maxx, Petsmart, Bed Bath & Be- yond, Big Lots, and Dollar Tree. Another aspect RCG performs at many centers is a "refresh," if not a re- model. The company adds a lot of in- creased traffic to the center by making the center look modern and refreshed. "We have the capital ready when we acquire a center to fix all the deferred maintenance," says Worley. "We have repaved parking lots, added lighting, replaced roofs, updated facades, and painted centers to fix shoppers' and retailers' perceptions of a property. These improvements translate into more sales for our tenants." RCG continued on page 66 For sponsorship information, contact Mike Jax: (713) 594-2000 • mjax@francemediainc.com For sponsorship information, contact Scott France: (404) 832-8262 • scott@francemediainc.com For registration information, contact Alicia Lewis: (404) 832-8262 • alewis@francemediainc.com www.interfaceconferencegroup.com/dmf2017 JUNE 20 « 7-10am « FOUR SEASONS HOTEL DENVER Presents... InterFace DENVER MULTIFAMILY Conference InterFace Denver Multifamily will be a western information and networking conference bringing together the leading buyers and sellers of multifamily as well as the capital sources, lenders and intermediaries financing the transactions. 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