Fast Analysis and Stabilization Key to Positioning Retail Properties for Resale
 
NORTH PLAINFIELD, N.J., April 14, 2009 – The retail real estate industry in today’s down cycle is facing the difficult reality of property defaults, foreclosures and bankruptcy proceedings. As a result, many lenders, financial institutions and bankruptcy trustees are taking back assets that often are in need of rapid financial and operational analysis, and immediate stabilization.
 
Levin Management Corporation of North Plainfield, N.J., which currently is responsible for a portfolio of some 80 properties totaling 12.5 million square feet, has managed properties for REO clients during market downturns throughout its near 60-year history. This year, the firm again has established its dedicated service to address the needs of the current environment, according to Matthew K. Harding, president and chief operating officer.
 
“Each time there is a downturn in the retail real estate sector, there is a strong demand for Levin’s REO services,” he said. “Very few firms have the specific expertise and the practical experience with distressed properties to immediately be able to analyze a shopping center and keep it from losing tenants or otherwise going downhill.
 
“Perhaps the loss of a major tenant devastated a property’s rent roll; a buyer borrowed more than a center’s current return can support; short-term financing came due in a market where underwriting criteria have changed; or an owner simply hit challenging times,” he added. “Almost always, the fallout impacts the center – financially, physically or in the form of tenant relations – before it comes back into the lender’s hands.”
 
This can range from incomplete documentation and uncollected rent, to deferred maintenance, to unhappy tenants and a negative image in the community. Putting things in order can be a complex task, according to Harding.
 
“Many lenders possess a deep understanding of retail real estate, but lack the time and staff to address the many details involved in retail property management and leasing efficiently and in-house,” he said. “So they turn to Levin, where our day-to-day business is focused on those specialties, with the exact skills set to assess a distressed property’s situation and address the new owner’s objectives.”

 
Levin’s initial priorities include assessing a retail center’s physical, financial and marketing conditions, in order to develop short- and long-range plans. The firm’s full range of services employed in this process include accounting and financial reporting, leasing and lease administration, property management and maintenance, marketing and market analysis, dispositions, and construction management – providing a one-stop source for REO clients. Throughout the process, Levin maintains close communication with the client – outlining services put in place and providing frequent, thorough property status updates.
 
A FORMULA FOR SUCCESS
For each new REO assignment, Levin immediately gathers all available information, and verifies the property’s financial status. Careful abstracting of the shopping center’s leases serves to determine if all payments due are being billed and collected, and to fully understand the scope of the client’s responsibilities.
 
Levin’s property management team quickly communicates directly with the property’s tenants as well, to ensure them that the property is being professionally managed, and that any former problems can now be re-stated and will be addressed.
 
“These are the first steps to improving comfort levels and fostering healthy tenant relations,” Harding noted. “At the same time, frequent site visits allow our property managers the opportunity to assess the visible health of the stores at a center. They note stock levels, cleanliness, the number of employees and customers, merchandising, and other details.”
 
These managers also establish contact with the center’s existing contractors. They examine agreements from a pricing and performance standpoint – and determine the potential to make changes, if warranted. “In markets where we manage other properties, we often can work with our existing suppliers to achieve ‘bulk’-type pricing,” Harding said. “We use our buying power to obtain the best service and the best price for our clients.
 
“We also employ all of our resources to reduce operating expenses without compromising curb appeal,” he added. “From closely monitoring utility usage, to planting perennial flowers instead of annuals, there are many ways we work to lower costs.”
 
Levin’s leasing and property management professionals examine the center’s vacancies to ensure that they show well. They dispose of old tenant signage and clean empty stores, prepping them to be toured by prospective tenants. If the entire property needs freshening, updated landscaping and painting can go a long way toward adding color and interest at minimum cost, according to Harding.
 
Additionally, Levin evaluates a center’s existing tenant mix – the stores currently in place, upcoming lease expirations and vacancies. In today’s economy, many tenants are seeking rent relief, and our recommendations can help our clients decide whether or not to grant it. A clear tenant retention strategy is always important, but especially so in a difficult economy. On a larger scale, the firm’s professionals analyze the entire market to see what categories are underrepresented, where competing stores are located and whether their spaces match their current prototypes.
 
“The goal here is to fill the shopping center with the best possible tenants at market rents,” Harding said. “In some cases, tenant categories can be adjusted to better reflect the needs of the market’s consumer base. In short, improving the tenant mix can increase income and strengthen the property from a traffic standpoint.
 
“Last, but not least, we recognize that the surrounding community is often aware of a shopping center’s problems,” Harding added. “As such, there is a public relations element that can be brought into play as well. It is imperative that consumers’ concerns and questions are put to rest so they know they can continue to shop there – and that their favorite stores are staying.”
 
All of these efforts work to make a distressed property healthy in as many respects as possible. “Centers that have strong occupancy and a loyal tenant base, and that are physically attractive draw the most consumers,” he said. “In turn, these assets are best positioned to appeal to new potential investors