When Lend Lease acquired prominent pension fund advisor Equitable Real Estate and its mall management and leasing subsidiary, Compass Retail, in 1997, Compass President Greg Greenfield saw an opportunity to create a new company. Greenfield believed that a company with an institutional background possessing an entrepreneurial perspective could successfully acquire and enhance middle-market regional malls.

Lend Lease eventually sold its management and leasing business to LaSalle Partners, which subsequently became Jones Lang LaSalle. Most of the former Compass Retail team became part of the new retail group within Jones Lang LaSalle. As Greenfield was starting his new company, he recognized this transition as an opportunity to work with his former associates in a unique partnership that has been beneficial to both companies.

Southeast Real Estate Business1 sister publication, Shopping Center Business, recently met with Greenfield and Greg Maloney, executive vice president and director of shopping centers for Jones Lang LaSalle, at Greenfield' Atlanta headquarters to discuss his new company and its relationship with Jones Lang LaSalle.

Time For A Change

In 1998, when Greenfield formed Gregory Greenfield & Associates (GG&A), middle-market regional malls were out of favor with investors. Despite this fact, Greenfield believed in the long-term potential of these assets. There were a lot of sellers of middle-market Class B centers at the time, since REITs were pursuing Class A malls and portfolios.

Greenfield formed GG&A with long-time associates Scott Boggio and Bill Brown. Their mission was to assemble a diversified portfolio of regional malls with upside potential located predominately in middle markets. It was a contrarian approach at the time. Greenfield and his partners had experience raising capital from private investors and investing in and enhancing mall properties. Based on their reputation, they were able to secure funds over a short time. Declining interest rates accelerated their acquisition schedule and GG&A was able to make its first purchase in early 1999.

Greenfield made an early strategic decision not to develop his own management and leasing organization. Instead, the company searched for a third party management firm that would handle those aspects of day-to-day management and ensure that the centers would run profitably while strategic plans were being implemented. Having worked with executives from Jones Lang LaSalle at Compass Retail, Greenfield looked to his old co-workers again to manage and lease his new portfolio. Together, the two companies developed a strategic alliance that would allow GG&A the flexibility it needed while allowing Jones Lang LaSalle to grow its busines incrementally.

"Any management company is only as good as its people," says Greenfield. "I previously worked with many of the people at Jones Lang LaSalle. They have shown a total willingness to be flexible in terms of crafting what we need from their organization and devoting appropriate resources," says Greenfield.

When redeveloping a regional mall, GG&A will traditionally handle the development responsibilities -- something that Jones Lang LaSalle would normally handle for a third-party client. Jones Lang LaSalle does handle all of the in-line leasing for GG&A, but GG&A handles all anchor lease deals.

"The reason that Jones Lang LaSalle is successful is because we can adapt to the client' needs, whether it is an institution or someone like Greg Greenfield," says Maloney. "When GG&A is happy, and all the properties are doing well, and his investors are happy, that means we are performing at or above expectations."

"Cooperation between the two parties is paramount," says Greenfield. "The two companies must develop the leasing plan together and create an achievable asset enhancement program."

"We are buying properties that we think we can improve," says Greenfield. "We are accountable to our investors right from the start. We expect Jones Lang LaSalle to share the same perspective."

Unique Opportunity

In the last 2 years, GG&A has begun to hit a sweet spot in its business plan. The company has been able to grow faster than it anticipated for several reasons. First, interest rates have declined dramatically. Second, its private investor pool has reacted to GG&A' early success and the decline in returns from alternative investments by increasing its capital commitment to GG&A' real estate investment opportunities. Third, banks are actively looking to provide debt capital for good real estate deals. Availability of capital has made GG&A versatile and competitive against other buyers.

"We' pleased that we1ve been able to be as successful as quickly as we have," says Greenfield. "Our capacity to buy larger, higher quality properties has continued to grow."

GG&A is somewhat of a merchant buyer. It is what some might call an active owner. The company acquires centers for its own portfolio, lets a third party manage them, but still remains active in the operations and interests of the properties. It is, in some ways, a return to the ownership model of years past. The company also has the experience: it has capital markets experience, asset management experience, tenant relationships and entrepreneurial skills that are seldom found together in the regional mall business. Since it is also a privately held company, GG&A enjoys a certain flexibility in decision making. It can move quickly and react quickly.

"We represent a very attractive alternative to sellers because we are not tied into any holding periods or board approvals," says Greenfield. "We have acquired a good reputation for negotiating upfront and then honoring our commitments."

In a typical year, GG&A will acquire three to four centers. The company has 10 centers in its portfolio currently, representing a total of about 5 million square feet of regional mall space. The company will buy properties across the U.S.; it currently owns centers from Florida to California, New York and Oregon. Having a third-party management firm that already has national coverage allows the flexibility to not worry about location when it acquires a center. Its base in Atlanta allows company executives easy access to anywhere in the U.S. within hours.

"We have been just as effective dealing with California as we have with Florida," says Greenfield.

Mall Focused

GG&A has no current plans to acquire any property type other than regional malls. Greenfield' career has been spent enhancing and repositioning regional malls. And that' all he is doing with GG&A. No acquisition goes untouched. It is immediately reviewed and a leasing plan implemented that, over time, is designed to maximize its profitability.

"Right now, there are sufficient opportunities in the mall business that we don1t feel the need to venture beyond that, " says Greenfield. "Our bread and butter is secondary markets with populations between 250,000 and 350,000 that have good anchors and sales per square foot of $275 to $350."

GG&A likes centers that are the dominant player in the market, but it has taken the second player in some cases. It also doesn1t mind if Wal-Mart is located across the street from the center. Often, says Greenfield, this drives sales at GG&A' center. Malls within the current portfolio range in size from 450,000 square feet to 1.2 million square feet. "We are buying properties that, when the glass is half-full, would be considered institutional grade," says Greenfield.

"We are buying properties that when we are done with them we hope to sell back to institutions or REITs."

The company' goal is to add value to everything that it acquires. The first regional mall that the company acquired was Mall of Victor Valley in Victorville, California. The center was 80 percent occupied when acquired by GG&A, and had been impacted by the weak California economy in the mid-1990' and the opening of Ontario Mills. But GG&A saw upside in the center. Victorville was gaining population as California' economy improved. A nearby military base was being converted to a private logistics center. Retirees are also moving in to enhance their quality of life while remaining proximate to Los Angeles and the Desert. There was no regional mall in the immediate area other than Victor Valley. Despite occupancy, sales had been growing at the center.

Just over 2 years after assuming ownership, the center is 95 percent occupied with more national tenants. One of the tenants that Jones Lang LaSalle brought on board was Barnes & Noble, which built a large store at the center. This brought other national tenants. Traffic is up and sales per square foot are well over $300. GG&A is working with the city to improve traffic congestion around the center. Investors in the center' fund are happy too: they' getting double-digit returns, according to Greenfield.

GG&A purchased Rogue Valley Mall in Medford, Oregon, in December 2000. The next nearest mall is in Chico, California, which, as it happens, GG&A purchased in late 2001. The 600,000 square foot, two-level center was anchored by Meier & Frank, JC Penney, Mervyns and a vacant Montgomery Ward store. Within a year of purchasing the center, GG&A cut a deal with The May Company to place a Meier & Frank home store in the vacant Montgomery Ward space and renovate its existing department store. This attracted the attention of national retailers who are taking space at the center and noticing the market for the first time. Greenfield believes that the center will be over 94 percent occupied and have sales per square foot over $300 by the end of 2002.

"The team at GG&A has a tremendous amount of knowledge about the shopping center industry," says Maloney. "Some of our clients have people that have moved to retail from other real estate sectors and there is an education curve. That doesn1t exist with GG&A. GG&A is already at the top of the curve."


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