COVER STORY, NOVEMBER 2011

ATLANTA RETAIL ROUNDTABLE
Industry experts discuss the state of the market.
Moderated by Randy Shearin

In September, more than a dozen retail professionals from the Atlanta area and Southeast region gathered at France Media’s offices in Atlanta to confer on the state of the market.  Attendees included: Ray Uttenhove, EVP and market leader of SRS Real Estate Partners; Peter Pelt, regional development director of Weingarten Realty; Mike Puline, southeast leasing, DLC Management; Mac McCall, regional managing partner of Franklin Street Real Estate Services; Whitney Knoll, principal of Newmark Knight Frank; Monetha Cobb, senior director for Franklin Street Real Estate Services; Abe Schear, partner of Arnall Golden Gregory; Jim Hamilton, director of Holliday Fenoglio Fowler; Sam Kupersmith, managing director of Cantor Commercial Real Estate; Ruth Coan, partner of The Shopping Center Group; Rod Mullice, managing director of Newmark Knight Frank; Ralph Conti, founder and principal of RA Co Real Estate Advisors; Bob Francisco, leasing director of Muntzing Sattele Co.; and Ted Benning, president of Benning Construction Co.

SREB: How do you see Atlanta compared to other markets in the Southeast and around the country?

Uttenhove: One of the challenges right now is there are so many mixed messages coming out of this economy. It’s hard to get your arms around what’s truly going on. Despite the fact that [Atlanta’s] unemployment is very high in comparison to the national average, the commercial real estate market is holding up fairly well here, and we’ve seen some definite improvement. Comparing it to where some of our other offices are, Dallas in particular has suffered a little less, just from the standpoint of vacancies and some of the issues. Perhaps their economy was a little more balanced. We’ve seen that some in the West as well. I would say our Florida offices are probably running about where we are; it was hit pretty hard early, but they’re picking up.

Peter Pelt (foregound). From left to right, Whitney Knoll, Sam Kupersmith, Ralph Conti and Mike Puline.

Pelt: We’ve seen improvement in Florida. In Atlanta, we’re seeing fewer rent reduction requests, and we’re seeing some rent growth in the good properties. We have probably 15 assets here, and I think just one has a problem with dark space. It’s really a quality asset situation more than anything else. We seem to be doing a lot more joint ventures, so I see a lot of broken projects in other cities. Some of the middle markets, like Knoxville, Nashville and the Carolinas, have probably weathered the storm better than we have, simply because they didn’t have the economy that we have. That being said, it’s going to be a slow climb back. Bob and I were just comparing today to 4 or 5 years ago — it’s been a dramatic change for most of us. It’s just going to take a while and that all depends on job growth and housing.

Puline: Our sites in the Northeast seem to be holding up a little bit better than our stuff in Atlanta. Our regional centers here seem to be performing better than our neighborhood centers; our in-line neighborhood shopping center leasing remains pretty difficult right now. We’re having to be very aggressive and spend a lot of time out in the market canvassing. Right now, in the neighborhood centers, it’s just a matter of trading tenants. You’re moving across the street, you’re moving a guy from down the road. We’re seeing very little in the way of new tenants coming into the market in the neighborhood asset class.

McCall: Definitely on the buying side, investors still look at the long-term side in Atlanta, especially for core grocery-anchored centers. Dallas [Texas], does much better due to its economy and the sort of industries they have versus our economy based on construction, banking and real estate largely. The Northeast and other core markets are much more stable than Atlanta. Atlanta is very similar to Florida and other markets like Las Vegas and Phoenix where it’s just a big, robust housing expansion. That’s really suffering right now as it slowly absorbs.

SREB: What about the investment sales aspect of the business? Where do you see the activity in the Southeast? Is it mainly in the Atlanta area?

Knoll: With [Atlanta’s] housing market, it’s the first time we have not led every other city coming out of a downturn. Cities in the Carolinas are coming out quicker. For the investment market, everyone is still very active on the core side and active in the REO side. It’s the barbell effect; the properties in the middle are having a problem. With a little bit of a disturbance in the CMBS market, that hurts a little bit more. People are a little afraid at this time. We need a little more stabilization in the financing market to be robust across the board in investments. But the core properties all over the Southeast — you can pick any state — are still high in demand. Everybody steps up for REOs as well.

SREB: Mac [McCall], are you seeing a lot of demand there?

McCall: We’re doing a lot of the REO, smaller strip center properties. There are huge amounts of auction properties being brought to market by the special servicers. Their pipeline is getting extremely full. It’s mostly outer-core, outline stuff; all strip centers where the loans are based on rent in the 20s while rent is probably half that in most cases. It’s going to be a long time before that non-anchored strip center product outside the Perimeter recovers, because that’s what gets foreclosed on. They’re going to be able to steal tenants from surrounding strip centers and create kind of a mom-and-pop tenant ping pong game, where people have good property, but a center that is not quite as well positioned down the street is able to attract tenants from their property. There’s a ton of capital chasing the REO side.

Cobb: That, candidly, helps tenants when these assets are being adjusted so that the rents are more feasible. Assets trading hands or being adjusted down to the pricing that these tenants can pay leads to more activity on the leasing side.

Schear: There are international investors coming to the United States. They’ve got plenty of capital and they are interested in assets. Certain companies are moving into the Southeast as well. I think that probably is a good thing in terms of property values. They are opportunistic and core buyers. Investors from all over the world are worried about political uncertainty and the markets.

Hamilton: We just priced a couple of core deals in Atlanta, and I would say it’s equally as competitive to similar pricing metrics that we’ve seen in other markets, like the D.C. area, the West Coast or even South Florida. There are certainly still pockets in Atlanta where you do have the barbell effect. There is a little bit of uncertainty, but there’s huge flight towards core right now, and it’s more competitive now than it was at the height of the market and has more aggressive pricing metrics as well.

SREB: Who do you see buying these centers?

Hamilton: On the core side, there’s more money to put out now than there was at the height of the market. We’re seeing a lot of the same pension fund advisors and institutions in the marketplace today. In addition to that, we’re seeing new players and joint ventures that have been formed, who have been aggressive with some new acquisitions in the Southeast and Georgia. It’s really more of a supply and demand function than anything else. There’s not a lot of core product on the market, so everyone is chasing the same thing. It’s going to be interesting to see what happens over the next 12 to 18 months: what the capital is going to do, what type of product are they going to chase, and are they going to go out and start to look at the top 25 or 30 markets? A lot of public REITs have been focusing on the top 20 markets. Now, they may be expanding their net a little bit to look at the top 30 or 40 markets. There’s a huge opportunity right now with some of the best in class assets in secondary markets because there is a gap in pricing between a core asset in a primary market and a top tier secondary asset. The gap in cap rates is wider than it’s been in a long time.

McCall: Private investors get squeezed out of investment sales by the REITs. Their access to capital is much cheaper than for the private investor. [Private owners] are hunting for deals, they just can’t find them. They are looking in secondary markets with secondary tenants, looking at Winn Dixie versus Publix, for example, just to get some deals and get their hands on them.

Knoll: We’re also seeing Canadian investors — for the first time their dollar is worth a dollar in the United States — entering the Southeast. Canadians are more likely to look at a B property then some of our REITs or pension funds. Several partnerships have been put together. The biggest opportunity is that people are going to move toward that better pricing. There’s opportunity in the B product. I’m not sure when people will get there, but 85 percent of the market is B or C product. At some point, people will figure that out, maybe entrepreneurs with the other types of money, whether it’s a REIT or pension funds just like it happened 6 or 7 years ago. The institutional players aren’t going to buy it straight up, but they’ll let someone else do it and make a little bit better deal. I think that will continue to be pretty strong assuming our interest rates don’t go crazy.

SREB: So what do you see on the market or coming to the market? You said 85 percent is B and C?

Knoll: I meant 85 percent of the entire inventory has always been considered B and C, and the B’s and C’s haven’t sold as well. One of the problems is they are much harder to finance. The CMBS market has gotten a little shaky recently, and people just can’t quite get there, but they will. It’s a normal progression that when private entrepreneurs get pushed out of a certain area, they figure out ways to get in. I know several people forming REITs right now to buy the B product because they’ve eaten at the A’s and they are willing to take on a little bit more risk — as they should as entrepreneurs.

SREB: Peter [Pelt], how does your company see the market in terms of opportunity here for expansion, or even with the retailers and their strength here?

Pelt: In Atlanta, it’s been tough. I think the major tenant pipelines are — probably Ray and Ruth would say — thinned out, which is a good thing I guess. It seems like everybody is looking for the same site. Denser sites, with more emphasis on demographics, population densities, the same thing we all knew and loved 4 or 5 years ago. Suburban areas are pretty much out of the question, and will continue to be, so everybody’s looking for that magical redevelopment. We’re even getting into some shadow space and some freestanding development to get outside the box and continue the development pipeline. The opportunities are going to be unique. There are some smaller markets where you’ve got entry from new tenants. Publix is going into Knoxville, for example. But we don’t see a lot of it. Academy Sports & Outdoors is active, L.A. Fitness is active, so from a tenant activity level, it’s encouraging.

SREB: On the CMBS side, can you give us a little overview of the market lately and how you view the Southeast in terms of viability for that product?

Kupersmith: In general, the CMBS market really kind of came back a year ago, so we opened our [Atlanta] office in September of last year and had a really great start. The market was probably better this time last year in terms of the opportunity to finance properties because there were a handful of deals that made a lot of sense. They had a good location and good sponsorship. Now we’re getting to the point where we’re seeing the assets that we underwrote in 2007 that we don’t want to underwrite now. Now, we’ve got to look at rents to market, tenants to market, looking at rent roll and where the tenant is going to go. It’s pushed back the dollars, so the easy money is not there at 80 percent or 85 percent loan-to-value. It’s more around 70 to 75 percent and, to Whitney’s point, people are a willing to take a little more risk, but now they aren’t getting as much debt. We’re a little more conservative, and the buyers are a little more conservative, so I’ve seen things slow down to some extent. In general, the market got real hot for CMBS earlier this year. We saw pricing come down substantially and there were a couple of deals that went to market that executed well and pricing just came in, which heated things up a bit for everybody. We were hoping to be 200 basis points over the 10-year [Treasury rate] so you’re looking at 5.25 percent. On the last few deals, the price is a lot wider. The market is pushing back so we’re seeing coupons widen and, as a result, the deals that had been bought on a 7 cap won’t work. That kind of slowed things down for us a little bit.

SREB: Who are the types of borrowers that can do CMBS? Are they familiar with CMBS or are they new to the market?

Kupersmith: It’s been a little bit of everybody. We’re working with REITs; we’re working with one-off, one-man shops doing small deals. By now, if they haven’t done [a CMBS financing], they are familiar enough and they understand what they are getting. It’s not the same smooth process it was in 2007. It’s a little more complicated, but I think we serve a purpose. If you can’t get a life company to finance your retail center, unless you want to do a bank loan and have full recourse, you come to us.

SREB: Abe [Schear], as one who is in the know on a lot of local deals, what do you see going on in the market?

Schear: I agree with what most everyone has said. There are some interesting projects that are going on. The property that everybody calls “Bobby Cox’s Baseball Property” [LakePoint Sporting Community] in Bartow County is a huge project that ultimately will be built out — hopefully in the next 5 to 6 years. It’s an interesting, large, mixed-use property that probably has more architecture done successfully than not. I think the Jamestown property over at City Hall East [Ponce City Market] will get done. Jamestown certainly has the ability to do that property; they didn’t buy it to not do it. The project that’s now called Buckhead Atlanta probably will get done. Oliver–McMillan intends to get started next year and they probably will. That’s a pretty sophisticated development company and I think it’s likely that’ll get done. Those are three interesting projects for the Atlanta market. Two are redevelopments and one is an out of the box development project. At the end of the day, we are coming out of the end of the pipeline. We’re still in the same fundamental business, but we’re trying to figure out different ways to do what we did 3 or 4 years ago. The one thing you can do in Atlanta is to predict that in 15 or 20 years we’ll have another million or more people. If we have another million people in Atlanta, it’s going to drive some development somewhere. That’s different than other markets.

SREB: Ruth [Coan], where are tenants looking when they come to Atlanta?

Coan: The good news is, and I would concur with Ray’s observation, that the fear and the negativity that are out there feed into concerns of retailers. Yet, they are actively looking at this market and probably most of the retail brokers here are busy. There are several categories that are active. To Abe’s point, there are different tiers of activity. There’s the redevelopment projects, which are exciting and have more of a signature feel to them, like the Buckhead Atlanta project, City Hall East [Ponce City Market], Prospect Park and Atlantic Station. There’s a little bit of panache that we’re hopefully creating with these projects and they’re looking for something a bit different, a little more upscale. Based on what we’re hearing coming out of Prospect Park, it’s going to be a good project. There’s a lot of pent up demand and the retailers are all visiting that project. We’ve got that excitement. On a different end, the discounters like Walmart are active. There are projects all across the city that Walmart is feeding. They are flexible and the size that they’re considering really fits a lot of redevelopment projects. They are filling some holes, taking some of the second generation space, tearing it down in some cases, but there’s opportunity and excitement in what they are creating.

From left: Rod Mullice and Jim Hamilton.

Mullice: The LakePoint project is great because it’s moving toward experienced retail. I think if you are going to do retail outside of the city core, you have to focus on more than just the big box. The whole concept of adding sports and layering it on hospitality and retail, that’s going to be something you’ll see more in the future. Projects also have to have a strong private/public partnership. City Hall East had the city [of Atlanta] technically as part of the capital stack. They had historical preservation tax credits in the deal also to make the development move. The area where I see a public/private partnership participating for successful projects is at the airport. We’re going to have 217 new shops to meet very strong demand. You have 20 million deplanements a year at the airport, so anything around the airport you’re going to see some demand in the future, especially on the Georgia International Convention Center where they have the new Marriott hotel. Also, MARTA is looking at doing retail at its stations. They’ve done a study recently and those are going to be a strong demand at the terminus buildings where you have people driving in and getting on the trains.

Schear: To that point, the Beltline has had a pretty good year in Atlanta. There certainly will be some new development, near the Beltline where there are access points. You are going to be able to track development near success points once it moves to the stage of being able to use it. You are going to see some development nearby, certainly in neighborhoods.

From left: Ted Benning, Ralph Conti and Mike Puline.

Conti: I happen to be working on Prospect Park and there’s a lot of activity on that project from a tenant interest standpoint. That is a suburban, upscale, mixed-use project. I am also working on a power center project on the south side of Atlanta [South Point], which also has a lot of retail activity. As a developer, you need to become an innovator now. You can’t just sort of do the same old-same old, with the exception of pure fundamental retail development, grocery-anchored shopping centers that have little opportunity to get too innovative. In mixed-use projects, you need to be an innovator. You need to create a different mousetrap, because that’s what the consumer is asking for. Retailers are adapting to that consumer demand. Where you can create that experiential component, you’re going to see those projects do very well.

SREB: What’s driving the demand for South Point and Prospect Park?

Conti: Core fundamentals. At Prospect Park, the Alpharetta market just has tremendous demographics and it really doesn’t have a project of this ilk, so it’s going to be a one-of-a-kind. Those opportunities are few and far between. On the South side, at South Point it is pent-up demand. That project has been floating around for 5 years; it’s taken a lot of time to develop that project. Retailers have finally figured out that there is demand on the South side of Atlanta. There are people who live there and if you do zip code counts, they are all shopping in Buckhead. The retailers who are open at South Point are all doing extremely well. I think Ray and Ruth would probably agree with me that it’s going to become the premiere shopping environment between Atlanta and Macon — it just happens to be right dead in the middle.

SREB: Ray [Uttenhove], where are you seeing retailers ask you to go in the market?

From left: Ray Uttenhove, Rod Mullice, Jim Hamilton and Ruth Coan.

Uttenhove: One of the areas of focus is in town. We’re seeing some hybrid kinds of tenant mix. It’s no longer strictly lifestyle tenants dictating; they are mixing it up. Recently, HomeGoods opened in The Forum on Peachtree Parkway and is bringing another dimension to that project. Retailers are, for the most part, clearly looking for opportunity. Retailers are honing their specific game — Walmart is a good example. But even in the smaller markets and middle markets of Georgia, there is demand. T.J. Maxx opened in Dublin, for example. It’s a very small market but they understand how to operate in a small market. They followed it with Milledgeville. Those are definitely small markets, so retailers are filling their pipelines with existing product in a much more creative way than they did before.

Coan: A lot of the retailers are looking at opportunities in some of the smaller markets because they can look at a larger trade area — and it’s a verifiable trade area. JoAnn’s, which historically was more in the metro areas, has been very successful in expanding to areas like Brunswick, Dalton and Gainesville [Georgia]. These are markets where they are absolutely a new entrant. Other retailers are similar; they are exploring these opportunities and finding that there is pent up demand for some of their services. They are resizing themselves in order to accommodate these markets. Where they might have been 40,000 square feet, they are now 25,000 square feet, but they are creatively finding ways to expand into the market and present a full array of their product in a smaller size.

SREB: Those of you on the ownership side, are you seeing tenants look at locations they wouldn’t have looked at 5 years ago?

Puline: You’re definitely seeing that. It’s just a matter of shopping centers not being built and retailers needing to grow. They are having to look at existing centers, whereas maybe they wouldn’t have gone into a particular type of center a few years ago.

Pelt: Not so much maybe different types of locations, but, like Ray alluded to, downsizing has been a big deal due to the impact of the Internet. Most tenants, maybe with the exception of grocery stores, have really adapted their sizes to different markets and that’s giving them additional opportunities. They’re not discounting demographics and the things they normally look at.

SREB: Whitney [Knoll], is there any fear from the investment side that the value of a center is impacted with lesser tenants in better quality centers?

Knoll: The biggest underwriting is in the tenant — is he going to pay if he’s not a credit tenant? However, you’re getting credit tenants back into areas that haven’t had them. Having credit like TJX makes a big difference now. People have a long enough memory to realize that the non-credit tenants are the ones that weren’t able to keep up when you take away small business loans or bank loans. TJX or Walmart don’t need those. That’s key and people are continuing to be suspect of non-credit tenants. We’ve been lucky; all this pain actually re-priced all the real estate, especially in Florida. Here, everything has been written down by 40 to 50 percent on small shop space. That is good for investors. Maybe we’ll get back to reality, it’s just so painful to get there.

Uttenhove: Retailers have adjusted to this market. One of the adjustments they have made is that their sales forecasts are different from what they were pre-recession. This impacts a lot of the deals that are getting made; it definitely had an impact on rental rates and occupancy costs as retailers are being much more conservative. They can’t get approval in their committees without having a fairly conservative approach. All of their models have been adjusted to that. That makes it a little trickier, a little harder to do construction. It means that a lot of the time developers have to look hard at what it means for my exit strategy, do the properties have good credit and can I make those adjustments accordingly. So it’s part of the pain we’ve gone through and one of those adjustments.

Knoll: I was asked by one of the developers that I work with who was building on an outparcel: should I wait for a restaurant or should I lease to an oral surgeon? I know he’s going to sign a 10-year lease and he makes a lot of money. They sign 10-year leases, they have great credit and baby boomers are getting old.

Schear: And they don’t spend as much time negotiating a lease, whether it’s with me or with somebody else. They are interested in the basics and often you’ll be able to get them to sign a very good guarantee on top of financials that are already somewhat usable. So it’s a win-win all the way for the retail developer/owner.

Coan: Co-tenancy becomes an issue, particularly with power centers who lease to some of these medical services. In so many instances, they are going into smaller centers where co-tenancy really isn’t an issue. In Dunwoody, there was just a physician who opened in 10,000 square feet. He’s in a secondary center, but he brought the entire credit of that property up; he certainly brought the occupancy substantially up and the rest of the retailers are really more than happy to feed off of the constant flow of patient population that’s coming in. You’re going to see a lot of dental care; there are several chains that are coming in and looking at end caps in some of the smaller, more promotional centers. The disconnect that we’re going to get with some of those is going to be for the smaller centers where these medical services are a very effective way of backfilling. They also take a heck of a lot of parking.

Bob Francisco

Francisco: When you backfill with medical tenants you can complement by using a pool of tenants like restaurants and vitamin stores; you remarket your centers accordingly. It’s no different than any other anchor. You have to say, ‘Now that I’ve got this user, what do I need to do?’ You can’t really go with what you typically do on a core asset. I helped one owner place a library at a center in a space that had been dead forever; it was an elbow in a strip center. The library comes in and brings the moms and kids. You can take that core group and complement what you have.

Kupersmith: The kind of feedback I get from the investment community whether you sell a loan or make a loan, is why is that hospital there?

Conti: That goes back to the core fundamentals of the business: if you’re going to do retail, make sure you’re on a retail segment. If you can do mixed-use, get on a mixed-use base. I don’t think people are going to stare outside the fence lines much anymore.

Puline: I have yet to see a shopping center that’s 100 percent retail. I don’t think they exist in today’s market. You’re always going to have services that are constantly changing. In this economy, more so than in the past, you just have to adapt to what’s going on in the marketplace.

Hamilton: From an investment standpoint, we’ve seen a lot more service uses coming into the properties. The reaction from the investment community has actually been positive, whether it’s been a doctor’s office, an upscale spa, or a computer repair shop. We’ve seen landlords and investors adapt as well. We’ve got two core properties in Atlanta right now that just priced and both had service providers who have recently done deals. These are our core buyers that sign off on these tenants and think they are a positive attribute to the property.

McCall: Those tenants, the medical, the colleges, those people that are taking the backfill space, realize that visibility is important, much like retailers. That’s a great way for dentists and doctors to be out of the traditional office park.

Uttenhove: I think that the important thing is — and I’m just sitting here thinking about retailers’ reaction to having a doctor’s office next to them — is that it is important that owners and developers understand what their center needs and that they understand their target customer and that they are not exploiting. There is still shopping that is critical to your apparel tenants. They love having medical in the area, they just won’t want it next to them. Part of our challenge has been created because of broken retail and we’re trying to figure out how to plug the holes.

Francisco: The worst part of this particular cycle is that there is no bank lending for franchising. It’s unbelievable. That’s where the growth always has been on little shop space and we don’t have it. Until that changes, you’re not going to have straight retail because there’s not any small mom and pops.

Schear: For those of us that have been in the business for two or three cycles, as the economy comes and goes and the cycles come and go, [banks] ultimately begin to see business is fine. This cycle is different. When I look back at the cycles that were in the late 1980s and early ‘90s, there weren’t any Costcos, Targets or Sam’s and there wasn’t the Internet, for that matter. It’s difficult to fill up these spaces today with small tenants because the big box tenants murder. That’s not good or bad, it just is what’s happened and the Internet may hurt or help the big box tenants. We didn’t have Amazon or the like — those are invisible tenants. I think Ray’s point is absolutely right. You’ve got to sensibly merchandise any property, but properties are owned by people who want things leased right this minute a whole lot more than they want to hold out for the right tenant for a year or two. At least that’s my experience.

SREB: Ted [Benning], what are you seeing? What do you see in the market as a contractor? 

Benning: We went through the first phase, which was that the retailers were shocked. All of the performers stopped working inside the suburban centers and they needed to have a certain amount of square feet for their sales. But they didn’t perform at all. Retailer developers pulled their horns in, and they spent a good deal of time figuring out where the market was going to or where they thought the market was going. The market transitioned for us from being a ‘Let’s go build a grocery-anchored center in a suburban market,’ to becoming a redevelopment contactor. I would say when we look at 5 years ago, 89 percent of our work was new construction. Today, 75 percent of our work is redevelopment of some kind. It’s common for us to see an old Kroger or Kmart unit on an existing piece of property being razed and a new tenant coming in. There’s a tremendous amount of discipline amongst the retailers to ensure that they have successful properties. The second thing that’s occurred is everybody realizes there aren’t any more construction bargains. The price of construction dropped dramatically, 25 to 30 percent at its peak, and it’s not dropping any more. In fact, it’s going up. Our inputs of raw material cost, whether that be the coal-based products or cement-based products or timber-based products, are going up due to world demand. We didn’t shed a lot of muscle but we did shed some. When we look at our sub-contractor base, or supplier base, they can’t shed muscle. We also are running into the situation where people took cheap work, and they’ve run through their bank of capital. Not only are our customers asking about contracts, they are asking about performance. They are asking can this team really deliver the way you say it’s going to deliver? We like that because the idea of ‘If I just wait 6 months the price will be cheaper and I’ll still get the same performance’ is gone. The markets adjusted quickly. We’re seeing some improvement and we think things are better. 

SREB: We talked a little bit about the national retailers and who is active here, but it seems like there’s a lot of local retailers that are active. Do you want to address that?

From left: Ruth Coan and Abe Schear.

Coan: You could name at least 10 restaurant operators that are expanding. Some are new entrances; some like Chipotle are expanding. Twin Peaks, a new concept, is coming in pretty aggressively, looking for multiple locations. Farm Burger is opening its second location. That’s a local operator.

Uttenhove: There is this focus on food, so that chef-driven concept is happening all over the place. Owners are looking to figure out ‘How do I make this more interesting’ so that you’re not in a shopping center that could be anywhere and it’s not cookie cutter. There’s a lot more interest in all kinds of local tenants. It’s still challenging. It’s difficult to get around the fact that there’s very little financing. Some developers are stepping up and figuring out how to make it happen. I feel like Atlanta is really becoming an interesting retail market.

Mullice: I’d like to see Atlanta’s airport concessions impose a request to have more restaurants. There was a scoring emphasis on local restaurants. You’re going to see people like the Varsity there; it’s going to build brand. I know there was a big push on a lot of the concessionaires to sign up concepts with local folks. You’re going to have 90 million people seeing these concepts at the airport. It’s going to make their brands stronger locally and maybe in other markets.

Conti: I would agree with Ray 100 percent. I just spent a week with my client and some others touring some West Coast properties trying to glean good and bad. Properties like The Domain and Santana Row. When you look at Atlanta and then you look at everything else, there’s a lot of opportunity for Atlanta in my opinion to create some cool and experiential locations; there is a void in Atlanta for some unique retailing experience.

Puline: In the neighborhood centers we’re finding that the operator is often in higher demand than the turnkey restaurant. We have a lot of spaces that are basically turnkey restaurants, and if you go to a successful operator and say, ‘We want you to come into our restaurant; you don’t have to spend any money, you can open up fairly easily, all you have to do is stock it with food.’ They are going to tell you that they have 10 other opportunities to do the same thing. So that’s the real challenge is for us, in the B and C centers. We’re not going to get the groups that have five or six concepts in Midtown to come to Stone Mountain or Norcross. For us, it’s more middle America, Mexican or Chinese restaurant operator and you have to be very creative to attract those tenants.

From left: Monetha Cobb and Mac McCall.

SREB: Monetha [Cobb] can you speak to your expertise in the market?

Cobb: I have a different perspective than a lot of other people who represent retailers. I represent a lot of value-oriented discounters and I am here to tell you that the last 2 years have doubled the appetite for their expansion plans. Their formats have not changed. If anything, it has become more competitive in the secondary markets because all of the guys who never operated there before are backfilling junior boxes that we used to be able to readily go into. The appetite continues for them. They are well funded, well capitalized, discounters who want to continue to grow.

SREB: Are they finding better locations than they were pre-recession?

Cobb: Interestingly, yes, in suburbia, because that’s the availability. They are going into Target-anchored centers where they probably couldn’t before because they couldn’t afford them. In the secondary markets, it’s tough. In Savannah and Augusta, they are now competing with a much larger retail group then they had to before.

SREB: In our discussion last year, it was brought up that since we haven’t had much new construction there might be some tightening of junior box space.

Coan: Everybody speaks about Borders vacating retail space in this market, but in reality there’s going to be a great deal of interest for some of those boxes because they are well positioned, they were in the higher-income demographics and many of them have enough frontage that they can be divided front to back to get to smaller retailers.

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