Colonial Properties Trust Looks To Growth
REIT expands its presence in the Southeast and beyond.
Julie F. Hunt

When Shopping Center Business last spoke with executives from Birmingham, Alabama-based Colonial Properties Trust 2 years ago, the company’s philosophy was to put itself in the way of growth.

Colonial Mall Myrtle Beach, Myrtle Beach, South Carolina

“The company is evolving, but our strategy is unchanged,” says Reynolds Thompson, chief operating officer. “We’re still a diversified real estate investment trust that has an interest in multifamily, office and retail. However, our geographic footprint has broadened somewhat in the last 2 years.”

There are 148 metropolitan statistical areas in the Sunbelt, and Colonial has ranked them based on population, job and income growth projected to occur over the next 5 years. “We’ve taken the top 37 cities from that list,” Thompson explains. “Our goal is to have 75 percent of our income coming from investments in those cities through multifamily, office or retail. Today, about 50 percent of our income comes from those cities, so we need to make a pretty substantial change. We’ve already made some significant headway toward that this year with the acquisitions and developments that we’ve got coming through the pipeline.”

Bluegrass Commons is a proposed 250,000-square-foot lifestyle development in Atlanta.

The company recently entered into a partnership with DRA to acquire a total of 16 multifamily properties in Albuquerque, New Mexico; Phoenix and Tucson, Arizona; and Las Vegas.  Colonial acquired a 20 percent interest in the partnership and will handle the property leasing and management of more than 4,200 units.

“We’re trying to put ourselves in the way of the growth, where population growth, job growth and incomes are going to help our properties succeed,” says Thompson. “A city like Orlando, Florida, is a good example of the kind of presence we’d like to have in a dynamic, growing city. We have all three of our operating divisions represented, and we’re the largest suburban landlord in Orlando. We’ve got over 5,000 apartment units and a very sizable retail portfolio in Orlando. We’ve got that kind of presence in Birmingham, but we’d like to have that kind of presence in Charlotte, Texas and even further out West. Toward that end, we’ve also brought a lot of new talent on board. These are a bunch of young, energetic people who have a vision for what we want our retail business to become in the years ahead.”

People Make the Difference

Colonial has hired a number of new executives recently, including Chip Light, executive vice president, retail division; Brian Neltner, senior vice president, retail division; and William Leitner III, executive vice president, retail development and acquisitions.

Colonial Pinnacle at Craft Farms, Gulf Shores, Alabama.

“The group as a whole averages of 18 years of experience, has long standing tenant relationships and has extensive market knowledge,” says Leitner. “We really feel like we have a seasoned team in the company right now. We’ve set up a decentralized strategy in various top-tier markets and put these developers in a position where they are like the owner of that franchise. They are all things retail development for that market. It enhances and increases deal flow in all respects.” 

The company’s strong retail leasing team of Bryan Ratliff, Paul Glascock and John Hughey also has gotten a boost from added talent with the addition of Ray Sankovich, Dan Zoghby, Wade Robinett, Pat Kelly and Lanne Cort.

Colonial Pinnacle at Tutwiler Farm, Birmingham, Alabama.

“The leasing staff is leaning to a greater tendency to be where the properties are to learn the markets, and to understand not just the malls that we have but [also] properties we don’t own that might be opportunities 2 or 3 years down the road,” says Neltner.

Additionally, Colonial appointed a new chief financial and investment officer, Weston Andress, last spring.

“Weston’s background is investment banking,” says Thompson. “He has really accelerated our participation in the deal flow and the different things that we’re looking at, from joint ventures to larger transactions. He is really going to help us try to grow the enterprise more than we have over the last few years.”

Retail Pipeline

Colonial TownPark, Orlando, Florida

“Our emphasis is on the open-air format, both in acquisitions and development,” says Thompson. “We’re looking for a diversified retail portfolio, [but] we want to weight our portfolio toward open-air shopping centers. That includes everything from grocery to power centers to lifestyle centers. We’re working on all types of those projects today.”

New projects include Colonial Promenade at Alabaster, a 660,000-square-foot power center in Alabaster, Alabama. Wal-Mart Supercenter, Lowe’s Home Improvement Warehouse, Belk and AmStar Cinema will anchor the project. “When it is completed, it will be the largest shopping center in Shelby County, Alabama’s fastest growing county,” says Leitner.

William Leitner III

In Gulf Shores, Alabama, Colonial is developing Colonial Pinnacle at Craft Farms. Cobb Theatres, a traditional department store and a high-end restaurant package will anchor this lifestyle center development. The theater will open next June, and the shopping component will open in 2006. “The Gulf Shores market resembles Destin, Florida 3 years ago,” says Leitner. “The 4.5 million tourists who visit this markets have high levels of disposable income, evident by the fact that the average condo price in Gulf Shores right now is $500,000.”

Colonial is underway with Colonial Pinnacle at Tutwiler Farm in eastern Birmingham. One section of the project contains price-sensitive big box retailers, behind which is a lifestyle element. Light describes the lifestyle portion as an outdoor mall. “It will have Belk, Best Buy and two traditional department stores — the typical things you’d find in a mall — and the tenants that are ancillary to those stores. Our goal is to have everything that a mall and peripheral retail offer in one package where it will be a little more consumer-friendly. You can park right in front of the stores and go in,” says Light.

Reynolds Thompson

“It’s not an asphalt jungle,” says Light. “We want to give people an environment that they want to keep coming back to.”

Retail Redevelopments

Retail redevelopments are a big part of Colonial’s portfolio. Last month, the company hired Brian Jones as vice president of redevelopment. He previously worked for Kimco Realty Corporation.

“[Jones is] very leasing and financially oriented,” says Neltner. “He’s trying to squeeze as much money out of each one of these assets, to really create better shopping environments in each one of them.”

The company redeveloped Beechwood Shopping Center in Athens, Georgia. When Colonial purchased the shopping center, it housed Harris Teeter, Stein Mart and some local shops.

“Through our very strong mall background, and the better tenant relationships that we’ve had, we were able to backfill that shopping center with a much better tenant mix, including Ann Taylor, Chico’s and Talbots. It’s been an absolute gem with great sales volumes — all due to Colonial’s experience with the mall tenants,” Neltner says.

Brian Neltner, Chip Light

Many of the properties Colonial works on today don’t fall into one particular category.

“These properties don’t fall into pre-conceived categories anymore,” says Thompson. “They’re hybrids. At Brookwood Village in Birmingham, we’ve turned the ground floor inside out. It now faces outside, and we created outparcels for restaurants. Once you go inside and upstairs, it’s a traditional mall. It clearly doesn’t fall into a single category anymore. We’re also working on a project right now in Birmingham that has lifestyle center and power center tenants. It’s just a great location and all the retailers wanted to be there.”

Goals

Colonial’s overall goal is to be the star performer in real estate, and each division’s goal is ties back to this corporate goal.

“We really have three constituents — shareholders, merchants/residents/office clients, and employees,” says Thompson. Colonial is traded on New York Stock Exchange as CLP. “We want to make sure we do what’s right by each one of [our constituents]. At a time like this, when we’re looking at shifting assets into multifamily, some of these dollars that we’re creating in retail actually may go back into multifamily. At the same time, we’re also dedicating a tremendous amount of capital to our retail development pipeline. We’re trying to weight our overall business in a different way.”

The company also is interested in teaming with a developer that is creating a master-planned neighborhood; Colonial could provide the retail, multifamily or office component. “That’s something that we think we’re well suited to do,” says Thompson. “We understand that.”