As long-term holders of shopping centers, Halpern Enterprises seeks fundamentally sound real estate in stable Southeastern markets. Increased competition and downward trending cap rates make good real estate hard to find in this territory.
As Halpern evaluates new buying opportunities, there are certainly important basics to consider, such as location, visibility and accessibility.
Beyond the basics, here are some tips that may help you beat the competition to the next acquisition:
1. Network with the brokerage community.
Establishing relationships with brokers is essential. This can be accomplished three ways:
• Stay in contact with the best brokers in your markets.
• Publicize your purchases to let the brokerage community know your company is active and has the financial resources to close a deal.
• Bring up concerns early and always tell the truth. Halpern relies on brokers to represent us to their sellers, so cultivating solid relationships based upon honesty and mutual respect will pay dividends down the road.
2. Include downside risk in your thinking as you evaluate properties.
There have been significant variations in rental market rates over the past 10 years. If you have a tenant in a prospective center paying $35 per square foot, but the market rate is now $20, don't assume that the space will necessarily continue to bring in the higher income. If the tenant fails or leaves, as an owner you'd have to backfill with a tenant paying market rate. You need to account for that possibility in your pro forma.
3. Visit the market.
A center might look great on paper but actually driving there and seeing it could provide a different story.
4. Don't pay for vacancy.
Can you realistically increase rental or occupancy rates? Current occupancy may be 85 percent with the broker advertising "upside." However, this may be the center's natural occupancy rate. Don't place value on the vacant suites unless you feel sure the current vacancy is a short-term issue.
5. Don't get emotionally attached to a deal.
There is a lot of bad real estate out there. If the property lacks fundamentals, or your numbers don't work, move on.
6. Attach your pro forma to the letter of intent.
Create your own proforma and attach it to the letter of intent to show the seller in detail how you arrived at your value.
7. The market should have a good growth story.
Halpern likes college towns and bedroom communities in addition to large municipalities. Look for communities that have growth in jobs and housing.
— Cary Halpern is the director of acquisitions for Atlanta-based Halpern Enterprises, which owns and manages 35 retail properties in Georgia, South Carolina, Florida and Tennessee.