September 26, 2017
By Glenn Rufrano, VEREIT CEO
Q: What are some of the challenges facing retail real estate?
A: Retail has to provide value through depth of merchandise, service and price. If a retailer does not provide those things in some form or doesn’t understand the importance, they will have difficulty surviving. Retailers who understand online distribution and have the resources to do it, when combined with great brick-and-mortar relationships, are generally able to provide customer service for their clientele that will work with this retail economy.
Q: What strategies has VEREIT developed to retain a strong retail base in the portfolio?
A: Our portfolio is more than retail, but the sector is important to us. We look for merchandise categories that we believe are good long-lasting categories. For example, the discount category has a strong retail base. We like the pharmacy, grocer and home and garden categories. Convenience stores, warehouse clubs, medical services, and pet supplies are all long-lived categories. Within those categories, we like tenants that can meet omni-channel requirements.
Q: How does VEREIT partner with retailers as a capital provider?
A: We provide capital to retailers and in return, they give us a long-term tenancy to house their business. Typically, retailers that need housing to be profitable invest in those properties and contribute their own capital. We like to make that trade with retailers. We also partner with retailers on sale-leasebacks to get product into our system. It has been very common for us to complete sale-leaseback transactions in the discount and drugstore retail categories.
Q: How does VEREIT partner with developers and brokers?
A: We completed $3 billion of dispositions in the past two years with brokers. Brokers also bring individual or multiple leases to us that are being sold on the open market. It’s important to maintain good broker relationships around the country.
On the developer side, we work with them on forward commitments where we will buy the property when completed under certain conditions. That provides takeout capital for developers, and in many cases, they provide long term product for us.