Has NewQuest always combined development and brokerage, or did that strategy evolve over time?
Jay Sears: We have a background in brokerage and understand not only what is important to a tenant but also what is important to a developer and landlord. When we started NewQuest, we carried that perspective into our development business. We really never knew anything different than to look at a deal from both the tenant’s perspective and the developer’s perspective. We understand that it needs to work for both in order to be a successful project.
NewQuest at a Glance
Commercial development, leasing, land brokerage, and property management
Working on projects from all angles like that must entail a complex relationship with your clients. What does a typical NewQuest partnership involve?
JS: All of our relationships differ a little bit. For both 24 Hour Fitness and Cinemark, we’re their exclusive broker in the Houston trade area, and we’re also their primary developer.
With Kroger, they by no means develop with us exclusively, but we are a preferred developer. That means we’re somewhat involved in their strategy and in how to best serve an area. Our relationship with Kroger is one where we truly are partners in the sense that we codevelop a site together. To the community, it looks like one seamless development, but in fact it’s actually owned in part by Kroger and in part by us.
Some landlords don’t want to do business this way—it’s what’s called a shadow-anchor development—because you don’t actually own the anchor. But from our perspective, we feel like Kroger is more fully invested in the site when they own their own building. We like the partnership structure.
How common is it to develop this way?
JS: Fairly uncommon. When we first started doing this for 24 Hour Fitness, it was virtually unheard of, and we drew some criticism from our competitors. They thought, “How could you possibly serve a tenant as its broker but also be its developer?” But we’ve done just that, through openness, honesty, and transparency. Our clients understand what our economic needs are, and we understand what theirs are. To our mind, it makes total sense, but it’s still relatively rare in the development arena.
What are some of the drawbacks to the NewQuest approach, compared to more conventional development models?
JS: One of the negatives is that we are extremely loyal, and with that loyalty comes a certain degree of exclusivity. There are deals that we have to pass up on because we are so wholly serving Kroger in some markets. That doesn’t mean that we only develop for Kroger. We’ve developed for some other grocers, but we do so in a way that we never compete with a project that we’re working on for Kroger or a site we have developed for Kroger.
And what about some of the benefits? What is it about your approach that has made NewQuest so successful?
JS: It really gets down to the partnership-relationship aspect and the serendipity that occurs because of those relationships. Ten or 11 years ago, Cinemark asked us to go up to Sherman, Texas. They had found a piece of property they wanted to build a theater on and said, “We think you can do more than just build a theater for us. We think it’s a really good retail site.” Two of my partners went up and said, “Yeah, this is a great site. Let’s not only buy this property, but let’s buy the one next door, too.” That lead turned into a project that’s now over 1.8 million square feet. It’s completely transformed the Sherman market. It would have never happened—at least, we would have never been involved—had Cinemark not said, “Hey, come up here and pull this thing together for us.” It’s been a fun experience. ABQ