Despite the down economy, venerable United Commercial Realty ventured into retail property management. The results have affirmed the company’s success.

Just as the recession began to choke retail spaces and other commercial property types, UCR Asset Services, a division of United Commercial Realty, launched its property management division with a focus on the pinched sector. Although the timing was ominous, UCR Asset Services has grown its portfolio 145 percent in five years. Scott Weaver, president, CEO, and partner in the division—and a 34-year veteran of the industry—says the firm’s experience in all retail property types and the fact that it doesn’t own competing properties enables it to serve developer and pension-advisory clients well. Weaver spoke with American Builders Quarterly about retail property management and the pending rebound in commercial development.

Interview by Laura Williams-Tracy

UCR Asset Services at a Glance

Location
Dallas

Founded
1988

Employees
102

Specialty
Retail property management

How did the firm come to focus on retail properties?
Scott Weaver: It makes sense for a brokerage company and property-management company to specialize in the various asset classes that they are working on. UCR has been around for 25 years; [it] was founded by Mickey Ashmore in 1988, and he is an outstanding retail broker. We not only represent developers and owners through project leasing, but a big part of our business is through broker representation of tenants, which might include retailers such as Crate & Barrel, Gap, 7-Eleven, grocery stores, or restaurant tenants.

What’s the scope of your services?
SW: We are in nine states. We are an asset-management-based service provider, which means we provide our clients with a higher level of service to include investment analysis and management, with value and return maximization as the principal objectives. We usually assign an asset manager to each shopping center, who serves as the operational team leader. We also offer construction management for projects that can spring forth from annual capital and operating budgets.

How are retail buildings different from, say, office buildings?
SW: One of the differences is the physical plant. For example, the two largest physical components of shopping centers are roofs and parking lots. We replace roofs and do parking lot repaving. The basic lease structures [also] are different. The difference in these lease types changes a property’s operating and capital-improvement budgets. We’re a full-service construction-management group; last year we did a total construction volume of about $9.6 million of all sorts of projects and 263,000 square feet of tenant projects. In 2011, it was about $6.95 million in construction and 218,000 square feet of tenant projects.

UCR Asset Services makes sure to anchor its shopping developments with the right larger tenants to attract a good mix of smaller tenants.

What unique challenges are you confronted with when leasing shopping centers?
SW: The challenge is the way retail tenants within shopping centers work independently yet cohesively. You’ve got to have the right tenant mix to fit the demographic and psychographic profile of the area and the customers you are trying to serve. You’ve got to have your anchor strategy and tenants in place before the smaller tenants will want to come; you are trying to encourage cross-shopping from larger tenants and smaller tenants. And you’ve got to look out for pitfalls in contracts. If larger tenants aren’t making their sales volume in that particular location, many leases have clauses which allow the tenant to close. Because tenancy can be tied to cotenants and cotenancy clauses, loss of one or more large tenants can result in a house of cards where many tenants can reduce rent and close.

Is right now a positive time for retail?
SW: The industry is better than it was in late 2008 and ’09. We’ve seen a lot of changes in ownership. Today we are seeing more and more retailers expanding. We have seen occupancy rates increase and rents trend up, but still we see a lack of development.

UCR did 263,000 square feet of retail tenant space in 2012.

How did your firm fare in the recession?
SW: During the recession we saw overall growth in our managed portfolio. A lot of property went back to the lender, so we did pick up some good relationships and some good product to manage, lease, and sell. We had 2.9 million square feet under management in 2008, and now we manage more than 7.1 million square feet.

What are the biggest retail design trends?
SW: Retail changes all the time because consumer preferences change, retail formats change, there’s generational change, and our society is becoming more diverse and multicultural. We are seeing smaller footprints, multilevel urban centers, and more-structured parking with a greater ability to get around by foot. Many national tenants now want out of malls because the operating costs are higher than in open-air centers.

Is it a bright future?
SW: The fact that makes this asset class a little different is that everybody doesn’t have to work in an office building, and everybody doesn’t work in an industrial park, but everybody has to go to the grocery store. There’s still something about shopping—touching and comparing the products—that people like to do. The challenge is staying ahead of the times, which includes internet sales. ABQ