The Acres Group

While touring a shopping center with an investor the other day, we started talking about the mass amount of vacancies and what the future holds for the retail real estate sector.   Both of us agreed that though the signs pointed towards the economy getting better, we still had a long way to go until things get back to “normal”.  After sharing a few war stories, we eventually started discussing the rising trend of converting retail centers to condo’s and selling the units to tenants.   Much to my surprise, he was familiar with the concept and had successfully converted, and sold out, seven centers using this method over the last couple of years.  I expressed our success with this strategy as well and asked why he thought more lenders and developers aren’t using this method given all the troubles they are having with retail projects.  He summed up his answer with a short story about how he tried unsuccessfully to get a loan, from a lender that had funded several of his other retail projects, to develop a retail condo development many years ago.  He met with the lender and discussed his strategy and the lender said they needed to think about it and get back to him.  When the lender called to decline the project, the developer asked them why.  Their response was “We don’t know why, we just haven’t seen many retail condo projects and there must be a reason”.  It was basically the fear of the unknown.  The lender didn’t understand the concept and fell victim to the “group think” mentality.

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