07/10/2013 | By Carisa Chappell
Ramco-Gershenson Properties Trust owns and manages shopping centers in the in the eastern, midwestern and central regions of the United States. The Michigan-based REIT currently has a portfolio of 78 shopping centers and one office building.
Gershenson discussed the company’s strategy to enhance the quality of its portfolio, which includes disposing of some of its assets.
“We’re interested in owning a portfolio of high-quality shopping centers in major metropolitan markets, primarily multi-anchored shopping centers,” he said. “Therefore, as a part of our portfolio, we had a number of assets that maybe didn’t qualify for what we want to own going forward.”
He said those assets may fall into several categories, including assets that may have had issues with anchor tenants that have gone out of business, assets that didn’t fall into the demographic profile that the company wants to own going forward, a single anchor that may not have been performing well in its area or single-location, high-quality centers in states where Ramco-Gershenson isn’t interested in expanding.
Gershenson also said that the old adage “location location location” is still valid today.
“But probably the scope of that definition has expanded,” he said. “Your location needs to be in a vibrant trade area. It means that the trade area is stable, you’ve got significant new household formations, you’ve got good educational levels and you have people moving in instead of out.”
Additionally, Gershenson discussed going to the market with two debt offerings in May. He said since 2009 the company has worked to build a “rock solid” financial structure.
“We came to an agreement with one of our partners, the Clarion Lion Fund, to buy 12 of the 15 shopping centers we have in that joint venture. So, we wound up acquiring about $250 million in assets,” he said. “We specifically then went out and did both a seven-year bank loan with a 3.5 percent coupon for seven years. We were able to secure on average a ten-year loan at 4 percent, replacing 7.3 percent money, so it was a win-win.”
He said the company used the proceeds to replace the 7.5 percent secured financing.
“We took secured assets and made them unsecured and we have been able to improve our interest rates by over 300 basis points,” Gershenson said.