NEWPORT BEACH, CA – Online shopping is shifting the fundamentals and demand for traditional retail, and investors who realize this focus on e-commerce-resistant tenants in the entertainment and lifestyle sectors, SRS Real Estate Partners’ managing principals for the net-lease group Matthew Mousavi and Patrick Luther tell GlobeSt.com. The firm recently hired Michael Walseth as SVP and McCall Huske as transaction coordinator, both formerly of Walseth Retail Advisors of Marcus & Millichap. We spoke with Mousavi and Luther about the new hires, what they say about the company’s growth and the company’s future plans.
GlobeSt.com: 1. What do the new additions to your team say about your company’s growth?
Mousavi and Luther: The SRS National Net Lease Group is a national investment sales and marketing platform that was formed to serve the expanding development and acquisition pipelines of our clients, which mirror overall market demand within the retail and net-lease sectors. We chose to respond to client needs for advisory and representation by assembling a highly skilled and experienced, but intentionally small, team of collaborative brokers, each paired with a tenured and skilled analyst. We are not building a “boiler room” or call-center-based platform. Rather, we focus on growing the depth of capability of each broker within SRS NNLG by providing robust resources, data and information for their clients.
We’ve created a centralized property-underwriting and property-marketing and distribution platform to serve not only the existing 11 brokers within NNLG, but the remaining 125-plus tenant and landlord-representation brokers across SRS’s 20 offices in the US. These other brokers within SRS have a “turn-key” system in which to refer and retain investment-sale business after locating land or signing a lease for their retailer or developer clients.
Our team provides its databases, marketing system, website and existing inventory of over 140 listings to each agent, firm-wide, within SRS. The result is that a buyer for a project, once stabilized, is typically identified prior to marketing the property, or at least within a curtailed timeframe of 30 days. Inquiries on existing listings that are no longer available or proceeding to contract are cross-sold into available properties. We have created a marketplace and critical mass of buyer requirements.
GlobeSt.com: What other future plans can you share with us?
Mousavi and Luther: We intend to continue to grow by hiring additional brokers both locally in California and wherever SRS maintains a physical office. Currently, NNLG brokers reside in Newport Beach, CA; Chicago; Dallas; Atlanta; and Orlando. Our existing staff of 11 analysts and marketing personnel who work out of our Newport Beach office is growing proportionally with the addition of more NNLG brokers. Our intent is that each broker who joins SRS will benefit from their own dedicated analyst, allowing for extremely detailed, high-quality marketing materials and valuations for their clients.
We seek brokers who have demonstrated year-over-year growth in revenue, but also in the complexity and quality of their respective product and client bases. We also place a high importance of individual accountability and resilience through market cycles. We like to see brokers who can generate revenue through changing markets and across varying regions of the country.
We anticipate some pressure on velocity and asset pricing as we enter a rising-interest-rate environment—many of the investment brokerage houses that have experienced strong growth have simply benefitted from a bull market and cap-rate compression. In short, advisory and actual skill in brokerage have been less relevant or necessary as property values have simply improved across most asset classes. We are positioning our platform to capitalize on what we see as continued market strength in the near term, but also to be prepared for what may be more difficult in times ahead.
This means our conversation with our clients needs to expand continually to include leasing, tenant-space and footprint-requirement changes; financing options; individual tenant-credit risk; and geographic and geopolitical risk. The “I see you bought this at an 8-cap and now it’s worth a 6-cap” conversations are already far less common and are quickly becoming a thing of the past as appreciation and cap-rate compression have slowed.
GlobeSt.com: What are some of the newer trends you’re seeing in net lease investment?
Mousavi and Luther: The good news about the sector as a whole is that it doesn’t change much, year-over-year and quarter-to-quarter. Returns are and have been relatively stable, which is why net lease has become a viable asset class and alternative for income investors both domestic and now foreign. We believe the current market to be stable, but do not see continued cap-rate compression or appreciation. Interest rates will cause upward movement in cap rates; however, increased inflation will allow more cash flow, particularly for individuals with a base of savings, hopefully facilitating higher spending for this portion of the population. In theory, this economic output would drive rents, construction, etc. E-commerce is shifting the fundamentals and demand for traditional retail. Investors who realize this focus on e-commerce-resistant tenants, which we see as entertainment and lifestyle uses—particularly food related.
GlobeSt.com: What else should our readers know about your company heading into 2017?
Mousavi and Luther: SRS is the largest retail-only brokerage firm in North America, with a heavy focus on tenant representation and landlord representation throughout the country. Having direct access, knowledge and forward-looking guidance as it relates to tenants gives us deeper understanding and access compared to other advisors. We have offices or boots on the ground in nearly every top 20 MSA nationwide.
With the help of SRS NNLG, our investors and developers will be able to identify trends early and will have access to forward-looking guidance and information based on real time data. We are marketing net-leased assets in the information age, so we are heavily reliant on data and analytics and CRM. Our office looks more like a tech company than a traditional brokerage house, and our focus is in using IT to broaden the depth and pervasiveness of our marketing so that we have more accurate information more quickly than our competitors. For sellers, this results in better pricing for their assets within a shorter timeframe.