Paster Enterprises is the quintessential owner and manager of community shopping centers. For more than 60 years, the St. Paul, Minn.-based company has stuck to its knitting of building, leasing and managing retail properties in the Twin Cities and across greater Minnesota. Its portfolio of 11 shopping centers, about half of which are grocery-anchored, totals 1 million sq. ft.
Calling Paster a long-term asset holder is an understatement. Company president Howard Paster says that a few of the properties in the portfolio were developed by his grandfather, Herman Paster, in the 1950s. The grocers in Paster's shopping centers are mostly a mix of independents and local chains, including Cooper's Supervalu, Festival Foods, Knowlan's Super Markets and R.C. Dick's. About 70% of in-line tenants are mom-and-pop retailers.
The company's shopping centers are primarily located in urban areas or first-ring suburbs that are densely populated. Average occupancy across the portfolio is 87%, but many centers are well above 90%. NREI recently spoke with Howard Paster about the company's challenges and successes.
NREI: Is it by choice that independent grocers and local chains enjoy such a strong presence in your portfolio?
Paster: It would be tough to say that it was by. We've owned some of these centers for over 50 years. It just evolved that way. At one point our centers had more of the market-leading grocers. In the 1960s and 1970s, we experienced the growth of the suburbs and the metro area expanded. The footprint of the national grocers became bigger. The Cub Foods and the Rainbow Foods went out to the cornfields, if you will, to the newer developments and passed our centers by.
NREI: What is the typical size of the grocery stores in your shopping centers compared with a large chain like Cub Foods?
Paster: A prototypical Cub Foods is 60,000 sq. ft. to 68,000 sq. ft. The independents are definitely smaller. The R.C. Dick's in our portfolio is 24,000 sq. ft., Knowlan's Super Markets is 22,000 sq. ft. The Festival Foods at one of our centers is 38,000 sq. ft. I would love to do something with Cub Foods or Rainbow Foods. The reality is that the shopping centers we own aren't big enough for Cub or Rainbow.
NREI: Do you have any success stories on the redevelopment front?
Paster: Sure, we've probably completed three or four redevelopment projects in our portfolio over the last five years. We redeveloped Crystal Shopping Center in Crystal, Minn. The center was built in the 1960s, and it was old and tired. We tore down one of the buildings and ended up with new buildings for Marshalls and Michaels, which were relocated within the center. We also re-skinned the rest of the center. Occupancy rose from 68% to nearly 90%.
NREI: Are you seeing any compelling trends in your centers?
Paster: In the last 90 days we've done nine leasingwith mom-and-pop retailers, which make up 70% of our portfolio. It's a bellwether of what's occurring. These retailers (which lease anywhere from 1,200 sq. ft. to 2,400 sq. ft.) thought the world was ending two years ago. Now they know it's a great time to do a deal because there is a ton of attractive space available. And you've got landlords who are hungry to do a deal and underwrite a lot of the costs.