With just a few college courses under his belt, Brooklyn-born David Lichtenstein abandoned higher education and began buying multifamily properties in New Jersey in the late 1980s. By the 1990s, his company, the Lightstone Group, based in Lakewood, N.J., had amassed a portfolio that today exceeds 20,000 apartments in 28 states and ranks among the top 30 or 40 apartment owners nationwide.

A dramatic shift occurred in 2000 when Lightstone began a buying binge in the retail sector — first strip centers, then malls. Lichtenstein discovered deals that delivered cash flows were increasingly difficult to find in the apartment sector. More recently, the company has broadened the focus to include offices.

In the last 15 months, Lightstone has closed on $2 billion of retail and office acquisitions, mostly in small markets with a population of less than 500,000, such as Odessa, Mo. The real estate investment company is now the second-largest owner of outlet malls in the U.S., after Simon Property Group. NREI recently talked to Lichtenstein about his company's expansion into retail and office sectors.

NREI: What is your investment strategy?

Lichtenstein: Most of the big REITs, or even private landlords, look at real estate only in terms of their own sector. Each REIT has an analyst, and each analyst says that if you step outside the box, we're going to massacre you. We see the country as one monopoly board. We look at the bottom line rather than only buy this or that asset type.

NREI: As prices peak or reach near-peak levels in bigger markets, do you anticipate increased competition in the small towns where you've made your mark?

Lichtenstein: We are opportunistic and turnaround buyers. We just purchased office property in Chicago, which is not a small market, but it's been a market down in the dumps for four or five years now. Will big mall players come into the small markets? Possibly. But a lot of the price pressure comes from the big REITs, and they want to own brand-name properties that investors recognize.

NREI: You're a recent player in the retail sector, having been a player in multifamily for most of your history? What unique challenges does retail pose for your company?

Lichtenstein: When you have a retail center, and you have Tony's Pizza, there's probably 20 other pizza stores in town. Nobody is driving to that center for Tony's Pizza. If the anchor is a good anchor, the local residents go to the anchor and pick up pizza for lunch. If that anchor isn't there, the pizza store dies, the cleaning store dies, so suddenly your neighbors are very important to you.

NREI: What's your performance improvement strategy for weaker shopping centers in small towns?

Lichtenstein: We study the market carefully. We bought malls in Shawnee, Okla. and Lake Jackson, Texas, where we felt that the stores that had been brought in did not represent the needs of the local populace. For example, a Gap was brought into a market that should have had an Old Navy. Sometimes, the mall needs a movie theater that wasn't there, other times it was a lousy movie theater and we buy out the owner and bring in a dominant player. We try to see how we can fix a problem.