Charged with business development for the Eastern U.S. region, Jeff Cox, managing partner at Stan Johnson Co., a national retail real estate advisory and brokerage firm headquartered in Tulsa, Okla. predicts a comeback in bricks-and-mortar retail as retailers reinvent themselves as omni-channel players. This evolution will benefit retail real estate investors no matter where consumers shop, he says.
Stan Johnson, which specializes in net lease assets, is currently working on expanding its reach and growing its client base and expertise by acquiring smaller, local retail brokerage firms in markets with growing, diverse populations, particularly across the U.S. Sunbelt and Western markets. For example, it recently acquired Atlanta-based Shane Investment Property Group, a 20-year-old local brokerage firm, a first step in accelerating its growth in multi-tenant retail investment sales.
The firm, however, is also expanding into other commercial real estate categories, according to Josh Campbell, managing partner in charge of the company’s strategic initiatives. He notes the company is seeking to acquire brokerage firms with an entrepreneurial spirit; strong producers; an established, local client base; and expertise across all real estate categories. Stan Johnson is looking to take a partnership approach to these acquisitions to ensure a win-win result for both parties, according to Campbell.
In the Q&A with NREI, Cox and Campbell discuss the company’s expansion plans; how the company’s growth will benefit its clients; and what Stan Johnson is seeking in local and regional market partners it would like to acquire.
This Q&A has been edited for length, style and clarity.
NREI: With COVID-19 taking a big bite out of bricks-and-mortar sales, what types of investors are attracted to multi-tenant retail centers and why?
Jeff Cox: While a return to “business as usual” may still take time, many investors ranging from private capital to institutional are taking the long view that although e-commerce is increasing, the reinvention of [bricks-and-mortar] retail will also occur. Rumors of the total demise of multi-tenant retail centers are exaggerated. As market equilibrium returns, opportunities to reposition, transition or redevelop will present themselves.
NREI: How has the pandemic impacted retail real estate investment?
Jeff Cox: Everything has changed, from where we work to how we purchase merchandise. A KPMG report recently noted that pre-pandemic online sales were increasing by 1 percent annually. During the first 10 weeks of the pandemic, online sales increased by 10 percent. That’s a decade of growth in a 10-week period! In essence, we arrived at 2030 in 2020! This fast-tracked uptick in online sales bodes well for retail real estate investors. An increase in sales, regardless of whether it comes from in-store or online shopping, helps to support retailers’ overall business models, and that directly benefits investors.
NREI: What types of retail real estate properties are most popular with investors today?
Jeff Cox: We are seeing healthy transaction activity in single-tenant net lease (STNL) retail, un-anchored strip centers and grocery (or other essential retail-anchored) strip centers. That’s not to say we are not seeing activity in other retail categories, but currently, not at the levels of the aforementioned.
NREI: Is the Atlanta metro area [where Shane Investment Property Group is based] a region particularly attractive to retailers and retail investors? If so, why?
Jeff Cox: Atlanta offers a strong diversified economy, with population and income demographics that attract both retailers and retail investors to the city. Historically, Atlanta has been a preferred market for retailers to test new concepts before launching nationally. The retail market will continue to thrive in Atlanta due in part to the many corporate HQs that will continue to choose Atlanta as their home, especially with the flight from northeast urban markets. With our recent acquisition of Shane Investment Property Group, we are even better positioned to serve our clients’ needs in the greater Atlanta market.
NREI: It’s obvious that your firm is expanding, but what were the reasons for acquiring Shane Investment Property Group? What benefits will this acquisition provide your company going forward?
Josh Campbell: What’s really important to us is that this deal represented an upside opportunity for both parties. We made this deal happen because we each see the benefits, and we know we’re stronger in the market together than we are apart. Emery Shane and his team of multi-tenant retail professionals have built a tremendous reputation over 20 years. They represent a broad range of wonderful clients selling high-end properties with investment-grade credit, and that’s core to what we offer in the market: a national inventory of high-end properties with good-credit tenants across industrial, healthcare, retail and office properties.
NREI: A Stan Johnson Company press release noted that your company recently reached $35 billion in transaction volume and that more company acquisitions or mergers are planned. Are there any particular regions where you company is focused on acquiring regional brokerages, and if so, where and why are these markets attractive?
Josh Campbell: The story of real estate investing is really a story of demographics, so, like our clients, where we see population, job and income growth, we will continue to pursue opportunities in those areas to grow our capital markets services across all commercial property types. Bringing in more local expertise in those markets, generally the Sunbelt, Mountain West and Southeast, as well as select other key industrial and healthcare corridors, will benefit our clients from coast to coast, as we see more of our clients following those trends, regardless of where they’re headquartered.
NREI: How will your company’s expansion and acquisition of local brokerage firms impact your client base?
Josh Campbell: It’s all about relationships. Having more advisors located closer to our existing and prospective clients helps us support existing relationships and grow and establish new ones. We believe that our ability to balance the story of what’s happening locally around an asset with the pricing driven nationally by investors from all markets is core to how we create value for them. It’s really that combination of local expertise and national perspective that allows us to create a balanced market for our listings, where our sellers can be confident that their pricing expectations and the market we create account for both national investors and local market players.
NREI: What criteria or characteristics are you seeking in local brokerage firms to acquire?
Josh Campbell: We’re entrepreneurs at heart, and our culture is a defining characteristic to who we are, so having a match on those two criteria is where we start. Certainly, we look for companies with high expertise in their market, strong producers who want to grow their business, and loyal clients who get excited to work with us. But what’s equally important is that with any opportunity we look at, we want our partners to be as excited about the chance to build, together, a very special, middle-market real estate company that’s highly specialized and diversified across the capital markets space. There are multiple firms that launched in the past cycle who are seeking a partner with the financial capability to scale through a downturn. I’ve also spoken with many founders of businesses who are looking to manage their transition toward retirement with a partner who has the same entrepreneurial spirit that moved them to launch their firm in the first place and won’t seek to fundamentally “corporatize” their culture. Where we have a strong foundation built on high expertise, client service, entrepreneurial spirit, and shared opportunity, we believe there’s tremendous upside for all parties to grow in a marketplace that’s largely been consolidated by the big corporate players.
NREI: Is there anything else you would like to say about your company’s expansion, acquisitions, or capital investment strategy at this time?
Josh Campbell: I think some investors in the real estate market would be pleasantly surprised to know that we’re looking beyond investment sales to opportunities in mortgage brokerage and related services to better service our clients. Anyone who has investment clients, from lenders and life companies to developers and funds, should know that we are actively working on expanding our platform, our technology, and our brand to deliver extraordinary service and outstanding value across all commercial product types. And finally, we don’t face the pressure of quarterly earnings calls, so we will continue to prioritize preserving and enriching our culture so that our valued employees enjoy a supportive work environment that helps them achieve the highest levels of success and have fun doing it.