Lowe’s Retail reVision platform, launched June 22, will bring in nonretail uses and increase density to boost underperforming retail real estate. Lowe will work as a joint-venture partner, an incentive-fee manager or an advisor. The company already is advising Centennial, owner of MainPlace Mall in Santa Ana, California, on adding nonretail uses and density. Construction is expected to begin early next year. SCT contributing editor Beth Mattson-Teig talked about the JV side of Retail reVision with Joel Mayer, previously of Rockwood Capital, whom Lowe has hired to lead the platform as executive vice president.
What deals are going to be a good fit for your JV investments?
The primary thing we like to look for is where there is an established density and demand for the alternative uses that are different from retail, such as residential, hotels or office. This platform is set up to really enhance challenged retail. We don’t want to say we are only going to look at distressed retail. It could be that we look at successful retail but with properties that need additional development. Most properties can benefit from that, and it is clearly not just malls. It could be lifestyle centers, power centers or neighborhood centers.
What market forces do you anticipate that will make these investments pay off?
We don’t want to solve retail problems with retail. We want to solve them with nonretail solutions: office, apartments, hospitality, recreation. We have all of those tools and Lowe’s deep experience in those product types to be able to do that. In many cases, that means more density, which helps the retail get stronger, and it also is important to understand who is going to do well going forward.
So will you target major metros, or existing live-work-play urban, or near suburban areas?
We want to focus on those markets where we have an established, experienced team with boots on the ground ready to go. Primarily, that would be San Diego, Orange County, Los Angeles, the San Francisco Bay Area, Seattle, Portland, Denver, the D.C. metro area and the Carolinas. We also would look at markets like Phoenix where we have done work before.
How much capital does Lowe have earmarked for these JV investments?
We haven’t specified a certain dollar amount. It really depends on the project and how many projects we do. We anticipate investing between 5 and 10 percent of JV equity per deal, and we have numerous investor relationships for additional capital that would partner with us. We have set a base guideline that the total size of projects would be between $50 million and $250 million.
How do you plan to underwrite these opportunities?
We don’t want to go into short-term decision-making mode because of one event or another. Obviously, COVID is a major event that has come up, but we want to look at the local and regional demand drivers, those things that have been there and are supported before COVID, during and after. Our patterns at this point have changed, but focusing on the fundamentals is key because we are investing for a very long period of time.
So will these be long-term holds, or do you plan to stabilize them and exit?
That depends on a number of things, one being the property and what it needs and also our investment partners and who we are going to be working with. In certain cases, they may be shorter holds, and in other cases they could be very long-term holds. Lowe has established itself as a developer for the last 48 years. We don’t want to be viewed as a short-term-only developer. We also don’t want to be viewed as someone who won’t ever be willing to take a profit. It really depends on who we are working with and the factors in that market.
