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Firm Returns to List After Shifting Focus of Business

Bucking the trend in a difficult real estate market, retail development and property management firm NewMark Merrill Companies has grown through one of the worst recessions in recent history largely by dramatically shifting their focus of business. The Woodland Hills- based company saw 36 percent revenue growth from 2007 to 2009 going from $40.11 million to $54.52 million. While other retail developers that experienced record growth up until 2005 succumbed to the shift in the real estate market, NewMark Merrill adapted by diverting away from acquisitions and development, and instead has made a successful business out of managing and redeveloping underperforming shopping centers. “When the market turned and other people kept buying, we stopped,” said NewMark President and CEO Sandy Sigal. “We switched from being a big time developer and a big time acquirer to being a big time property manager and big time advisory company – a company that’s looking to focus on its own assets to fine-tune them so it can survive.” NewMark Merrill now oversees some 1,400 tenants, and owns and/or manages eight million square feet of retail space in three different states, representing almost $1 billion in value, according to Sigal. Some of NewMark’s local properties include Janss Marketplace in Thousand oaks, Tarzana Village and Thousand Oaks Marketplace. The latter is a 155,000 square foot development built by NewMark in 2008 where a Hampton Inn & Suites hotel opened this year. “We’re growing our platform, we just went into Sacramento, we grew a lot in Colorado over the last year, and we’re growing a lot in San Diego,” Sigal said. Most recently NewMark was named to lead the management and redevelopment of Southgate Plaza, a 365,000-square-foot retail center in Sacramento, which marked the company’s first management assignment in the region. Like many of the properties it redevelops, Southgate Plaza is currently 20 percent leased, following the departure of several tenants during the down economy including Albertsons, Office Max and Ross. Finding a niche With so many retailers in distress, NewMark Merrill has found a niche opportunity helping to shore up shopping centers, strengthen their tenant base, and eventually restore cash-flow and long-term viability. Richard Rizika, executive vice president and managing director of retail services for CB Richard Ellis, who has represented NewMark Merrill in asset acquisitions as well as in several lease transactions with tenants, said the company understands that they have to be knowledgeable and flexible with the stakeholders in the retail real estate community and have proven their ability to do so short and long term. “Developers like NewMark that have the foresight to adjust to the economic challenges are the developers that will continue to thrive in the future in the new economy,” he said. NewMark Merrill’s efforts to revitalize properties entail figuring out what the community around the shopping center wants, identifying and attracting new tenants, and branding and marketing the shopping centers. “We provide intensive care for properties,” said Sigal. “Our niche is being able to look at a shopping center beyond just a performer or as a spreadsheet and looking at it as a living breathing thing that needs to be fostered and needs to be tied into the community.” NewMark Merrill’s promotions to foster a sense of destination and community at their properties have even included parachuting Santa into a shopping center with some elves to kick off the holiday season, Rizika recalled. “They do a very good job of promoting shopping centers as opposed to others who have sat down and waited for rent to come in,” he said. With the growth and continued expansion in the property management arena, adapting to the changes in the market and to the enhanced focus on property management has not been easy and has posed a new set of challenges for the company, according to Sigal. “I’ve spent the last two years building up management systems for us, reaching out to our investors, to our lenders, to our tenants, making sure that they understood that we had a plan, that we knew what we were going to do, that they didn’t have to panic, that they weren’t going to become a statistic so that all takes time and work,” Sigal said. “I traveled more in the last two years than at any other time in my life because people want to see that we’re committed and that we’re at the property.” The future When it comes to future growth NewMark Merrill, which offers an entrepreneurial approach to managing assets, will take on as many management assignments as the partner level people at the firm can handle, said Sigal. “I think our management business will be as robust as we want it to be and we’re just going to have to be more selective about the accounts and what we take on,” he said. Regarding acquisitions, the time is not quite right to start buying yet, but once banks begin releasing troubled assets, activity will likely pick up. “There’s a lot of defaulted commercial projects out there that no one has reckoned with yet and until that is figured out we don’t know what our values are going to be,” Sigal said. “I can’t pay 2010 dollars for something that might one day be at 1992 prices, so we’re going to wait until we understand what that level looks like. We and a lot of other people have money waiting to invest in the business, but we’re not doing it just yet. We have to wait until we see what happens with all these troubled assets.” The company’s development business will also likely pick up once the markets recover. In recent years, the 25-year-old company has focused development efforts through its LandMark Retail Group, a preferred developer for CVS/Pharmacy, which has also seen robust growth even during the downturn.. Last year LandMark Retail Group built 21 new CVS locations.

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