One buy at a time: Equity One CEO Chaim Katzman has proven to be a savvy shopper, purchasing retail real estate properties and managing them to the tune of $64 million in net income for 2003

South Florida CEO, Sept, 2004 by Mike Seemuth

"They clearly have outperformed most of the REIT market, at least over the last three to five years," Gilbert says of Equity One. The company has grown not only in a financial and operational sense, "but also from a human resources perspective," he says. "I have seen as little turnover in that company as in the industry. I've been working with the same people there for the last five years."

SIZE MATTERS

In the first seven months of 2004. Equity One leased almost a million square feet and had an occupancy rate of about 92 percent at what it calls "stabilized" shopping centers, which account for the vast majority it owns. This year, many of the new leases have been signed with discount store chains such as Dollar Tree, Save a Lot, Big Lots, and Dollar Stores.

Its sheer size gives Equity One an advantage in attracting national retail chains--not just discount stores and supermarkets, but also Blockbuster video rental stores, Kmart department stores, and Eckerd Drug stores.

"They can sit down with national retailers and show them 100 locations that might fit the profile," Gilbert says. At the same time, "they operate their properties like a local owner. They put local management in place. They don't run their properties by telephone. They don't lease off a 1-800 number."

Not every customer of Equity One has been a satisfied one, though. Consider the case of a former tenant in West Palm Beach. Gracie Street Interior Design, an upscale retailer of furnishings and design services, got a rude shock at its former leased location when the landlord, Equity One, let a tattoo parlor move in next door.

The experience prompted Gracie Street to move out of the Equity One property and purchase a retail space on the ground floor of a residential condominium, says Jonathan Satter of Compass Realty Advisors in West Palm Beach, who represented the seller. "No condo association is going to allow a tattoo parlor in there," Satter says.

But Equity One obviously has satisfied more tenants than it has alienated. Publix, for example, leases space at more Equity One shopping centers than any other single tenant. At the end of 2003, Publix was occupying two million square feet of space under 45 leases with Equity One and paying more than $14 million a year in rent.

In Florida, home to nearly half of Equity One's shopping centers, Publix is a powerful magnet for customer traffic that benefits nearby tenants, says Cushman & Wakefield's Gilbert. "Shopping centers anchored by a Publix supermarket tend to have higher occupancy and higher rental rates," says Gilbert. Supermarkets doing business under the Kroger, Food Lion, and Kash 'n' Karry names also rank among the Top 10 tenants of Equity One.

Still, even supermarkets run into financial problems. This year, Jacksonville-based Winn-Dixie sold or closed 32 stores by late August and announced plans to close another 124 stores by April 2005.

So far, Winn-Dixie's issues have not caused serious problems for Equity One, which was leasing anchor space to the supermarket chain at 17 of its shopping centers at yearend 2003. Winn-Dixie is not closing stores in Florida, but improving them, Katzman claims, and "almost all of our Winn-Dixies are in Florida, so this should be advantageous to us."