Over the past years, the retail market in the United States has been growing at an accelerated pace. With technology advancing and the needs of the consumers changing, the retail sector seems to be more alive than ever. To get a better overview of the industry and some valuable insights, we had the pleasure to pick the brain of Marcos Puente, Director of Acquisitions at MMG Equity Partners–a privately-owned investment company focused on the long-term ownership, development, and acquisition of commercial properties in Florida.
With vast experience in the retail sector, Puente is currently leading MMG’s investment efforts in all aspects of acquisitions, from sourcing to underwriting. Read on to find out more about Puente and his view of the U.S. retail market in 2019, and also get some tips on how to maintain a healthy relationship with customers in such a competitive industry.
Q: Tell us a little bit about your background and the reason behind choosing a career in commercial real estate.
I was a finance major at FIU. I finished my undergrad during the recession, and it was a tough time for a jobless finance major. Having seen all the private equity funds coming together and the demand from these funds for new talent to underwrite distressed asset acquisitions, I looked into the industry and loved it after realizing the potential for profit and growth therein.
Q: What is your role now with MMG Equity Partners and what parts of the portfolio are you in charge of?
I head up new acquisitions at MMG and am handling certain dispositions in the net leased and shopping center space. I am focused on broker relations, sourcing new opportunities, underwriting of potential new acquisitions, market research, and tenant relationships given that we are largely a retail firm (although very entrepreneurial and opportunistic, so we look at many different asset classes).
Q: How would you describe the retail market in the U.S. today in terms of trends and challenges?
There is a needed correction in the retail space, with many over-leveraged companies going bankrupt and creating many vacancies. Indoor Class B and C shopping malls are becoming obsolete throughout the county–I see this as a secular trend due to demographic shift and today’s consumer preferences. The higher quality Class A malls are usually much better located in dense, infill areas of major MSA’s, and are doing a good job at repurposing any spaces that come available to meet the needs of the consumers.
The same goes for spaces in well-located power centers or grocery-anchored centers in similar areas that are vacated by bankrupt retailers. We are seeing retailer demand for these spaces quite high or secondary uses absorb them quite easily. Can’t say the same for secondary and tertiary markets; I would not want to be a retail landlord in that space today.
Q: How has the Miami market evolved in the past years and where do you see it going in the future?
Miami has grown at an incredibly rapid pace this cycle, and it is truly becoming a world-class city. We are seeing all the secondary urban nodes grow at the same pace as well; the city as a whole is growing, not just the urban core. Given the land constraints of Miami Dade County, the strong population/tourism growth, the benefit of being located in a tax-free state with great weather on our side, all the new supply throughout all asset classes is mostly being absorbed quite well (other than condos).
Q: What’s the most common problem you see in this industry?
Easy money can lead to asset bubbles and foul play. With the real estate market becoming more and more efficient and institutionalized over the past decades, it is becoming very easy to raise private capital and I see a lot of folks misusing those funds. Not the same this time around as in the last downturn, but I still see some transactions that really make me scratch my head and wonder who is ultimately going to get hurt. This is still a largely uncontrolled space.
Q: Which are the 3 most important aspects to consider in maintaining a lasting relationship with your clients?
- Do not be transactional; even if you make less money today, think about the relationship over time. Always leave some meat on the bone for the sake of the relationship.
- This is a small world, and it is easier than ever now to know who’s who, anywhere and everywhere. You only have one reputation and you must maintain it with the utmost care.
- Good relationships will lead to more prosperity over time, you never know where the next deal will come from.
Q: Any other insights you’d like to share?
This industry is evolving ever more rapidly with the advent of technology and how much information is available–a once highly inefficient space is becoming ever more efficient for these reasons. My comments above reflect the need for further checks and balances, however overall the industry is growing in the right direction due to widespread information and technology.
A good real estate education is easily found and we now have a good trove of empirical data over the past 40 years, which we can more easily work off of and make better decisions with in the future, and further educate those seeking to come into this space.