The Whole #CRE Industry is Improving Step by Step, Slowly and Steadily


Mr. Henry, 63, is the vice chairman, chief executive and president of the Kimco Realty Corporation, a real estate investment trust based in New Hyde Park, N.Y., that owns and operates nearly 930 neighborhood and community shopping centers in North and South America, totaling 136 million square feet.

Christopher Gregory/The New York Times

Interview conducted and condensed by


QHow is business?

A. The whole industry is improving step by step, slowly and steadily. And since consumer spending is 70 percent of the economy, and the economy is still very soft, it’s a gradual improvement.

But our tenants in general — retailers — are healthier. Their balance sheets are stronger; they’ve learned to live with lower levels of inventory and they’ve cut their operating expenses where they can. So the national retailers in general are in much better financial shape than they have been in years and committed to resuming their store-count expansion. In addition, you’ve got the country growing at three million a year, and all those people need dry cleaners or Dunkin’ Donuts.

QHow many new projects or deals are you working on these days?

A. In the last year and a half we bought about 40 shopping centers and we sold about 60. The ones that we bought were bigger than the ones we sold, so net-net we’re growing.

Capitalization rates for the good stuff are 6 percent, and in some places in the high 5 percent.

QHas the proliferation of online shopping sites affected business?

A. There certainly has been an effect. It’s not quite as scary as it was a couple of years ago, because most of the national retailers have found a way to integrate their e-commerce divisions with their brick-and-mortar divisions and enhance their sales by having an Internet strategy and a store strategy. And there are certainly services like dry cleaning or barber shops that you could never do online.

QAre your tenants, though, leasing less space?

A. There are challenges to our industry in general. One is the fact that e-commerce is growing faster than regular sales. Secondly, you do have smaller store prototypes — they may want to renew but in a smaller space, so we may have to subdivide.

The third challenge is local stores — mom-and-pops simply don’t have the credit that they’re used to. So we continue to see the signs of that in our portfolio. As an example, our bigger stores over 10,000 square feet are 96 percent leased. Under that level it’s in the 80s.

QWhat percentage of your portfolio is made up of mom-and-pop stores?

A. It’s very small. Less than 15 percent of our income comes from the small guys. The true mom-and-pops are probably less than 10 percent.

National retailers or franchisees are increasing market share because of credit restriction with mom-and-pops. Your local bookshops are going away, and so are coffee shops.

QWho is your biggest tenant?

A. Home Depot is our biggest tenant, but no tenant is more than 3 percent of our income.

QYou were named C.E.O. of Kimco in late 2009, a year after becoming the president. What changes have you made since taking the helm?

A. Part of these changes are a direct result of the recession. As an example, we used to be a merchant builder. We used to do a lot of development activities; we scaled that back. We used to have a lending business where we lent money to shopping-center owners and developers. We’re no longer in the lending business.

We’re concentrating on very simple equity ownership: long-term neighborhood and community shopping centers. So we simplified our business model. We also acquired some nonretail assets — we had some senior living assets, office buildings and hotels — and we gradually sold off our non-shopping-center assets. We started with $1.2 billion nonretail assets and it’s down to a little less than $500 million.

QHow did Kimco fare during the recession?

A. Market rents in 2009 dropped 25 to 30 percent, and perhaps we recovered a third of that. But rents are still down from peak levels.

QWhat is your average rental rate?

A. Our average rent is about $12 a foot, which I would argue is considerably lower than market rents because many of those leases are older leases. So if you wanted a guess, I’d say the national average for rents is $20-ish a foot.

Larger tenants generally pay lower rent per foot, so if you’re a local dry cleaner in Long Island you may pay $40 or $50 a foot, and a big grocery store would pay $20.

QDo you like to shop?

A. Like most men, I would say no.

QDo you have any predictions for the holiday season?

A. We think it’s going to be O.K., subject to macro events. There are lots of global events to worry about.

A version of this interview appeared in print on September 19, 2012, on page B8 of the New York edition with the headline: David B. Henry.
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