New England is beset with small one-way streets, curvy roads that switch names mid-curve, and traffic jams that put even the worst in Los Angeles to shame. But it’s also full of potential for investors looking to best such challenges with unique retail solutions. Such is the case with Linear Retail Properties. Bill Beckeman, president and CEO, established the company in 2003 with a mission to be an aggregator of smaller, well-located convenience-oriented retail properties in the New England and Greater Boston area. Beckeman said institutional investors typically don’t find great success in buying significant amounts of retail space in New England, mostly because the region doesn’t look like other parts of the country. So he founded Linear Retail Properties with a focus on the region’s distinct profile.
“I saw an opportunity to be an aggregator of well-performing, well-located smaller properties,” he said. “We started on that mission seven years ago and formed a terrific capital partnership. We’ve been acquiring and operating properties that have these characteristics ever since.”
Today, Linear Retail Properties owns and operates 55 properties in Eastern Massachusetts, Southern New Hampshire, and Rhode Island. It purchases properties ranging from $1 million to $25 million, and a typical deal will cost between $5 million and $10 million. The real estate company’s portfolio includes properties in smaller convenient strip centers in well-located areas, but it’s also invested in some storefront and specialty retail in targeted markets such as Newbury Street in Boston and other downtown locations.
“We like to own properties in the primary destination retail corridors where dominant, large tenants are located,” Beckeman said. “A lot of real estate companies focus on big box or even junior box tenants, but our primary focus is on smaller stores.”
Building the team
As he plunged into the New England real estate market, Beckeman put together an operating team that could execute on his mission, starting with a capital partner to finance the purchase of the properties. He also found the right fit with business partner Aubrey Cannuscio.
Cannuscio joined shortly after Beckeman started the company, and the two worked together on Linear Retail Properties’ second acquisition as well as those going forward. Beckeman said Cannuscio has been integral in working closely with the brokerage community and has helped the company develop a reputation of being a buyer that closes.
“We have to pay pretty well to survive in such a competitive market, but we’ve closed on almost every transaction we’ve put under contract,” said Beckeman. “Brokers and sellers appreciate that.”
With only 13 employees handling its growing portfolio, Linear Retail Properties outsources many of its services, such as property management. Part of the decision to outsource was based on ease, but the other was based on Beckeman’s prior experience as a partner in a property management services company.
“KeyPoint Partners provides the majority of the property management services to my firm,” he said. “In some markets, competent and capable management companies aren’t available, but we’re fortunate here.”
Outsourcing some of its services has also enabled Linear Retail Properties to remain on top of its niche market; there are few full-time professionals interested in buying, recapitalizing, and repositioning the kinds of properties the company does and even fewer with the same caliber capital.
“We tend to compete against well-heeled private investors that dabble in retail or who might own office buildings or other property types,” said Beckeman. “We focus strictly on retail in a targeted geography, so it gives us a competitive advantage.”
Linear Retail Properties’ strict focus has brought it tremendous success. In the past two years, under the direction of Linear Retail Properties’ partner in charge of leasing, Joel Kadis, the company has seen a 6% increase in occupancy and introduced approximately 50 new retailers to its portfolio. “We seem to have a formula for the times,” Beckeman said. “We work our properties hard, and we’re constantly improving and upgrading them.”
Wearing the retail hat
The process by which Linear Retail Properties finds clients to fit its properties varies. For the majority of the properties, the company hires brokers it believes will be the best fit for a specific location, whether a local broker wired into a community or one that handles lower-profile mom-and-pop clients.
When handling dominant, strategic locations, Linear Retail tends to work with the national relationship brokerage houses. Beckeman said as Linear Retail Properties has grown and built a critical mass of properties and stores, retailers have come to know its name. “Often, retailers or their brokers call us even before we’ve called them to offer them a tenancy,” he said.
But before agreeing to offer a retailer a tenancy, Linear Retail Properties evaluates the merchandising mix to find out which tenant would help raise the value and the traffic at any given asset. Beckeman said the tenant also has to fit the vision his company has for how the property is to be repositioned.
From a retailer’s perspective, the appeal of working with Linear Retail Properties comes from how the company chooses its acquisitions and how it handles working with the municipalities in which they’re located. Each property must have easy access, a strong identity, and visibility, but they don’t need to be in perfect condition. In fact, the company will sometimes buy a location with vacancies with a focus on repositioning if it’s in a prominent location.
“We do buy stabilized properties or those with a value-added characteristic to them, but we start by looking at the demographics to make sure the property has enough of a potential customer base,” Beckeman said.
Although working with its properties’ cities and towns is essential, Beckeman said it’s a double-edged sword. Sometimes design constraints stifle the competition, but sometimes it stifles his tenants, too. However, Linear Retail Properties’ asset management team focus and track record of improving its properties tends to make cities and towns more receptive to discuss changes that may aid the success of its tenants.
“We’ll work with the town and tell it why we need to improve the signage, why it needs to work better, and why it should look a certain way,” Beckeman said. Retailers market themselves and spend a lot of money establishing their brand. When municipalities want everything to be one color, block letters, or wood-carved signs, the result isn’t as effective for retailers. “When dealing with any of our properties, we try to put on the retailers’ hat and tackle their issues from a real estate standpoint.”
A thawing market
What differentiates Linear Retail Properties from its competition is that it’s backed by institutional capital. The company has the financial capacity to make needed improvements, and it strives to position its properties for long-term success. Linear also tends to buy properties from individuals who are not full-time operators that may be more focused on short-term cash flow.
Such backing made it possible for this real estate company to survive the economic downturn in great shape. In its first five years, it developed a reputation as a prolific buyer of New England properties. During the downturn, the company chose not to focus on buying distressed real estate and instead focused more on improving its existing portfolio.
As a result, when the market started to thaw last year, Cannuscio was able to once again actively pursue acquisitions. Linear has since purchased three new properties with several targeted deals on the horizon.
Beckeman said with the leverage of a strong portfolio, it’s easier to dictate a winning strategy. “We’re in it for the long haul,” he said. “We spend the money on our properties to make them attractive and make them work for the cities, towns, and retailers involved.”