As others retreat from the battered U.S. retail space, a subsidiary of a major Israeli player sees an opportunity to pick up distressed assets on the cheap.
Gazit Horizons, the U.S. arm of Tel Aviv-based Gazit-Globe Ltd., has approximately $2 billion in potential spending power, and much of it could be deployed on retail in American gateway cities, according to newly-appointed president and CEO Jeffrey Mooallem.
Mooallem, who joined the company from retail-focused real estate investment trust Federal Realty Investment Trust, told The Real Deal that he plans to focus on acquiring retail assets in markets such as New York, Miami and Los Angeles, despite uncertainty surrounding the future of the sector.
Manhattan saw a net loss of 24 chain stores last year and Ralph Lauren’s decision to close its Fifth Avenue flagship store fueled speculation that the struggling retail industry was dragging down the retail real estate market, TRD reported. Thousands of mall-based stores, such as JCPenney, Macy’s and Sears, are also shuttering across the country. Developer Billy Macklowe recently said retail is “fucked, plain and simple.”
“I believe everything is still cyclical,” Mooallem said, “so it makes sense for us to be zigging while others are zagging.”
A good chunk of Gazit Horizons’ cash was generated through the 2016 merger of Gazit’s former U.S. subsidiary, Equity One, with Regency Centers Corporation. The parent company, headed by Chaim Katzman, is focused on supermarket-anchored shopping centers in urban markets across the world.
Mooallem said he believes there will be opportunity arising from distress in the market in 2018. While high street retail on strips such as Fifth and Madison Avenues may still be overpriced, an inevitable correction could spell opportunity for well-capitalized firms like Gazit, though there’s no pressure to buy quickly.
“I’d rather have $2 billion in cash and no assets right now than $2 billion in assets and no cash,” he said. “If prices adjust, we can be more aggressive.”
He is also looking for underutilized retail in the boroughs, he said.
Mooallem appears to be following the lead of executives such as Steve Roth of Vornado Realty Trust, who said last month that there is enormous opportunity for those with capital to “feed on the carnage” of the retail sector.