David Phelps Quoted in Commercial Property Executive on Latest Joint Venture by Sears Holdings

David Phelps, a partner in the real estate practice at Akin Gump, was quoted by Commercial Property Executive on a recently announced joint venture between Sears Holdings Corp. and The Macerich Co., a California-based real estate investment trust (REIT).

The article notes this is the third joint venture Sears has made in the past month, following earlier partnerships with General Growth Properties and Simon Property Group. In this recent transaction, Sears contributed nine properties to the joint venture where it currently operates stores at Macerich-owned malls.

Discussing what this means to the industry, Phelps said REITS are having a difficult time deploying capital, at least as it relates to new construction and development, and they are trying to find new areas for positive returns for investors. Because of an oversupply of retail space, especially in primary markets, he told the publication that growth “will come in the form of acquisition and not new development.”

Phelps continued by saying, “at least in first-tier markets, growth in the short run will come from acquisition of malls or the REITS or other companies who own them. The only out-of-ground construction is likely to come from construction in second- and third-tier markets or from acquisition and value added renovation in first-tier markets.”