More shades of gray at yearly retail property convention

LAS VEGAS (Reuters) - Only the showgirls sparkled at this year's RECon, the annual Las Vegas convention of retailers, shopping center owners and investors, as U.S. consumer worries over gas and food prices and tight credit markets dulled the outlook for the once thriving sector.

"This convention seems quieter than it has been," said Peter Gold, CB Richard Ellis Group Inc head of cross boarder retail for Europe the Middle East and Asia. "It feels like fewer people are here. You kind of expected that."

The International Council of Shopping Centers, the trade group sponsoring the event, said 42,942 people preregistered for the convention, down by only 40. But many attendees thought the final tallies will show a lot fewer people actually showed up.

"It took me hours last year to register," Mark St. Jean, vice president of Massachusetts-based Realty Financial Partners said. "This year it took 10 minutes."

A U.S. consumer spending slowdown plus a credit crunch have landed a double blow to some owners of retail real estate who see stores cutting back on expansion plans and face higher borrowing costs to finance buying, selling and redeveloping properties.

Yet long lease terms, typically 10 years, and well-tended balance sheets mean many property owners will continue to post strong cash flows. That's because their portion of their tenants' sales account for a small fraction of a landlord's overall income.

Unless a tenant goes bankrupt, they are obligated to pay rent, even if they close the store.

Many at the convention said the slowdown is weeding out those opportunists who were riding the wave of charged-up consumer spending and easy credit.

"The people I see here are the people who should be here," said Anthony Buono, CB Richard Ellis executive managing director of retail services. "There's not a lot of fringe."

But it is likely to hurt some developers who are building shopping centers, especially lifestyle centers - trendy open-air shopping centers that include a theater, restaurant or other entertainment venue -- and need to secure permanent financing for their projects once they are completed.

These types of centers proliferated as the retail industry boomed.

It is also likely hurt those who have built in areas such as Florida, Nevada and parts of California, where housing booms fizzled.

But others may be in line to reap the rewards. David Simon, chief executive of Simon Property Group, the No. 1 U.S. shopping center owner, said his company may be able to buy distressed, newly constructed centers.

Edward Coppola, chief executive officer of shopping center owner Macerich, said it also will help trim the competition for tenants in certain areas and bring back tenants who thought they could get a better deal at a nearby lifestyle center.

"It's a great opportunity for us because we're going to take those tenants," Coppola said.

The retail real estate transaction market also is beginning to show some signs of perking up again after the credit market brought sales to standstill last August, said James Koury, national director of the retail sales group for brokerage Jones Lang LaSalle.

Publicly traded real estate investment trusts and some institutional investors are beginning to sell. Institutional investors, such as pension funds, and private equity players are beginning to buy.

The new deals should help other potential buyers and sellers jump back in the game by giving them some pricing guides and expectations, Kuoury said.

"We're seeing a very healthy private sector market finding gold again against other investors who are using a broad brush of fear," Kurd said.

The yields buyers are expecting are about 50 to 150 percentage points below the peak of the market seen in August 2007. That means prices are going down but are not cratering. "Instead of Mt. Everest, they're getting Mt. McKinley," he said

In the Boston area alone, he expects 32 deals to close within the next few months.

(Editing by Kim Coghill)