Ever since childhood when he’d watch his father survey buildings and construction sites, Ron Koenigsberg has had a passion for real estate.
Now this highly regarded commercial real estate broker, based in Garden City, has found a new outlet for his passion—repurposing retail shopping centers across Long Island.
As the president of American Investment Properties, one of the leading niche brokerage firms in the region, Koenigsberg is launching a new partnership, the Long Island Investment Group, to “implement what’s been bothering me,” he admits, since 2005.
The revelation came to him when he was driving home about a decade ago and realized that even though he was one of the leading salesmen of shopping centers on the Island, he was still buying everything he needed online.
“I’m saying to myself: ‘I need another business because I’m finished. Retail shopping centers are not going to make it,’” he recalls. “I think I was a little bit ahead of the curve.”
Koenigsberg may have been right about that, but now the trend in retailing is much clearer, as the once-mighty giants in the retail mall world close up shop one by one.
“People who sell goods in the brick and mortar stores are not making it,” says Koenigsberg. But that doesn’t mean it’s Armageddon for retailing, or, more importantly for someone like him, the end of commercial real estate as he and his real estate peers have known it.
Instead, Keonigsberg bided his time and did his homework. He took a hard look at the Long Island landscape and saw something different—if only he could reconfigure it. He waited for his chance, and now that the economy is finally coming out of the Great Recession, he has the capital to make his move.
“We’re able to buy shopping centers at or below replacement costs,” says Koenigsberg. “We see it as a great opportunity at this very moment to be purchasing Long Island retail centers.”
He explains his modus operandi:
“We’re purchasing properties that are suffering and using our strategy to re-engineer these [poorly performing] strip centers into high-demand, service-orientated tenants that provide services, not goods,” he says.
Koenigsberg finds the shopping centers that are losing their tenants, where the vacancy rates are high, that are mismanaged, and in serious need of an upgrade. Then he’ll dig deeper. Perhaps the partners no longer get along and want to sell the property, or the center is in an estate sale or a divorce proceeding. He checks out the locations and sees if he and his partners can maximize the value.
Their acquisition criteria tend to be very specific at this point. They’re looking for shopping centers with about five to 10 stores of around 10,000-square feet each, relatively small compared to a regional mall. But they want the traffic to be 20,000 vehicles a day for the property to make the cut, and the center should have a ratio of 3.5 parking spaces to every 10,000-square feet of retail.
“We’re going to walk before we run,” he says. “Eventually we’d like Long Island Investment Group to be a major player, but I think that’s a 10-year process.”
One clear advantage Koenigsberg has with this strategy is that he doesn’t have to worry about rezoning these “tired” B- and C-grade properties. His group plans to take the shopping centers as they are, so he doesn’t have to worry about appearing before a local planning board, because he won’t need any variances. Once the site is 100-percent acquired, Koenigsberg and his partners in this venture will come in and fix up the site with their value-added upgrades, bring in new high-demand, service-oriented tenants that perform better than the current ones, and grow the net-operating income of the center over time.
“If we are able to isolate that property in Great Neck, or Roslyn, or Merrick, or East Northport, where the demographics warrant it, we’d love to raise the rent $12 to $15 per square foot,” Koenigsberg says, “but realistically we understand that we’re buying properties all over Long Island and it may result in only a $4 to $6 bump.”
For Koenigsberg, the ideal tenants bring in a lot of foot traffic. He cites urgent care centers where people seek treatment for minor medical needs, and cell phone providers where customers want their new products activated immediately. And, of course, he’s including decent food and drink establishments.
“You can’t change the experience of going out to a restaurant,” he says. “You can’t get that online!”
This new venture has barely begun, but Koenigsberg is confident it can succeed.
“What we are is a dynamic, successful, decades-old brokerage firm that sees an opportunity in this marketplace and we’re going about doing it,” he says. “Now that the economy is finally coming out of recession, we can follow our passion.”