In today’s Four on Friday, we chat with Mark O. Hackner, president of Atlanta-based FOG Capital. Mark gives us the lowdown on the types of assets his company develops and acquires, discusses how he came to work in the commercial real estate industry, and reveals which Pink Floyd album and which Peter Sellers movie he would be hard-pressed to live without.
Give us an overview of FOG Capital and the types of properties the firm concentrates on.
Hackner: FOG Capital has traditionally been a developer of single-tenant credit properties. However, since 2009 the investment profile has been more eclectic with some build-to-suit development for national tenants, acquisition of entitled vacant land for shopping-center development and the purchase of vacant retail buildings for repositioning. We focus on major metro centers in the Southeast and in Chicago. A number of properties were acquired from institutional lenders and property owners selling retail properties with limited term remaining on the leases, and we have resources committed to additional similar acquisitions in 2014.
What's your take on the pace of retail investment sales and development so far in 2014, and how do you see those trends playing out over the rest of the year?
Hackner: It is remarkable how fast and how dramatically development has turned in the past two or three years, although not so much in the retail build-to-suit sector. Of course, a lot of this has been spurned by the compression of cap rates and the jump in rental rates, both in retail and multifamily. This has been a boon for developers and property owners who incubated projects a few years ago.
However, we now see land trading at prices predicated upon such rental and cap rates, and the key is going to be in not over-committing when the environment looks so compelling and lead times are long. I believe the rest of the year should continue to be strong, but watch for signs of a slowdown turn towards the end of the second quarter of 2015.
I also expect to see a narrowing of the gap in cap rates between the best credit and lease terms versus lesser credit and lease terms. The first push will be towards buyers recognizing that stores with strong volumes and limited lease terms are no less valuable than new stores with unproven sales histories and longer lease terms. The current spread of 200 to 400 basis points will shrink as investors learn to assess the longevity of these lease situations.
What made you decide to pursue a career in commercial real estate?
Hackner: Upon graduating from business school, I took a position in real estate only because the securities industry was not hiring at the time. I was fortunate enough, through a series of events and with no experience, to be running a shopping center development program for a national grocery chain within three months. The learning curve was steep and once in the business, I realized I enjoyed the retail end of it.
If you could listen to only one album and watch one movie for the rest of your life, what would that album and movie be?
Hackner: The album would be a recording of Beethoven’s Ninth Symphony or “Dark Side of the Moon.”
The movie would be “Being There.”