In a captivating episode of Street Smart Success, Roger Becker delves into a revitalized corner of commercial real estate with Andy Weiner, the president of RockStep Capital. As a veteran in retail property investment, Weiner brings a refreshing perspective to a sector often deemed out of favor—enclosed malls and power centers in secondary and tertiary markets.
Retail's Revival: An Unlikely Comeback
While retail real estate has faced its share of challenges, Weiner explains that recent years have sparked a resurgence in select segments. Stagnant inventories, paired with the growing footprint of successful retailers like TJ Maxx, Ross, and Hobby Lobby, have created opportunities to raise rents and fill vacancies.
“Amazon, combined with COVID, cleared out weaker retailers. What’s left are strong, innovative companies that know how to compete with e-commerce giants.”
Weiner also highlights the unique financial opportunity in retail real estate.
“Retail might be the only sector where cap rates exceed borrowing costs, allowing investors to benefit immediately from cash flow. You don’t need wildly optimistic underwriting like in multifamily.”
Enclosed Malls: The Surprising Opportunity
RockStep Capital focuses heavily on enclosed malls, acquiring them at substantial discounts—often in the 15-18% cap rate range. Despite the negative press surrounding these properties, Weiner insists their cash flow potential, when managed effectively, is unmatched.
“Malls are a cash machine. For example, we purchased a mall in Manhattan, Kansas, at a 17% cap rate. In the first year, we hit $2.7 million in net operating income, exceeding our projections by $700,000.”
A cornerstone of RockStep's strategy is investing in "hometown America" rather than major metropolitan areas. Andy Weiner explains that the company doesn't target large markets like New York, Houston, or Chicago. Instead, it targets secondary markets where people care deeply about their community assets. This approach allows the company to foster local partnerships with city governments, community banks, and business leaders.
“In these markets, people want to see these properties thrive. Their involvement reduces risks and aligns our goals with theirs.”
Innovative Strategies for Enclosed Malls
Each mall acquisition is handled uniquely, employing strategies like:
High-Cash-Flow Management: Operating the property as is, capitalizing on strong retail demand.
“Sometimes, the market supports the existing retail footprint. In those cases, we just let the cash flow.”
2. Mixed-Use Redevelopment: Shrinking retail footprints to make room for alternative uses like multifamily housing, entertainment, or civic projects.
Mixed-Use Redevelopment: Shrinking retail footprints to make room for alternative uses like multifamily housing, entertainment, or civic projects.
“In Janesville, Wisconsin, the city is building a $50 million hockey arena on our mall site. We’re incorporating multifamily housing, hospitality, and reducing the retail space by half.”
Piece-by-Piece Sales: Selling off individual parcels, such as out parcel restaurants or anchor stores to reduce overall investment risk.
“We’ll buy a property at a 15% cap rate, sell off portions at 7% or 8%, and keep the rest for high cash flow.”
Community Investments: A Game-Changer
RockStep requires local investor involvement for every deal. In other words, according to Andy Weiner, if their team can't find community buy-in, they walk away. These partnerships provide invaluable insights into local needs and opportunities, from zoning changes to alternative property uses.
“Our local investors become deputized leasing agents. They’re on the boards of local institutions—hospitals, colleges, economic development groups. They know what the community needs and guide us to the right solutions.”
Weiner recounts a success story in Hot Springs, Arkansas, explaining that the company bought a mall at a mid-teens cap rate and repaid all investor capital. At the moment, the RockStep Capital team is redeveloping it with new tenants and restaurants. Weiner asserts that the involvement of local banks and investors has been key to their success.
Lessons From the Field
Weiner’s journey isn’t just about real estate; it’s about adhering to a guiding philosophy of integrity and community. Inspired by his family’s legacy of paying back debts during the Great Depression, Weiner ensures his company operates with transparency and accountability, encapsulated in RockStep’s 25 guiding principles.
“Do the right thing, always. My grandfather taught me that even if you’re legally absolved, you still have a moral obligation to make things right. That lesson drives everything I do.”
Weiner also shares a personal insight into the nature of consequences. In his professional and personal life, he has learned that one cannot live without consequences. Ultimately, every decision matters.
Building A Brighter Future For Retail
Under Andy Weiner's leadership, RockStep Capital is turning challenges into opportunities and transforming the perception of retail real estate. Their innovative approach generates returns, strengthens communities, creates jobs, and reimagines spaces as vital hubs for everyday life.
For those looking to invest in a forward-thinking, community-focused venture, RockStep Capital offers a rare combination of financial prudence and social impact.
“We don’t just invest in properties; we invest in people, cities, and possibilities. If you want to be part of revitalizing hometown America while achieving remarkable returns, RockStep Capital is the partner you’ve been looking for.”
