Next Realty has countered a dramatically transformed retail landscape—including the extraordinary growth of e-commerce, a shakeout of big box retailers, and an ongoing evolution of brick and mortar retail —with a refinement of the central strategy that has guided the firm since 1998.
For 20 years, Next Realty has been known as an investment and management firm with a niche in retail properties and parking facilities. Over that time, Next has completed more than 60 investments valued in excess of $550 million.
Next Realty CEO and Founder Andrew S. Hochberg has concluded that in the current retail environment, “the yield potential is not there for the price being asked … the inherent risk being incurred.” As a result, Next Realty has been expanding and diversifying the asset classes in which it considers investing as it broadens its portfolio of assets under management. It also has developed the Next Equity Program (NEP) to provide equity for joint venture acquisitions with local operating partners.
Next’s overall acquisition philosophy underscores the thoughts of Howard Marks, an American investor, who writes in his book, The Most Important Thing, “Investment success doesn’t come from buying good things, but rather from buying things well.”
Next Realty’s refined strategy embraces that concept in what it defines as the Next Value-Keep® investment philosophy. In a value-keep strategy, the firm seeks to deliver stability over extended periods of time and varying economic conditions. That stability, Hochberg and his team believe, will be enhanced by acquiring multi-tenant assets—office, industrial and retail properties—that produce diversified cash flow potential with limited risk.
For example, most recently, Next Realty acquired Arlington Executive Plaza, a well-located office property in Arlington Heights comprised of six buildings totaling 62,500 square feet of space. The property is leased by a diverse roster of tenants, including several medical/healthcare users. This diversified tenant base provides a certain degree of protection in the event of an economic downturn.
Hochberg’s view on investing, in retail properties as well as in other asset classes, also includes buying properties with above average cash flow and limited risk. The firm also looks to avoid “problem properties” or those that may have a greater propensity to be adversely challenged as market dynamics fluctuate. To date, with a portfolio in excess of $250 million in assets under management, Next’s track record is very strong. Historically, the Next portfolio has maintained an occupancy rate at or above typical market percentages.
Realistically, however, no investor, including Next, is immune to the potential impact of a dramatically and constantly changing retail landscape, the bankruptcies of major national retailers, or other economic forces that are part of investing in real estate.
Over the years, the firm has been able to quickly and creatively rebound from individual property adversity. The firm has overcome property-specific challenges by leveraging property location and a unique, problem-solving mindset. (For more specific examples, please read “When Bad Things Happen to Good Properties”)
Regardless of varying economic conditions, or specialized market forces, Next Realty has recognized and proved that buying things well pays good dividends in the long-term.