Developers Diversified Realty Corp., based in Beachwood, announced plans last week to knock down unprofitable shopping centers in San Antonio, Texas, and Denver and remake the sites around new Target stores.
The publicly traded company, which owns and manages approximately 520 retail properties globally, views redevelopment as a growth strategy in a recession-scarred industry where new projects don’t make financial sense.
Lenders including Cleveland-based KeyCorp have curtailed their commitments to new projects. During the last three years, Key winnowed its exposure to commercial real estate and moved away from construction lending, in favor of working with established real estate owners who need commercial mortgages and other financial services.
“In today’s world, there’s a real aversion to risk,” said E.J. Burke, an executive vice president and group head overseeing real estate and corporate banking services at Key. “We like retail, but we’re more focused on owners at this point in the cycle.”
Yet retailers are under tremendous pressure to grow, shifting power to landlords after several difficult years. That means tenants are willing to take a second look at properties and projects they passed by a few years ago, said Daniel Hurwitz, president and chief executive officer of Developers Diversified.