Timeless Business and Building Strategies

Building a Retail Empire: Systems, Strategies, and Success in Commercial Real Estate

• Tony Johnson

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Jeffrey Rosenberg shares the journey of Big V Properties from a family grocery business to a vertically integrated real estate company managing 10 million square feet across 14 states. He reveals how strategic systems implementation and operational efficiency enabled their impressive growth trajectory.

• Started as a family grocery business in 1942, with early crowdfunding through 6% savings bonds sold to customers
• Evolved from small $2-3 million shopping centers to $50-200 million acquisitions in high-growth markets
• Invested in enterprise-level systems like Yardi and custom Salesforce applications to scale without operational impact
• Tracks tenant timelines as KPIs to maximize efficiency and return on investment
• Uses comprehensive credit checks through dedicated credit department to mitigate tenant risk
• Maintains control through strategic ground leases rather than selling outparcels
• Focuses on open-air retail centers with national anchors in the Southern US
• Manages approximately $50 million in annual construction projects
• Prioritizes performing consistently to build reputation with national retailers
• Carefully evaluates profit margins when deciding whether to develop or sell to specialized developers

If you're interested in learning more about Big V Properties, visit bigv.com or contact Jeffrey directly at jrosenberg@bigv.com.

Big V Properties is a family-owned leader in retail real estate with an 80-year history of serving communities and creating superior value for investors. We own, operate, and develop premier retail properties in growing and thriving Sunbelt communities. Our properties are the heart of retail districts in high-growth demographic markets. This careful selection has led to record-high occupancy rates, as our prime locations drive significant business for our tenants, enhance returns for investors, and support vibrant community activity.

To learn more about Tony Johnson and Timeless visit us at:
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Speaker 1:

Welcome to Timeless Building and Business Strategies. This is Tony Johnson. I'm here today with Jeffrey Rosenberg from Big V Properties. Jeffrey, thank you so much for joining us.

Speaker 2:

Happy to be here, Tony.

Speaker 1:

So, Jeffrey, could you first give everyone a background on you and how you got into real estate and development?

Speaker 2:

Sure, sure, I'll give you my quick elevator speech. My grandfather started a corner grocery store in 1942. He opened a bigger store in 1952. And funny story he actually sold 6% savings bonds to all of his customers to raise the capital. I would consider one of the first crowdsource funded companies out there. And I remember back in 19, I want to say 85, he was telling me it was the last bond to be paid off from the 50s Because it was a 30 year. He sold 30 year $100, 6% savings bonds to all of his customers to raise the capital. But he opened up a second store and that grew into a fairly large supermarket business. We sold the supermarket company in 1987, kept the real estate. We owned a host of shopping centers plus the supermarkets in them, and then over the years we have transitioned our assets to the south and southeast and southwest parts of the United States. We are completely vertically integrated. Today we have about 10 million square feet in about 14 states across the US.

Speaker 1:

Wow, amazing. So could you tell us how Big V evolved over time to stay ahead of the market and grow?

Speaker 2:

Well, we started as a supermarket company. We owned all of the real estate and so we were always in the real estate business. We sold the supermarket company and, as I mentioned, we transitioned our assets to the South. But as we've grown as a real estate company, we started off in the beginning I was buying small $2 million, $3 million shopping centers, $5 million shopping centers, mostly strip supermarket anchored. We grew and modified our acquisition targets to a larger format center back in, let's say, probably started in 2015, where we started to focus more on the 20 to $30 million open air centers, and then we grew that portfolio and continue to look at higher and better properties and so, at the end of the day, most of our acquisitions were best in class open air, usually target or or Walmart anchored centers in the best part of the retail market within a high growth demographic market, and so our acquisitions range from, you know, a $50 million center up to we've purchased up to $200 million.

Speaker 1:

So that is a ton of growth and I know we've spoken briefly prior to this and before you know, you were at the two to $3 dollar mark and now you're at the 50 to 200. And what you stated, which I think, is profound and when anyone's trying to scale that much, you really have to set up systems and processes to be able to get to that level and not be falling apart, chasing your tail and be completely unorganized and have some things collapse upon you, chasing your tail and be completely unorganized and have some things collapse upon you. Could you walk everyone through how you set up everything prior to getting to that level and to make it a smoother transition for growth?

Speaker 2:

Sure. So when we were really small, we actually decided to invest in a much bigger system. So there are two basic systems in the industry today for managing our types of products. There's MRI and Yardi, and so we chose Yardi as our base, but we chose their biggest system. So we did not use the Yardi starting system or whatever.

Speaker 2:

We chose the biggest Yardi system that was out there because I always knew that we needed room to grow, because every time we add a shopping center to our portfolio, there is no impact to our operations and so when you think about the complexity of that right onboarding new tenants, accounts, payable accounts, receivable there is no organizational impact to the addition of additional square footage because of the systems that we have in place. We've also invested heavily in Salesforce and some people like Salesforce, some people don't, but we've developed our own Salesforce applications over the last 10 years. That really helps to manage our entire leasing process and it manages our legal process and manages the entire system and is fully convergent with Yardi. So we have it set up so it communicates back and forth with Yardi so that we are as efficient as possible in managing our business.

Speaker 2:

And as you know, in the retail side you know it's a very, very detail oriented business and you know when we're doing a build out and you're in construction. So you know, you've got timelines, you've got. You know you've got various trigger dates. If you have to approve a plan within 10 days. If you don't approve the plan, then it's automatically deemed approved, and if you, you know so the whole, those whole trigger dates which, can you know, potentially really screw you up if you miss something. And so we, we built an entire Salesforce system that manages that, that whole process, process, so we don't miss trigger dates. And then we do, I don't know, we do about 50 million in construction on a yearly basis, and that's. You know. New pads, new buildings. We're under construction now for a new target in Wilmington, north Carolina, in your neighborhood.

Speaker 1:

Yes, sir.

Speaker 2:

And so that's all tied into our systems and processes as well.

Speaker 1:

And it's really interesting because there are so many that go through this process and to get to your level is extremely difficult. So you know a lot of people can start getting into development. But when you try and vertically integrate, this becomes not just a little real estate firm where you have a couple of people. You can get some VA assistance. You're running a full operation once you vertically integrate. And so when we're talking these big deals that you're putting together, when you transitioned out from the grocer anchors to the retail, what was the biggest difference you saw in operational and the ability for growth?

Speaker 2:

Well, so a couple of comments. Number one the grocery business is very, very low margins, and so when we were in the grocery business, you have to operate super efficiently in order to make money. And it's similar in our business In construction. You know one little miss and we could be off $100,000. And so you have to be really, you have to be really efficient from an operation basis in order to make sure you don't miss anything, that you're delivering what you've promised to deliver to your customers. I mean, you know it's probably similar to your construction business as well, where you need to be customer centric.

Speaker 2:

You know our customers are our tenants, our investors. You know our constituents. We've got entitlement issues right. So we all have entitlement issues on development and whether that's dealing with the municipalities, with the DOTs, you know those are really important components that you have to manage efficiently, and so we've got a whole group of people that continuously manage that process. We're doing subdivisions on development and we're doing subdivisions on out parcels, and we're always in various municipalities, and so those pieces and the efficiency in which you're able to handle them help to fuel your growth, because the market rewards people who perform and do what they say they're going to do, and so everybody says, oh, I could have done that, I could do that. But then you know, at the end of the day it's those people who do what they say they're going to do and continuously do that over a long period of time, are those people who actually do the new buildings, who get awarded the contracts, who are able to grow their business.

Speaker 1:

Absolutely. Yeah, this is a marathon and reputation is everything. A marathon and reputation is everything. So when you're dealing with these large retailers, you know it's all about performing on what you say you're going to do over and over and over again. And so I have a quick question when you're going through this, you know one of the biggest challenges on timelines is getting through that entitlement. When you're going to these different areas, dealing with different municipalities and you have, you know, dot to deal with there's constant different challenges that you run up with. Do you guys have your own design team that works on your civil, or do you always farm that out? Or do you in-house civil design work in order to move entitlement through faster?

Speaker 2:

No, we farm it out.

Speaker 2:

So we have a group of partners that we use on a consistent basis that we've dealt with for many years.

Speaker 2:

We also sometimes use a local expediter, which may be a little bit more costly but certainly efficient in terms of getting things done. I mean, a lot of times we've got tenants who are doing their build outs, and the tenants you know need really help from us because they're either sometimes they're mom and pops and they're building out a new store, sometimes they're nationals, but they're franchised and the franchisee needs help, and so everybody's goal is to get a tenant up, built and operating and paying rent as fast as possible. And so if we can shorten that time and we track the time so we track from the time a tenant calls us to when we sign the lease, to when we start and deliver their space, to when they get open and when they start paying rent, and we use that as one of our KPI metrics is to look at squeezing those timeframes down, because every week saved where we can deliver quicker is a week faster we receive rent and it's a better outcome for us and for our investor group.

Speaker 1:

Absolutely.

Speaker 1:

And so to speak to that for people who aren't so familiar, when you're going through and when we're talking through this, so when you're going, he's going through entitlement, building the shell, he's getting a lease tenant though it's a, let's say it's a national franchise, the tenant, the franchisee he may's say it's a national franchise, the tenant, the franchisee, he may have never opened one of these franchises before.

Speaker 1:

So Jeff's having to walk them through the whole process of opening this and you're trying to get all of this done and you're at one. You're at an advantage because when you're doing the show, you can get a portion of that upfit going and you already have the trades there, so you're more cost efficient. So you have an advantage when you're doing that, which is a great reason to vertically integrate the construction to your development. But so, yes, to speak to all this every single week makes a difference to you to get that rent earlier because you know the client probably, based on the lease agreement, doesn't have to pay rent till you get a CEO and they're ready to occupy. So all these things in order for you to make money. You can really make a lot more money or really lose a lot of money based on just a couple months turns into quite a bit of money when you're dealing with this amount.

Speaker 2:

Yeah, yeah. And actually what's also kind of interesting to remember in the real estate business, the landlord is often looked at like a bank right, and so you know that the landlord provides certain. We call it tenant dollars right when we'll provide X dollars, and so typically a tenant may be spending our money, and so our goal is to make sure that they're open faster, because it's our money that we're giving them to improve the space, but we don't start getting a return on our money until they start paying rent.

Speaker 1:

Right, absolutely, and a lot of these. They'll want an agreement where they are not paying rent for a few months, even after they get in the space. So not only are the tenants asking you to front them money with the tenant improvement allowance, then they'll want, you know, three or four months rent. So these things can really put you in a pinch if you don't hit that timeline. And, yeah, you're really invested in and you know, the shocking thing is some of the people that don't have a lot of experience, that don't have, you know multiple locations already, they think the tenant improvement allowance is supposed to cover, you know, half their bill or something you know, and then they want the money for free. They don't quite understand the amount of risk and overhead you're putting in, because when you put in those short term tenants, if they don't survive the five or seven year lease agreement, you know they go out, they fall out. You have to retenant that space. The new tenant doesn't want that build out. They're wanting TI again.

Speaker 2:

That's right, that's right. And we, you know, we own several of our own office buildings where we, where we? We have an office building in Charlotte, an office building in the state of New York and then some additional office buildings, and the office market, surprisingly, is even worse.

Speaker 1:

Right, I don't know if you know much about building in the office building market.

Speaker 2:

But, holy mackerel, you could spend. Every office tenant wants a complete build out from scratch and everybody's different. And you do this build out and someone leaves in two years and you've spent money where you're going to only recoup it over a five year period, and now you're two years in and you lose the balance of your investment and you have to reinvest for another office tenant, and so retail is similar to that not as bad, but retail is similar.

Speaker 2:

Where you're right. If a tenant goes out of business, we have that. Now we have a tenant that we paid a TI package to. They can't afford for us to pay them and they pay the contractor, so we actually had the contract assigned to us and we pay the contract directly. There are those scenarios as well.

Speaker 1:

Yeah, that happens quite a bit actually with any of the newer franchisees or just mom and pops there. They run into that quite a bit. So that is something you need to do your due diligence whenever you are leasing out space, uh, to the mom and pops, to make sure they're financially able to cover what they're signing on the line for you know they. It's easy for someone who doesn't have a ton of money to go sign these things. So you really have to do your due diligence, even if you're trying to fill a space slowly, slow to approve anyone in the space, because, like we're talking about someone, like you guys, you could really put yourself in a pinch. If you have two or three of those tenants fall apart, that turns into quite a bit of money, especially if we're talking about a 20,000 square foot space. This is no small thing when it falls apart, right.

Speaker 2:

Right, yeah, and that's that. That's part of our build out in Salesforce. So when someone comes in, they, they get a lease. The leasing company then pushes it through Salesforce to credit Credit, will run background checks and credit, come back with an approval or denial or say something like you need another guarantor or you need you know X, and then they'll go back. They'll go back, be pushed back to the leasing individual and they'll say all right, you know we can't, we can't approve you with your credit. You're, you know, and they don't see credit scores or leasing folks. I mean, it's only through our credit department that they, they see credit scores, they see credit scores, but the leasing team and the team who are asking for credit checks will get a red or a yellow or a green or a green with a personal guarantee or a green with no guarantee or those types of things. And really, really important to understand the risk that you're taking when we as bankers you know we're landlords, but we're bankers provide capital to our tenants.

Speaker 1:

Right, and so let's. On the reverse side of that, we could go to someone like when you mentioned Target, some of these bigger retailers. So it's a flip difference on that. That incorporates your risk as well, because for them they want much lower rent. They want you to get their space to a certain portion. They don't want a TI, they want the space built out to a certain extent, then turned over to them and they just have their portions come in right. So could you speak to that to someone understand? That's a. That's a whole different ballgame.

Speaker 2:

So with the bigger retailers, yeah, so, for example, we're under construction for a target project in Monkey Junction, right near you guys in Wilmington, north Carolina, and Target bought their land from us as part of the as part of it. They don't want us to build their building, though. They're building their own building, but they want us to create the site, put the parking lot in, parking lot lights, put all the access in, do the off sites, which we're doing that and then once we complete them I think it's going to be done very shortly then we turn it over to them and they'll start building their store. And they don't want us to build their store because their cost of capital is a lot less than ours.

Speaker 2:

I mean, if you think about it, we're borrowing money at what everybody else is borrowing money 6%, 7%, whatever it is today, seven and a half but Target's borrowing money at four, three and a half, whatever their you know, their corporate internal rate charges, and so they can borrow money a lot less than we can. And so they're all building their own stores. And a lot of times we do a lot of pad sites. We do a lot of ground rents where the tenant just wants us to say here's your piece of dirt, it's got sewer water, electric to a specific place you've designated. We've finished all the parking and the easements are in place. Now tenant just spends their own dollars.

Speaker 2:

A national tenant usually spends their own dollars and just builds their space. We're doing that with in Houston, texas, as a shopping center we own. We're putting in a Twin Peaks to replace a TGI Fridays and it's the same thing. It's a ground rent. They're taking the TGI Fridays building they're going to I don't know if they're going to take it down or redo it, but from our point of view we just have a ground lease.

Speaker 1:

So for those that don't understand ground lease, could you go through that, Jeffrey, just so someone understands the difference in you guys doing a ground lease versus selling the out parcel.

Speaker 2:

Sure. So when we do a ground lease, we basically sign a lease a long-term lease, and usually it's 20 plus years with a national tenant who then builds and owns their own building. So they actually so we own the ground underneath it. They build the building At the end of the lease term. The building belongs to us, right, but their cost of capital is much less and we would charge a lot more rent for us to build the building. So right now our rent is based upon the cost of that dirt. So if it's a million dollars that we assume on the market piece of dirt, we may charge $100,000 a year for that million dollars or some return metrics that we're looking for and not build a building.

Speaker 2:

And for us, we like ground leases. I mean, they're easy to handle, you don't have to worry about building issues and there are access agreements related to those that the tenant still has all the access to parking and driveways or whatever. And if we had sold that piece to the tenant instead, we would then not get the benefit of a long-term tenant as part of the shopping center. And when someone owns their own piece, they can do whatever they want with it. And a lot of times we want to make sure we understand what the use of that space is going to be right. And so because if we sell a I don't know like the TGI Fridays if that was a TGI Fridays and we sold that to TGI Fridays and they're in bankruptcy or they close the store, we can't control what actually goes there. Right, tgi Fridays could put up I don't know anything that they want there, but if we own and and have a ground lease, we can control what actually ends up replacing tjf fridays right, because this could ruin you.

Speaker 1:

You're having a full center behind you. You have these out parcels in front. You get somebody to go in there and does some piece of junk, or like a garden center where you've got something that doesn't make any sense. Uh, that matches up, you know it. It will deter traffic into the center, and so this is a smart maneuver to hold on to make sure that the because not only does that outpost you want to keep that filled, but when you start getting different types of tenants, then your major retailers behind you might say well, we're getting terrible traffic through here, so now we don't want to renew. So it could, it could spoil the whole entire master site.

Speaker 2:

But I will. I will tell you that there are some out parcels that we do sell. So we own some Chick-fil-A's. We sold those. We own, you know some, some uses that we don't think will change over a very long period of time. And if we can build a Chick-fil-A for a million dollars and sell it for a million and a half, you know maybe then we know the use won't change that could be a benefit if we like a bank.

Speaker 2:

So currently we're under construction with a Wells Bank and we have that in the market to be sold with a Wells Bank and we have that in the market to be sold, and so we build it to a certain cap rate, right or cost, and we understand that we're probably going to sell it at a different cost and give us a little bit of a you know, a nice profit. Now, some of the retailers really, as you mentioned earlier, a lot of the retailers control the amount of profit you can make and so you know they're really controlling in terms of your ability to make money. And you know many of the supermarkets if you're building new supermarkets, many of the supermarket companies control your profit. Many of the major retailers for new development controlled your profit, and so it used to be. You know 15, 20 years ago that it was more profitable than it is today.

Speaker 1:

Yeah, especially right now with the inflation, because those retailers, they don't want to go up on the amount that they're spending. So there's a crunch there. You know the land price is up, so they don't. You know you get your profit a lot of times from getting a great land price, but the land prices are up, right. So that's crunched. You then the construction numbers up. Uh, let's say it's up 20, the retailer might go up 10, right. So there's a variation there in how much more. And they're saying, yes, well, this is the max we're going to pay for you to get this site to this point, or get the site and the shell built and hand it over to us and this is the set we're paying.

Speaker 1:

So then to your point. You have to figure that all up and that really, you know you have investors that just want to go and buy that because you know you'll walk into a 20 year lease and so they just, you know, at a cap rate, want to buy that cashflow. So there's a lot of pressure on you to go in there and build it at the number. Um, you know, and you don't know if you have unforeseens that come up underground. Those things don't matter to them. That's your problem. So all you're going in at a tight margin. All of a sudden you could really lose your tail. So it takes a lot of courage to do what you're doing, jeffrey, and so that's amazing. Now, if people do you let's say you had a developer that wants you to go find him some land and build him Do you, do you ever do that? Or is everything just for your company only?

Speaker 2:

We do that on a very limited basis and so that's not a big part of our business. But, you know, sometimes we can't. Even so, sometimes we own property where we want to develop, but we, because of our cost of capital, it doesn't make sense for us and so we actually sell it to a national you know Hardee's developer, or a national, you know Chick-fil-A developer, if there is one or a national McDonald's developer, right. And so because they can build it, if they have a relationship with McDonald's or a relationship with Hardee's or a relationship, and they have the plans and they have the exact costs related and they can do it cheaper, more consistently than we can. And you know, for us to make, uh, in a two million dollar investment, for us to make a hundred thousand dollars, it's very, you know it's not, it's not very appealing?

Speaker 1:

no, not very, because the risk is.

Speaker 2:

we don't know that business well enough and we just made a hundred thousand dollar mistake and you know whereas a national developer for you know, for one of those you know quick service restaurants. They do it day in and day out.

Speaker 1:

Day in and day out. And I will tell you, they have those things so tight. There is not more than a hundred thousand on a two million build out. I can tell you that. So you are, oh, really, is that, is that? So is that stamp? Because that's, you know, that's what we were looking at.

Speaker 2:

I'm like I passed on it. I'm like, listen, we own the dirt. Well, I'd rather sell the dirt to someone who's uh, willing to, who does that day in a day. We don't do this day in day like we don't. We don't build 50 of these a year. We don't do this day in and day out. We don't build 50 of these a year. We don't build 20 of them. We build two. Right, I'd rather let someone who builds 50 of these a year do it Much smarter.

Speaker 1:

Yeah, it's a niche. It's the Starbucks, the Hardee's, the McDonald's, even the Chick-fil-A's, all of them, the Freddy's Frozen Custard's, a lot of these that are really growing and expanding right now. It is extremely difficult with the way numbers have moved right now and, as I was speaking to earlier, these people, they don't want to go up on their number. So there is these things that have tightened up so much so the labor that you have to get is inadequate to perform the work that's needed on these spaces. So you really get yourself in a bind because you've got to hit timelines and dates and then you have, in order to make the numbers work, you have to use inadequate subcontractors and labor forces to hit your number. That can't hit the timelines, don't have, don't have the crews to perform the work as promised.

Speaker 1:

So, yeah, you're you're smart to not get into that, and so anybody looking to get into those things be very cautious. Uh, we don't want you to get injured. So, jeffrey, thank you so much for joining us today. Uh, we'd love to get you back on talk some more, and I appreciate your time today. If someone wants to reach out to you directly, what's the best way to get in touch with you?

Speaker 2:

They can reach me by email at jrosenberg, at bigvcom. They can go to our website, bigvcom, and I think all our various contact information is there as well and if you'd like to learn more about you know what we do in terms of our development program, our construction, as I mentioned earlier, we do about 50 million a year in construction projects, which is, you know, fairly decent. It's not big, but it's not small, and so we are always looking for ways to improve.

Speaker 1:

Absolutely, and so also if you have some good land opportunities that you'd want to share with Jeffrey. Jeffrey, where all do you invest?

Speaker 2:

All across the South, so Southeast, southwest. We own assets from the East Coast all the way across to Arizona, and so we're looking to continue to invest in the Southern part of the US, and so we're looking to continue to invest in the southern part of the US, absolutely and mainly just retail, correct, jeffrey. Yeah, we own some like I own a couple of office buildings. We own I own some multifamily on some single family, but right now our focus is really, you know, open air retail centers.

Speaker 1:

Fantastic. Well, it's been a pleasure having you on. It's a lot of great information for anybody that's, you know, interested in retail development and growing their business in that route. So, jeffrey, thank you so much for joining us.

Speaker 2:

sir, I really appreciate it All right, will do.

Speaker 1:

Have a great day, sir.

Speaker 2:

You too. Bye now.

Speaker 1:

Bye-bye.