Martin E. “Hap” Stein Jr. is the chairman and CEO of Jacksonville-based Regency Centers Corp.
Since 2000, Regency has developed more than 200 shopping centers and now owns almost 370 centers.
Stein’s father and mother, Martin Sr. and Joan, started the company as Regency Square Properties in 1963.
They built Regency Square in 1967, which many say launched the area’s growth of large suburban shopping centers. Regency no longer owns the mall.
His parents gave Hap his nickname so he would be called a different name than his dad. They had two reasons — they thought of military veteran and aviation pioneer “Hap” Arnold, who served both as general of the Army and general of the Air Force, and also because “mom claims I was a happy baby,” he said.
Stein joined the company full time in 1976 and guided the company’s initial public stock offering in 1993. It was the start of a much bigger company. Stein refocused the company on buying and developing grocery-anchored shopping centers.
Having been in the business since 1976, Stein also has seen many major business cycles.
The Daily Record interviewed Stein for “First Coast Success,” a regular segment on the award-winning 89.9 FM flagship First Coast Connect program, hosted by Melissa Ross.
The interview is scheduled for broadcast this morning and the replay will be at 8 p.m. on the WJCT Arts Channel or online at www.wjctondemand.org.
These are excerpts from the full transcript.
Tell us about the name. How did your parents decide on Regency Square Properties?
Regency had a regal name to it, and I’ve always said, Dad had the vision and Mom provided style and grace, and that was one example of her influence on the company from the standpoint of the important soft side of the business.
Your mother is still very much involved with the company, isn’t she?
She’s chairman emeritus. She still comes in pretty often, but she’s not that involved with the company from day to day. She’s still very active in the community, on the board of the University of North Florida and organizations like The Cummer Museum of Art & Gardens.
She was a trailblazer in Jacksonville as well, wasn’t she?
She was one of the first women with a very influential role in business, and she, together with Dad, laid the foundation for a wonderful business.
Tell us about the business today. What is your market niche?
Our market niche is grocery-anchored shopping centers, that is, shopping centers that are anchored, the largest store being a supermarket anchor like Publix. We like grocery-anchored shopping centers, because that anchor, the Publix, generates significant daily traffic. We estimate about 20,000 shopper visits each week to our shopping centers. We also feel that grocery-anchored shopping centers are somewhat recession-resistant, and somewhat Internet-resistant, because not only is our No. 1 tenant supermarkets and grocery stores but our second largest tenant category is restaurants.
How do you choose where you will develop or buy a center?
We want to be in locations, No. 1, where we have a market presence. Regency has 17 market offices throughout the country, all the way from Portland, Oregon, to West Palm Beach, from Dallas, Texas, up to Philadelphia. We want to be where our team can be the local sharpshooter.
Secondly, we want to be in a location with attractive demographics, where there’s significant purchasing power. Our average household income in our shopping centers is over $100,000. And we want to be in an area with dense population and the average population of our centers is over 90,000 people. That combination provides a lot of purchasing power. But obviously, we want to be on the corner, where the anchors want to be, and the better side-shop retailers, like Starbucks, like Panera Bread, and the other convenience users like Great Clips want to be located.
You must have quite a research department.
We do have a research department, but it comes with a lot of experience, and very close and enduring relationships, not only with the Publixes and the Whole Foods and the Trader Joes of the world, and the better supermarket anchors and large discounters like Target, but also great relationships, knowing where Starbucks want to be located, where Panera Bread wants to be located, and other side-shop retailers.
How many centers do you own in the Jacksonville area? Do you see that increasing?
We own over a dozen shopping centers in Jacksonville. I’m sure that will increase over time. We believe in the Jacksonville community, being in North Florida, and see this area continuing to grow, and we know it will.
How do you see the economy? Your shopping centers and your stores have resilience. What is your take on how the economy is operating now?
No. 1, from a perspective standpoint, our shopping centers have always been about 95 percent leased, forever and ever and ever. However, as we all know, our economy has just experienced the worst recession in our lifetime. And our occupancy, our percentage leased, never got below 92 percent.
If you’d have told me we were going to go through a horrible recession, almost a mini-depression, and occupancy is not going to be less than 92 percent, I’d say, ‘where do I sign?’ That’s a pretty good thing, and speaks volumes about the quality of our shopping centers, the quality of our team, and the quality of our anchor tenants.
What’s encouraging is that last year, we signed almost 7 million square feet of new leases and renewals, and over 2 million feet of new leases. So, we’re seeing a strong tenant demand, tenants still want to expand into the best shopping centers with the best anchors. We’ve seen and experienced that demand continuing into 2012, so we’re very encouraged by that.
When did you develop this strategy?
Our first development was Regency Square shopping center, which is obviously a regional mall. But it became obvious to us, a couple of things, No. 1, we couldn’t compete with the large regional major mall developers like Simon Properties. Secondly, we saw this niche of grocery-anchored shopping centers which were recession-resistant. Publix was expanding at the time on a pretty aggressive pace, and we thought this was a niche that made a lot of sense for our company, and it has.
What are some of the major changes you’ve seen in the retail industry?
One thing that’s stayed the same is great operators, like Publix, like Target, have continued to be able to thrive. But we’ve seen side-shop retailers change a lot over the last 10 years. As a matter of fact, Simon Properties, the largest mall developer in the country, has a slide that shows “these were our 10 major tenants 10 years ago, and here they are today,” and there’s very little overlap.
The growth of the Internet is going to continue to play an important part in retail. But great real estate, great corners, with great tenants and retailers, will continue to thrive and that’s one constant.
In Jacksonville, Simon owns or has an ownership interest in The Avenues, the St. Johns Town Center and the Orange Park Mall. They are well entrenched in the area.
Absolutely, and is a wonderful company.
Tell us about the size of Regency Centers. How many employees do you have?
We have about 400 employees, about half of which are here in the Jacksonville area. Our office is Downtown in the Wells Fargo Center. We love working in Downtown, we’re a strong believer in it, but we have 400 employees throughout the country, and as you mentioned, almost 400 shopping centers
You operate Downtown, you’re based Downtown. Do you have any insights into what could bring more businesses Downtown? Will we see Downtown revive to any degree that it was, perhaps in the ‘60s and ‘70s and early ‘80s?
I think that it’s important, and the mayor’s focused on that, that we continue to promote Downtown Jacksonville, and create from a security and from an entertainment standpoint an environment in which it’s a great place for people to work, and also a great place for people to live.
I will say, and I love Jacksonville, I’m a longtime resident, we work Downtown, but when you compare Jacksonville’s downtown with other comparable cities, whether it’s Indianapolis or even smaller cities like Greenville, S.C., there’s a lot that we can learn and do a better job with, from making our Downtown a more appealing place to shop, work and live.
You grew up in Jacksonville. How has the city changed in general?
It’s grown a lot, but it’s still a wonderful place to raise a family. It has a great community feel, and I think we’re still blessed with a lot of great community leaders that are dedicated to making this a better city in the future and for our children and grandchildren.
You have children and grandchildren. Are your children involved with the business?
We’ll see. None of our children are involved in the business right now. Two of my daughters are moms, with young kids. My youngest daughter lives in New York.She is in the real estate business, but the residential real estate business.
What would you say is the smartest business decision you ever made?
I don’t know that it’s the smartest business decision that we ever made, but I think it was an important transformational decision when the company went public.
It gave us tremendous access to capital to multiple sources, not only from a bank financing standpoint, but we can raise money from the public markets.
That provided additional discipline, it provided a scoreboard which every employee and every officer can fully understand.
But when you really get right down to it, people say, what are the three most important ingredients in real estate, and people say location, location, location.
Location’s important, but people do business with people. And the most important resource that Regency has, even more important than our very strong balance sheet, our access to public and private capital, is our people.
That, once again, is a constant, and it was something that my mom and dad believed in, and it’s part of the culture they’ve embedded in the company, in Regency, that we still live and breathe every day.
Are there any decisions you wish you would not have made?
I think the mistakes that you make in business are when times are good. And you start forgetting the valuable lessons you’ve learned in the past. And you lose a little of the discipline that was there. We could have been a little bit more disciplined, a little bit more conservative as the economy continued to grow in mid-2005 to 2008, leading into the downturn. We knew better than that, but fortunately the company had a strong balance sheet, a great team.
Where do you see the economy in the next year, the next five years?
The economy does feel like we’re involved in some amount of growth. But the big elephant in the room is the short and especially the long-term deficit. We have to have growth, and economic growth is real important, but it’s also going to be critically important that we address the long-term entitlement commitments this country has, because if we don’t do that, then interest rates are going to rise, the dollar isn’t going to be the reserve currency for the world, and I think we’re going to have big problems. Hopefully our leadership in Washington, after we get the noise from the election behind us, is going to roll up their sleeves and make the tough decisions, especially as it relates to addressing entitlement reform, because those are obligations, unfortunately, that we can’t afford today.
Do you have any advice for small business owners who are trying to figure out what to do next?
I think small business owners, the key thing is to obviously take care of the customer, hire talented and dedicated people and have a conservative balance sheet.
Any other insights you would like to share?
This world has been good to many of us, and we need to be thankful, and give back to those less fortunate in the community, the Jacksonville community, that’s been so good to us.
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