Kenneth Fries
Vice president, acquisitions and leasing, RK Centers
Age: 53
Industry experience: 30 years
Ken Fries witnessed the changes sweeping through the shopping mall industry in the 1990s as an executive at firms including Commonwealth Development, which built the Providence Place mall, and Urban Retail Properties, developer of Copley Place. Today, Fries oversees development and acquisitions in one of the retail industry’s harbors of stability: grocery-anchored shopping centers.
As a vice president at RK Centers, Fries orchestrated recent deals including the $26.3 million acquisition of the Stop & Shop-anchored 99 Charles St. in Malden. Founded by Ranaan Katz, RK Centers owns more than 102 properties totaling approximately 10 million square feet, primarily in Massachusetts. The Needham firm specializes in opportunistic acquisitions of properties by pursuing cash deals enabling it to close within weeks, satisfying sellers facing tight deadlines.
Q: What is RK Centers’ business model and how does that influence your acquisition strategy?
A: The focus has always been on grocery-anchored properties, which are recession-resistant more so than any other retail properties. We are able to buy these properties, reposition them and increase the cash flow. We increase the return on investment through redevelopment parcels, operational savings and things of that nature. Our business model is low debt and using funds from our cash flow to buy. So don’t have financing contingencies when we buy properties. It gives us an advantage. We also close 99 percent of the time, and we don’t retrade. We will get deals at the end of the year when people need to close for some reason: it’s their financing, it’s the charter of their real estate investment trust, it’s tax reasons. We’ve been able to pay less because the industry knows if we’re interested, and we’re going to close.
Q: What are the plans for RK Centers’ newest acquisition, the 99 Charles St. shopping plaza in Malden Center?
A: I don’t know where it started with these massive seas of parking. You look at some of the Market Baskets, and they really need to have more parking. But the rest of the industry really doesn’t need so much parking, and it’s kind of an eyesore. We’ll go in and look at the coverage ratios and have conversations with the city. You don’t want to hurt your overall investment. Your most important tenant is Stop & Shop and you want to negotiate something that is worthwhile for all partners.
Q: How do exclusivity clauses play into retail leasing?
A: Anchors most certainly have them. If you go into a TJ Maxx-Stop & Shop-anchored plaza, you will not see a Ross Dress for Less, not that you would want to as an owner. You don’t want competing uses where you would impact your own tenants. If you have a nail salon next to them, it’s only going to dilute the overall sales volume of both tenants.
Q: Why has there been a slowdown in development proposals for multifamily housing at grocery-anchored properties such as Allston Yards?
A: Some of these leases have 10, 20 or 30 years of control. In Allston, Stop & Shop was part of the development team to make that happen. The question is the loss of [grocery] sales during the development process. So, it’s operations versus development. The same thing would apply in Malden, where you’ve got a really good grocery store, and you’ve got to factor in that you may lose those sales while you’re in development.
When you have a multi-level project, does it operate in the same fashion? That can be a deal-killer when you start to get out into Waltham and beyond Route 128 where it doesn’t make sense to do that. A [new] grocery store is a $20 million investment. And all of the store employees have gone elsewhere, so you’ve got to restock it and rehire it and rebuild it. You’ve got to be really close to Boston and the population for that really to make sense. And you’ve got to go for 6 or 8 stories [of multifamily housing] to justify it.
Q: Does the business model for new construction of a retail-only project make sense anymore?
A: The construction industry, the retail industry, and the labor industry were all pretty stable for the last 60 or 100 years. And because of COVID and the internet, we got into this really unstable period where construction costs are exorbitant, not just for the developer but also the tenant. Labor is difficult to find, and tenants are competing with their Internet divisions for allocation of capital. The returns are pretty stable, but because it’s stable it’s low and I don’t believe that return has the ability for your average developer to make money. It’s got to be a unique situation.
Fries’ Five Favorite Places to Eat:
- Skaneateles Bakery, Skaneateles, New York
- Carl;s Steak Subs, Waltham
- Lola 41, Nantucket
- Grill 23, Boston
- Fat Matt’s Rib Shack, Atlanta
