Developer Q&A: Asana Partners Managing Director Reed Kracke

Late last year, a new Charlotte, North Carolina-based investment firm led by the former CEO of Edens began scooping up Old Town Alexandria retail properties. Asana Partners acquired 15 properties between December and July, followed by another six in August. Bisnow caught up with Asana Partners Managing Director Reed Kracke to hear about the company's strategy and vision for its Old Town Alexandria portfolio.

Bisnow: As of August, Asana Partners had invested a total of $106.9M on at least 20 Alexandria properties. Have you continued to acquire more since then?

Kracke: Yes, we absolutely are still looking for the right opportunities in Old Town. We’re obviously focused on King Street. We have now acquired 23 buildings that we’ve either closed on or have under contract. That totals 210K SF on King Street or just off of King Street. We are at about $115M in acquisitions right now. We feel like that is starting to build a compelling critical mass that is important for our strategy in Old Town.

Bisnow: So it sounds like you're still looking for more properties to acquire. Do you have a target for how much you would like to invest or how many buildings you would like to own? 

Kracke: I think we’re going to be patient and wait for the right opportunities. Our capital is discretionary and therefore we don’t have a specific mandate of where we need to and how much capital we need to deploy in any individual market. The opportunities will really drive that.

Bisnow: Why did Asana decide to launch this massive wave of investment in Old Town Alexandria retail? What appealed to you about the market? 

Kracke: What we felt was really compelling about the Old Town Alexandria market, and especially King Street, was that so many of the factors that are compelling for retailers today, in terms of where they want to locate and where they feel like they can drive business, are already in place in Old Town, and you didn’t have to create them. The demographics were there. The density is very compelling. Educational attainment is at the top of any community in the country. The average household income is $170K a year. You have the captive audience for retail with spending power.

Second of all, you have King Street ... from the water to really the 1100 block you have over 300 different storefronts that really create a compelling critical mass of real estate. It’s already in place and the buildings are really irreplaceable historic buildings that have been around — some since the 1700s, 1800s and early 1900s. The authenticity of the buildings on the street is not something you can re-create.

Bisnow: What particular characteristics did you look for when searching for properties to acquire?

Kracke: When we look at buildings, we really try to use our experience with talking to and hearing from retailers. We try to use that to identify assets that are going to fit their demand profile. That includes everything from location, in terms of who they want to be co-located with, to inline versus core locations and also the physical plant of the building and selecting buildings that have a footprint that meets retailer demands today, which is changing significantly from what it was two, three, four and five years ago. Retailers are moving into smaller footprints, so we like to ensure the ground floors of the buildings are going to meet their needs.

Bisnow: You have said you planned to renovate the properties you acquire to draw new tenants. Where are you right now in the overall renovation process for the Alexandria portfolio? 

Kracke: We think that an important part of executing on our strategy is to bring significant capital investment into the assets we’re buying. We’ve started to execute on some of those renovations. One that’s currently under construction and will be completed in the next couple weeks is 1100 King. It had a great presence on the corner of the 1100 block, but a narrow storefront facing King Street. What we’ve done there is entirely redone the storefront on King and on the side street to give it a bigger retail presence on the street. We’ve done a full interior renovation on the first and second floor and made a separate entrance for the office. Conte’s Bike Shop, which is a great, well-established regional bike store, will be opening just after the holidays in that location. We think that will be additive to that portion of King Street.

That’s just one example. We’ve done other work to date building out office space that isn’t seen on the exterior of the buildings, but we’re trying to create interior spaces that are compelling for tenants. We’ll continue to invest in updated storefronts. We think despite the historical nature you need to balance that with the types of design and presence retailers are looking for to reflect their brand on the street level. We worked closely on planned storefront locations with the Board of Architectural Review and found their plan is similar to ours to create modifications and compelling designs.

Bisnow: Do you know the total amount of money you plan to spend on renovations?

Kracke: I don’t know exactly how much. Part of our decision to invest capital is really driven by retailer demand and office demand. We are prepared to invest capital, and we’re also diligent about how we do that. It fluctuates based on as we lease up space or release space — as it turns over that demand is largely tenant driven.

Bisnow: Have you signed any new leases at the properties you've acquired? 

Kracke: We have signed a restaurant group that will be coming into the 100 block of King Street that I think will be a really good addition and provide an offering to Old Town on King Street that doesn’t exist today. We’re excited about that. I don’t think they’re ready to announce yet. In addition to that, we feel confident we have several leases ready to execute. I think we will start to solidify the strategy and the story we’ve been telling over the last year or so. I think we’ll be ready to announce more hopefully in Q1.

Bisnow: What types of tenants do you aim to draw to Alexandria? 

Kracke: For us it’s really about bringing in the right mix of local, regional and national tenants. Regardless of how many locations a retailer has, it’s really more about bringing in the right experiences and the right uses to really expand on the offerings that are currently in Old Town and give people a reason to spend more time on King Street. We think if we can bring the right uses and really fill the needs of everything from a great morning breakfast spot to service retail, like a blow-dry bar or a boutique fitness user, and then bring in more soft goods retail to complement what’s already there and bring in some new restaurant users that bring new concepts to Old Town, we think that will help create more of an 18-hour-a-day environment.

We’re also selecting retailers we think will complement the demographic which is growing the most, the millennial demographic. Alexandria over the last 10 years has become focused on the right type of growth. I think there has been a desire amongst institutional developers to come to Alexandria and specifically Old Town. With EYA’s current development at Robinson Landing, with some of the other projects including Potomac Yard down the road, there’s a lot of multifamily and office density coming to Old Town. That is attracting a lot of young people that want the convenience of a five-mile trip into D.C., but also are looking for a discount to the cost of living in the city. We think bringing in the right retailers really will create a way for us to keep those consumers in Old Town rather than going across the bridge to find those experiences.

Bisnow: How do you envision the Old Town Alexandria market looking in the future? What will be different?

Kracke: We’re only a small part of the ownership in Old Town and on King Street, but I think it’s really about creating the right mix and driving a stronger demand by consumers. So hopefully you’ll see more people on the street after 8 p.m. and more people all day and just that traffic on the street will be the biggest sign we’ve been successful in our strategy.

Bisnow: Do you think Alexandria is well-positioned to compete with some of the other emerging waterfront markets in the D.C. area, such as Capitol Riverfront, The Wharf and National Harbor? 

Kracke: Certainly I think a lot of people would agree Old Town has not taken advantage of its position on the waterfront compared to some of the other water markets, including Georgetown, the Southwest Waterfront and even the ballpark area. But I think there is a vision and a plan in place to really invest significant capital, and this is being driven by the City of Alexandria and I think it’s really critical they recognize the opportunity that we all have to really use that to drive the local economy in Alexandria. Time will tell, but we’re excited about the momentum of some of the waterfront plans. We’re excited about the effect that will have over the next five to 10 years. One of the things that can’t be duplicated in some of these other developments like The Wharf and other ones is creating that authentic experience. The Wharf is an amazing project, but it’s hard to build new product that feels authentic, which is something that we have as an advantage.