Katie Grissom (0:00 - 0:32)

I'm covering retail globally. It's over $20 billion in retail assets. And it means you have access to real data, real relationships, and you have a real influence on how the market moves, which is pretty scary, honestly.

 

And I think that access and the exposure to decades of investment data across housing, office, healthcare, even industrial, it informs retail, it informs how we're investing in retail.

 

Nancy Lashine (0:33 - 3:37)

Hello, and thanks for tuning in to Real Estate Capital. I'm your host, Nancy Lashine of Park Madison Partners. Capital is the lifeblood of the real estate industry, but the decisions on where and how it's allocated are driven by people and personalities.

 

Who are they? What motivates them? What can we learn from their experiences?

 

On this show, we introduce you to some of the real estate industry's most influential thought leaders and decision makers, and we talk about what is important to them, how they make critical decisions, who has influenced them, and a lot more. Our guest on this episode is Katie Grissom, Global Head of Retail at Nuveen Real Estate. One of the largest real estate investment managers in the world with approximately 141 billion in real estate assets under management.

 

Katie oversees Nuveen's $20 billion real estate portfolio, spanning the US, Europe, and Asia. Katie is one of the most dynamic young leaders in the retail real estate business today. Her path to institutional real estate is an unconventional one, and that background gives her a well-rounded perspective that sets her apart from her peers.

 

She began her career at Elkanderton, a consumer private equity firm, where she led operations for several portfolio retailers, including Pure Bar, one of the nation's leading fitness brands. After several years in retail private equity, she moved to Asana Partners, a retail-focused real estate investment firm, where she was put in charge of leasing across its street open-air portfolio. I recall being truly impressed with the new names and innovative retailers that Katie found when she was in this role.

 

Katie brings a perspective that combines operational knowledge of how retailers think with the discipline of institutional investing. She has built a platform at Nuveen that puts retailer relationships at the center of every investment decision. In our conversation, we discuss the retail resurgence, how Nuveen is approaching convenience-oriented retail in the current environment, and where she sees risk emerging as retail has become a consensus trade.

 

Well, Katie, first of all, huge thank you for agreeing to do this. I am a Katie fan. I'm a groupie.

 

And since the first time I met you, I was like, who is this woman? You are such an original thinker, so much fun, like I grew up in the retail real estate business when I first started in the industry, and you have such a fresh and wonderful outlook and what you initially created with sort of the early or sort of the urban infill projects, the retail is so fresh and interesting and fun.

 

I'm delighted to have you on. And I've been so excited to see you, your meteoric rise in the investment world, which is so well-deserved. And I can't wait to see what you're doing at Nuveen.

 

So thank you for joining us.

 

Katie Grissom (3:38 - 3:50)

No, thank you so much for having me.  it's so crazy to hear you saying something like that to me because I just admire you so much. So thank you for having me.

 

And I'm really excited to be here.

 

Nancy Lashine (3:50 - 5:06)

For everybody who doesn't know who Katie Grissom is, tell us a little bit about how you got, you're currently head of retail at Nuveen, which is a very large platform, by the way, I'm going to say TIAA, which was formerly what Nuveen was called, is a very large teacher's insurance annuity association, I guess, had the most innovative retail platform 35 years ago when I started in the business and they were doing forward commitments on regional mall developments.

 

I think TIAA did the Mall of Americas and just some of the most were the Gramezians and some of the most innovative projects when regional malls were becoming, as important to the retail landscape as they were and creative structures and were just out there. obviously, retail has had a very, great run and then it had a plateau and then, as people call it, the retail apocalypse happened, online shopping, COVID. And now the last, is it three years, I've seen a real return, resurgence.

 

So tell us a little bit about Katie, your background and how you got into this business.

 

Katie Grissom (5:06 - 6:27)

I kind of accidentally got into it. I started my career on the retail private equity side, right out of college. I studied finance and economics and I just had this insatiable love for the consumer.

 

I taught yoga all through college. I just loved wellness and it just so happened that a small private equity firm based in Spartanburg, South Carolina had acquired a company called Pure Bar and I was interning for that company. I got to work directly, on Pure Barre’s growth, I stayed there for four years and moved, with the company when Elle Catterton purchased, Pure Barre and was able to work across many of their brands on the operations side.

 

I really fell into real estate from that moment. I led operations for the brands and a very small part of what I did was real estate and a very big part of what I did was speak to other retailers about how they were performing. I built a lot of retailer relationships from that.

 

Just through, some relationships actually with some, Eden's employees, I, found Asana Partners, my husband at the time was a race car driver. I wanted to move back.

 

Nancy Lashine (6:27 - 6:31)

Wait, double click, please. Your husband was a race car driver.

 

Katie Grissom (6:31 - 7:17)

He grew up in the business. His dad was a race car driver.

 

And because of that, he had to be in Charlotte while he was trying to grow his career. You couldn't do that from where I was, which was in Denver, Colorado, where Pure Bar and Core Power were both headquartered with Elle Catterton. I got a phone call from one of my closest friends and someone who taught me a lot early in my career, a guy named Chris Dalton, I've just joined this company.

 

We're doing some really cool things. I think you would be a great fit. You have a lot of retailer relationships.

 

all of the neighborhoods that we want to buy in. Why don't you come meet them? And the rest is really history.

 

I spent about seven years with Asana Partners and left in 2022 to join Nuveen.

 

Nancy Lashine (7:18 - 7:21)

When you joined Asana, did you join as head of leasing?

 

Katie Grissom (7:21 - 8:24)

I joined on the leasing team and eventually became the head of leasing and then joined investment committee and our executive committee and really enjoyed every minute of it, but leasing was not something that I had ever done before. I was kind of learning as I went, but I think that really helped me and you'll appreciate this because, you've been in the business a long time and it's very much, you have a mentor, you work your way up, you kind of do deals and you just kind of do that forever. And I really benefited from not having this mindset.

 

I don't know what the playbook is, but I think this is how we should do it. And I had a ton of support from the partners to really explore that. And it worked and we built a really, really strong business.

 

I was lucky enough to, to join them on capital raising adventures and I got a lot of exposure and a lot of experience and reps doing that, which I think ultimately really helped me get to where I am today.

 

Nancy Lashine (8:25 - 8:40)

Asana was successful in the real estate, private equity business at a time when there were like less than a handful of others who were able to do it. What was it about Asana that made them able to raise capital and successfully deploy it?

 

Katie Grissom (8:41 - 10:04)

I think it's a couple of things. The founders are just incredible people with incredible track records. And you just instantly feel that when you meet them.

 

And I think that was very helpful. I also think, now that we're in the environment we're in, the capital raising environment then was maybe a little more favorable than it is now, on the macro level. And then they had a really differentiated perspective and I think they were counter cyclical, when they were raising capital for these urban mixed use, really authentic neighborhood retail investments, the rest of the world was still putting money into malls at four and a half caps.

 

it's crazy to think about that because we were so focused on what we were doing that you didn't really think of that, but I think they were really the natural decision for institutional investors into retail because, you're bumping right up on the retail apocalypse, like you said, if you have to have a retail allocation, this kind of mixed use retail with office, with maybe some multifamily feels like the best place to put your capital and get diversification across income streams while still really calling it retail. and so I think that was a really unique and differentiated angle that, that really propelled them forward.

 

Nancy Lashine (10:05 - 10:13)

You use the word authentic when you were talking about a neighborhood community, what makes a community center authentic?

 

Katie Grissom (10:14 - 11:47)

when I think about authenticity, it's a couple of things, first and foremost, physically the building or the neighborhood or the fabric of the neighborhood is authentic. The way that the West village is authentic or the East village is authentic.

 

It’s kind of a double positive in the sense that you have this authentic neighborhood, but it's also not authentic in a way that gets tired over time, the way that something like say a contrived lifestyle center or super regional mall might get tired over time. The historic Cobblestone Street is getting more charming as time goes by.  if the buildings are well maintained, your CapEx load is pretty low.

 

There’s a lot of positive there just physically. And I think the other piece is this idea of the retailer is really solving a need. if there's five pizza shops, in a market, do you really need another and understanding the nuances of that and thinking beyond just your shopping center and thinking about the broader market and how a consumer might use your center in their daily lives.

 

Those are the two big things to me, the other thing I'd say is, it's great to have some hometown hero tenants where, you have someone you walk in every morning and the owner of the coffee shop says, good morning, Nancy. How are you?

 

I've got your latte and you want to go back there every day. And I think those little moments matter more than you can put  on paper and do math around.

 

Nancy Lashine (11:48 - 12:10)

absolutely. And it's funny. It's one of the reasons that people love living in New York City, Manhattan or Brooklyn, because you have that authenticity.

 

You have the neighborhood community within a few blocks, maybe of where you live. So you're working at this really successful shop. You're living in Charlotte.

 

Should I ask if your husband's still driving race cars?

 

Katie Grissom (12:10 - 12:15)

He's not. I think he's upset about, I'm very happy about.

 

Nancy Lashine (12:16 - 12:21)

That's a good thing.

 

So what, what attracted you to Nuveen?

 

Katie Grissom (12:22 - 15:16)

A couple things, the scale of the platform, probably first and foremost. when I joined, I was covering retail in the U S now  I'm covering retail globally.

 

It's over $20 billion in retail assets. it means you have access to real data, real relationships, and you have a real influence on how the market moves, which is pretty scary, honestly. I think that access and the exposure to decades of investment data across housing office, healthcare, even industrial it informs retail and informs how we're investing in retail.

 

And then you layer in our, our debt business and our exposure there in retail and beyond. We'll forget more than most people will ever learn about real estate. And today we have about 135, 140 billion.

 

I'm not sure, what the most recent number is in real estate at Nuveen globally. And the first thing I do when we look at a new deal is, I see what we own around it or what we did own around it and how it performed and what the demographics are. if we still own it, we talk to the asset manager and the fund manager and really understand the why.

 

there's a lot of lessons in there if you look for them. And I think that's something that really allows you to think about relative value and think about how retail sits into the broader picture. And also what institutions are looking for.

 

And you can always guess, but I've learned a lot since coming to Nuveen about some of the positives and the negatives of, what an institution has to deal with when they're thinking about adding to their portfolio. And I think the thing that probably excited me most, which impacts me most day to day is just the scale of our portfolio from a retailer relationship perspective, we're the largest relationship. If you look at our equity and debt book for more than 25 retailers globally.

 

And then we're, top of the list with many others like Ulta, Zara, Dix, Whole Foods, Trader Joe's, Solid Core, Warby Parker, J. Crew, et cetera, all the LVMH brands. And that gives us a ton of leverage that, most of their landlords don't have, like retailers don't really need to talk to us and they want to talk to each other, we're kind of in the way.

 

We have a very, the market has a very parent-child relationship, landlord and tenant. I think our benefit has been that we have more of a partnership.  information flows both ways.

 

We're trying to lean in and lead across the aisle with our partners, on the debt side of the business, or when we're in an LP position, and that has been incredibly valuable for us being on the operating side and signing leases with tenants across our portfolio.

 

Nancy Lashine (15:16 - 15:27)

Can you give a real-time example of a deal that you either did or killed because of the data and the information that you had that would be somewhat unique?

 

Katie Grissom (15:28 - 17:35)

We did a deal  in Minneapolis, we just closed, actually two of them, we were able to sit down with a grocer and their chief development officer and understand their performance. It’s a regional grocer that we don't have in our portfolio.

 

Another grocer actually introduced us to them and said, hey, you should really meet this guy and really understand, how the tenants performing at the property sitting down with him and understanding what their plans are for the property, for improvements, for renewals, what they want to see in terms of capital improvements on our side became a really helpful step in our diligence process.

 

And we were able to move forward with a tenant that we really weren't sure about at the beginning. And then on the other side, we just looked at a deal in the Northeast and there was no sales reported for three of the boxes. It was a grocer, with three additional boxes and the traffic looked really good, but just something wasn't adding up and we weren't sure that we could lean in on pricing if we didn't understand how the tenants were performing and really underwrite the rent growth that we needed to get to our IRR.

 

We sat down with two of the tenants and they were like, look, we're not going to renew, we're just telling you that because we want to do this deal with you down the road at this other project in Florida we want to be honest with you because we don't want you to be mad and we want to do this other deal, but we're not going to stay. And the other tenant was like, look, this is just a bottom quartile store for us. It's not going to be something that, if you raise our rent, we can't stay.

 

We ended up dropping out of the deal for that reason. And that's happening, whether it's the one decision like factor in moving forward or not, it's probably not, but it's a huge piece of the puzzle and being able to speak directly to retailers instead of brokers or alongside brokers is incredibly valuable. We take that to our investment committee and it gives people a lot of confidence one way or the other.

 

Nancy Lashine (17:37 - 17:53)

Do you have a sense, this is maybe an unfair question, but how much of that relationship that you're able to build today because of your, the size of Nuveen's portfolio and the leverage stays ultimately with the organization versus the people?

 

Katie Grissom (17:54 - 18:10)

I would tell you, I think the people matter immensely. Nuveen has been, before I joined, this was really not a strategy that Nuveen had implemented. And kudos to them for saying, hey, Katie, we think you have this really interesting angle and we'd love for you to bring it here.

 

Nancy Lashine (18:10 - 18:12)

What do you mean by this Just for everybody?

 

Katie Grissom (18:12 - 19:11)

This being the retailer is the most important piece of what we do. And having those relationships gives us an unfair advantage on leasing, but even more importantly on how we're moving strategically, which today is towards convenience oriented retail, because that's what retailers want. And then it's directly saying, how are you performing here?

 

And what are your sales? be straight with us. and they will, because, we have just as much information as they do, that's going to help them grow into the right locations.

 

And so, it's both, but I think there's so many groups that have scale that are not focused on this. Or they have the wrong people in place I do think that we've built an amazing team.

 

I have a head of leasing strategy who he's charming and French, and he's been at Nuveen for over 10 years and every retailer loves him and he loved them. you're better at my shtick than I am. I hate you, but it makes me so proud.

 

Nancy Lashine (19:11 - 19:13)

You're just going to have to learn French, Katie.

 

Katie Grissom (19:13 - 19:20)

But it does. It’s really exciting. And now we have a team of people that that's all I do.

 

Nancy Lashine (19:20 - 19:28)

And that's all they do, meaning they are talking to retailers and they're doing what they want.

 

Katie Grissom (19:28 - 20:52)

They're talking to retailers at all points of the process. They're talking to retailers when we're looking at an acquisition, they're talking to retailers when we're looking at a disposition, everything in between from getting lease waivers from the big boxes, like Whole Foods, so that we can do a solid core deal or a CAVA deal to actually signing leases and working on deals directly.

 

We just bought a deal in Florida and we were really nervous about buying it. Almost didn't buy it, for all the same reasons that we just talked through. And we ended up calling one of our closest relationships.

 

We think you guys would really do well here, have you looked at this market? And I won't say this happens all the time, but they signed a lease with us before we even closed.

 

it was incredibly beneficial to our underwriting, the team is kind of doing everything, but I think the most important thing they're doing is asking retailers, why, how are you growing and why, and then we're taking that to our transactions team and saying this is what we're hearing. Retailers want to go to the Midwest.

 

They're going to tertiary markets. They want to be in convenience oriented centers with good co-tenancy and they want lower rents. Because, the consumer's shaky at best and we really want to make sure that we're de-risking our growth.

 

Nancy Lashine (20:54 - 21:34)

That's amazing. How do you figure out how to take what you're doing here and obviously your experience, whether it's in Denver or in the Southeast or the Northeast and apply it to other markets and then obviously apply it to, this global portfolio, do you have to go spend time there? How do you hire people there to help you stay informed?

 

This idea of authenticity. It's very different, here versus, well, you'll tell me where you are, obviously, but once you're in other countries, it must be a whole different something.

 

Katie Grissom (21:35 - 25:24)

It’s been a really great learning, any good institutional platform, we built a little bit of a structure that is repeatable really.

 

But the idea is, our thesis globally is that we want to invest in neighborhoods where people live and work and where retailers want to expand. And I always say to investors and it just couldn't be more true. We’re two or three steps removed from the end user of our product.

 

And the closest we are going to get to the end user who is the consumer is the retailer, our customer is the retailer. oftentimes we're one layer removed from them because there's brokers. Maybe we have a broker and then they have a broker.

 

Maybe they have two brokers everything that we do we run through a framework. So in the U S our framework is very demographically driven.

 

And in Europe, it's a little different because the demographics and the way that retailers expand is different. So we have a head of retail research who is based in Boston. I collaborate with her and the rest of our senior team who's out in the field every day.

 

And we have what I would call an investment scorecard. it aligns with what you might've looked at an Elkanderton when you're looking at a brand and how you think about how many stores can they have? How can they grow?

 

for example, you're saying I could put a pure bar, in, in this market and I look within a three mile radius, there's 50,000 people. Okay. Half of them are men.

 

So now you have 25,000 people. Half of them are too young. Half of them are too old or don't like fitness.

 

Half of them don't have the income. and you start to whittle down your total addressable market pretty significantly. And that's how a retailer really looks at growth.

 

That’s how we look at growth. And then we layer on things, important to us because we think they're more resilient and spend more money or we look for people that are between 30 and 40 years old in the U S. That is your largest cohort of people living today.

 

There's more 20, there's more 30 to 40 year olds than any other 10 year age range. They're buying homes. They're forming families.

 

They're moving to the suburbs. They're clothing their children. They're sending them to preschool and camps and schools and buying them toys and birthday parties.

 

They’re spending a lot and then they're moving into their highest earning years. And so that's really where we're focused. beyond that, they're busier than ever.

 

67% of households have dual working parents. And when you think about all of those things together, convenience is really important. And as you move up the income spectrum, you can pay more and more for that convenience.

 

We’re focused on age and we're focused on educational attainment, meaning, does the population have a bachelor's degree or higher, how much as a percentage of the population has a bachelor's degree or higher, and we really use that as a proxy for how people will spend money. And so that's the U S but if you apply that same lens to Europe, a couple of different things, like every country has their own grocery chain. In some countries, those grocery chains have really accessed food delivery, grocery delivery in a way that's much more impressive and meaningful than what we've done in the U S and then you also have a declining population and everybody's educated because it's a lot more affordable.

 

In Europe, retailers are looking at household formation, how many people live in a household. And we're looking for markets where you have a growing population, not a declining population. there's nuances.

 

And the great thing about retail is it's so granular that, I always say to investors there's a hundred different ways you can make money in retail, this is our way.

 

Nancy Lashine (25:25 - 25:27)

Are you in Asia as well?

 

Katie Grissom (25:28 - 25:28)

We are.

 

Nancy Lashine (25:29 - 25:32)

And how do you think about the Asia markets? So which markets are you in?

 

Katie Grissom (25:33 - 26:52)

very similar to Europe. It’s even more fragmented. You have cultural language barriers, you have geopolitical risk.

 

We actually have what I would call a legacy outlet mall strategy in China, super luxury. They do really well. Australia trades very similar to like the UK and the U S in terms of this idea of convenience.

 

I think the retail in places like Singapore or Thailand or Vietnam is better than almost anywhere in the world, but it's extremely capital intensive and very, very large bets where you have these giant super regional malls that are just like nothing you've ever seen before. So it's really nuanced. I would say we're probably most excited about the opportunity in Australia.

 

We have a team there and our CIO there, she's been in Asia her whole career is based in Sydney and has great deep relationships in Asia across the retail space, but the way that we work there because of all of the country nuances is more as an allocator. we're partnering there with best in class, Chinese outlet mall strategy operator, in Australia we could do it ourselves, but in other markets, you really need someone with boots on the ground that understands the local market better than anybody else.

 

Nancy Lashine (26:53 - 27:07)

Talk to us a little bit about your capital aggregation strategy. Is it all one bucket?

 

Do you have multiple different buckets? And then maybe focus a little bit about on what kinds of investors you're seeing have appetite for retail today?

 

Katie Grissom (27:07 - 27:35)

It's been really interesting, to join Nuveen because we have what I would call buckets of more internal capital. Nuveen is wholly owned by TIAA, which, has a very large balance sheet, and we invest on behalf of the balance sheet. We also invest on behalf of tons of, teachers and hospital workers in their retirement accounts those are two really big buckets for us

 

Nancy Lashine (27:36 – 27:37)

Is that defined contribution, the retirement account?

 

Katie Grissom (27:38 - 27:39)

It's our 403B.

 

Nancy Lashine (27:40 - 27:42)

So is there a liquidity requirement there?

 

Katie Grissom (27:42 - 27:43)

There is. Yes.

 

Nancy Lashine (27:43 - 27:44)

That's interesting.

 

Katie Grissom (27:45 - 27:51)

It's very interesting. Every single day, all of those assets, the books are closed and you go forward from that day.

 

Nancy Lashine (27:51 - 27:54)

And you value that there's an NAV at the end of the day.

 

Katie Grissom (27:55 - 28:30)

It’s been really interesting because, I obviously come from, a world where you were doing closed end funds, it felt very simple to me. When I joined Nuveen, there's all this talk about the benchmark and the go forward just because we've owned an asset since 2002, like a lot of those gains or losses have been realized for the investor and you're going forward from today. Depending on the fund, there's a lot of nuances that you have to think about as an investor you might not otherwise, to a lay person, think about, when you're thinking about, should we hold or sell this asset?

 

Nancy Lashine (28:31 - 28:38)

On the 403B, which is presumably it's the net asset value at the end of every day is based on appraisals.

 

Katie Grissom (28:39 - 28:40)

Yes.

 

Nancy Lashine (28:41 - 29:04)

When you look at the valuation there, you think about say Green Street is, a good research organization.

 

There's a lot of research out there that says that the private markets value assets at 10 to 20% higher than the public markets. Do you see that in the valuation there of what that portfolio looks like relative to a comparable publicly treated REIT?

 

Katie Grissom (29:05 - 30:50)

For some subsectors, I'm sure, but for grocery anchored retail, it is so liquid. We're pretty much, at least since I've been here, we've been at parity on, on the grocery side. I think for less liquid sectors, I would say that's probably a fair assessment or less liquid subsectors even of retail.

 

As far as investors, third party investors has been a really big focus of the firm over, at least my time here and probably even before that. But Chad Phillips took over as our CEO of real estate a little over a year ago and has been really focused on how we can find fewer, better partners, if that makes sense., we have really deep relationships with some of your largest blue chip investors and how can we do more with them?

 

When we think about resourcing and we think about, how we can really focus our team's time on investing, that feels like a really clean path for us, and becoming, feels like more of a real partner to some of these investors who might want separate accounts or want something a little bit more curated. If we have large scale with them, we're able to really meet their needs in a way that, if you're a smaller shop or you don't have that scale, you can't always do. That’s been hugely beneficial for us.

 

But our success on the retail side over the last three years has been primarily in the core and core plus space with core plus kind of being the darling, which has surprised me because, at least in my career, no one ever talked about core plus and investors now really like the income side of the equation or, all the reasons.

 

Nancy Lashine (30:50 - 30:53)

So what are the numbers, the returns for core plus?

 

Katie Grissom (30:54 - 32:04)

For core plus, we're really looking in that 10 to 12% net return range income of call it 70 to 90% of your return is coming from income and it's really hard for other sectors to find that. It’s been a huge benefit, I think, to retail for investors. And what we've heard from A lot of institutional groups has been, look, we've got a lot of money tied up in value add, closed in funds.

 

We have constituents to pay out. We'd really like to have distributions and income coming back to us. And that's the type of strategy we're looking for today.

 

in the same breath, we don't really like core, it's not enough. We’ve seen the core threshold really move from what I would have thought was more the 7 to 9% return range with low leverage to more, what I would say is an 8 to 10% return range. And we are starting to see investors really come back on the core side.

 

over the last year, we've raised almost a billion dollars in core retail money to get to that, what I would call eight to 10% return range.

 

Nancy Lashine (32:05 - 32:20)

And when you talk about returns in your global portfolio, the non U.S. dollar denominated portfolio, do you translate them back after currency hedging to dollars? Or are you just thinking about local currency and are they still in that 10 to 12% range?

 

Katie Grissom (32:21 - 33:25)

it depends on the fund and the investors, on the currency. when I think about our Europe holdings, our returns are slightly higher.

 

you're getting a higher yield on the portfolio. And it's not apples to apples because a lot of what we own in the U.S. we own wholly in Europe, we have a lot of JV relationships, which adds a little bit of a nuance there. on the core side what is maybe more European, it's probably about the same.

 

On the core plus side, you're looking for 10, it's a wider range, maybe 10 to 13% IRRs for core plus, but it's honestly been very challenging to find product that fits that right now. And there's been very little on the market, on the retail side. a lot of it has been the, there's a lot of geopolitical uncertainty and Europe's a little bit closer to it.

 

The European central bank, has done a couple of hikes, like all those things. So, it's an interesting point in time for Europe from that perspective.

 

Nancy Lashine (33:26 - 33:36)

And you like Asia, sounds like you like Australia and maybe some of the other markets better. Higher growth, lower interest rates, good demographics.

 

Katie Grissom (33:37 - 34:14)

Strong demographics. the other thing I really like about some of the Asian countries, and we haven't quite figured out how to play in this space yet, but is the concentration, of a retail center of gravity

 

You have these big mega projects. You can put out dollars efficiently. However, they're big mega projects, which means they're probably illiquid.

 

If you do you want to sell them and they have a higher capex load.  I really like it because it's very clearly dominant and you're not going to build another one, but it's, a challenge to kind of bridge that gap today, just based on where buyers want to buy and sellers want to sell.

 

Nancy Lashine (34:15 - 34:21)

Have tariffs impacted your tenants here in the U S and how have you adjusted to that?

 

Katie Grissom (34:22 - 36:56)

There hasn't been a huge direct impact on our portfolio because our tenant base really skews towards services, grocery, fitness, food, and those categories are more, at least delivered domestically service domestically, et cetera. But we have seen and heard from a lot of our fashion retailer relationships that they're facing real margin pressure. I would tell you is kind of an underpinning of, of why I'm so bullish on our convenience strategy.

 

And I'll give you an example in a sec. The other piece is more of a macro impact that the tariffs have had, which has been that it's kept inflation higher and the Fed on hold. And I think that combined with a lot of other factors has, has made the story for cap rate compression, which we are starting to see in retail, very challenging.

 

It's not a story that I would tell you I'm comfortable with, for us, it really reinforces that income first underwriting thesis. And then, the way it's playing out with retailers is more subtle. And I'll give you an example.

 

So a great athleisure brand, household name, public company is a tenant in a few of our malls, paying probably around $300 a foot all in, they're probably on average doing, 10 to 12 to 15 million in sales, somewhere in that range. When you look at that same tenant across our grocery portfolio or open air, more convenience oriented portfolio, they're paying an average of $60 a foot and, and they're doing 10 to $12 million in sales. And so when you think about margin pressure and you think about, , increased competition, you think about the consumer and, consumer sentiments at all time lows, all these, these things that are out there as a retailer, trying to grow and continue to go to the market and say, I'm opening 30 stores, I'm opening 40 stores over the next three years, you're going to be a lot more thoughtful about where you put those stores and what the risk is if it doesn't work.

 

That is, it's a subtle and maybe secondary impact. It's not just tariffs, but tariffs, certainly a part of that margin pressure issue for the consumer and for the retailer. That is a place where I think we're going to continue to see high demand on the leasing side for the type of product that, we're buying and that I think investors want.

 

Nancy Lashine (36:57 - 37:06)

Do you have tenants who you'd like to have in one of your centers, but their CapEx requirements are just too high to justify putting them in there for the rent you can get?

 

Katie Grissom (37:06 - 38:42)

Most of them are food and beverage concepts. There’s heavy CapEx to build them out, but we've actually just started partnering with this company called Bonside.

 

We, Nuveen made an investment in its VC arm in this company, but they actually provide non-dilutive capital to brick and mortar tenants that are, not necessarily like your fashion tenants, but more services like I was describing. And they underwrite them, they provide them capital, and then it's paid back through a revenue share program we're using them in two places.

 

We're piloting, having them help us underwrite new tenants, regardless of whether or not they're in their ecosystem so that we have a really strong, consistent way to underwrite tenants at the LOI stage, which there's really not any other groups that do that other than like your, your credit report type groups. So that's been, that's been a really great thing for us. And then on the other side, they're introducing us or we're introducing them to new leads that have been vetted that are either in our portfolio or in theirs.

 

It's been really cool, but I think this is a huge issue and so many tenants want to grow, but the construction costs and the hard costs are so high and landlords. I have 10 tenants waiting for this restaurant space. if you have an exorbitant ask, I could just go to the next guy., from a partnership perspective, it does create a little bit of friction.

 

And I think that, groups like Bonsai that are providing this capital are going to be really helpful to that because you know-

 

Nancy Lashine (38:43 - 38:58)

Why can they do it? I mean, obviously you could also go out and get a construction per construction loan or something and put it on your balance sheet or the tenant could do that and do it, or maybe someone, but is the concept of a revenue share just, is that the revolutionary idea?

 

Katie Grissom (38:58 - 39:51)

I think so, what I've seen from, from being on the retailer side is that's pretty expensive if you can get it. you might have two or three locations.

 

It could be more cost-effective and less risky as a retailer to do a revenue share program that feels, maybe more challenging in some ways, not in others, but it's not dilutive to your equity, which is probably the other, option for a lot of these groups. And it's more accessible. I think for a lot of retailers out there, especially that want to grow, loans and dealing with banks is not their core business.

 

Oftentimes, you're resource constrained and you have a group that's, willing to plug that hole for you in a really sophisticated way with institutional backing. It feels great.

 

Nancy Lashine (39:51 - 39:55)

What do you think bond shares cost of source of capital is?

 

Katie Grissom (39:56 - 40:01)

They actually have raised a couple of funds and I can't remember who they're, their largest investor is.

 

Nancy Lashine (40:01 - 40:09)

It's institutional equity. It's really an equity strategy that's providing financing with a revenue.

 

That's a great idea.

 

Katie Grissom (40:09 - 40:27)

And honestly, the woman who founded it was a retailer herself, founded Globar and grew it we've opened 30 stores and we got to figure out how to do this better. And she left and started this company, which I just, I think is incredible for the brick and mortar ecosystem.

 

Nancy Lashine (40:28 - 40:41)

The innovation in retail is just so much fun.

 

What are the most common mistakes you think you see institutional investors making now in your space?

 

Katie Grissom (40:41 - 42:46)

Now a consensus play, which is crazy. Something that I've seen start to play out is we're selling deals at cap rates and at go forward returns that I'm not comfortable buying at, if that makes sense.

 

We’re starting to just see there, there's a super strong appetite for best in class, especially grocery anchored retail. And I think, where investors should be wary of retail maybe is a couple of places. One numbers on paper are just numbers on paper.

 

I have seen so many groups say, you can just clip a 9% coupon on this power center for the next 10 years. And in my head, I'm like, God, there's so much asymmetric downside risk there. You have long wall.

 

If a tenant leaves, like you don't have a lot of leverage, your rent roll, all of a sudden an OI goes to zero and everyone's on percentage rent. You're not getting paid enough for that. Or you might be buying in a neighborhood where the population's declining 2% a year, or there might be a development happening across the street that you don't know about.

 

The risk for the retail space is that it is so localized and it's so granular that you've got to understand where, all the risks are. if you're not seasoned, because you've know a thing or two, cause you've seen a thing or two as the farmer's commercial says, then I think you can get into a really tough spot. And so really understanding the consumer and asking who's going here and why is really the most important question you can ask.

 

And I think the other thing is that investors are buying real estate for today, 2026, a retail hold period, at best is five years and at worst is 10 or 15 for an investor. And you think about 10 years ago today, it was 2016, 7% of the population had ever even used or downloaded DoorDash or Uber Eats today, 50% of the population uses it once a week.

 

Nancy Lashine (42:46 - 42:50)

Is that right? That's incredible I've never heard that statistic before.

 

Katie Grissom (42:51 - 43:40)

It's such a random statistic, but I think it's representative of how much we've changed as people. And if you think about AI and just how quickly that's evolving and how it's impacting our daily lives, it's not farfetched to think that we could change even more rapidly, barring a pandemic or whatever that might accelerate it over the next 10 years, which you're going to still be holding that real estate that you bought today.  I think that's a really important piece of it as well for investors to think about.

 

And then the last thing I'd say is, partnership and structure of a deal is so important. And we've been in every part of the capital stack that you could imagine for every type of retail deal. And LP, which is very unique.

 

Nancy Lashine (43:40 - 43:42)

It's unique to your perspective.

 

Katie Grissom (43:42 - 44:39)

I really could never have appreciated it until I joined Nuveen. But, GP returns are not LP returns, management fees and asset management fees and construction fees and development fees and leasing fees.

 

What you're approving and what you're paying for, it gets pretty expensive and it erodes your returns pretty fast. Investors have to really understand the nuances of those things or when things go wrong, what's your optionality to get out of this? And that's where I feel like, retails, it's so hot.

 

Everybody likes it. That’s kind of where you start to say, we could do this and, we'll figure it out and we'll all do this together and take it down. And then, three years later, you want to sell and everyone's pointing fingers at each other and all those things.

 

It just- it's really hard to quantify that risk. And I've seen it play out over and over and over again.

 

Nancy Lashine (44:40 - 44:57)

Katie, for somebody so young and with so much vision and energy, you've seen so much. I can see why you are running the Nuveen platform for retail. It's really it's amazing to listen to you talk as you are, wise beyond your years.

 

What's the best advice you ever received?

 

Katie Grissom (44:58 - 45:39)

I think a couple of things, nothing's ever as good or as bad as it seems, which my dad says all the time. I have to give credit to Terry Brown, actually. Who said to me, good things happen to good real estate and you should never settle for less than quality.

 

That is something that echoes in my mind every time I look at something. The basis is really good. Not sure if I love the real estate.

 

And then he like slaps me on the face from his shoulder, good things happen to good real estate. You have to focus on quality. And that has really, really stuck with me and something I try to try to take to work every day.

 

Nancy Lashine (45:40 - 46:04)

Before we finish, I have to ask the question that, it's when I see you and think about everything you're accomplishing now and running a global portfolio out of a city that's not where you live, you have a husband. I don't know how you're managing. How do you manage family, career and this global sort of lifestyle that you're living with and still look so cool every day?

 

Katie Grissom (46:04 - 46:52)

You’re so nice. Well, this morning, my son screamed at me that I shouldn't go to work because I needed to poopy.

 

I'm on the phone and someone's what did he say? So I manage it. I don't know if I manage it well.

 

It's extremely humbling. There's some nights I am on a Zoom call with Australia and like six neighborhood children run in my house screaming, I'm so sorry. But I also think that, one of the best things that has happened in my career has been the balance that COVID has kind of allowed for, you can take calls from home.

 

I can take my child to preschool and be on a call. And that balance has been really important to me and something that's been very helpful. The other thing is, I just have a lot of help.

 

Nancy Lashine (46:53 - 46:53)

Yeah, yeah.

 

Katie Grissom (46:54 - 47:38)

I just have a whole lot of help. my in-laws, my parents, obviously my husband or nanny and great friends that, step in when, when your kid has to be picked up at school or like My son swallowed a rock the other day and I was out of town and he had to go to the emergency room. My mom's like, I'll be there in five minutes.

 

And there's no one like your mom, which, I just, I'm incredibly grateful for all the support. And I think, my advice or, my learning is, you can't do it all at the same time. And if you try to strive for work-life balance, you'll never find it.

 

I like to think that I really tried to like integrate my life with my work and that has been very helpful.

 

Nancy Lashine (47:39 - 47:44)

You're obviously doing it very well. And I assume your son is fine.

 

Katie Grissom (47:45 - 47:45)

He's fine.

 

Nancy Lashine (47:46 - 47:46)

Yeah.

 

Katie Grissom (47:46 - 47:50)

They couldn't even find the rock. So, not really sure what happened there.

 

Nancy Lashine (47:51 - 47:53)

We all have stories.

 

Katie Grissom (47:54 - 47:56)

I'm sure you have so many

 

Nancy Lashine (47:57 - 47:59)

It's just wonderful when you can just tell the stories and smile.

 

Katie Grissom (48:00 - 48:03)

it's just a story. It's not a big deal. Exactly.

 

Nancy Lashine (48:03 - 48:14)

I have one last question I want to ask you, which I think I'm really curious. What's your favorite city to walk through and just look at the retail experience?

 

Katie Grissom (48:14 - 48:20)

I have to say London, but that's such a cop-out. Everyone knows why I would say London

 

Nancy Lashine (48:20 - 48:25)

No, no, no, no. Why would you say London? Because I would say, by the way, because I would say New York.

 

Katie Grissom (48:26 - 49:59)

I love New York. London, I think does as good of a job in some ways, a better job at integrating public transportation, especially from the suburbs in a way that feels really accessible at, 18 hours a day it's just older.

 

I am a sucker for charm and a cobblestone street. The thing I love about London and Paris too, there's all these little 15 minute cities inside of London.

 

if you live in Notting Hill, other than maybe going to work, you don't necessarily have to leave Notting Hill. You can go to the doctor there. You can take your kids to school.

 

You can go to the post office and you can go to do your grocery shopping every day and go to a great public park and go shopping and go to restaurants. And maybe any big city is like that to be fair, London and the European cities just have this great integration of everything being kind of walkable and proximate the public schools and the systems and the parks and everything really works the way it should. And I love that.

 

But the other thing I would say is Portland, Maine. I'm going later this summer and I'm telling you so many national retailers have been like we opened in Portland, Maine, and we are murdering it. It is just such a cool place.

 

I am such a foodie. They have an amazing bakery and coffee scene, which, I'm excited to check out.

 

Nancy Lashine (49:59 - 50:25)

We didn't talk about your early cake, decorating career. We did not have to save something for next time.

 

I've heard that about Portland, Maine too. It's very cool.

 

Katie, I'm a groupie. You're fantastic. Thank you for joining.

 

Look forward to having you on again and hearing how the markets have evolved over the next few years.

 

Katie Grissom (50:26 - 50:28)

Thank you. It was an honor to be here.

 

Nancy Lashine (50:30 - 51:02)

I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We put a lot of thought and effort into this show and making sure we bring you insights from real estate leaders that you don't normally find in the mainstream media.

 

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