While the Hutensky Group owes its beginnings to 1979, the company firmly planted its roots in downtown Hartford when Allan Hutensky and his partner built CityPlace, the 39-story office tower, in the early 1980s. Since then the Hutensky Group has adapted, moving away from building and investment and focusing solely on investment opportunities.
Now managed by Allan’s son Brad Hutensky, who is principal and president, the company launched the Hutensky Capital Partners (HCP) investment fund in 2000, a $100-million-plus account that “invests in retail real estate, joint ventures [and] re-capitalization,” said Hutensky, and serves as a continuation of a company philosophy developed nearly a decade earlier.
“In the early 1990s, we focused 100% on retail,” Hutensky said. “We thought that was the best opportunity.”
Hutensky said HCP looks for investments where there is upside potential. “We have on staff the ability to manage and operate properties ourselves, but in this fund, it’s mostly joint ventures,” Hutensky said.
In this day and age, the retail space can be a tricky adventure, seemingly turning with every twist of the economy. According to the latest U.S. National Retail Report from Chainlinks Retail Advisors, rents, after falling between 30-45% from market peaks, have started stabilizing. And with that stabilization has been an increase in shopping center sales activity.
“Trophies versus trash became the rallying cry as the market bifurcated between investors looking to purchase the steady income streams generated by trophy shopping centers with stabilized occupancy from strong national tenants … and those looking for fire sale pricing on distressed assets and REOs,” Chainlinks said.
Hutensky said his firm isn’t looking for distressed properties, but rather “we’re providing capital, sometimes in debt, but usually in capital, to move the business plan forward.”
“Competing against a hedge fund or bank, we can provide [experience] and not just funds,” Hutensky pointed out. “They have to have a quality project … but what you’re seeing is properties that could be profitably with capital are not getting that capital” due to stricter back lending practices.
As the economy still tries to kick off the cobwebs of the Great Recession, Hutensky sees plenty of opportunity for HCP.
“Our business is filled with opportunity,” he said. “We have a talented team and a $100-million fund to operate, and plenty of opportunity.”
According to Hutensky, as the U.S. population grows over the coming decades, the question is how many more shopping centers will be needed to meet the demand?
“Some centers will need to be repositioned, and some new centers will need to be built, and we do both,” he said. “We get as involved as we can be helpful. For instance, if we have a partner that can [manage] everything, we let them do it. If we can help out, we have the resources.”
Hutensky said his entire staff of 15 is fully equipped to identify opportunity, as well as provide expert insight to HCP’s partners. But HCP is not simply a buy-low, sell-high investment fund.
“Mainly, what we want to do is solve a problem,” Hutensky said. “So we want to hold [on to the investment] long enough to solve that problem. We want to stabilize the property.”
Chainlink reports that vacancy rates were 10.9% earlier this year, but with so little new construction taking place, capacity should be tightening.
“Retail construction has dropped to its lowest levels in decades. This bodes well for reducing vacancy in most markets,” Chainlinks said. “With national vacancy at 10.9%, new construction dropping to a virtual standstill, and retailer requirements up 40% this year, it would appear that we are looking at a formula for rapid decreases in vacancy.”
That expected decrease in vacancy may leave more shopping center operators in need of funds and expertise, opening even more doors for HCP.
Hutensky said the company focuses on three core strategies when evaluating potential investments. First, the quality of the real estate is considered, such as “does it have the right kind of anchor” stores, Hutensky said. Second, is it located in a large market? Hutensky said his preference is to invest in large markets, which tend to be more stable. And third, is the center’s current management a quality partner?
HCP’s active portfolio includes properties in Arizona, Indiana, Maryland, New Jersey, Texas, Virginia and California. That portfolio, though, is ever-changing, Hutensky said, as new opportunities arise.
“The biggest advantage we have is the kind of people we are doing business with; they are very similar to us in that we understand retail [and their business is retail],” Hutensky said. “I think it’s very important to have somebody similar to you providing the capital.”
The company moved to downtown Hartford 27 years ago and has stayed ever since. Hutensky said the location is ideal for his employees, who come from various cities and towns.
“At the end of the day, it’s a great place to raise your families, and Bradley Airport is not far away,” he said, noting that the location of the airport is important because of frequent travel involved in HCP’s work.
As someone who has experience repositioning properties, Hutensky said Hartford has even greater potential to improve the business climate.
“I think there is a lot of great things about Hartford,” he said, “but I think it needs to take a more regional approach” and include the suburbs.
Hutensky should know, because if there is at least one thing he is skilled at, it is identifying opportunity.
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