When Stuart Tanz was looking for tenants to fill the first strip shopping center he developed, he stopped at a veterinarian’s office to see if the vet might be interested in renting from him.
There was another man sitting in the waiting room with a shar-pei dog. Tanz started talking to the man, wondering what was wrong with the frisky canine. He was told by the dog breeder the animal was to be put to sleep because it didn’t meet breed standards of perfection. Tanz immediately offered to adopt the dog and his offer was accepted.
“My wife and I were recently married at the time and she was surprised when I came home with the dog that night, since I was supposed to be looking for tenants and not pets,” Tanz says. “She agreed to adopt the dog and it was a good companion for many years.”
The incident illustrates the ability Tanz, president and CEO of Vista-based Pan Pacific Retail Properties Inc., has to see value in something someone else wants to discard. It has enabled him to build his company into what will soon become the largest owner of grocery store-anchored shopping centers on the West Coast.
Pan Pacific currently owns 60 strip shopping centers with a total of 9.4 million square feet. Its two local properties are Melrose Village Plaza, a 132,000-square-foot strip center in Vista, and Encinitas Marketplace, an 118,500-square-foot center in Encinitas.
He says that most of his career has been spent acquiring retail properties the owners are no longer interested in operating. He then does cosmetic repairs to the buildings and remarkets the space at a higher rental rate.
Major Merger
Last month, Pan Pacific announced an agreement to acquire Western Properties Trust, a Northern California shopping center company with 57 properties, in exchange for Pan Pacific common stock. The move will make the merged company, with 110 centers scattered across California and the West, the biggest owner of strip shopping centers in the region.
Western Properties Trust was in business for about 20 years and the board of directors felt they had gotten as much mileage out of their real estate as possible, Tanz says.
He thinks otherwise.
“I would say most of their strip shopping centers are as good as the ones we have. They just need some cosmetic work and new tenants,” Tanz says.
Tanz, 41, a Toronto native, was born to a father who developed real estate while his mother stayed home to raise their five children.
“Dad built houses, office buildings and then retail properties,” Tanz says. “I spent my summers during high school picking up trash and doing maintenance around the shopping centers he owned. I learned this business in the trenches, later canvassing on foot to find tenants and learning all facets of the business.”
In 1976, his family moved to San Diego and Tanz later graduated from La Jolla Country Day School. He attended the University of Southern California and obtained a degree in business administration in 1982.
Seeking Properties
After graduation, he went to work for Branela Inc., an $8 billion Toronto real estate company. As director of acquisition from 1982 to 1987, he traveled around the West Coast looking for real estate.
“That job gave me an understanding of how capital markets work, and I also learned who owned what because I studied transactions and how they were put together,” Tanz says. “If you have knowledge of a particular piece of real estate and the personality of the owner, you can move quickly when there’s a purchase opportunity.”
This knowledge of the Northern California retail real estate market came in handy when the opportunity arose to acquire Western Properties Trust, he says. Pan Pacific Retail Properties was able to move in secret within a matter of six weeks through the due diligence process. Secrecy was important because Western Properties Trust, like Pan Pacific, is a publicly traded company and news of the acquisition could drive up the price of Western’s stock, he adds.
He prefers retail real estate investments to other types of commercial property, such as offices, industrial buildings or apartments. That’s because tenants of a well-run shopping center who are making money at the location will never want to leave, he says.
“It’s a contrast to the office building industry where if somebody builds a new office across the street from you, all of the tenants will move over there,” Tanz says. “When a retailer has a good location, he will never leave.”
He prefers strip shopping centers, with their grocery and drug stores, to malls, because their tenants sell basic necessities that are purchased in good times or bad.
Origins Of Pan Pacific
In 1987, he began working for the family business, Revenue Properties Ltd. of Toronto, developing strip shopping centers in Southern California. Then in 1991, several bankers who held the promissory notes of Pan Pacific Development, a real estate company, approached him about acquiring it.
Pan Pacific was struggling through a real estate recession complicated by expensive development projects and acquisitions it had done. Revenue Properties Trust, his family’s firm, acquired the development company in early 1992.
After five years of work turning Pan Pacific around, he took it public in 1997. It’s now traded on the New York Stock Exchange under the symbol PNP and Revenue Properties holds 51 percent of its common stock.
During all of this intense activity, he was able to start a family.
“You have to keep your priorities straight,” Tanz says. “The most important things are your health and your family, not how much money you’re making.”
The Rancho Santa Fe resident and his wife, Karen, have two children: Sarah, 12, and Zachary, 8. On the weekends he spends most of his time on local excursions with his family, also taking time out for tennis, aerobics and snow skiing.
Tanz, whose taste in music runs to classic rock bands such as the Beatles and Led Zeppelin, admits he can’t remember the last book of fiction he read. Most of his spare time is spent reading business publications.
He contributes to several charities and says he wishes he had the time to help them by volunteering.
Community Concerns
The high price of residential real estate in San Diego County is a problem that concerns him because of its impact on tenants and working people. He believes establishing master-planned communities, complete with industrial and office buildings, in the rural areas of the county could provide affordable housing without undue strain on the freeways and other infrastructure.
However, excessive government regulation and an anti-development attitude by many of those who already own their homes have made that almost impossible, he says.
Tony Bernheim, president of Corporate Office Services Inc. of Fairfield, N.J., went to the University of Southern California with Tanz. He worked also leasing space in a Southern California shopping center Tanz was building. He also assisted Tanz on the first public offering of Pan Pacific stock.
“Stuart understands the capital markets as well as the real estate markets in the areas where Pan Pacific is looking for property,” Bernheim says. “There isn’t a shopping center deal in the areas he specializes in that he doesn’t know all of the details.”
Tanz has been successful at promoting Pan Pacific’s ability to close real estate sales quickly and without financing contingencies, he says. That’s because he has built an organization that can move quickly and decisively.
“He is a very tough negotiator and is a hard worker who expects his people to grasp all the details of a transaction the way he does,” Bernheim says. “He’s extremely fair to his employees as well.”
Tanz is also poised enough to keep putting good real estate purchases in the acquisition pipeline even as he is managing the company, Bernheim says.
Bernheim also says Tanz has an ironic sense of humor that puts his colleagues in stitches when he jokes.
“The growth of Pan Pacific since it went public has been phenomenal,” Bernheim says. “I’ve seen Stuart grow into the president’s job since the company went public by being willing to delegate but also willing to accept responsibility.”
