Colorado Real Estate Journal - April 6, 2016

Meranski: Low-profile head of Western Centers

During the past 25 years, Arnie Meranski’s Western Centers has bought, sold and managed dozens of properties, most of them grocery-anchored shopping centers in the Denver area.

“I think what I am most proud of is that none of our investments have ever lost money,” said Meranski, president and founder of Western Centers.

“I think that is an unparalleled record,” Meranski said.

In fact, his first deal, a 90,000-square-foot center in Lakewood, was not only a home run, but also a grand slam.

More than a grand slam, in fact.

“We bought it for $800,000 and sold it for $5 million,” he recalled, after owning it for only 2 ½ years.

Timing was the reason Western Centers was able to make such an incredible return on its first deal.

It bought it during the savings-and-loan crisis, when real estate prices were depressed, and sold it into a recovering market, he noted.

Although Western Centers currently owns 20 buildings with 894,193 sf and manages another 250,000 sf or so in shopping centers, Meranski himself has never been very high profile.

“I’m not really comfortable talking about myself,” admitted the 61-year-old.

Yet, his Western Centers is a force in the world of smaller, typically older, suburban shopping centers.

“We have very good relationships with the brokerage community and if a center becomes available in the $3 million to $10 million range, we are one of three groups that it would be logical to call,” Meranski said.

Meranski understands what it is like to be a broker, as during a pivotal point of his 30-year career in real estate, he was a successful retail broker at Fuller and Co. And his son, Joel, is following in his father’s footsteps, while following his own path, as a broker with Colliers International.

The elder Meranski also was known to wash dishes and make a mean Caesar salad, skills he learned as a partowner of an Italian restaurant on East 17th Avenue in Denver’s Uptown neighborhood.

Today, Western Centers’ biggest and flagship holding is the 168,508-sf Mission Trace North.

“It just had a milestone of being 100 percent leased for the first time, which is pretty cool,” Meranski said.

He estimated that center is worth $35 million in today’s market.

Western Centers also opened the Hemp Centre in a center in Aurora, which is focused on serving clients in the cannabis industry.

“I received lots and lots of offers of becoming involved in the cannabis industry on the production side, which I had absolutely no interest in,” Meranski said.

However, he thought the Hemp Centre would be a responsible way to have a concentration of cannabis stores in one place.

“We poured a lot of money into the center,” he said.

“We also have a church as a tenant, which plays its role,” he said. “And we would like to get some medical and counseling tenants in there,” who could deal with consumers who are abusing marijuana.

Meranski wasn’t planning on a real estate career and certainly not in the Denver area.

He grew up in Miami.

While he was a student at Florida State University, his stepdad, who had been a general contractor, developed a system for closets.

“He was kind of pioneering in that industry,” he said.

“I tried working for him for a few years,” he said.

But he was never passionate about the business.

“It was a family business, but I never had much interest in it. Honestly, I didn’t know what I wanted to do.” He didn’t know it at the time, but his life was going to change while playing racquetball with a Denver real estate investor, Marty Herzog.

“Marty had a place in Miami where he liked to spend part of the winter,” Meranski said.

“Marty told me if I was ever interested in learning the real estate business, I should join him in Denver.” When Meranski was 30, he got married and took Herzog up on his offer.

“I just immediately fell in love with the mountains and the whole lifestyle,” Meranski said.

He arrived in Denver in 1984, just before the S&L crisis kicked off and the Resolution Trust Corp. took over failed projects on behalf of the government.

That was a time when most owners couldn’t sell properties, because they had lost so much value that they were underwater on their loans.

The RTC was taking back overleveraged shopping centers, leasing the retail space for a huge discount, driving nearby properties into foreclosure, creating a vicious cycle.

“I’d make cold calls and everyone was leaving town, and they were telling me I was crazy for wanting to buy in Denver,” he said.

After 18 months with Herzog, “It just wasn’t working out,” so he decided to go in a different direction.

“My stepdad lent me $7,500 and I bought half of a little Italian restaurant, Dario’s, on 17th Avenue,” he said.

“The owner taught me how to wash dishes and pour wine.

Most of the time, she made me pay for my lunch.” His wife was pregnant and he decided he needed to make more money, so he re-entered the real estate world, but this time as a commercial real estate broker.

“I interviewed at all of the brokerage houses and Fuller and Co. was the only one to make me an offer,” Meranski said.

To this day, he still considers John Fuller, the founder of his namesake firm, as one of his mentors.

“Fuller already had superstar brokers in land, office and industrial, but they didn't have much of a presence in retail, so I kind of filled that niche,” Meranski said.

Soon, he was closing a deal a month, which was considered astonishing at the time, he said. After a couple of years at Fuller, he sold back his interest in Dario’s to the original owner.

“By that time, my only involvement was to stop by on a few evenings each week.

I made a pretty good Caesar salad,” he said.

At Fuller, he made a cold call to Dan Weingarten, a real estate investor in the Northeast.

“Dan became a very active buyer,” and the two became fast friends.

“We did everything on a handshake,” Meranski said.

Weingarten was buying a lot of properties from the RTC and sometimes there wasn’t money available to pay Meranski’s commission.

“He always made good on it,” when he turned the property around, he said.

“Dan really had a huge depth of knowledge about the retail business that he parlayed into a very successful career and he shared his knowledge with me,” Meranski said.

“He taught me a lot,” he said.

Two lessons stood out: Timing was important and you don’t want to take on too much debt.

Weingarten also offered Meranski a right of first refusal when he sold properties.

“He would carry back some of the debt to make it easy for me to get financing,” Meranski said.

As he bought more centers, he targeted properties that were too small to catch the eye of institutional buyers.

“We also started to look at the secondary, or tertiary, markets, and bought properties in places like Sterling, Trinidad and Firestone, where your only competition was from local buyers,” he said.

Today, he fields a lot of questions from people seeking advice on how to get their foot in the door and keep it there.

“We have no secret sauce,” Meranski said.

“Most of it is common sense. Don’t overleverage, control your expenses and treat your tenants fairly.” Also, you can’t invest “scared” money, he said.

“By that I mean you have to know your strengths and weaknesses and you can’t be afraid to walk away from a deal, or sell a property if the time is right,” he said.

He said a “comfort zone” for Western Centers is to control about 1 million to 1.5 million sf of space.

“We like to balance life and business,” Meranski said.

“We’ve found if we get bigger than that, we don't really know all of our tenants and what their needs are,” he said.

He also has a crackerjack executive staff in place, including Brian Pesch and Corey Wagner.

“I’m very blessed to have Brian as a COO,” Meranski said.

“He really runs the company and does an outstanding job,” Meranski said.“That pretty much gives me the freedom to do what I want.” Outside of real estate, he is an investor in an online, addiction recovery, live video website called In the Rooms.

It provides free videos to every kind of addiction, from drugs and alcohol, to overeating and gambling.

“I think these are issues that touch everybody in this country, either directly or indirectly,” he said.

“Ultimately, I think it could be worth a fortune,” Meranski said.

However, he is having ongoing discussions with his partners, who have more than 30 years of experience in the mental health field, on what direction to pursue with the company.

“We’ve talked about whether it should be a for-profit organization or it if is better to turn it into a nonprofit organization,” Meranski said.

Meranski also is a big fan of all sports, both as a participant and a spectator.

“I love to golf and go to Florida to fish,” Meranski said.

“I’m also very passionate about playing basketball,” he said.

His daughter, Meryl, 30, works with him at Western Centers.

“She’s a very big part of the operation,” he said.

Joel, 26, “wanted to get out on his own and build his own career, and I encouraged him to do so,” as a broker, his father said.

While Joel has occasionally done deals with Western, such as bringing tenants to the Hemp Centre, the vast majority of his brokerage transactions have nothing to do with Western Centers, he said.

“I would like to think that he will come and join our firm at some point. But right now, he is really enjoying the peer pressure of having the need to produce and being around a lot of very successful brokers.”