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Posts from April 2011

Urban Outfitters to Open Downtown Store in W Hotel Complex

Posted on April 28, 2011 in

By Shonda Novak, American Statesman

Urban Outfitters will open a store in downtown Austin in August, in the W Austin Hotel and Residences development north of City Hall.

The popular purveyor of clothing, accessories and “apartment wares” that targets 18-to-30-year-olds will open a 9,931-square-foot street-level store, below the new Austin City Limits Live at the Moody Theater venue.

Beau Armstrong, CEO of developer Stratus Properties Inc., said Urban Outfitters’ “cutting edge” brand and products will complement both the W project and the larger Second Street district.

Urban Outfitters also has a store on Guadalupe Street near the University of Texas.

The new lease is for 10 years.

“We just really felt that was the perfect retailer for the block,” Armstrong said. “They’re well-run, so at a pure economic level, they’re a great tenant business-wise. Layer that with a W and all the things going on in the district, and we feel they’re a very compatible tenant for Second Street. Their product line and their corporate philosophy fits well with the W brand and with Austin.”

Armstrong also noted that music is a big part of Urban Outfitters’ in-store culture, another way it fits with the block housing the new studios for KLRU’s “Austin City Limits.”

Urban Outfitters joins nearly 60 other retailers in downtown’s Second Street district, which includes shops, restaurants and entertainment attractions, including the Violet Crown Cinema, an art-house movie theater that opens Friday.

“Although our locally owned businesses are our foundation, the presence of a major national retailer will only further energize the district,” said Julie Sutton-McGurk, retail marketing manager for the district.

“We’re looking forward to the energy and the foot traffic, but I also think it will give our very loyal and conscious patrons of the Second Street district brand yet another fun experience. We’re thrilled about it.”

Rance Wilemon and Sue Wasserman, brokers who own Plat.Form Real Estate, represented Stratus in the Urban Outfitters lease.

Wilemon said the retailer will act as a “mini anchor,” drawing shoppers and families alike.

“Urban (Outfitters) caters to a younger demographic, and we are excited to get their customer down to Second Street,” Wilemon said. Urban Outfitters “speaks to the Austin culture and will bring other like-minded retailers downtown,” he said.

Armstrong and others say that Urban Outfitters’ arrival helps validate downtown as a viable retail market.

“The urban market is hot, desirable, and this deal continues to prove that downtown Austin is the place to be, whether you are a local, regional or national store,” said Molly Alexander, associate director of the Downtown Austin Alliance, a group whose mission includes recruiting retailers to downtown.

Distressed Asset Avalanche Looms

Posted on April 11, 2011 in

By Jennifer Dawson, Houston Business Journal


An estimated $150 million of distressed retail properties in Houston are expected to be listed for sale within the next two years, as owners struggle to make mortgage payments.

Micha van Marcke of Page Partners LLC, who specializes in selling assets for the special servicers of commercial mortgage-backed securities, estimates approximately $300 million worth of local retail properties are in distress, though not all of them will be taken back by special servicers.

Investors who expect a bargain on a troubled CMBS asset, however, will be out of luck, she said.

“There are not going to be these big discounts that they thought they were going to get,” van Marcke said. “Everybody thinks they can buy it for 10 cents on the dollar, and that’s not the case. In some cases it will be on par with the value of the loan.”

The default projections based on van Marcke’s research pertain only to CMBS assets, not distressed retail properties whose loans are held by banks.

Van Marcke became an expert on distressed properties out of necessity.

She wanted to get into the investment sales side of retail real estate, so, in 2008, she joined Page Partners to pursue that goal. But the capital markets took a nosedive in late 2008, severely hampering her plans.

So van Marcke, who got her master’s in business administration from Rice University, came up with a Plan B.

Special servicers, she concluded, would become the next big owners of real estate after the collapse because they would take over commercial mortgage-backed securities — the large portfolios of real estate assets that had been securitized.

Van Marcke immersed herself in the CMBS industry, learning all she could about what she anticipated would be the next cash cow for retail sales. She also educated herself on the behind-the-scenes workings of the special servicers who handle distressed CMBS properties.

Her objective was to secure listing assignments from some of the nation’s five largest special servicers. And it worked.

Van Marcke’s work has brought Page Partners leasing and management duties on approximately 500,000 square feet in 10 retail properties, all but one of which are in Houston. The expectation is that she will get the listing assignments on those assets from the special servicers when the time comes to sell.

That work is already coming to fruition. On March 22, van Marcke sold a 22,000-square-foot strip center adjacent to a Walmart at State Highway 6 and FM 529 to CFT Developments LLC of California, which was selected from among 10 bidders. The purchase price was not disclosed, but van Marcke said it was above the appraised value.
Exploding market

Special servicers selected to dispose of commercial real estate assets are nothing like the Resolution Trust Corp., which, in the 1980s, was mandated to sell properties fast.

Special servicers “are not dumping that stuff at 50 cents on the dollar,” said Blake Tartt III, who specializes in retail real estate as president of New Regional Planning Inc. in Houston.

“I think it’s been very healthy for the Houston market,” said Tartt. “It’s helped a lot of people hang on.”

The disposition system is different this time around, van Marcke explained.

Distressed properties have not flooded the market, as many real estate watchers anticipated, said van Marcke, because of how the special servicers handle distressed properties. When the owner of a retail center is in default on mortgage payments, the loan is transferred to the special servicer. A 2009 regulatory change gave special servicers more flexibility to work out those loans as a way to avoid foreclosure.

Special servicers are not in a hurry to sell assets because they typically have a vested interest in the properties. Special servicers have to bid for the chance to manage a pool of assets, and, to be selected as the winning bidder, they more than likely had to acquire part of the debt associated with the pool of loans, she said.

More specifically, they had to buy the highest risk debt — the last to be paid back after assets are sold.

“They’re trying to recover some of their losses,” van Marcke said.

Special servicers have a fiduciary responsibility to bondholders to do no harm to the property, stabilize cash flow and add value, she said. When a special servicer takes over a pool of assets, it typically is not aware of conditions and circumstances surrounding the individual assets.

That’s where a real estate professional can get their foot in the door, which is what van Marcke and Page Partners did.

Special servicers hire a broker to give their opinion of value on each asset. They hire a leasing and property manager to stabilize the property. Retail centers often need to be cleaned after being neglected, sometimes through a foreclosure process. That helps the broker retain existing tenants and attract new ones. Once the property is stabilized, a broker is enlisted to set up a bidding process to sell the asset.

Page Partners has been able to handle CMBS assets because it does all the work special servicers need.

“We went after them with a more holistic approach,” van Marcke said.

Ed Page, principal and manager of Page Partners, said the firm saw two to four CMBS properties per month four months ago, and now it’s seeing two to four a week.

“It’s just exploded,” he said.
lengthy process

Investors interested in distressed commercial properties must compete for them in a traditional bidding process, including a best and final offer round.

Some investors have lost out on buying assets, said van Marcke, because they expected a big discount in exchange for offering all cash and a quick close. But special servicers are not wired for a quick close. Plus, their fiduciary responsibility requires them to get the best price possible.

It’s not like when an investor has a friend at the bank and calls up to make a deal for an asset, van Marcke explained. Special servicers don’t deal with individuals on properties, whether they are a borrower or potential buyer.

“They don’t market themselves publicly,” van Marcke said. “They market to the investment banks.”

Every step of the disposition process must go through multiple approvals at the special servicer. The checks and balances have contributed to the delay in release of assets so far, van Marcke said.

“The approval process is complex,” she said. “Everything’s slower.”

The procedure cannot go on forever, though. Once a special servicer forecloses on an asset, it has three years to move the property out of its system, van Marcke said.

Larry Levine, a Houston retail developer and property owner, said he’s working directly with banks to acquire prime assets in financial trouble, but he’s not interested in CMBS properties because of the sales process.

“I won’t look at something that’s on the market and it’s in a bid situation,” said Levine, president of Levcor Inc. “I don’t want to get in a bidding war.”