Could General Growth Be Sold?

As the credit crisis drags on, debt-ladened General Growth Properties, the nation’s second largest regional mall REIT, may have no other choice than to sell the company. That move, according to some observers, could even happen before the end of the year.

Last week, the Chicago-based firm announced it was exploring financial and strategic alternatives, including possible sale of the company, as it races to retire all of its 2008 loan maturities, which total $2.8 billion. Beyond that, as of Aug. 29, the company had a total long-term debt load of about $27 billion, according to Columbia Capital Services, Inc. Its long-term debt to capitalization ratio is at 72 percent, according to a report from Wachovia Capital Markets.
On Monday, Standard & Poor’s downgraded General Growth’s corporate credit rating to BB from BB+ and put the company on the watch list for further downgrades.

General Growth has already adopted several extraordinary measures as it tries to work with debtors and calm investors. On Sept. 2, it added seven of its properties to the collateral pool to repay $391 million in near term mortgage maturities. On Sept. 17, it increased the initial repayment guarantee to 50 percent of its outstanding $1.5 billion credit facility. On Sept. 20, two days after the company’s stock plummeted to a 52-week low of $19.50, General Growth was added to the short sell ban list by the Securities and Exchange Commission (SEC). It has also doubled its recourse levels with lenders to 50 percent. . . . more

REIT history bodes well for outlook in current volatile market

Prices said to dip and climb before those of commercial property

Even though commercial- property values are decreasing, equity real estate investment trust prices will likely rise if historical trading trends are an indication, some industry observers predict.

"There's a tendency for people to think that if property values are going down and they own REIT stocks, then that means their REIT stocks will go down — and that, historically speaking, is not the case, because REITs lead the rest of the market," said Brad Case, an economist and vice president of research at the National Association of Real Estate Investment Trusts in Washington. "Returns to REITs lead the returns to real properties."

Equity REIT share prices have tended to decline, trough and rebound a year or two ahead of commercial-property prices shown on the NCREIF Property Index, from the National Council of Real Estate Investment Fiduciaries in Chicago.

If this trend holds up during this cycle, equity REITs, which were up about 2% in the first eight months of 2008, should continue ticking up even though commercial-real-estate values will likely be falling, Mr. Case said. . . . more

Baltimore: Owner says Columbia Town Center project still on tap

Debt-laden mall owner General Growth Properties Inc. plans to follow through with its proposed Columbia Town Center redevelopment, despite recently announced plans to shore up its finances and refinance its debt by selling off some of its properties.

Greg Hamm, general manager of the Columbia project for General Growth, said the company hopes to submit documents to Howard County outlining its plans for the project.

“We have every intention of moving forward,” Hamm said. “It’s a wild world out there, but we’re very excited about the project.”

Bill Mackey, project manager for Howard County’s planning and zoning department, said General Growth has said it will provide the county with the plans next month. . . . more

Mohegan Sun's Expansion Put on Hold

UNCASVILLE, CT-The Mohegan Tribal Gaming Authority is planning to delay a large capital spending component in the Project Horizon expansion of Mohegan Sun. A statement cites the ongoing economic recession affects on regional gaming markets as the cause of the interruption.

The components that will be suspended are the Earth Expansion and the adjacent parking garage. The complex consists of Casino of the Earth, Casino of the Sky, Casino of the Wind, Sunrise Square, the Shops at Mohegan Sun, along with a 10,000-seat arena, a 350-seat cabaret theatre and 100,000 sf of meeting and convention space. There is also a 1,200-room Sky Hotel Tower. The Project Horizon project included costs spent on different parts of the complex with $17 million to Sunrise Square, $116 million for Casino of the Wind, $58 million for Property Infrastructure and $75 million has already been spent on Earth Expansion and $5 million on the parking garage. By halting the expansion now, the project will save $734 million. . . . more

Real estate investor shoring up purchase of former Yoken's site

PORTSMOUTH, NH — A local real estate investor is in the process of finalizing a purchase-and-sale agreement to buy the former site of Yoken's restaurant on Route 1 from Shaw's Supermarkets Inc.

Anthony DiLorenzo, owner of several commercial properties in Portsmouth, entered into an agreement with Shaw's on April 21, according to a published report in the Portsmouth Herald.

DiLorenzo is the owner of the former Meadowbrook Inn, which was recently demolished to make room for a large multipurpose development on the Route 1 Bypass. He is president of Portsmouth Chevrolet, as well as principal of Key Auto Group.. . . more

Developer hopes for hit at Fenway

Retail residential complex proposed for area between Park Drive, Yawkey Way

A developer is proposing his third retail and residential complex outside Fenway Park - a project that would be aided by a new street the city wants to build to spur fresh development in the neighborhood. The plan disclosed by Steve Samuels and city officials yesterday is the next step in transforming the gritty triangle between Park Drive and Yawkey Way, where residents and neighborhood planners have long sought to create an "urban village" in the shadows of the ballpark. Mayor Thomas M. Menino said plans for the new quarter-mile-long street, to run parallel to Yawkey Way, would ease traffic congestion and lay the groundwork for a shopping district where Fenway sausage vendors would intermingle with high-end boutiques.

"What we want to do is have a balance between residential, retail, and some office space," Menino said. "It will be a more walkable area, a more friendly area. Now all you see is auto repair shops and sub shops. That's not the future, that's the past." . . . more

Burlington: Forest sale is scratched

Scope of project too large for town

After much hoopla in town and beyond, Burlington officials are putting the brakes on an ambitious development proposal to turn a large swath of forest land into the state's largest life sciences complex, senior housing, and playing fields.

The Board of Selectmen has decided against selling the 247-acre landlocked parcel near Route 3, saying the community is not ready to let go of the property.

"The land is not for sale," said Sonia Rollins, chairwoman of the panel.

But Patriot Partners, the development group that holds an option to buy the land if the town does decide to sell, is not giving up on its vision for the site bounded by Route 3, Interstate 95, and the towns of Lexington and Bedford. . . . more

Merrimack NH outlet mall gets go-ahead

MERRIMACK – Before a packed room last night, the planning board approved a site plan with conditions for an estimated $100 million, 135-store outlet mall project that would generate a combined 1,400 full- and part-time jobs and more than $800,000 in property taxes.

The planning board voted 6-1 to approve the retail project, with Nelson Disco, Pete Gagnon, Alastair Millns, Stan Bonislawski, Tom Koenig and Tom Mahon in support. John Segedy served as the lone voice of opposition.

Segedy said he voted against the mall because he perceives it as unfair to the residents living near the retail project. He also said it would put a considerable burden on town staff and may be too much for them to handle.

Meanwhile, Koenig said he has put "a level of trust in Chelsea" Property Group despite some concerns he has about the plan. He added that there is no legal reason to deny the project, which could be justified in a court of law.

Millns said he's all for Chelsea coming in for the tax advantages related to the project, but reiterated his previous concerns on the traffic impact.

Gagnon described the project as "the most complex plan" he's ever seen, even more so than when Digital came to Merrimack years ago.

. . . more

Commercial construction costs continue to rise

Commercial building costs rose 1.77 percent in the third quarter over the second quarter and nearly 6.5 percent over the third quarter of last year, according to Turner Construction Co.'s Building Cost Index.

The index, which projects domestic commercial building construction costs, found that construction costs are rising faster than the Consumer Price Index.

The increase is due in large part to price hikes for steel, non-ferrous metals, petroleum-based products and energy.

. . . more

Mall developers facing excess space, too few tenants

Shopping-mall owners have struggled this year with a darkening economy, slowing consumer spending and store closings by retailers. But they face another problem that may persist long after the economy bounces back: a decade of overbuilding.

Developers have built one billion square feet of retail space in the 54 largest U.S. markets since the start of 2000, 25 percent more than what they built during the same period of the 1990s, according to Property & Portfolio Research Inc. of Boston. U.S. retail space now amounts to 38 square feet for every person in those 54 markets, up from 29 square feet in 1983, the firm says.

Consider a six-mile stretch of highway north of Dallas, where three developers are racing to finish four huge shopping centers with a combined three million square feet of space. Not only will they compete with each other, but there are three existing malls within a 10-mile radius.. . . more

District’s Golden Triangle sees golden opportunity

A landscaped median down Connecticut Avenue NW. Charming benches and quaintly designed vendor booths dotting the sidewalks. And yellow flowers everywhere.

That’s the vision business leaders in D.C.’s Golden Triangle district have laid out for a neighborhood they say is underrated as a retail opportunity.

“We’re trying to think more Fifth Avenue, not Times Square,” said Steven Gewirz, a principal with developer Potomac Investment Properties Inc., noting that Gallery Place and Chinatown are more akin to New York’s flashy and gritty 42nd Street. . . . more

Bound to go bust?

Retail construction booms, but economy raises doubts

Sparkling new shopping complexes have opened in recent months in Foxborough, Mansfield, Plymouth, and Wareham. Legacy Place, a 675,000-square-foot "lifestyle center," is slated to open next summer in Dedham. The South Shore Plaza in Braintree is expanding, and large retail projects are planned in Hingham, Sharon, Westwood, and Weymouth.

But this wave of suburban retail development is arriving on an uncertain landscape. The real estate market, which was sizzling when the projects were first drawn up, has cooled considerably, and consumers are pinching pennies. Across the country, businesses are struggling, and empty storefronts are becoming a more common sight.

"It's a very difficult retail market right now," said Robert F. Sheehan, vice president of research for KeyPoint Partners LLC, a Burlington-based commercial real estate firm. "This is just my opinion, but I think you're going to see significant vacancies if all of these projects get off the ground.

"It's not the greatest time."

Indeed, vacancy rates at US shopping centers are the highest they've been since the mid-1990s, and mall vacancy rates haven't been this bad since 2002, according to the New York-based real estate research firm Reis Inc.

A recent KeyPoint study found that the overall retail vacancy rate in Eastern Massachusetts (based on square footage) rose slightly to 7 percent in March 2008 from 6.9 percent in October 2006, but that big retailers seem to be weathering the downturn better than smaller businesses. The study showed that over 99 percent of big-box stores were occupied, but that the vacancy rates among smaller stores - under 2,500 square feet - climbed to 9.9 percent in 2008 from 8.4 percent in 2006.

"Within that segment, you have mom-and-pops, and you have national and regional chain stores closing," said Sheehan.

It seems that no sector is immune. The national chain Linens 'n Things Inc. announced in July that it would close three Massachusetts stores, including one in Taunton. Starbucks announced that it was closing coffee shops in Dartmouth, Sharon, and Stoughton.

Smaller independent businesses, meanwhile, can be hurt by the proliferation of giant shopping centers. Book Ends, a locally owned bookstore on North Main Street in Mansfield, is closing because it couldn't compete with online retailers and the Borders bookstore that opened at Mansfield Crossing, a new 383,000-square-foot shopping plaza on Route 140.

In Massachusetts, the amount of unoccupied retail space varies widely from community to community.

The KeyPoint report found the highest retail vacancy rates in Swansea (22.1 percent), Stoneham (17.5 percent), and Lawrence (15.8 percent). Retail vacancy rates for the Globe South region ranged from as low as 1.3 percent in Wareham to as high as 12.5 percent in Foxborough.

In Wareham, Chuck Gricus, the town's former director of planning, said the retail scene has been thriving, especially since the arrival of Wareham Crossing, a 675,000-square foot open-air shopping center that opened last fall.

The plaza, which Gricus described as "booming," is home to big-name tenants such as Best Buy, Target, Borders, and Old Navy. JC Penney will celebrate the grand opening of its store there next weekend.

"Wareham is a regional retail center; people come from all over, and off the Cape to shop here," said Gricus. "Wareham has its share of problems, but retail is not one of them."

On the other end of the spectrum, Stephen M. Costello, Norwood's planning and economic development director, chalks up the town's 12 percent vacancy rate to two large empty properties: the long-dormant Home Quarters Warehouse and the former Decathlon Sports Megastore.

"Those two are substantial vacancies on our Route 1 landscape," said Costello. "We're trying to actively fill them with tenants."

The Home Quarters Warehouse, known as HQ, was part of a national chain of home improvement stores that went under in 1999. The 115,000-square-foot warehouse has been empty ever since, according to Costello. The former 40,000-square-foot Decathlon store has been vacant since 2006.

"With HQ, it's a substantial space for a specific type of use. . . . We're working with the owner to make it permit-friendly and tax-friendly," Costello said.

"It's the larger spaces that seem to be nagging and chronic," he said. "We're in pretty good shape, except for those" two properties.

Costello said the situation in Norwood is still much better than during the 1990s, when several manufacturers left town, Raytheon closed, and hundreds of local jobs disappeared.

When Klein's department store on Washington Street closed in the early 1990s, several other merchants followed. "That really caused a big ripple in downtown," said Costello. By 1998, the town center was left with 18 vacant storefronts and a vacancy rate of 22 percent.

Norwood's downtown has since been revived, said Costello, thanks partly to such initiatives as a sign and facade improvement program, which helped make the downtown area more attractive to restaurants and niche tenants. Costello said the former Klein's site is now occupied by Woodstuff, which sells unfinished wood furniture, and Byblos Restaurant, which is Zagat-rated and serves Middle Eastern cuisine.

The regional boom is evident in Braintree, where big changes are underway at South Shore Plaza. The mall, which opened in 1961, is undergoing renovations and creating a large addition that will include a 150,000-square-foot Nordstrom department store.

A recent visit to South Shore Plaza found more than a dozen empty storefronts. Most of them appeared to be in transition and were covered with "Coming Soon" signs. A mall spokeswoman said that several spaces are undergoing renovations, and that other tenants recently moved to bigger spaces within the mall.

Five new stores - Chipotle restaurant, Teavana tea shop, children's clothing retailer Janie & Jack, Zumiez skateboard and snowboard shop, and Zounds - opened in mall this summer, and two other restaurants - Shrimp Market and Quiznos - will be opening in the food court, according Judy Tullius, the mall manager.

All told, there are "essentially 22 different properties coming into the shopping mix," Tullius said in an e-mail. "And this is all before a new wing opens, featuring Nordstrom."

"Not only is the mall doing major upgrades and improvements," she said, "but the existing tenants are also taking the initiative to remodel and rebrand their stores, while new tenants are seeing what's coming with the mall's expansion and additions and want to be on board."

Nordstrom officials last month hosted a project preview for several minority- and women-owned building contracting firms, according to Nordstrom spokesman Michael Boyd. "Our store is still on track there at the South Shore Plaza, scheduled to open in spring 2010," said Boyd. "We don't have a specific opening date to share with you yet, but we are on track."

Retail development is also humming along in Hanover. On Route 53, the site of the former Decathlon sporting goods store at 1207 Washington St. is fenced off and surrounded by construction vehicles. Bulldozers have removed acres of trees behind the store to make way for a shopping center that will be anchored by Target. The Decathlon space could become a restaurant.

The La-Z-Boy furniture showroom at 1271 Washington St. is empty. But most retailers along Route 53 are open. The Hanover Mall is also fully occupied.

Tom Burke, president of the Hanover Chamber of Commerce, is optimistic.

"To me, it really feels like we're at the traditional occupancy level, given the current conditions," he said. "The impression I get is that we probably have the normal amount of vacancies. With all the development, when you look at what's going on . . . it's pretty promising."

Source: The Boston Globe

MA: Hanover draws Target to new retail center

Passing motorists see only boulders and tree trunks. But the town of Hanover envisions a retail hub for the site on Washington Street (Route 53) between Mill and Pond streets, and already has secured a prominent national retailer.

Target Corp. has agreed to set up shop in a 137,000-square-foot building that will serve as the anchor for the Washington Street Shopping Center complex. According to Town Planner Andy Port, the town hopes to have the store opened by late summer or early fall 2009.

The new Target will be the largest single retail store in Hanover, according to Port. While the Hanover Mall is larger in overall size, it houses dozens of individual retailers.

Though Target will serve as the centerpiece for the site, which is in its early excavation and grading stages, plenty of other construction is already planned.

The former Decathlon Sports building, which more recently housed a furniture retailer, will not be demolished. Instead, the existing structure is to be expanded and incorporated into the new complex.

"The building will be expanded by construction by 10,000 square feet," said Port. "This will house two large retail units, and will be about 50,000 square feet total."

Another new retail building will be constructed, and at 17,000 square feet, will house five smaller retail units.

To make the center more than just a shopping destination, two restaurants, at 6,000 to 7,000 square feet each, are also planned for the site. Tenants for the smaller retail units and restaurants have yet to be confirmed.

The Washington Street Shopping Center project was bolstered by the continuing road-widening project along Route 53. "The road-widening has been in the works for a while, but Target probably wouldn't have found the site as beneficial without it" and would have had to pay to widen the road in order to prevent backups, Port said.

Due to the anticipated increase in traffic from the shopping center, Target will be required by both Massachusetts and town law to install a lighted intersection and turning lanes to facilitate entering and exiting the complex, similar to those just up the road at the Hanover Mall.

Source: Boston Globe

Towns recycle abandoned stores

Wisconsin Rapids, one of Wisconsin's old paper-mill towns, had never fought to keep Wal-Marts and other big-box retailers out. Quite the opposite. The city was so welcoming that it got a state grant to meet Wal-Mart's parking needs in the 1980s.

By the late 1990s, however, Wal-Mart outgrew the space and moved to the outskirts of town. Downtown Wisconsin Rapids was left with a 120,000-square-foot shell and a giant parking lot. A neighboring shopping center suffered.

Today, the old Wal-Mart has new life as the Centralia Center for senior citizens. "Had we not (done so) … today it would still be sitting there blighted," says Mayor Mary Jo Carson.
America's big-box experience is entering a new phase.

Some towns continue to block megastores because they object to their economic impact on local merchants and the traffic congestion they can create. But thousands of other towns across the USA that welcomed them face a growing challenge: What to do with the cavernous spaces left behind by retailers such as Home Depot, Wal-Mart and Kmart when they downsize or expand elsewhere.

Big-box stores leave huge spaces behind — many carry deed restrictions that prevent other retailers from moving in — and filling the space can be difficult. So cities have become creative and some are turning these hubs of capitalism into centers of civic life.

A Kmart in Hastings, Neb., is a Head Start Early Childhood Center. Kmarts in Buffalo and Charlotte and a Wal-Mart in Laramie, Wyo., are charter schools. After Hurricane Katrina's devastation in Louisiana, the St. Bernard Health Center opened in government trailers in the parking lot of a closed Wal-Mart.

Among the most unusual uses: An old Kmart in Austin, Minn., is the site of Hormel Foods offices and a museum dedicated to Hormel's famed meat product, Spam; the Peddlers Mall in Nicholasville, Ky., is a flea market and antiques mall where a Wal-Mart once was.

Profting from abandoned spaces

Julia Christensen spent six years documenting the trend in Big Box Reuse, a book to be published in November. She details how 10 communities turned vacant big-box stores into schools, a courthouse, church, museum and other civic organizations. "We have a bunch of empty buildings all over the country," says Christensen, an artist who teaches at Oberlin College in Ohio.

Most cities don't know what other cities are doing with abandoned big-box spaces, she says.

"I hope this project will give us a platform so that we can make informed decisions," Christensen says. An exhibit of Christensen's photos that appear in the book opens this week at the Miller Gallery at Carnegie Mellon University in Pittsburgh. "Hopefully, we can raise awareness," she says.

Wal-Mart owns more than 3,400 stores among its Supercenter versions, Sam's Clubs and others, says Jennifer Evans-Cowley, a city and regional planning professor at Ohio State University who has written about how communities can prepare for the short life span of mammoth stores.

"Every year, Wal-Mart closes stores," she says. "There are 15 major retailers. Multiply that by 2,000 stores each with a 20- to 25-year life cycle. It's not unreasonable to expect that closure would happen during that time."

Cities adopt new standards

More communities are introducing policies that require big-box retailers to help redevelop the spaces they leave behind. Some require them to tear down the stores if they're empty more than a year. Others have introduced design standards that require landscaping and more than one main entrance so that the building can accommodate multiple tenants in the future.

A retailer the size of Wal-Mart can make or break a town like Wisconsin Rapids, which has about 18,000 residents. "It changed us," Wisconsin Rapids Mayor Carson says of Wal-Mart's decision to leave downtown and build a superstore on the edge of town. The move eventually helped, she says.

"We, as a city, now have a central location for our seniors that's better than having it on the outskirts of town," Carson says.

About 20,000 square feet of the old store were knocked down to make way for a community garden and benches. Inside, seniors now enjoy a library, meeting rooms, a walking track, pool tables and state-of-the-art kitchen and computer center. The center also holds aging and disability centers for two counties.

"Local officials today have to be problem-solvers to survive," Carson says. "It might help local public officials to think as far out of the box as they can."

Source: USA Today

NJ: 435,000-SF Mall Sets Opening

TINTON FALLS, NJ-The nearly $160-million project had languished for several years because of legal challenges that were tied to traffic patterns, overpass construction and storm water management. But Jersey Shore Premium Outlets finally had its official groundbreaking in late 2007, and above ground construction started earlier this year. Now, developer Chelsea Property Group has set a formal opening date of Nov. 13, 2008 for the center, and has simultaneously released the tenant roster for the first time.

“We will announce the stores’ names to coincide with a large job fair several months before the opening,” Michele Rothstein, SVP of the Roseland, NJ-based Chelsea told GlobeSt.com earlier this year. Altogether, the 435,000-sf outlet center is slated to have 120 stores, and Rothstein this week released a list of 100 retailers that have signed on at the project.

Burberry Ugg, Kate Spade and Juicy Couture head the list of stores that have signed leases. Others on the expansive list include Calvin Klein, Ecko Unlimited, Cole Haan, DKNY, Perry Ellis, Sony, Theory, Kenneth Cole, Le Creuset, Nike, Michael Kors, Adidas and Brooks Brothers, to name a few. The center will also have a food court with about a dozen eateries.

“Today’s savvy shoppers want high-quality designer and brand-name merchandise,” Rothstein says in a statement. “But they don’t want to pay a fortune. This is a market of sophisticated customers, making it perfect for the kind of upscale outlet centers that we develop.”

The surrounding market consists of central Monmouth County, with the 60-acre site specifically at the intersection of Route 66 and Essex Road, just off the Garden State Parkway. The single-level, village-style center is the third in New Jersey bearing the Premium Outlet brand for Chelsea, which is a division of the Indianapolis-based Simon Property Group. The company’s two other Premium Outlet properties are in Flemington and Jackson.

Source: GlobeSt.

Boston: Menino wants assurances from developers

Mayor seeks new rule after financial tie-ups

Boston Mayor Thomas M. Menino wants to require developers of large projects to obtain financing before they win permission to dig up the city.

His call follows financial problems for two high-profile developments that have already begun construction in Boston: the $650 million redevelopment of the Filene's building in Downtown Crossing and the $800 million Columbus Center complex over the Massachusetts Turnpike.

Menino is having city planners devise a regulation that would delay approvals for developers who cannot show adequate financial backing to proceed with construction. The regulation is an attempt to prevent city streets from being at the mercy of credit markets that can suddenly stall or upend projects.

"We already have two or three holes in our landscape; we don't want any more," said Menino. "We don't want to stifle development, but we don't want developers to take advantage of the city."

The mayor spoke yesterday after the Globe reported that the developers of the 38-story commercial and residential tower on the former Filene's property have been unable to raise financing because credit markets have severely tightened in the wake of the subprime mortgage debacle.

The project is the cornerstone of Menino's effort to remake Downtown Crossing into a destination shopping district in the heart of the city. Almost a year after receiving city permits, the developers have only begun to excavate a portion of the site for its new foundation.

Menino and officials at the Boston Redevelopment Authority said they have been working on the policy for several days and that they were not spurred to action solely by Filene's or any other development. A draft of the regulation indicates that $12 billion in projects are currently under development in the city, and points out that many neighborhoods might have to put up with abandoned or vacant construction sites if tight credit markets continue to delay construction.

An executive with a leading development group said the mayor's regulation is unworkable and would have a chilling effect on future projects.

"It will become a barrier to development. The market just doesn't work that way," said David Begelfer, Massachusetts director of the National Association of Industrial and Office Properties. "To react this way because of the current abnormality in the credit market, I don't think is very prudent."

Other individual developers, including those for the Filene's and Columbus Center projects, declined to comment.

Lenders have been wary of making commercial real estate loans since the subprime mortgage crisis erupted last summer and caused heavy losses at investment banks and other financing firms.

The team trying to build the Columbus Center halted construction on the giant mixed-used complex this year after developers lost some of their private financing as well as some state subsidies.

The draft of Menino's regulation indicates that developers would have to show proof of financing within 18 months of city approval in order to move forward with construction. If they fail to do so, they would have to ask the city for an extension of their permits.

The Filene's project received its city approval in August 2007, while the Columbus Center project was approved in July 2003.

To take effect, the regulation needs the BRA board's approval.

The mayor said the policy would also help the city control the practice of "flipping," in which developers get approval for a project, carry out demolition and other site work, and then sell it for a profit.

"Too many times developers come in, get approvals, sit on it and make all the money off the city," Menino said. "It's an issue we have to get a hold of."

Source: Boston Globe

Back to work in Towson

Nod your head if you have heard this one before: Baltimore County leaders and local developers want to pump millions of dollars into new projects in Towson, with the hope of turning the county seat into a more pedestrian-friendly locale.

It's an effort Towsonians are all too familiar with. Over the past four decades, slews of studies have recommended ways to turn Towson into a more thriving hub of commercial activity.

The latest version calls for more than $700 million to be spent by developers and investors in everything from the expansion of Towson Towson Center to the redevelopment of Towson Commons. Baltimore County is even kicking in about $8 million to put toward new open space and parking projects.

Still nodding? This time, county development officials say the outcome will be different.

"The extent and scope of the development, and the creative way that developers are looking at the physical space, distinguishes this redevelopment plan. They're approaching it with an urban sensibility," said Fronda Cohen, spokeswoman for the Baltimore County Department of Economic Development.

But even as builders move dirt and lay concrete, the viability of this development is clouded by an uncertain economy and perceptions that Towson has long tried to shake. The current downturn and subsequent financing challenges pose the biggest question marks to projects proposed and in development. At least one developer has put the brakes on his project as the housing market continues to suffer.

Other obstacles -- real or perceived -- include Towson's current pedestrian-unfriendly layout, insufficient parking, and a debate over whether the town should cater to the large number of Towson University and Goucher College students. More than 151,000 people live in Towson -- about 4,000 of which are college students living on campus.

"Towson suffers from its image of a college town. As a result, adults and children are not as inclined to come there," said Jennifer Weeks, a local planner and member of the Urban Design Assistance Team (UDAT), a national group hired in 2006 by Baltimore County's Office of Community Conservation to consult on Towson's future.

The projects

The latest redevelopment of Towson consists largely of three commercial projects and four residential ones. Among them are:

• Towson Circle III: Baltimore's Cordish Co. and Heritage Property Inc. are working together again on another Towson Circle project. About four years after developing Towson Circle II, the developers plan to create a "Main Street-style" project with 60,000 square feet of retail space, 60,000 square feet of office space and a 62,000-square-foot cinema atop a 4-story, 700-space garage.

Construction on the $75 million project -- bound by Joppa Road and Virginia, Pennsylvania and Delaware avenues -- is slated to begin in March.

• The expansion of Towson Town Center: Chicago-based General Growth Properties Inc. wants to add about 113,500 square feet to the 1.2 million-square-foot mall on Dulaney Valley Road. The project includes several new restaurants and retailers, including the Cheesecake Factory, P.F. Chang's China Bistro and the Pottery Barn.

Work could be done by October.

• Redevelopment of Towson Commons: The scarcely occupied retail and office complex has been something of a boondoggle for Towson in recent years. Retailers and restaurants have come and gone, including Borders Books & Music and Pizzeria Uno, leaving many storefronts empty.

Three years after buying the property, Washington, D.C.-based Western Development Corp. has yet to fill the 95,000-square-foot retail pad and company officials are mum on their plans. Ben Miller, Western Development's president, declined to comment on the project's status.

Baltimore County economic development leaders said the slow pace of redevelopment at Towson Commons is not linked to the sagging economy. Cohen said it is "not a reflection on the retail or restaurant market."

But little else is known of the progress at Towson Commons, other than leases for existing retailers and the AMC movie theater there will not be renewed because Western plans to reconfigure the space.

• The Palisades: As part of Towson's effort to boost its residential offerings, Southern Management is building a 357-unit apartment complex at Towson Boulevard and Susquehanna Avenue. The nearly $100 million project could be done by spring 2010, assuming construction begins as scheduled this fall.
• The Quarters: As many as 160 Goucher College students could live in the 900-unit condominium and apartment complex under construction at Dulaney Valley Road and Fairmount Avenue. The project is being developed by New Jersey-based Lane Co. and is expected to cost about $190 million.

But the final look and cost of the Quarters is uncertain. It is among the latest victims of the sour economy.

Lane Co. has delayed the second phase of the project for at least 12 months -- from mid-2008 to mid-2009 -- while the housing market remains weak. Jeff Price, a regional partner for the developer, said sales of the 430 residential units expected to open this fall have been slow.

The third phase of the Quarters project, consisting of 135 units, "will commence as the market permits," Price said.

Student-weary residents

Assuming developers do complete proposed residential projects, some community constituents voice concerns over students occupying much of that new space.

"Once you start loading up new apartment buildings with college students, you're going to drive out other tenants, like empty nesters," said Ed Kilcullen, president of the Greater Towson Council of Community Associations (GTCCA). Having an overwhelming student presence in the new housing units will have a negative trickle-down effect on the local economy, by discouraging high-end retailers from moving into the area, Kilcullen said.

Although the Greater Towson Council recently fended off development of a Towson University student housing project in downtown Towson, that won't keep area college students out of new residential projects. Southern Management Corp. predicts college students will comprise the majority of occupants at the Palisades. And Goucher students are expected to occupy part of the Quarters.

During a week-long planning session in 2006, UDAT panelists, community groups, area institutions, and county officials agreed on the need to increase the town's residential core. UDAT also suggested several ways to make Towson more appealing to residents and visitors. Topping the list was greater walkability.

"Every successful city is pedestrian-oriented," said Andrea Van Ragsdale, director of Baltimore County's Revitalization program.

The County is finding ways to increase foot traffic. They include aggressive signage to encourage motorists to circumvent York Road as a thoroughfare, granting the Towson Chamber of Commerce nearly $100,000 for downtown landscaping and maintenance, and narrowing of the Towson Circle, which slows traffic and makes it safer for pedestrians to cross.

Source: Baltimore Business Journal

NJ: 14-Screen Theater Starts Construction

SECAUCUS, NJ-Construction has started for a 14-screen, stadium-style theater operated by Kerasotes ShowPlace Theatres within Hartz Mountain Industries’ Harmon Meadow mixed-use community here. The new location was reported by GlobeSt.com in May, and with the start of construction the Chicago-based Kerasotes is projecting a fall 2009 opening.

The 2,752-seat venue also marks Kerasotes’ initial foray into the New Jersey market, notes COO Dean Kerasotes. The cost of the project hasn’t been released.

The construction start comes as the locally based Hartz takes the wraps off a renovated Plaza Courtyard within Harmon Meadow. The pedestrian walkway surrounded by stores, restaurants, hotels and offices has been redeveloped with a replica of the Chartre Labyrinth, copied from the Notre Dame de Chartres Cathedral outside of Paris.

"Labyrinths have their origin in prehistoric times and offer an opportunity for reflection and recreation, which is what our plaza does for office tenants and visitors," says Emanuel Stern, Hartz’s president and COO.

Harmon Meadow has several other retail openings on the immediate horizon. A Toys ‘R’ Us and Babies ‘R’ Us combo superstore and TJ Maxx are both slated to open in the fall, and a Sports Authority is under construction and on target for a spring 2009 opening. All three are Harmon Meadow’s Mill Creek site.

Source: GlobeSt.

Bulfinch Triangle project OK'd

The Boston Redevelopment Authority has approved a $160 million hotel, office and retail project in Boston’s Bulfinch Triangle neighborhood.

Construction work is slated to begin during the first quarter of 2009 and is expected to take two years to complete. The project will also bring approximately 240 construction jobs and about 275 permanent jobs.

Dubbed The Merano, the project will include two moderately-priced hotels — a 153-room short-term hotel and an 121-room extended-stay hotel, as well as 206,000 square feet of office, 10,000 square feet of retail space and 13,000 square feet of restaurant space. The hotels will be operated by the Marriott Hotels.

Located across from the TD Banknorth Garden and in close proximity to the Rose Kennedy Greenway, the hotels at The Merano will accommodate tourists and fans attending events at the Garden, according to a BRA press release.

The demolition of the elevated I-93 highway helped make the 54,900 square-foot property available for development. It consists of three parcels owned by the Massachusetts Turnpike Authority.

The development team includes: Boston Development Group; architecture firm CBT Inc; permitting consultant Epsilon Associates Inc.; Engineering firm Howard/Stein-Hudson Associates Inc. acting as transportation consultants; and the law firm Goulston & Storrs LLP as legal counsel. The project includes public benefit such as: $50,000 to support a comprehensive traffic study of the Bulfinch Triangle neighborhood in coordination with the Boston Transportation Department; $75,000 to support neighborhood improvements; $300,000 for the city’s Crossroads Initiative; $12,000 for the Bulfinch Triangle Streetscape Improvements Initiative and the generation of substantial annual property and hotel taxes.

Source: Boston Business Journal

Is It Time For A Massive Mall Meltdown?

It's the icky Darwinian side of every economic downturn--watching the weaker brands perish just yards away from the watering hole, while vultures and buzzards fill the air.

But observers say it's probably a little too soon to declare a meltdown in the retail sector, despite the recent Chapter 11 filing of Mervyns, the Hayward, Calif.-based chain. Other recent casualties include Steve & Barry's, Linens 'n Things Inc., and the Sharper Image Corp., as well as widespread store closings, such as those announced recently by Starbucks.

Yes, there will be more to come: In its most recent report, the International Council of Shopping Centers predicts that close to 144,000 stores--or about 36,000 per quarter--will bite the dust in 2008. That's a 7% jump from 2007, and the largest increase in 14 years. But the trade group points out that those numbers mask the many stores that will open. For instance, it says, in 2006, 139,000 stores failed--but 123,000 new ones sprung up. Clothing stores, it says, continue to be the most vulnerable, with such chains as Wilson's Leather, Geoffrey Beane-outlet stores, Goody's Family Clothing, Ann Taylor and Talbots among the many retailers that shuttered stores in the first half.

But the retail deathwatch is enough to set tongues wagging about even the strongest brands. Macy's recently had to respond to concerns about its financial health, with the CEO filing a letter with the Securities & Exchange Commission to defend its finances: "Our same-store sales trends are better than J.C. Penney, Kohl's, Dillard's, Nordstrom, Bon-Ton, The Gap and Limited Brands, to name a few," he wrote.

Some experts believe the worst of the shakeout will be restricted to smaller, weaker chains.

"Retailers that have a reputation for offering good value, those that have diverse geographic portfolios--both in the U.S. and around the world, and those that offer a broader selection of merchandise are in a better position," says Tony Gao, Ph.D., marketing professor and retail expert at Northeastern University's College of Business Administration in Boston, who points out that Mervyns and several of the other more troubled chains had a strong presence in California, which has been particularly hard-hit by the housing downturn. "And specialty stores tend to file for bankruptcy first."

Among higher-end stores, he says, those with the broadest global presence, as well as access to wealthy U.S. urbanites and international tourists, also have an edge.

Source: Media Post

Retail Construction Hits a Red Light

Consumers are checking discretionary spending and, seemingly everyday, new retailers come out with announcements that they are filing for bankruptcy, shuttering stores and constraining expansion plans. As a result, construction is coming to a screeching halt at projects across the country as developers reevaluate proposed centers' economic viability.

Most recently, site work of the planned 215-acre open-air center, Bridges at Mint Hill in Charlotte, N.C., came to a halt. Chicago-based General Growth Properties and local partner Childress Klein Properties originally announced plans for the center in June 2005. It was slated to open in 2007. A series of delays pushed projected completion back to 2009. As for now, no new timeline has been announced.

Elsewhere, Memphis, Tenn.-based Poag & McEwen Lifestyle Centers scrapped plans to build Boise, Idaho's first lifestyle center, a 200,000-square-foot, $50 million project. The developer initially had planned to open the center in 2009. Now the project no longer appears on the company's list of new developments on its Web site. Poag & McEwen did not return calls seeking comment.

CBRE/Torto Wheaton Research, a Boston-based research firm that tracks completions of neighborhood and community shopping centers, estimates that developers delivered 6.3 million square feet of space in those sectors during the second quarter--two-thirds of the planned 9.7 million square feet of space that was supposed to come online. “That, to me, signals that some of the projects are being either taken away or delayed,” says Abigail Marks, economist at CBRE/Torto Wheaton.

However, Marks forecasts the full impact of the current downturn won’t be realized until next year, when only 14.7 million square feet of new neighborhood and community center space is projected to come on-line. In the first half of this year, developers in the U.S. began construction on 71 million square feet of retail space, according to CoStar Group, Inc., a Bethesda, Md.-based commercial real estate information provider. That figure represents a 24.5 percent decrease compared to the first half of 2007, when construction was started on 94 million square feet of new projects.

With the conditions in the retail sector deteriorating precipitously, real estate developers are abandoning projects that appeared to be sure bets a year or two ago. As retailers pull back, many developers have opted to forgo construction of centers that have gone so far as breaking ground. That trend is expected to escalate as the retail market continues to deteriorate, says Gary E. Mozer, managing director/principal with George Smith Partners, a Los Angeles-based real estate investment banking firm. Speculative projects in secondary and tertiary markets especially face a risk of being delayed or scrapped, Mozer says.

The credit crunch is in part responsible for the increase in construction halts and delays. The market's capacity to finance new projects has diminished with CMBS issuance year-to-date down to $12.1 billion from $158.9 billion during the same period in 2007, according to Commercial Mortgage Alert.

To help address the void, Continental Retail Development, in Columbus, Ohio, has formed the Continental Opportunity Fund, a $200 million fund, to provide equity and mezzanine financing for retail developments that have a first mortgage, but require additional funds to begin construction. It will contribute as much as $40 million towards a project.

One reason there hasn't been an even steeper decline in completions this year, says Continental's CEO David Kass, is that most of the financing for retail projects scheduled for delivery this year was completed years ago. Retail centers scheduled to come online after 2008 will be hit harder, he says. Completions in 2009 could be off by as much as 70 percent, Kass estimates.

For example, unable to shore up financing for its $3 billion project, the Grand, in downtown Los Angeles, Related Co. sought and received approval by city officials to delay the groundbreaking of its 3.6 million square foot mixed-use center by eight months, until Feb. 15, 2009. If Related does not begin construction by that date, the city of Los Angeles has the option to impose a $250,000-a-month penalty for up to 24 months. The Grand's groundbreaking has already been delayed three times. Related says it was due to design considerations and not because of financing. Read more here.

A spokesperson for Related says the firm is in the process of putting together the necessary construction documents, which is why it still hasn’t secured a construction loan. As the debt markets have tightened over the past year, lenders won’t negotiate with a developer until all the paperwork is complete, she added.

Mozer says banks would rather lend on a cash-flowing asset than a construction project because you don’t have as much lease-up risk. For Continental to provide financing, a project must have committed anchors and at lease 50 percent of its leases signed.

The ebb in retailers’ expansion is a big issue, according to Bernie Haddigan, national director of the retail group with Encino, Calif.-based Marcus & Millichap Real Estate Investment Services. “I don’t see retailers getting more aggressive at this point,” he says. “I see them getting more cautious.”

Source: Retail Traffic

U.S. Office, Retail Building to Drop Through 2009, Study Says

July 16 (Bloomberg) -- Construction of U.S. office and retail buildings is poised to fall for the rest of this year and through 2009 on lower demand from tenants, stricter lending standards and rising building costs, the American Institute of Architects said.

Office-building construction likely will drop 3.7 percent this year and 12.3 percent in 2009, the Washington-based group said today in its semi-annual Consensus Construction Forecast. Construction of shopping centers and other retail buildings is forecast to fall 8.3 percent this year and 9.9 percent next year.

"The more pessimistic forecasts this round stem from the lack of growth in the overall economy, the ripple effect from the faltering housing market and the anxiety in the credit markets leading to a restriction in lending for all types of construction projects," Kermit Baker, the institute's chief economist, said in a statement.

The slowing U.S. economy is cutting demand for space from retail and office tenants, and the cost of construction materials has increased 37 percent since 2004, more than double the rise in the cost of consumer products and services, the American Institute of Architects said. Petroleum-based materials and commodities such as steel and concrete "have experienced sharp price increases in recent years," Baker said.

Hotel construction probably will increase 6.6 percent this year before dropping 9.9 percent in 2009, the institute said. Construction of warehouses and other industrial properties is forecast to rise 4.6 percent this year and decline 5.5 percent next year.

Health Care, Education

Construction of the two largest institutional categories, health-care facilities and educational buildings, likely will rise 0.2 percent and 2.7 percent respectively, this year. Health-care construction likely will rise 1.1 percent in 2009, and construction of educational facilities will probably fall 1.1 percent, the institute said.

The institute twice a year issues its forecast using projections from Global Insight Inc., the Portland Cement Association and management consulting firm FMI Corp. The institute has been producing the forecast for 10 years.

Source: Bloomberg.com

Target, Best Buy Debut at $400M Center

Stafford Park

STAFFORD TWP., NJ-Two major tenants at the $400 million Stafford Park here are scheduled to open their doors by the end of the month. Target will debut a 137,000-sf space and Best Buy will operate out of 30,162 sf. It is the first store in the Stafford Township market for both retailers.

The two stores join Costco, which opened last month. Costco and Target will anchor the 650,000-sf retail portion of the mixed-use development, which will consist of retail, residential and office space. Fellow retail tenants include Dick’s and PetSmart. According to Ed Walters, founder and partner of the Walters Group--the company developing the site--leases are also being negotiated with Vitamin Shoppe, Longhorn Steakhouse and T-Mobile.

Source: GlobeSt.

Construction of the Target building began in September 2007, and ground was broken on the 100,000 sf building that will house Best Buy, Dick’s and PetSmart in January of this year. Construction was preceded by a $31 million cleanup of the 370-acre site, where two landfills once stood.

"What we’re doing here is we’re bringing Target, Costco, Dick’s and Petsmart to o

High-rise proposed at Downtown Crossing

A New York developer is proposing to build a $200 million retail and housing development in Downtown Crossing, a milestone in Boston Mayor Thomas M. Menino's effort to revitalize the city's central shopping district.

Midwood Management Corp. wants permission to raze several buildings at the northern corner of Bromfield and Washington streets, and replace them with a 28-story building that will include 260 units of luxury apartment units, three floors of retail space, and three floors of underground parking, according to city officials.

The existing buildings are currently home to a number of stores, including Payless ShoeSource, Wendy's, CitySports, and the Bromfield Pen Shop.

The location is on a diagonal from the Filene's block, where a development team led by John B. Hynes III has received city approval to build a massive retail, hotel, and office complex above the historic department store.

Midwood is expected to file formal plans with the Boston Redevelopment Authority later this week and hopes to begin construc tion in 2010.

"We believe rental housing has a role in downtown Boston's continuing growth," said Paul Davis, a Midwood senior vice president. "We looked at condos, but we think rental housing is more appropriate for us."

Menino disclosed the Midwood project at the start of a five-hour tour of Downtown Crossing and other city commercial districts that he led to interest real estate developers and retailers in Boston. Midwood, he said, is the latest in a stream of development projects planned for Boston - some 60 altogether worth about $4 billion in new investment.

"Despite the national economic [slowdown], Boston's economy is strong," Menino said. The tour was timed to coincide with a regional trade show for retailers, developers, and real estate brokers being held in the Boston Convention & Exhibition Center today and tomorrow.

The Midwood development is the latest in a buzz of development to hit Downtown Crossing. The city estimated there are 2,900 residential units in the neighborhood, with 1,350 more under construction, including college dorms. Indeed, Menino kicked off his walking tour of Downtown Crossing at the Hayward Place parking lot on Washington Street, where a $200 million, 14-story residential and retail building is planned. Closer to Millwood's location is 45 Province Street, an ultra-luxe condominium tower now under construction and slated to open in 2009. Hynes is currently lining up funding and tenants for the office, hotel, and retail complex across the street at Washington and Franklin streets. Down Washington Street, Emerson College is embarking on an $80 million renovation and addition to the Paramount Theater that will include a 262-bed dormitory, black box theater, and class-related facilities.

"I think Downtown Crossing is on the verge of greatness," said Lisa Campoli, executive vice president for commercial real estate brokerage Colliers Meredith & Grew in Boston. But Campoli said it's unclear how many of the proposals will become reality because tightening credit markets have made it difficult for some developers to finance construction.

"It's a question of capital," she said. "I think if half the projects went through, it would be in great shape. There is so much potential there."

The city has announced a number of initiatives to help spruce up the neighborhood, including lighting, sidewalk repair, and solar-powered trash cans.

Midwood is generally a low-profile firm with a long history. It owns 100 properties spanning more than 3.5 million square feet nationwide, including in New York and Philadelphia. This would be its only development in the Boston area.

Based on New York's Park Avenue, Midwood owns or operates properties in at least six states, ranging from upscale apartments to suburban shopping centers with tenants such as Stop & Shop, TGI Friday's, Home Depot, and Walgreens.

The company was founded roughly 80 years ago by Samuel Lemberg, an important early donor to Brandeis University in Waltham. An academic building on campus is named for him. Current Midwood president John Usdan, Lemberg's grandson, is a Brandeis trustee.

Davis, the company executive, said Midwood normally keeps properties it develops, rather than selling them to investors, and plans to do the same with the Downtown Crossing development.

In addition, Davis said Midwood hopes to work with several existing tenants, including CitySports and the Bromfield Pen Shop, to accommodate them in the new building. The new building will have 60,000 square feet of retail space.

"There will be new tenants, and there will be relocation of tenants," Davis said.

The city said it will try to assist any stores that are forced to move.

Mike Kennedy, cofounder and chief executive of CitySports, said he wasn't surprised by the announcement, because he knew Midwood had acquired the buildings. He said CitySports has been in Downtown Crossing for about 15 years and plans to remain there for the long term - either in the new building or nearby.

"There's plenty of time to work it all out. If it doesn't work out for us" to stay, Kennedy said, "we'll find something else."

Other businesses located there could not be reached for comment.

Source: Boston Globe

New Downtown Crossing development proposed

A New York developer plans to build a $200 million housing-retail development in Downtown Crossing, a key milestone in the city’s effort to revitalize the central shopping district, Mayor Thomas M. Menino said today.

Midwood Management Corp. said it plans to build 200 luxury apartments, in addition to three floors of retail space at the corner of Bromfield and Washington streets, where it has acquired several buildings.

The development would replace buildings that are currently home to several stores, including Payless ShoeSource and City Sports.

The company, which is expected to file formal plans for the 28-story building with the Boston Redevelopment Authority this week, said it hopes to begin construction in 2010.

"We believe rental housing has a role in downtown Boston's continuing growth," said Paul Davis, a senior vice president of privately owned Midwood Management. "We looked at condos, but we think rental housing is more appropriate for us."

Menino used the news to highlight the stream of development projects underway in Boston. He said that there are $4 billion in projects under way.

"Despite the national economic (slowdown), Boston's economy is strong," Menino said.

Midwood Management, which generally keeps a low profile, owns 100 properties with more than 3.5 million square feet nationwide, but the development would be the firm's first for the Boston area.

Midwood Management normally retains properties that it develops, rather than selling them to other investors, and it plans to do the same with the project proposed for Downtown Crossing.

Davis, the Midwood Management executive, said that the firm hopes to work with several tenants, including City Sports and the Bromfield Pen Shop, to accommodate them in the new building, which is expected to have 60,000 square feet allocated to retail space.

"We will try to accommodate tenants if we can," Davis said. "There will be new tenants and there will be relocation of tenants."

Source: The Boston Globe