NY developer moves executives to Nashville, teases future projects

Jul 1, 2020, 12:35pm CDT

A real estate developer from New York is so smitten with Nashville that it’s opening a permanent office in mid-July — and tipping its hand about where its next projects will occur.

Somera Road Inc. announced that three employees will move from New York to Nashville, to elevate what had been a part-time office into a full-time operation. Two of those three transplants will jointly lead the Nashville office: Joe LeMense, the company’s vice president of construction, and Jonathon Reeser, vice president of acquisitions. Somera Road will look to hire three additional employees in Nashville, for what it’s dubbing a “second headquarters.”

Somera Road illustrates how quickly so many out-of-state developers have become smitten with the city’s growth, prospects and vibe. Somera Road joins a growing group going as far as opening an office in the city.

Somera Road sealed its debut investment less than three years ago, buying a former Gibson Guitar warehouse in the Gulch. Today, it’s home to two entertainment concepts, Pins Mechanical Co. and 16-Bit Bar+Arcade. Somera Road’s other developments include revitalizing an industrial building in Wedgewood-Houston, spending $18 million to buy an office building in MetroCenter, and paying $30 million at the end of 2019 for 2.6 acres of land near the Gulch on Eighth Avenue South, including the Voorhees Building.

Ian Ross, founder and managing principal of Somera Road, said Nashville sits in the “pole position” of all the markets the company invests in (referring to the most favorable spot to begin a car race).

“Nashville’s proximity to other focal markets with active projects, such as Memphis, Louisville, Kansas City and Indianapolis, is an added perk,” Ross said in a statement. “These cities allow for increased productivity, improved retention and a happier and more fulfilled workforce – allowing people to embrace some of the American Dream elements that have become out of reach in high-cost gateway cities.”

Somera Road said new projects will “be announced shortly across Wedgewood-Houston, Germantown and East Nashville.”

“In addition to being a thriving city with a diversified employment base, Nashville’s location is ideal for us as we continue to expand our platform, located within a two-hour drive or flight to the majority of our portfolio,” Ross said. “And most importantly, our team and our families have fallen in love with the city.”

Original feature: https://www.bizjournals.com/nashville/news/2020/07/01/ny-developer-somera-road-nashville-office-move.html?iana=hpmvp_nsh_news_headline

Retail has been on life support — coronavirus could pull the plug

“One in 4 jobs are retail related. If you want to save the U.S. economy, you need to focus on the retail industry,” said one analyst.

With hundreds of thousands of stores closed nationwide, the coronavirus pandemic is accelerating dramatic changes across the retail industry that had been underway well before the viral outbreak hit the U.S., according to analysts.

“Retail has been on life support,” said Ian Ross, principal of the commercial real estate investment firm Somera Road. “Dozens of these companies were on the verge of financial collapse, and I have a hard time believing they’re not going to collapse because of this.”

Over the last few weeks, dozens of retailers have announced furloughs. Macy’s put the majority of its roughly 130,000 workers on furlough. Kohl’s, JCPenney and Nordstrom temporarily closed all of their stores and put their workers on furlough, about 300,000 people.

Mall operators Simon Property Group, Westfield and Taubman Centers have announced temporary closures in response to state-mandated shutdowns of nonessential businesses.

Even digitally savvy companies have buckled. The online beauty shop Glossier closed its retail stores, Rent the Runway laid off all its retail employees and the fashion company Everlane laid off or furloughed about 200 of its workers.

“Nobody wants to cut people out of their company,” said Allen Questrom, the former CEO of Macy’s, Neiman Marcus, Barneys New York and JCPenney. “The key is to stay alive so the company can come back into business.”

However, in a highly competitive business with slim margins, the impact of the virus is broadening the gap between which companies may be viable after the pandemic is contained and which may not survive, said Linda Tsai, a real estate investment trust, or REIT, analyst who covers retail with Jefferies Financial Group.

Full coverage of the coronavirus outbreak

Companies that have gone through bankruptcy proceedings, such as Sears, are clearly on the shakiest ground, while stores in higher-income areas and retailers with low debt will likely bounce back faster from the impact of the virus and any potential recession, Tsai said.

Over the last few years, the retail industry has been rocked by a wave of bankruptcies as retailers rush to right-size their businesses. Most recently, Forever 21 and Barneys New York filed for bankruptcy, along with retail chains like Payless ShoeSource and Modell’s Sporting Goods.

“Big companies with the ability to weather a storm like this can go on for a while without income and can come back strong,” said James Cook, director of retail research for the commercial real estate service firm JLL. “A lot of retailers who have gone through private equity and mergers or acquisitions that have saddled them with a lot of debt can’t coast for very long without some kind of restructuring.”

Mall operators that house the retailers are also scrambling to preserve cash. The mall owner Macerich cut its dividend by 33 percent. Westfield cut its dividend in half. Weingarten, which operates open-air shopping centers with mainly grocery and essentials tenants, drew down a $482 million line of credit, citing an immediate need for liquidity.

“It may take time for damage to unfold,” said Anna Lai, a REIT analyst with S&P Global Ratings.

Some mall operators and retailers had already been short on cash and high on debt before the pandemic hit, according to S&P Market Intelligence reports. Mall-based companies, including Belk, Neiman Marcus and J.Crew, are on the S&P’s watch list for default, with triple-C credit ratings. That could create major challenges for malls after the virus is contained, according to the company.

“I think the malls will face near-term pressure, but longer term, they could face pressure to lower rent but also occupancy pressure if some of these retailers do not survive,” Lai said.

At this moment of crisis, all options are on the table, said David French, senior vice president of government relations for the National Retail Federation. Retailers are discussing their lease terms with their landlords to find temporary relief on rent and are asking their lenders to ease their debts, he said.

The mall operator Taubman recently told its retail tenants that it expects all of its tenants to meet their lease obligations but that it is willing to discuss any financial challenges and help them with a type of payment plan.

“Liquidity is a massive issue, and there is no one silver bullet,” French said. “If you’re not making sales, you’re running out of cash.”

The retail and shopping mall industries have joined the melee of hamstrung sectors to plead for financial relief from the Trump administration as it rolls out a $2 trillion stimulus program.

The National Retail Federation asked the administration in a letter last month to consider offering retailers government-backed loans and relief from certain tax obligations. The International Council of Shopping Centers, a trade association representing malls, including Simon Property and Kimco Realty, argued in a letter to the Trump administration last month that shopping malls could crumble without business interruption coverage for retailers, restaurants and landlords. The organization argues that without ensuring the stability of its tenant base’s roughly $1 trillion in secured and unsecured debt, the shopping center industry will be at risk.

“One in 4 jobs are retail related,” said Tom McGee, CEO of the International Council of Shopping Centers. “If you want to save the U.S. economy, you need to focus on the retail industry. It’s foundational to the economy and foundational to the community.”

As retailers resort to furloughs and close stores to manage costs, retail workers are left without incomes.

Nayeli, a former JCPenney employee in Santa Ana, California, who asked that her last name not be used, has been unemployed for about a month. She considered a job at Costco to continue to help her parents make rent and buy groceries, but her dad said he’d rather pick up extra shifts at his job manufacturing airplane parts than risk her being exposed to the coronavirus.

“I was concerned because I helped my parents with rent and groceries, and I was like, ‘What am I going to do?'” she said. “Although JCPenney isn’t doing well as a company, they should offer some sort of pay. Imagine people who just rely on that paycheck. How are they going to pay the bills, you know?”

Original post: https://www.nbcnews.com/business/consumer/retail-has-been-life-support-coronavirus-could-pull-plug-n1178356

New PPL Plaza owners detail plans for property improvements

ALLENTOWN, Pa. – The PPL Plaza in Allentown is headed in a new direction and preparing for a new name.

The new owners invited media inside for a tour Wednesday after purchasing the property in a sheriff’s sale last month.

The building, though 16 years old, was way ahead of its time and offers a lot of modern features.

The biggest change up is the plaza. The new owners want to make it more of a communal space. The water fountains go, but they’ll add more places for people to sit and beef up entertainment.

The PPL Plaza has a spectacular lobby skylight, rooftop gardens and countless eco-friendly features.

The PPL Plaza building was sold at a sheriff’s auction to Somera Road for 16 million, a fraction of what it cost to build it. It most recently was home to Talen Energy, a PPL spinoff.

The owners aim to make the building once again attractive to tenants, who recently have gone for newer, cheaper builds thanks to the Neighborhood Improvement Zone.

The old PPL Plaza Is in the NIZ, and the new owners could be eligible for NIZ benefits for new improvements like upgrading the lobby and revamping the plaza space.

Ian Ross says there’s a lot of vendor interest in the vacant restaurant space, especially with 2,000 ADP employees soon to move in just down the street.

“A lot of vendors want to play into that and be accessible from a street front perspective,” Ross said.

About a half a dozen companies have already expressed interest in moving into the building.

“Companies are saying I want to be downtown,” Ross said.

The new owners aren’t naming those companies, but they say they expect tenants will start moving in by the end of the summer.

 

Original post: https://www.wfmz.com/news/lehigh-valley/new-ppl-plaza-owners-detail-plans-for-property-improvements/1081928942

New PPL Plaza owner shows off building, expects tenants this year

PPL Plaza in downtown Allentown has posed something of a conundrum for its new owner, Somera Road.

The New York commercial real estate firm typically acquires distressed properties in need of some obvious renovations. While the PPL Plaza (or, its previous ownership group) has certainly faced financial distress, the 16-year-old LEED Gold-certified structure is already “hands-down the architectural gem” of Somera Road’s portfolio, founder and managing principal Ian Ross says.

“We’ve banged our heads against the wall trying to figure out how to make it a better space,” Ross said in the atrium of the building prior to a tour Wednesday.

He later said it might be the “nicest vacant office building in the country.”

Ross reiterated his conviction that the more than 200,000 square feet of office space is of superior quality to any other office building in the city, and he promised to lease it at cheaper rates than anywhere else downtown.

Prospective tenants like that value proposition, he said. A half dozen are actively looking at the seven full floors of office space, he said, and three are interested in the retail space on the southeastern corner of the ground floor. Somera Road hopes to begin announcing tenants in the next three to four months and have its first tenants move in this fall.

“The interest has been astounding,” Ross said. “We’ve barely gotten started.”

Somera Road, which owns 55 buildings with about 11 million square feet of space across nearly 40 cities, has hired original building architect Robert A.M. Stern to consult on some modest upgrades.

That includes a redesign of the lobby, including new furniture and removing security turnstiles; fresh foliage in “winter gardens” on the third and fifth floors; and some demo work on the top two floors to create more open spaces attractive to today’s tenants.

It also wants to bring food trucks to the outdoor plaza, as well as more events and seating, Ross said. (It will feature the main stage of the city’s Blues, Brews & Barbecue festival June 8).

“We want it to again be the focal point of downtown,” he said.

Somera Road officially added the office building and accompanying parking garage at 940 Linden St. to its portfolio after submitting the top bid of $16 million at a sheriff’s sale last month.

Liberty Property Trust built the $60 million project in 2003 for PPL Energy Supply, which later became Talen Energy after the parent company headquartered next door spun it off.

A firm led by investor Joshua Safrin bought the property for more than $90 million in 2006, taking out a $83 million mortgage. The debt proved too much, and it’s been mired in foreclosure proceedings the past two years following a mortgage default in late 2016.

The previous ownership group argued the financial distress was a result of an unfair playing field created by the city’s Neighborhood Improvement Zone, where developers can tap into certain state and local taxes to pay the debt service on their construction loans.

It filed numerous lawsuits against the city and the Allentown Neighborhood Improvement Zone Development Authority, including a claim that the tax subsidies offered competitors constitute a “de facto taking of the property for which just compensation must be paid.” Talen moved three blocks last year into City Center Investment Corp.’s Tower 6, where rent per square foot was up to 30 percent cheaper.

In April, Lehigh County Judge Doug Reichley ruled against the former owners.

Somera Road, the new owner, claims it too has been unfairly hurt by the NIZ. On May 9, it filed a notice of appeal before Commonwealth Court.

According to Lehigh County Court records, Somera Road took on Wells Fargo’s obligations in the mortgage foreclosure judgment. That amounts to about $56 million, Ross said. Somera Road bought Wells Fargo’s interests in the mortgage last year for roughly $18.4 million, according to Trepp, a New York firm that monitors commercial property mortgages that have been bundled into bonds.

Somera Road also was one of the investors that sustained a considerable loss on the JP Morgan Chase mortgage-backed security that included the PPL Plaza loan, Ross said.

“We think we have a viable claim,” Ross said. “There was an artificial supply created in this market that unjustly burdened this building.”

City spokesman Mike Moore declined to comment Wednesday on Somera Road’s claim.

The building still has a few tenants: PPL Gold Credit Union, a restaurant and a BB&T bank branch on the first floor, along with some PPL Electric Utilities employees on the third floor. Somera Road said the third floor will again be vacant in a few months.

While the firm is open to leasing all the office space to a single tenant, Ross said it’s leaning toward multiple tenants, with most taking one floor and a marquee player taking the top two floors, which features an outdoor garden.

Morning Call reporter Andrew Wagaman can be reached at 610-820-6764 or awagaman@mcall.com

 

Original post: https://www.mcall.com/news/local/allentown/mc-nws-allentown-ppl-plaza-somera-tour-20190529-vwqtxvktajhrvmtrx35nj4qzdq-story.html?outputType=amp

TPG Lends $60M for Downtown Kansas City Office Tower Acquisition

TPG Real Estate Finance Trust has provided $60.2 million to Somera Road to finance the acquisition of 30-story office tower in Kansas City, Mo.’s financial district, according to HFF, which arranged the debt.

The floating-rate bridge debt helped facilitate Somera’s off-market acquisition of Kansas City’s City Center Square building, a 657,070-square-foot office tower at 1100 Main Street.

Leon McBroom and Mark Katz comprised the HFF debt placement team that represented Somera Road.

“This was a highly stressful closing that bridged the holidays and the new year – the teams were incredibly responsive and professional, working around the clock to get this deal over the finish line,” Ian Ross, a principal at Somera Road, said in a prepared statement. “We have been a long-time believer in continued growth of the downtown [Kansas City] market and we believe the timing and the supply and demand dynamics are just right to bring this asset back to Class A status.”

Specifically, the debt proceeds will finance renovation, rebranding and repositioning efforts aimed to make the asset the “premier downtown office tower” in the city, according to information from HFF. The additions will include a fitness center and tenant lounge, dining options, a renovated lobby, a hospitality center and a conferencing center. Somera will also add retail terraces and public seating to the property’s exterior.

A spokeswoman for TPG RE Finance Trust told Commercial Observer in a statement that while the firm typically targets larger loans in primary markets, it looks to provide this type of transitional financing in secondary markets to strong sponsors.

Built in 1979 and designed by , the building encompassing an entire city block and two-acre lot and has a Kansas City streetcar stop located outside the entrance to the property. The tower is home to the Kansas City Business Journal, law firm Dollar Burns & Becker, data advertising firm Pinsight Media, and marketing analytics firm Alight Analytics. There’s also a U.S. Post Office and a Country Club Bank on-site. Colliers International Senior Vice President Phil James handles leasing at the property.

In February 2018, Commercial Observer reported that City Center Square backed the second-largest loan ($32.5 million) in Värde Partners’ first ever collateralized loan obligation (CLO) transaction, known as VMC 2018-FL1. At the time of securitization, the asset was only 52 percent leased, with 70 tenants, making it one of the riskier assets in the $368 million pool.

In the deal, which was rated by Kroll Bond Rating Agency (KBRA), the CLO’s KLTV—a loan-to-value-like indicator derived from KBRA’s cash-flow analysis—was at 128.3 percent, which was riskier than any CLO transaction the agency had rated the previous year in 2017.

BY MACK BURKE JANUARY 29, 2019 3:45 PM

Original post: https://commercialobserver.com/2019/01/tpg-lends-60m-for-downtown-kansas-city-office-tower- acquisition/

City Center Square’s new owners secure $60M for renovations

A substantial renovation will be coming to City Center Square after Somera Road Inc. bought the building in mid-January for an undisclosed amount.

Dallas-based Holliday Fenoglio Fowler LP said in a release Tuesday that the company secured $60.2 million in acquisition bridge financing on behalf of Somera Road.

According to the release, Somera will use proceeds from the loan “to renovate, rebrand and reposition the property as the premier downtown office tower in Kansas City.”

Located at 11th and Main streets, the 30-story, 657,070 square-foot building is home to the Kansas City Business Journal, Pinsight Media + and Alight Analytics. Its market value last year was $17.37 million, according to Jackson County property records. The building’s occupancy rate is 50 percent.

The renovation will include a “state-of-the-art fitness center and tenant lounge, numerous in-house dining options, a fully-activated lobby, a hospitality center, a conferencing center and a revival of the property’s iconic lightwell,” the HFF release said. “Furthermore, Somera Road intends to activate the exterior with retail terraces and public seating.”

HFF Director Leon McBroom and Senior Managing Director Mark Katz represented the borrower.

Representatives from HFF and Somera Road could not be reached for comment before publication.

By Miranda Davis – Staff Writer, Kansas City Business Journal

Original Post: https://www.bizjournals.com/kansascity/news/2019/01/29/city-center-square-somera-road-renovations-hff.html