By Steve Kilar and Lorraine Mirabella, The Baltimore Sun
9:14 PM EDT, October 23, 2012
The Baltimore waterfront's iconic Harborplace has been sold to a New York real estate investment firm that has a reputation for purchasing distinctive retail centers, Mayor Stephanie Rawlings-Blake announced Tuesday.
Ashkenazy Acquisition Corp., which is collecting unique commercial landmarks like Faneuil Hall Marketplace in Boston, Union Station in Washington and Rivercenter in San Antonio, purchased the Inner Harbor mall from General Growth Properties, Rawlings-Blake said in a statement.
"This is a company with a track record of investing in and managing premier destinations, each with its own local character, in cities across America," she said. The city owns the land on which Harborplace sits and leases it to the mall owner.
A new owner could stoke the 32-year-old mall's nascent renaissance, spurred by the recent addition of major tenants such as Ripley's Believe It or Not Odditorium.
The sale of Harborplace comes as no surprise to city officials, given General Growth's financial woes. Since buying it in 2004, General Growth had difficulty finding the right mix of tenants to attract to both tourists and local residents. Last year, Phillips Seafood restaurant — its last original tenant — left.
David Keating, General Growth's vice president of corporate communications, would not confirm the sale, saying that the company does not "comment on the operations of any of our properties." Likewise, representatives from Ashkenazy and Christopher Schardt, Harborplace's senior general manager, did not respond to interview requests.
The mall is assessed for tax purposes at just under $38 million, but no information about the sale has been disclosed. The Wall Street Journal reported the sale will close Nov. 19, citing “people with knowledge of the talks.”
The Gallery, the glass-enclosed shopping center across Pratt Street from Harborplace that is also owned by General Growth, was not mentioned in the mayor's statement as part of the sale.
On Tuesday, as unseasonably warm weather drew joggers, outdoor diners and shoppers to the brick plaza surrounding Harborplace, many of the merchants and managers said they didn't know the retail center was changing hands.
Julio Febrer, managing partner of La Tasca, said he's seen improvements in the center and his business since the Spanish tapas restaurant opened in the Pratt Street pavilion six years ago. Originally, he said, tourists made up most of the largely seasonal business.
Now, local residents account for about three-quarters of his customers, he said. He attributes the shift to new retail offerings — such as discount clothing store H&M — and to better promotion by General Growth.
"All the changes have been good," said Febrer, who said he hopes the new owner will continue "the partnership of working together to bring people to Harborplace."
The vision of Columbia founder James W. Rouse, Harborplace was built and owned by the Rouse Co., which General Growth purchased in 2004.
Chicago-based General Growth, which also owns The Mall in Columbia, Mondawmin Mall in West Baltimore, Owings Mills Mall, Towson Town Center and White Marsh Mall, has been selling off noncore assets to boost its balance sheet since emerging from bankruptcy in 2010.
General Growth sold the Village of Cross Keys, an upscale North Baltimore shopping center and one of Rouse's earliest projects, to Ashkenazy earlier this year for $25 million.
Raymond Mitchener, the owner of women's apparel store Ruth Shaw Inc., said that Ashkenazy has not made any significant changes to Cross Keys since taking over ownership of the shopping center, but he's been satisfied with the company and expects to renew his lease in December.
Mitchener's impression is that Ashkenazy has not made any major announcements about changes to Cross Keys because it still is searching out appropriate tenants for the center's empty space.
"They're very thoughtful about who they put in and what the mix is like," said Mitchener, who expects that Ashkenazy is looking for unique stores, not national chains, to put into Cross Keys.
In a New York Times interview in February, Michael S. Alpert, Ashkenazy's president and vice chairman, said the company was planning to invest about $700 million this year in property and debt acquisition.
Ashkenazy's goal is to "acquire irreplaceable properties in premier locations with the potential for significant increase in cash flow and residual value," according to the company's website.
Mark Millman, CEO of the retail executive hiring firm Millman Search Group in Owings Mills, said that Ashkenazy is not flashy and prefers to stay out of the news.
"They're very shrewd business people," Millman said. "When the timing is right, they swoop down and make a deal."
Ashkenazy, Millman said, still has a lot of work to do on renewing the infrastructure of Harborplace and filling empty space, bargaining chips they probably used to keep the price low.
The investment firm took over Boston's Faneuil Hall, another retail outlet developed by Rouse, from General Growth in the fall of 2011. It spent $136 million for lease rights at the popular Boston tourist spot, which is owned by the city, according to news reports.
Ashkenazy hired a Boston architecture firm to "guide design plans for improvements to the outdoor shopping center," according to a June article in The Boston Globe.
Some city officials and Faneuil Hall tenants were becoming frustrated with General Growth, the Globe reported, "because of concerns that [General Growth] was not making needed upgrades and it was alienating local shop owners."
This year, according to city records, 93 percent of the nearly 150,000 square feet of leasable space in the two Harborplace pavilions was occupied. In the past few months, McCormick and Co.'s World of Flavors and Bubba Gump restaurant opened in the Light Street Pavilion along with Ripley's.
But those new additions and a refurbished food court appear to have had little effect on business in the Pratt Street pavilion, said Brian Needel, a co-owner of Lenny's Delicatessen, which opened in there in spring 2011.
Things have changed, he said, since "Harborplace opened and people would go out of their way to come downtown." Now, merchants rely on special events to bring more people downtown, Needel said.
"The biggest problem we have is affordable parking. People don't come to Harborplace like they used to because it's expensive to park," he said.
General Growth has kept the center well maintained and provides good security — but structurally, he said, "things need to be done. The building is 30 years old and a dinosaur in a lot of areas."
The city's lease for the site won't change regardless of the operator.
In September, Baltimore's Board of Estimates agreed to amend the lease, extending it by 33 years through 2087 in exchange for increased annual payments.
It now will be paid $262,000 each year until mid-2022, when the rent is set to increase. In each of the past five years, the city was paid an average of $102,000, according to the board's records. General Growth paid base rent of 67 cents per leasable square foot plus 25 percent of the mall's net cash flow, which never materialized.
As part of the new lease deal, General Growth agreed to replace the exterior awnings, improve the interior and exterior lighting, repair the sidewalks and pedestrian bridge, and landscape the street side of the mall.
Kaliope Parthemos, the city's deputy chief of economic and neighborhood development, said that the new lease was written to be binding on Harborplace's new owners and those capital improvements still will be made.
Branden Freiner, a tourist from St. Louis, said he and a friend had been driving to their hotel when the cluster of waterfront shops and restaurants drew them in.
"Every city needs a place like this," he said.
History of Harborplace
April 1974: Construction begins on the Inner Harbor promenade.
July 1976: Seven tall ships and six military vessels from around the world sail into Baltimore's Inner Harbor to celebrate the nation's bicentennial, revealing the potential of the Inner Harbor as a tourist destination.
November 1978: Voters approve referendum permitting the use of 3.2 acres of public parkland to be developed by the Rouse Co. for Harborplace as long as 26 acres remain public parkland.
January 1979: Ground broken for Harborplace.
July 2, 1980: Grand opening of Harborplace.
1981: Developer James Rouse featured on the cover of Time magazine.
September 1987: Opening of the retail section of the Gallery at Harborplace.
April 9, 1996: James Rouse, founder of the Rouse Co., dies.
January 1998: Will Smith and Jada Pinkett Smith break ground for a Planet Hollywood restaurant in the Pratt Street pavilion of Harborplace. It closed in September 2001.
November 2004: General Growth Properties of Chicago purchases the Rouse Co. for $12.6 billion.
April 2009: Unable to refinance debt acquired during its rapid expansion, Harborplace owner General Growth files one of the biggest Chapter 11 bankruptcy cases in U.S. history.
May 2010: Federal judge approves Harborplace owner General Growth's plan to emerge from bankruptcy, which it plans to do by year's end.
July 2010: For Harborplace's 30th anniversary, General Growth announces a strategy to appeal more to nearby residents and office workers as well as tourists and conventioneers.
June 2012: The 32nd Ripley's Believe It or Not Odditorium opens in the Light Street Pavilion.
September 2012: McCormick World of Flavors, the only retail venture by the Hunt Valley-based spice company, opens in the Light Street Pavilion.
October 2012: City Hall announces that Ashkenazy Acquisition Corp. purchased Harborplace from General Growth for an undisclosed sum.
Source: Baltimore Sun research
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