By Edward Gunts, The Baltimore Sun
3:40 PM EST, December 3, 2010
At a time when many real estate companies are having trouble getting loans for expansion, Pikesville-based America's Realty is growing steadily. Headed by chief executive Carl Verstandig, it now controls 164 commercial developments in 13 states — a total of 21 million square feet of space housing 15,000 retailers.
And Verstandig is looking to buy even more.
His company recently acquired Long Reach Village Center, one of Columbia's original shopping areas, for $5.4 million. It is one of three commercial developments that America's Realty bought this fall in Central Maryland and marks the company's first venture in Howard County. Its other recent acquisitions are Eastern Plaza in Essex, for $640,000, and Yorkshire Park in Arbutus, for $2.5 million.
At 56, Verstandig runs the company with his son, Steven, and his sister, Diana Schuchman. He specializes in turning around distressed properties — those that aren't fully leased and may be on the market, or properties about to go up for auction in a foreclosure sale.
He talked recently with The Baltimore Sun about the latest acquisitions, his business approach and his interest in Towson Commons, Owings Mills Mall and Maryland's thoroughbred racetracks.
Question: Despite the recession, your company is busier than ever. How do you do it?
Answer: We're at the right place at the right time, and we have been for the last five years. That's why we're able to grow. The bad economy is good for us.
Q: What do you mean?
A: We specialize in acquiring and repositioning distressed properties owned by others. Their junk is our gold. Their distress is value to us, and opportunity to us as well. The worse the economy, the more opportunities there are for us. This year, we will have purchased 21 properties, eight in Maryland, at a time when others have their horns pulled in.
Q: You seem to go where others aren't.
A: We're sort of going in our own direction. We go where nobody else wants to go. A lot of our centers are filled with ma-and-pa stores, businesses that cater to the blue-collar market — Rose's department store, Family Dollar, Dollar General, Family Tree. Those are the kinds of stores that are doing well in this economy. … We're very opportunistic. We're very busy right now.
Q: Is Long Reach Village Center an example of your approach? It has a Safeway grocery store as an anchor, but much of the retail and office space has been vacant.
A: Yes, because of the vacancy factor and the potential upside it has. Physically, it's not in bad shape. It just needs to be brightened up and renovated. Give it a new face and a new image, and bring in tenants who cater to the neighborhoods nearby. That was the philosophy [original developer James] Rouse had, to provide services for the surrounding area. We're bringing that back. We're talking to two possible Mexican restaurants and office tenants that will serve the community, such as a property manager, a dentist, a tax preparer.
Q: How do you get tenants to come to your centers?
A: We offer the lowest rent to get people to come in, and we can do that because we get the property at a lower price. In today's economy, people are looking for cheap rent. That's the name of the game. At Long Reach, because of the price we paid for it, we were able to drop the rents from $22 per square foot to $15 per square foot. And we're able to offer free rent to some new tenants as an incentive.
Q: Where did you get the financing?
A: We got financing with Wells Fargo Bank. They had the loan on the property. They assigned the loan to us. It took four months to get them to do it. We showed them that we've been in business for 27 years, that we're local, that we're hands-on, that everything we have in our portfolio is at least 98 percent leased, that we do everything in-house. It took some diligence, but that helped convince them.
Q: Besides monitoring real estate listings, how do you find properties to buy?
A: We see what's coming up for auction and, if we're interested in a property, try to catch it before the sale. We also have a lot of banks bringing us distressed properties because they want to get them off their books. They say, "Can you settle quickly?"
At any given time we're looking at about 25 properties. But we're very conservative in our approach. We do a 60-day study period. If we can't pre-lease 60 to 80 percent of the vacant space during the study period, we won't buy it.
Q: You've expressed interest in buying Towson Commons, the retail and office development that was bought back by its lender at a foreclosure auction this fall.
A: We submitted an offer after the auction, but it wasn't accepted. We're contemplating making another offer.
Q: Anything else you have your eye on right now?
A: I like Owings Mills Mall. If the opportunity came up, we'd have an interest. If the price were right. I've reached out to the brokers several times. It's an eyesore now, but I feel that is a property that can be a gem.
Q: What would you do with it?
A: Tear it down and build five or six big-box stores, like Costco or Lowe's. Discount-oriented stores that would draw people from a long distance. I'd love to do that. I think it'd be very successful and good for the area. And should the racetrack properties became available, Pimlico and Laurel Park, I'd love to redevelop them, too. It'd be a great opportunity.
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