UrbanAmerica targets nation's inner cities

N.Y. for-profit firm seeks retail, office sites in blighted areas

August 12, 1999|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

A newly formed New York commercial real estate company is looking to acquire retail and office projects in low- to moderate-income areas in cities such as Baltimore, in an effort to capitalize on a lack of competition in urban areas.

UrbanAmerica LP also is hoping its efforts will spur redevelopment in blighted areas by creating necessary infrastructure and jobs.

The nearly year-old company -- which is billing itself as one of the first for-profit real estate firms to exclusively target urban areas -- has raised $40 million from a collection of investors and institutions such as Deutsche Bank, J. P. Morgan & Co., Citibank and PNC Bank Corp. to snap up undervalued properties.

UrbanAmerica's strategy is two-pronged. The company focuses on empowerment and enterprise zone areas where tax credits or other government support is in place, and seeks out areas where lenders are required by the federal Community Reinvestment Act to invest funds.

And while it has yet to commit to a project, the company hopes to have more than $100 million worth of property in redevelopment regionally within the next year. UrbanAmerica is targeting Baltimore; New York; Chicago; Washington; Birmingham, Ala.; Newark, N.J.; Atlanta and Philadelphia for acquisitions.

"We like Baltimore a lot, for the demographics it has, the fact that there's been significant government investment, and because there's tremendous infrastructure and tourist business," said Richmond McCoy, Urban-America's chief executive officer.

McCoy said the company will target properties such as the Mount Clair Junction Shopping Center, where limited redevelopment has occurred. "We want stable properties where there's room for expansion," he said.

"This isn't an area a lot of people are pursuing, and we're encouraged by that," McCoy said.

UrbanAmerica got its start in September, when investment firm Utendahl Capital Partners approached McCoy and other investors and persuaded them to ante up $10 million in initial equity.

Before taking the helm at UrbanAmerica, McCoy owned McCoy Realty Group, a New York management firm that had more than 100 employees and maintained nine offices -- including one in the 35-story Legg Mason Tower -- and did work for Teachers Insurance & Annuity Association and other giant pension funds.

"UrbanAmerica is filling a missing link as an institutional investor between local community development corporations and financial institutions," said Hugh Price, president and chief executive officer of the National Urban League. "UrbanAmerica is contributing to the long-term stability and wealth creation in our inner cities."

To help regenerate shopping centers, UrbanAmerica said it has received expressions of interest from national merchants including CVS Pharmacy, Radio Shack, Payless Shoe Source, Burlington Coat Factory, McDonald's, Magic Johnson Theaters and others.

"There's no question that there's a lot more untapped buying potential in inner-city markets," said F. Barton Harvey III, chairman and chief executive officer of the Columbia-based Enterprise Foundation, which facilitates housing and economic infrastructure for low-income residents nationwide.

"The tricky part has been the doing it," he added. "But there's no question that most inner cities are under-retailed."

But in focusing exclusively on inner-city areas, UrbanAmerica acknowledges that it will face uphill battles involving labor, security and other challenges.

McCoy contends that successful inner-city stores operated by Rite Aid Corp. and other retailers demonstrate that viable markets exist.

UrbanAmerica's efforts come on the heels of a U.S. Housing and Urban Development study that concludes that residents in inner cities have tremendous buying power.

And funds are being deployed. Most recently, Bank of America announced a $500 million fund to finance urban retail projects.

"We've given this a lot of thought," McCoy said. "And we think the time is right."

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