They're lifting up run-down centers Developers lift up run-down centers

Renewal: By focusing on decaying shopping areas, developer Carl J. Verstandig and his partners venture where others fear to tread.

April 24, 2001|By Meredith Cohn | Meredith Cohn,SUN STAFF

The developers were waiting for a worker to hang a banner announcing their plans to buy the West Baltimore shopping center when a woman in a station wagon pulled up to ask how they would fill a space once occupied by a supermarket.

"We need a grocery," said Joyce Owens, targeting Carl J. Verstandig and his partner Lee N. Barnstein in the parking lot. "We're begging."

The Super Pride Market in the Pimlico Shopping Center on West Belvedere Avenue had been gone for months. Left for the neighbors - including a seniors' home next door - were a Rite Aid drugstore and shops selling laundry services, fried chicken and beauty supplies. They sat in an aging strip with a cracking parking lot.

But in the next few months, the facade will get a makeover, the lot will be repaved - and, perhaps, a grocery will open.

Verstandig and his partner are spending $1.45 million to buy the center and $300,000 to renovate it. It's one of several such centers Verstandig, who runs a small development company, plans to acquire and refurbish this year - just as he has done for the past two decades.

Along the way, Verstandig and his America's Realty LLC have picked up a half-dozen partners, a stable of national and mom-and-pop retailers and millions in bank loans. The company has also returned grocery stores and other retailers - often discount stores - to some of the region's vacant and decaying shopping centers.

Verstandig has claimed a niche in area redevelopment by scooping up properties too small for big local developers, too run down for institutional investors and too expensive for occasional entrepreneurs.

Officials in Baltimore say there are few people willing to buy and redevelop these centers.

"We've gotten some calls from developers, and we're building relationships with them," said Kevin Malachi, director of Baltimore's division of commercial revitalization, which works to lure investments in the city. But there aren't as many calls as there are centers in need of attention. "He [Verstandig] may have enough centers to look at, but we're going to give him more."

Verstandig has relied on his instinct and hand-written notes - he said he plans to buy a computer soon - to amass a collection of about 50 buildings and centers in Maryland and Washington, including 10 in Baltimore.

His wife, Denise, keeps his books. His son, Steven, a senior at Pikesville High School, is interning in his office and is preparing to get a Realtor's license. Verstandig has eight employees who work out of a small, renovated house on Hooks Lane in Pikesville.

"I'll go anywhere there's potential," Verstandig said. "Anyone can buy a center that's fully leased. When a center is in terrible condition, it makes you happy you did something."

But Verstandig said his work is not charity. He said he makes an average return of 18 percent to 20 percent on his investments - a figure his partners support.

He's been such a good customer to area lenders, including Susquehanna and Chesapeake banks, that they are vying for his business.

John Morrison, a vice president at Sun Trust Bank, said Verstandig has four active construction loans and, all together, has gotten a "couple of million" dollars.

"There's a certain amount of risk inherent in the business, but that's what we take on," he said.

Verstandig follows a pattern: He zeros in on distressed properties in the 10,000- to 30,000-square-foot range, on the market for two to three years in some cases. He buys them cheap and signs a contract that gives him up to 60 days to find tenants. If he cannot find them, he backs out of the sale.

If he goes through with the sale, he goes to the banks, which generally require him to invest about 20 percent to 25 percent of the costs in each project.

For that, he reinvests profit from other centers and brings in partners.

Several of his partners said they've grown to trust Verstandig's eye for gems in the rough.

Corey Rehak met Verstandig four years ago when the two were scoping out properties. He's since bought into Verstandig centers in Cockeysville, Hyattsville, Rosedale and Finksburg and small buildings in Baltimore.

The two review 10 to 20 possible deals a week, he said. They weigh potential rental income against rehabilitation costs. They see if merchants have interest an in locating there.

The Rosedale center in Baltimore County, for example, was partially damaged by fire and abandoned by its owner when they bought it cheap from its insurance company.

"The number one thing is that he's excellent at leasing properties, finding tenants," Rehak said.

Other partners are business associates, such as Robert Yerman, one of Verstandig's attorneys. Lee Barnstein, the partner in the Pimlico center, is a real-estate veteran who does much of the paperwork.

The two are now busy trying to sign that grocery for Pimlico.

Ted Laster, economic development coordinator for the Northwest Baltimore Corp., a nonprofit community group, said many individual owners are overwhelmed by rehabilitation costs and stymied by vacancies. The group helps link developers to money for facade improvements and pressures some owners to sell.

"We try and convince people it's worth investing in properties like Pimlico," he said. "There aren't enough willing developers. They're doing a valuable service for the community and, hopefully, they are also making some money."

Joyce Owens just wants somewhere to shop.

"Whatever you do," she said to Verstandig, "hurry up."

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