Ashkenazy, future owner of Harborplace, cuts bad investments loose

Properties in Milwaukee and Tampa, Fla., fell into foreclosure

  • The Light Street Pavilion at Harborplace. The waterfront mall has been sold to Ashkenazy Acquisition Corp., a New York real estate investment firm.
The Light Street Pavilion at Harborplace. The waterfront mall… (Kim Hairston )
November 10, 2012|By Steve Kilar, The Baltimore Sun

Baltimore's political and business leaders praised the New York-based real estate investment firm purchasing Harborplace as a potential savior for the Inner Harbor mall that has struggled to find the right mix of tenants to appeal to both tourists and locals.

When it was announced last month that Ashkenazy Acquisition Corp. was eyeing Harborplace, Mayor Stephanie Rawlings-Blake cited the company's high-profile properties — among them Faneuil Hall Marketplace in Boston, Union Station in Washington and Rivercenter in San Antonio — as evidence that Ashkenazy will do right by Harborplace. The nearly 20-year-old company, which purchased the Village of Cross Keys shopping center in North Baltimore earlier this year, has garnered a reputation for buying one-of-a-kind properties and maximizing their assets.

"These are places that are destinations," Rawlings-Blake said. "To me, that suggests what's coming in the future. We want to make sure Harborplace continues to be a destination. They create premiere destinations across the country."

But not all of Ashkenazy's downtown shopping venues have succeeded. Two major investments — in Milwaukee and Tampa, Fla. — in the last decade were lost by the company, which failed to make payments on the properties' loans.

Michael Alpert, Ashkenazy's president and vice chairman, said this week that he does not see similarities between Harborplace and the two urban malls that were pushed out of Ashkenazy's portfolio.

In an interview with the Boston Globe last year, he called the Wisconsin and Florida properties "over-leveraged assets in troubled markets." He added that they were the only troubled properties among firm's portfolio of more than 100 developments.

The private investment firm has acquired over 13 million square feet of retail, office and residential properties in North America, valued at about $5 billion, according to its website. In addition to shopping centers, Ashkenazy's portfolio includes the Barney's department stores in New York and Beverly Hills, several office towers on Madison Avenue and a few buildings on North Michigan Avenue, Chicago's "Magnificent Mile." An affiliate of Ashkenazy, Trihop LLC, also has franchise rights to IHOP, the breakfast chain, for the greater New York area.

Ashkenazy purchases each of its properties through a separate company, insulating the parent firm from liability. Ben Ashkenazy, the firm's chairman and CEO, is affiliated with dozens of companies used to buy properties. He bought his first property at 17, according to the New York Daily News. He's now in his early 40s.

Alpert declined to disclose to The Baltimore Sun how much Ashkenazy is paying General Growth Properties for Harborplace and said the sale was expected to close by the end of the year. The mall is assessed for tax purposes at just under $38 million.

Chicago-based General Growth, which also owns The Gallery mall across Light Street from Harborplace, has been selling off assets since emerging from bankruptcy in 2010. Its other Baltimore-area properties include The Mall in Columbia, Mondawmin Mall in West Baltimore, Owings Mills Mall, Towson Town Center and White Marsh Mall. It is shedding Harborplace even though the mall's occupancy percentage is in the mid-90s.

"I don't want to get deep into initial thoughts" about Harborplace's future, which Ashkenazy is "very excited" about, Alpert said. "We're focused on closing," he said, adding that Ashkenazy will take time after the purchase for "understanding the opportunities, and then come up with a plan."

Although the commercial real estate market is beginning to pick up again, it is still far from its status when Ashkenazy was making plans several years ago for its newly acquired properties in Milwaukee and Tampa.

In 2005, an Ashkenazy-backed investment group called Grand Avenue City Mall LLC bought the Shops of Grand Avenue in downtown Milwaukee for $31.7 million, according to court records and news reports.

The two-story mall is a block from the Milwaukee River, which runs through the center of downtown, and is within walking distance of many office buildings. It is anchored by a Boston Store department store and a T.J. Maxx. It opened in 1982 — two years after the Rouse Co. opened Harborplace — part of the early-1980s trend toward downtown revitalization.

By the end of 2009, as recession gripped the nation, just a little over 50 percent of Grand Avenue's space was occupied, according to the Journal-Sentinel. According to Fitch Ratings, the low vacancy rate at the end of Ashkenazy's tenure was largely due to retailer Linens 'n Things' bankruptcy. "The borrower was unable to re-tenant the former Linens 'n Things space, triggering many co-tenancy clauses and increasing vacancy, as tenants exercised their contractual rights to vacate their spaces," Fitch said.

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