Bayer Branches Out
Careful in its execution, insistent on reinvestment, Birmingham, Alabama-based Bayer Properties makes a name for itself nationally with the same sustainable retail philosophy that made the company a success regionally.
Katie Foxworth Lee

Many commercial real estate firms grow by acquisition. REITs, especially, have come to rely on this strategy to pad their portfolios. They buy a dozen properties at once; they even acquire other companies in an effort to grow instantly larger than their competition. Bayer Properties LLC, on the other hand, takes a different approach. The Birmingham, Alabama-based development company creates all of its value from ground-up development — seeing a project through, carefully and methodically, to the very end and then maintaining and continuing to reinvest in the property. And now, the 23-year-old company begins taking its approach nationwide.

Jeffrey A. Bayer, founder, principal and CEO of Bayer Properties LLC.

“We think that the greatest value is created from taking undeveloped real estate and creating a project versus buying someone else’s where that process has already taken place,” says Founder, Chief Executive Officer and Principal Jeffrey A. Bayer. “Because then you’re in a very competitive mode for the acquisition of that finished product.”

Developing from the ground up — and owning and holding onto its real estate — is what attracted Libby Lassiter to join Bayer Properties last summer. Previously, Lassiter spent 10 years with one of the biggest national players, Chicago-based General Growth Properties, where she headed the retail redevelopment group. Along with her national experience, she brought to Bayer Properties a host of new names and faces — all with the experience and skills Jeffrey Bayer and his long-time development partner David Silverstein needed to take the company to the next level nationally.

“We are a company based in Birmingham; [we] never participated in the national market,” Bayer says. “So it was important to us to bring someone to the company that (1) already had that exposure and knew the country well and (2) knew the skilled practitioners in the marketplace and then could in a more expeditious fashion recruit people to our company.”

With Lassiter’s help, Bayer Properties has now fully developed its predevelopment, due diligence, development and leasing teams — all from hand-picked, seasoned veterans of the industry that Lassiter brought to Bayer Properties. To accommodate such personnel growth, Bayer recently opened a new Mid-Atlantic regional office in Baltimore. Currently, Bayer Properties has approximately 105 associates; a year ago, it had 50 to 60. Growth on that front, though, has likely leveled off.

“We’ve put key people in key positions, which allows us to go into the marketplace and be successful in our execution,” Bayer says. “We have the underpinnings in place, and now we’ll just add incrementally.”

The center that started it all: The Summit Birmingham.

Bayer Properties, which garnered national attention with its 1997 opening of The Summit in Birmingham, has continued to build its brand and its image by following up that success with more Summit developments. The company is currently in development or predevelopment on over $1 billion worth of properties. And that’s not just regionally — Bayer has branched out nationally in a major way.

Using The Summit Birmingham as a model, the company successfully opened Phase I of The Summit Sierra on 200 acres in Reno, Nevada. The first 25,000-square-foot phase opened in March 2006, with a 30,000-square-foot second phase currently under construction. Anchored by Cinemark Theatres, the center also features several restaurants that opened this fall. Retail tenants include Dillard’s department store, Williams-Sonoma, Pottery Barn, Coldwater Creek, J. Jill and Chico’s.

“That was a milestone for us,” Bayer says. “[Reno, Nevada] is a long way from Birmingham, Alabama. It taught us a great deal about how to build a major project that far away from home.”

In February 2007, Bayer Properties plans to break ground on the 900,000-square-foot Front Range Village in Fort Collins, Colorado.

In February, Bayer Properties will break ground on Front Range Village in Fort Collins, Colorado. This 900,000-square-foot “hybrid” center will combine big box retail with a town center setting. Built on 110 acres, Front Range Village will be developed in phases with room to grow for the future.

In the Oklahoma City suburb of Edmond, Oklahoma, Bayer Properties has a 133-acre site under contract. Like the projects in Reno and Fort Collins, this 900,000-square-foot project will also be built out in phases.

“We like to go into a market and control a fairly large piece of property and then build these projects in phases as the market dictates instead of trying to build it all at one time,” Bayer notes. “We build what we think the market can accept on a regional basis, and then as the center becomes successful, we continue to build more square footage on a reasonable timeframe without rushing the market.”

The Summit Sierra in Reno, Nevada, was modeled after The Summit Birmingham. Phase I opened in March 2006.

Building into the market instead of forcing itself upon the market is a fundamental business strategy of Bayer Properties. For The Summit Sierra, for example, the company purchased 200 acres and will continue to be able to build out there and expand Bayer’s Summit brand. This approach also ties in to Bayer’s habit of reinvesting in what it already owns. For example, GLA is still being added to the 9-year-old Summit property in Birmingham. Still the talk of the town 9 years later, The Summit Birmingham remains relevant as a premier property because of its constant upgrades and expansions. It is still a benchmark by which other outdoor lifestyle centers are measured nationally.

“By continuing to invest money on a regular basis in our own existing properties, we are able to maintain our edge in the marketplace,” Bayer says. “It’s my feeling that most owners of large real estate properties don’t continue to invest capital to keep it the premier project of their marketplace. We’re insistent upon that.”

Bayer Properties has also found it works best in secondary markets of major markets. In the southeastern part of Atlanta, along Jodeco Road, Bayer has plans for a 750,000-square-foot retail center with a residential component.

“Secondary markets represent our niche,” says Bayer. “For example, this site in Atlanta. Although it’s a major market, the site’s in the southeastern part of the market. We don’t find ourselves in competition with what’s going on in Northern Atlanta or Buckhead. This is a separate market within a major market.”

In the New Orleans suburb of Slidell, Louisiana, Bayer Properties has another major project underway in a secondary market. Located in St. Tammany Parish — where population surged by 25 percent in the wake of Hurricane Katrina — Bayer Properties is developing a 400-acre parcel just over the I-10 bridge across Lake Pontchartrain.

“We had the site under contract pre-Katrina,” Bayer says. “When the storm hit, we just assumed there would be no need for the project. But the demand has done nothing but accelerate exponentially.”

Because of Katrina, many New Orleans residents were dislocated and moved north of Lake Pontchartrain, to higher ground and Northern Shore communities like Slidell. According to Bayer, the area around Slidell grew by 65,000 residents.

“We expect some of those to move back,” Bayer says, “but there is now a dramatic increase in the permanent population of Slidell. There were many retail projects that were destroyed. The retailers need new locations. The residential and retail demand in that part of the Northern Shore has just exploded — beyond what I ever thought would happen.”

To meet that demand, Bayer Properties plans to break ground in 2007 on the first phase of 1 million square feet of retail and 600 residential units. Eventually, the Summit Slidell project will accommodate 2,000 single-family and multifamily homes, as well as office space and a University of New Orleans technology park. Anchored by two department stores, the retail portion will be situated in a Main Street town center setting. Phase I is expected to open in third quarter 2009.

A rendering of The Summit Lehigh Valley in Bethlehem/Allentown, Pennsylvania. Site work is set to begin month on the 500-acre project, for which Bayer is partnering with Forest City.

In Bethlehem/Allentown, Pennsylvania, Bayer Properties is involved in a joint venture with Cleveland-based Forest City Enterprises, to be called The Summit Lehigh Valley. Site work should begin this month on the 500-acre development. No small undertaking, The Summit Lehigh Valley will involve not only major retail but also residential, biotech, hospital and office space. The mixed-use center will offer more than 100 specialty shops, upscale dining and a 20-screen Muvico movie theater. Bayer Properties and Forest City Investments are working jointly on the leasing, while Forest City takes the lead in the actual construction and development of the project. The two companies, Bayer says, are equal partners and make decisions jointly.

Cahaba Village is a 10-acre project in the upscale Mountain Brook submarket of Birmingham, Alabama.

In the upscale Birmingham suburb of Mountain Brook, which has the highest per capita income in the state of Alabama, Bayer Properties is underway on Cahaba Village. Situated on just 10 acres, the project is small but complicated. The land was tied up in litigation for 20 years between the landowner and Mountain Brook before Bayer Properties was asked by the city of Mountain Brook to take over the project and help bring it to fruition. Three years after Bayer took over, construction is finally underway. A 50,000-square-foot Whole Foods, a bank and a restaurant, along with the project’s small retail component, will be accented by 22 residential units atop the businesses — the only vertical residential space in all of Mountain Brook.

“It’s shaping up to be a very high-quality project,” Bayer says. “It’s taken a non-productive asset that’s sat in litigation for all these years and it’s bringing it to market. I think this city, even those who were opposed to it, will be very happy with its quality.”

Cahaba Village begins opening in February with Whole Foods; the balance opens in June 2007.

With Cahaba Village and so many others, Bayer Properties prides itself on taking its time and doing the job right. “No one would ever accuse us of being the hare,” Bayer says. “We don’t think we can afford to make a mistake. If it means we don’t get to market with a project as fast as somebody else, that doesn’t deter us.”

“We’re in there for the long haul,” Bayer adds. “We own our real estate. We think it’s important to be careful and not try to be too quick and ‘cute’ for the market. Sustainability is our middle name.”