Gaining Independence
After buying out its owners, Urban Retail Properties gains its independence and prepares to re-enter the development and ownership arena, with experience as a stronger property manager.
Randall Shearin

Urban manages and leases the Marq-E Entertainment Center in Houston. The center is anchored by Edwards Theaters, Jillian's and Red Robin.

Just before the ICSC Spring Convention in May, one of the biggest deals of the year thus far took place. Chicago-based Urban Retail Properties Co., which has been jointly held by Westfield, Simon and General Growth Properties for several years, announced that it had finalized a management buyout and is now an independent, privately held company. The news was all over the ICSC Convention. For Urban's principals, though, it is a long-awaited milestone. Being owned by three of the nation's top mall owners meant that Urban could not own properties and couldn't pursue development opportunities either. For 3 years, the company was dependent solely on leasing and management contracts and development consulting. For Urban's senior staff — with an average tenure of about 22 years — it was an unusually long waiting period.

Urban has acted as a development consultant and leasing agent on Branson Landing, the first tourist-oriented destination center in Branson, Missouri, that will open spring 2006.

Upon hearing the news, Shopping Center Business made arrangements to meet with executives of Urban to get the exclusive story first. While in Chicago, SCB met with Ross Glickman, chairman and chief executive officer; Len Tobiaski, president and chief operating officer; Michael Levin, president, development division; Oscar Reid, president, management division; and Steve Warsaw, president, leasing division.

History Lesson

Urban manages the 900 North Michigan Shops in Chicago.

Since Urban Retail Properties Co. was strictly a third-party management firm; it was left holding only leasing and management contracts. The loss of the Urban Shopping Centers portfolio left Urban Retail Properties a much smaller company; 60 percent of its business was immediately gone. Company executives launched an aggressive plan to build back the business, and within a year they had rebuilt the company into a much stronger company with many more capabilities. The problem still lingered that the company was controlled by Westfield, Simon and Rouse. Furthermore, Rouse merged with General Growth in November 2004. Since General Growth also offered third-party management, the possibility that the two firms were competing became a potential conflict. That, plus the fact that Urban Retail Properties, despite being one of the largest retail property management firms in the country, was a relatively small entity for large cap companies like Simon, Westfield and General Growth.

In 2004, the companies began to discuss a game plan to disengage Urban Retail Properties from their joint ownership. The effort among all the owners was amicable and willing, says Glickman. On May 18, 2005, the deal was signed and Urban again became an independent company.

“We really wanted to regain the ability to develop again, the ability to acquire again and to take an ownership stake in some of the properties that we manage,” says Glickman. “At the end of the day, it was mutual respect from all parties involved that made the deal plausible. We brought nothing to their table.”

With its management buyout, Urban also has the financial capacity to move itself into new arenas, like center ownership and development. It now plans to actively pursue development opportunities as well as acquire existing centers.

“We bought ourselves out very strategically,” says Glickman. “We felt that it was the appropriate thing to do and that the timing was right.”

A New Day

Urban recently assumed the management and leasing of Mazza Gallerie, located along Washington, D.C.'s Wisconsin Avenue. The upscale center is anchored by Neiman Marcus, Saks Fifth Avenue Men's Store and AMC Theatres.

“Our key people stayed with us and believed that we could eventually buy out the company,” says Tobiaski. “For those who held out, it is going to be an exciting period to work here.”

Glickman attributes the retention rate at the company to the fact that the company is vertically integrated. With that structure, it had the ability to offer third-party clients the disciplines that they required. Development, management and leasing are all treated as separate disciplines within the company.

“We are, by essence, a development company,” says Glickman. “We've done development since the company's inception. Even though we were only a third-party manager for several years, we kept our development team in tact and consulted with other owners who needed development expertise. We've also done development from ground up for third-party developers.”

“Urban's culture is unique,” says Levin. “It is a very special place to work and that's a big part of why so many people stuck it out here.”

One big part of Urban's culture is the decision-making process. Since each division has its own president, there are very few layers to get to before a decision gets made. There is no multi-level bureaucracy. Even the company's development managers have tremendous responsibility. They are basically given a budget and told to complete the project, says Levin.

A Developer and Owner — Again

The opportunity that Urban's executives are most excited about is re-entering the development and ownership arena. As a third-party management firm, Urban often had owners that wanted the company to participate with them in acquisitions. Under its old structure, the company couldn't do that. Now, it can and plans to as soon as a good opportunity comes its way. These joint venture partnerships can also extend to the company's existing clients as well as new clients. Urban also plans to comb the country for acquisitions that it feels fit the company's profile.

Providence Town Center is a mixed-use center under development that will contain 662,000 square feet of retail space in Collegeville, Pennsylvania. Urban has acted as a development and leasing consultant for the property's owner.

Urban is viewing itself as a firm with global capabilities. The company did development work in Taiwan and Japan in the 1990s, consulting work in the Middle East, Mexico and Eastern Europe. The company is currently viewing projects in China to consider development opportunities there.

In the 1970s, ‘80s and ‘90s, Urban developed a lot of Class A properties in urban and suburban communities. With its third-party business, the company had a lot of B and C class malls, as well as Class A. Its experience runs the gamut among all property types. In development as well, the company has built everything from strip centers to regional malls to urban vertical mixed-use facilities.

“We don't want to restrict ourselves to one asset class or one region of the country,” says Tobiaski. “We're going to look at everything that's out there, be it lifestyle centers, big box centers or urban mixed-use.”

Building on a Strong Foundation

Urban manages Randhurst Shopping Center in Mount Prospect, Illinois, anchored by Carson Pirie Scott, Costco, Borders Books & Music and The Home Depot.

Urban also has plans to continue development of some of the capabilities it has started over the last several years. Moving beyond property management, 7 years ago the company signed a contract to manage the concessions for the City of Chicago's parks and recreation department for 29 miles along the lakefront. It took some older facilities and made them year-round restaurants, along with managing all the concessions and vending on the lakefront. The company has plans to roll this opportunity out to other cities, and will shortly announce a new, similar contract to operate concessions with another of the country's top 15 cities. This privatization by many municipalities and jurisdictions has been very successful in the efforts to produce additional revenue sourcing devices.

Urban leases and manages the Ronald Reagan Building and International Trade Center in Washington, D.C.

“By design, we have created a new segment of business that has been very rewarding,” says Glickman.

“Because of its success, other government agencies are coming to us and having us look at their event management,” adds Tobiaski.

Urban Retail Properties is also active in the management of government buildings and has a close relationship with the General Services Administration (GSA). About 20 percent of Urban's business comes from the management of government buildings. Urban's subsidiary company manages the Ronald Reagan International Trade Center in Washington, D.C., which, at 3.7 million square feet, is the second largest building in the GSA's portfolio next to the Pentagon. Trade Center Management handles all catering and events at the building, and Urban also handles all food service and vendor leasing for the building. It does this as well for the federal courthouse in Boston. It wants to offer these capabilities to cities, so that they can get management expenses off their books.

Urban has leased and managed retail operations for The Pier in St. Petersburg, Florida, for 7 years. The Pier is the city's top tourist attraction.

“We understand how to deal with cities,” says Glickman. “We understand their sensitivities and their problems, as well as the bureaucracies that you have to go through.”

Urban also is discussing opportunities to consult with the Hudson River Valley Trust to renovate some of the piers in New York City. It has also worked with the city of Boston, and was awarded the contract by Massport — the state's transportation authority — to manage and lease a project called Waterside Place, adjacent to the new convention center. The property will contain 550,000 square feet of retail space, as well as a condominium tower and a hotel.

Urban has also created several alliances with entities that complement the retail environment. It has partnered with CyberMedia, a new audio technology that can direct sound to a single targeted area. The company has also partnered with PolyBrite International, a lighting company that uses LED technology in retail locations as well as commercial properties.

“Rather than build the company from a head-count standpoint, we are looking at forming strategic alliances to supplement some areas,” says Tobiaski.

Years Ahead

Urban is excited about being a player in the retail, development and acquisitions game again. The company wants to be prudent in its investments, but also aggressive. The company has all of the disciplines it needs in place to run a successful company. Management, marketing, development, leasing, tenant coordination and lease administration are all up and running, as they have been for years.

“We are on the track of doing what we do best,” says Warsaw. “We have all of the capabilities in place and we are poised to capitalize on our well respected expertise.”

Urban currently has more than 50 clients. The clients range from institutional investors like MetLife, JP Morgan, and Teachers Investment and Annuity to family-owned real estate. The relationships that it has created with these owners will lead it to new opportunities in the future.

“The relationships that we've formed with our clients will allow us to expand our management and leasing capabilities, as well as our development arm, in addition to what we do for them now,” says Reid. “We want to cultivate the relationship side of the business.”

Reaction from tenants and clients has been extremely positive. A lot have already approached Urban with development and acquisition opportunities.

“The support and reaction from the industry has been very enthusiastic,” says Warsaw. “People have been really rooting for us and they've been on our side. Our clients have been very supportive of what we are going to be doing in the future.”

“In an industry where everyone has been buying each other and merging, we've taken a different tact,” says Glickman. “We have bought out from the fold. We want to show that there is room for the smaller boutique company that can compete in the marketplace.”