Blatteis & Schnur Looks To Be An Owner
With a new CEO on board and a new capital partner, upscale brokerage Blatteis & Schnur looks to own more properties.
Randall Shearin

(left to right) Dan Blatteis, Robert Schnur, Scott Ball and Marc Guth.

For Blatteis & Schnur, upscale real estate is the name of the game. For years, the Los Angeles-based company has been leasing and managing high-end retail space for its clients, and developed a cadre of high-end retailers for its tenant representation business. Since it operated in that circle, Blatteis & Schnur often came across opportunities to acquire 100 percent real estate. At first, the company passed these leads on to its clients. Later, it formed joint ventures among its partners and executives to acquire the properties, then managed them under its portfolio. Now, the company has taken the next step, forming a venture with a major capital partner to dramatically ramp up its presence as a principal. Concurrently, the company has hired a CEO to focus on growth in its existing markets, as well as pursue new opportunities.

Shopping Center Business recently spoke with Robert Schnur, Dan Blatteis, Marc Guth and Scott Schuster, principals of Blatteis & Schnur, and Scott Ball, who recently started as the company’s new CEO and principal.

Blatteis & Schnur recently signed Skechers to a lease at its building at 200 Powell Street in San Francisco.

Many people have come across Blatteis & Schnur as a tenant representative or a landlord representative. As a retail tenant rep, the company has been known for its high-end clients like The Cheesecake Factory, Kenneth Cole, Barneys New York, Louis Vuitton, The Art of Shaving, Salt Creek Grill, Taryn Rose, Ferragamo and Prada. As a landlord rep, the company leases high-end street properties in areas like Beverly Drive in Beverly Hills and San Francisco’s Union Square. More recently, it has begun leasing large-scale projects like The Grand Canal Shoppes and The Village at Queensridge in Las Vegas.

For years, principals at Blatteis & Schnur had invested in smaller high street retail properties across the country. The company would generally maximize the value of the property, by renovation and re-tenanting. There have been more than 20 such partnerships over the years that have bought and sold properties through the firm. The volume had grown to a point where all the partnerships had become a meaningful portion of the company’s property management and leasing business. The operation was entrepreneurial and opportunistic, and only occurred when one of the principals located an acquisition. No real resources were set aside to seek out new investments, and often, when a property was found, it was thoroughly time consuming to pool the money, secure a loan and execute the deal. The solution, the company decided, was to partner with Drawbridge Special Opportunities Fund, a hedge fund managed by Fortress Investment Group, a leading global alternative asset manager, to create a venture to execute on future opportunities.

Blatteis & Schnur also owns 1000 Armitage Avenue in Chicago, where it has located a Polo Rugby store.

This summer, Blatteis & Schnur announced it had formed a venture to acquire high-end, well located retail properties across the United States. The venture is targeting $500 million in acquisitions over the next 2 years.

The new venture will allow Blatteis & Schnur to participate as an owner in significant retail properties where it sees potential. The company is charged with identifying the properties, then executing on value-added business plans for each asset required.

“As we were acquiring properties under our joint ventures, we realized along the way that it is a wonderful synergy to be the principal as well as the broker and participant in these transactions,” says Blatteis. “One hand can work with the other very well through value-add.”

While the old partnership method worked, the new venture will be much more efficient for the company and its principals. It will also aid Blatteis & Schnur in its chief business of leasing and management, rather than serve as a side business. The business plan calls for the company to acquire real estate that is specialized in high-end, 100 percent urban retail locations in the top 20 retail markets in the U.S.

“These are irreplaceable assets, which are what we know best from our ongoing brokerage activity throughout the country,” says Blatteis.

Blatteis & Schnur acquired a building along Chicago’s Magnificnent Mile (545 North Michigan Avenue) and located a flagship store for Nokia at the property, then sold the building.

Thus far, the company has acquired its first property with Drawbridge. Similar to what Blatteis & Schnur’s partnerships were doing, properties acquired under the fund will be acquired and redeveloped or re-tenanted to create value. The first acquisition is located in the Union Square area of San Francisco. The company had previously acquired a nearby building at 200 Powell Street in San Francisco, located on a strategic corner on the famed cable car line. This building was recently leased to Skechers for a flagship store. Nearby, at 800 Market Street, is the site of the venture’s first co-investment. Blatteis & Schnur is in the process of a major renovation and locating another flagship retailer for the property. Last year the company purchased a property along North Michigan Avenue in Chicago. There, the firm located a flagship location for Nokia. Markets where Blatteis wants to acquire properties include Washington, D.C., Dallas, Miami, Seattle, Honolulu and Maui.

Blatteis & Schnur met with Drawbridge when it went looking for a venture partner to acquire the San Francisco property.

“We had interest from half a dozen investment groups, but Drawbridge struck us as the most synergistic partner for our strategies,” says Blatteis. “When you are choosing a partner on a venture like that, you want to know that the chemistry is going to work. They look at real estate in a similar fashion and they make prudent business decisions.”

Most of Blatteis & Schnur’s retail clients are in the first round of what a landlord wants in his space. Because of that, Blatteis & Schnur is among the first to see any evolving or new areas. It is also the first to see high-end space on the market along the nation’s top shopping streets, from Miami to New York to Chicago to Beverly Hills.

“There is not a retail street in this country that we don’t understand or see emerging before most others,” says Schnur. “We have great, unique knowledge of the entire country from a retail perspective. That is what we are putting to work as an asset for us in this partnership.”

The venture will also allow Blatteis & Schnur to move quickly once an asset has been identified for acquisition.

Schnur feels that the company’s long-term relationships with its clients will add to the venture. The company has represented The Cheesecake Factory exclusively for 15 years, handling all of its real estate as if it were the in-house real estate department. Blatteis & Schnur has negotiated more than 100 locations for The Cheesecake Factory during that relationship. It has also rolled out new concepts for the company, including Grand Lux Café, and is currently working on the rollout of the latest new Pan-Asian concept, Rock Sugar.

Coupled with the formation of the venture was the hiring of Scott Ball as CEO. Ball spent 20 years with The Rouse Company, and then assisted General Growth briefly with its transition after the companies merged. At Rouse, Ball worked in asset management, ultimately becoming the company’s senior vice president in charge of the company’s leasing division. He was part of the team that worked on the company’s Las Vegas portfolio after it acquired the properties from The Hughes Corporation. For the past 2 years, he served as executive vice president of leasing and asset management for The Mills Corporation, operating the company day-to-day as the company completed its exit strategy.

At Blatteis & Schnur, Ball will have oversight of brokerage and fund operations, as well as working hand-in-hand with Blatteis on the acquisition of new properties. Ball knew Robert Schnur, Marc Guth and Dan Blatteis from his days at Rouse, when he did many deals with them for The Cheesecake Factory.

“I had a tremendous amount of respect for the way that they conducted their business,” says Ball. “They were not in-house real estate for The Cheesecake Factory, but you would have never known that. They were so involved and so passionate about making sure that their client was well represented.”

A friendship developed through all those deals that has lasted for years. When the time came for Blatteis & Schnur to hire a CEO, their first call was to Ball. One of Ball’s first duties was to help create a structure that would allow Blatteis & Schnur to focus more on the real estate and less on how to raise capital to acquire it.

“Dan has a great eye for real estate,” says Ball. “They have done a terrific job historically of identifying some amazing properties and really maximizing the investment, then selling or holding opportunistically.”

“It was a perfectly timed marriage in a sense,” adds Schnur. “We are entrepreneurs here. Scott has a strong entrepreneurial streak to him that I don’t think he was going to be able to satisfy in a REIT environment again. From our perspective, we’ve got a great partner who can add structure to our company.”

Blatteis & Schnur has been successful, opening offices in San Francisco, Dallas, Las Vegas and Chicago over the years. Ball is charged with expanding the number of offices, while making things run more cohesively among all the offices and all the company’s agents. Currently, the company’s landlord representation business is running even, in terms of revenue, with the company’s tenant representation business. On the tenant rep side, luxury has been a growing segment, meaning that Blatteis & Schnur has been busy. New tenants, like Lucky Strike, a bowling alley concept, have kept the company busy.

“We are not just an investor,” says Blatteis. “We have a thorough understanding of all aspects of the retail real estate.”


©2007 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.