Value-Added Proposition
Seeing that institutional investors want value-added investments in shopping centers, Pine Tree Commercial has formed a new company to fill a niche.
Randall Shearin

Lake Bluff, Illinois-based Pine Tree Commercial has been known as a developer of community centers in smaller markets in the Midwest. Recently, though, the company has been shifting into buying centers as well, and has grown its geographic area to other parts of the country. It has broadened its horizons and expanded its range of capabilities. Enabling the company to do so has been its relationships with financial partners like GEM Realty Capital, Syndicated Equities and Buchanan Street Partners, as well as new relationships with institutional funds looking to invest in real estate. These relationships have led to the formation of Pine Tree Institutional Realty, a new company that will acquire, own and sell real estate assets. Pine Tree Commercial Realty will continue to develop and manage properties as it has for the past 11 years.

Tim Roe has been appointed president of Pine Tree Commercial Realty.

Throughout its history, Pine Tree Commercial has looked for opportunities in secondary and tertiary markets in the Midwest. Often, the company would develop centers shadow-anchored by Wal-Mart or other retailers in smaller communities.

Gateway Center, San Ramon, California, was the first acquisition Pine Tree made with its funding from Henderson Global.

“We originally started our pension fund business as an enhancement to our development business; it has now led to the formation of a new company,” says Herring. “It has synergy with our development business between acquiring and developing, as well as getting us into new markets and involved with new tenants. We had hoped that one side of the business would help feed the other side, and we’re seeing that happen now.”

The 110,000-square-foot Gateway Center in San Ramon, California, is anchored by Albertsons and Walgreens.

The Bay Area is a competitive market not only for acquisitions of centers, but also for retail business. Pine Tree has continued to scour California for properties not only in the Bay Area, but in Southern California and the Central Valley as well. It has also been looking in Arizona, Colorado, Oregon and Washington.

Value-added centers are also in the sights for the Pine Tree Commercial portfolio as well. The company is looking for deals with vacant anchors and redevelopment opportunities. Pine Tree Commercial will use different sources of money than the institutional side of the business. Pine Tree Commercial generally partners with another capital source, like GEM Realty Capital, to acquire and redevelop centers. The company also has a group of private investors that it syndicates its properties to as well. On the tenant side, the company has a track record with many of the nation’s top retailers. It does a lot of deals with companies like Babies “R” Us, Michael’s, Best Buy, T.J. Maxx, Petco, Target and Wal-Mart.

Severance Town Center in Cleveland Heights, Ohio, is anchored by Wal-Mart, The Home Depot, Office Max, Borders Books and Music, Marshalls, Rack Room Shoes and the Avenue.

“Our goal is not to say how many we want to buy,” says Borzak. “We want to be in a position so that we have the opportunity to buy any retail deal that we like that comes through our door. We want to be a player for any property, whether it’s raw land, a stabilized center or anything in between.”

Pine Tree’s range of capital partners allows the companies to be financed to buy most any property that fits its core portfolio. The company is nimble and reactive; it’s quick to make a decision and fast to the closing table. With Gateway Centre in California, the company closed in a short amount of time, especially given that the company was new to the market. 

While Pine Tree has always managed its own properties and will continue to do so even for properties located on the west coast. Pine Tree has installed voice-over-Internet phones in all of its offices so everyone in the company can call each other using the intercom. Video cameras are also being installed at the company’s shopping centers so that property managers can log onto the Internet and view the property from his or her desk.

“Technology is making it easier for a shopping center owner to be a national company,” says Herring.

East Lloyd Commons in Evansville, Indiana, is a 155,000-square-foot retail center redeveloped from a 170,000 square foot Super Kmart, now in Phase II of construction.

Pine Tree Commercial has experience acquiring portfolios as well. In 2003, the company acquired a portfolio of 12 centers in Indiana from Williams Realty Group, a local developer. The neighborhood centers included a few that were shadow-anchored by Wal-Mart and Kroger grocery stores. The company currently has three projects under development. The first is a center in Florence, Kentucky, that Pine Tree has created from an existing Wal-Mart building and an adjacent center. In Avon, Indiana, Pine Tree is planning a new community center. The third center is a community center in Ft. Wayne, Indiana. Two other centers are in the early planning phases in Montrose, Colorado, and Westfield, Indiana.

Creating a second company to handle institutional investments was a natural step for Pine Tree. Most of the company’s professional staff has more than 20 years’ experience in the industry and loves development and ownership of strip shopping centers.

Severance Town Center, Cleveland Heights, Ohio, is 620,000 square feet.

By keeping the same core business in development with Pine Tree Commercial, creating Pine Tree Institutional is using the same knowledge set to expand the company and grow through acquisitions. One of the secrets to Pine Tree’s success is the fact that the company’s senior staff knows they have a say in a potential deal.

“There’s not a defined hierarchy here,” says Herring. “When it comes to looking at a transaction, everyone has an equal voice. Everyone here has a different background — whether that be from a retailer, finance, legal, property management, accounting — everyone puts their voice in.”