2C —August 24 - September 13, 2018 — ICSC PA/NJ/DE Conference & Deal Making — Shopping Centers — M id A tlantic

Real Estate Journal


ICSC PA/NJ/DE C onference & D eal M aking Restructuring/sale assignment highlights the challenges facing owners & developers in the age of Amazon AlgonGroup finds solutions for real estate owners challenged by changing retail market dynamics P HILADELPHIA, PA — Algon Group , a lead- ing financial restruc-

pany through several complex transactions that included the sale of 3,028 acres to Mattamy Homes and the transfer of 1,222 acres to an entity as- sociated with the City of Port St. Lucie, FL. The 8,000+ acre “Tradition” property, which has five miles of prime Inter- state 95 frontage and three interchanges, was initially designed in the early 2000s as the site of a large mixed-use community. Tradition was planned to have over 11,000 homes and a 300-acre regional mall site, as well as other com- mercial and retail uses. In 2007, anticipating rapid

commercial and residential development, $165 million in municipal bonds was raised for infrastructure expendi- tures in Tradition. Along with the new off-ramp, roads, and utilities came substantial an- nual bond payments. However, the impact of the residential real estate “bust” of 2008-12, followed by macro changes in the retail market, resulted in a significant portion of this proj- ect, including the mall site, to remain undeveloped. Recently, the residential portion of the property is beginning to see new development vigor, but retail and commercial activity

has been slow to follow. After the owner turned to a national real estate bro- ker, who was unsuccessful in finding a buyer for the retail and commercial acres, Tradi- tion retained Algon to struc- ture a solution that would bring relief from the onerous debt burden. Algon founder and president Troy Taylor said that because retail was a substantial component of the planned community, “the changing dynamics in the retail industry negatively impacted the economics of the Port St. Lucie development.” Those market dynamics

were characterized by Busi- ness Insider reporter Mary Hanbury on August 2, 2018: writing about the “national retail apocalypse,” Hanbury cited a Credit Suisse report projecting 3,600 more store closures in 2018, following more than 6,400 closings last year, and an additional 20% to 25% of U.S. mall closings over the next five years, represent- ing up to 275 shopping centers. “Retail is going through a fun- damental change right now— witness the recent Toys R Us and Brookstone bankruptcy filings—and the macro issues around these changes will continue to have an impact on shopping center viability,” said Taylor. “We know many owners are starting to address the chal- lenges posed by online retail- ers, but many more are bury- ing their heads in the sand,” Taylor adds. “What we have seen time and again is that the sooner real estate owners proactively address their prob- lems, the better the outcomes. It often takes 12 to 18 months to work out a viable solu- tion, so if owners don’t begin problem-solving early, they often throw good money after bad. After a certain point, situ- ations become unsustainable and there is no good answer.” Taylor strongly encourages owners to be proactive and retain appropriate legal and financial advisors early, at the first signs of trouble, when acceptable outcomes are still attainable. The Tradition assignment is the latest high profile, complex real estate situation that Al- gon has successfully complet- ed. They have advised on more than $4 billion of real estate restructurings for clients such as Peninsula Papagayo Four Seasons Hotel and Resort in Costa Rica; The Related Group of Florida; Reynolds Planta- tion on Lake Oconee, Georgia, One Bal Harbour Resort in Miami Beach, FL and Agway, Inc. of Syracuse, NY. Taylor, along with several of his Algon colleagues, is an alumnus of The Wharton School, where he earned both a B.S. and aM.B.A. degree, after growing up in Northeast Phil- adelphia. This background, combined with his 25-year ca- reer in traditional investment banking, inspired him to found Algon more than a decade ago continued on page 18C

tur ing and investment b a n k i n g firm, recent- ly completed a major real e s t a t e r e - structuring/ sale assign- me n t t ha t

Troy Taylor

highlights the challenges fac- ing shopping center owners and developers in the age of Amazon. In June 2018, Algon navi- gated Tradition Land Com-

June 2018

Tradition Land Company, LLC has divested its remaining assets in Port St. Lucie, Florida via a restructuring and related sale

has acquired via a transfer 1,222 acres Government Finance Corp.

has acquired via a purchase 3,028 acres

The undersigned served as:

Financial Advisor to Tradition Land Company, LLC

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