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ALWAYS LOOK ON THE DOWNSIDE

Baltimore

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ALWAYS LOOK ON THE DOWNSIDE
Hometown company Continental Realty has made good all the way down the Eastern Seaboard since its founding in 1960, with 7,000 apartments and a couple million square feet of commercial, most of it retail and all of it 97% occupied. That success derives from a glass-half-empty outlook because—well—you can never be too careful. (Hey, it worked for Eeyore, right?)
J. M. Schapiro at Baltimore Hilton on April 24, 2012
CEO JM Schapiro, who's actually got quite the sunny disposition, tells us he spends 70% of his time on downside due diligence. (That's just good situational awareness; he should've captained theS.S. Minnow.) But his Baltimore-based firm, whose portfolio spans from this region all the way down to Florida, knows what it likes and moves quickly once it sees it. He says Continental is seeking value-add, off-market deals with situational distress (bank foreclosure or borrowers that have run out of time to find refinancing).

I'll Have Another
He says the ability to get deals to the finish line faster than I'll Have Another gives his firm a competitive advantage over other buyers. In-house counsel lets Continental move fast on note purchases, too. Still, JM says, it's even harder to find a good deal than it is to find equity. So what does he hear when he puts his ear to the ground of his own portfolio? A lot of quasi-office uses (dentist, physical therapist, real estate firms, gyms, and urgent care) leasing retail space. And second-generation restaurant space is leasing well because it requires less equity investment to get a new operation up and running.

ALWAYS LOOK ON THE DOWNSIDE
Continental is also an asset manager, and JM is raising money for its third fund (the first was in '09), a $100M retail and multifamily value-add pool that raised $52M in a February close and expects to pull in another $20M in a second, June close. Continental acquired the above, 73k SF Shops at Verandah in Fort Myers, Fla., in January '11 for that fund. JM tells us the Publix is doing $725/SF in sales.