Exclusive: Why ASB CEO Robert Bellinger Bet $600M on Urban Retail
ASB Real Estate Investments’ recent $91.2M purchase of four Back Bay buildings reflects its national strategy of amassing core urban mixed-use assets in gateway US markets. Last year, it purchased $600M in retail properties to grow its urban retail portfolio to $1B, CEO Robert Bellinger tells Bisnow.
Back Bay properties are difficult to acquire but worth the effort, Robert says. Along with New York, DC, Miami, Chicago, Denver, San Diego, LA, and San Fran, Boston is where shoppers and top global retailers want to be. Bricks and mortar stores--far from dead--are “incredibly” important in building brand and driving online sales. ASB bought the Back Bay properties--333-335 Newbury, 342 Newbury, 352 Newbury, and 801 Boylston--in a JV with Blatteis & Schnur on behalf of ASB’s Allegiance Real Estate Fund, a $3.1B national core vehicle focused almost exclusively on urban properties.
ASB launched this strategy in ’03, buying 545 N Michigan Ave in Chicago, which it sold for twice the purchase price. Core urban retail assets present modest risk, strong income and solid long-term appreciation, Robert says. As for DC, in 2000, it started attracting more residents and its subsequent expansion has been “staggering” compared to the previous 50 years of decline, Robert says. In Santa Monica, Steve Jobs built one of his last stores at an ASB-owned site, which is now Apple’s West Coast flagship. Its Manhattan store in the basement of the GM building—with signage over the sidewalk—is the company’s top grossing venue, Robert tells us.
A store in a basement? That’s an anathema to basic retailing precepts. But today, when retailers pick a location and decide how much rent to pay, they often first consider visibility and branding power, and second in-store sales. A central downtown location in a gateway city that offers the opportunity for standout signage adds tremendous value by boosting website sales, he says. (Once you come back above ground and have reception again.) In Q3 ’13, retail rents rose 60% in Soho, 38% in the Meat Packing District (ASB owns retail properties in both markets), and 22% on upper 5th Avenue, according to a recent Cushman & Wakefield report.
For ASB, the tenant mix isn’t centered around an anchor; it derives power from all the brands on the street. In Back Bay, they include names such as Barney’s, Fendi, and Ralph Lauren. Another ASB acquisition is 320 Summer St, an old industrial building in the Seaport District that ASB bought in '07 and renovated. In ’13, Logmein leased all 100k SF in a relo from the ‘burbs that was quite costly. In Q4, the average asking rent was $23.12 on Rt 128 and $46.28 in downton Boston, according to LPC. But the tech firm was willing to pay double the rent knowing that its talent not only wants to work downtown but wants to live there too. “It’s that dynamic we’re building on,” Robert says.