The Wall Street Journal - USA (2020-12-02)

B6| Wednesday, December 2, 2020 THE WALL STREET JOURNAL.

open, with foot traffic remain-

ing weak as office workers and

tourists haven’t returned to

the city.

These days, he is getting

unsolicited offers from prop-

erty owners in SoHo and Long

Island with generous terms

such as six months of rent

based on a percentage of sales.

But rather than tempt fate

again during the pandemic, he

is staying put for now. “It’s

not the best time to test new

businesses,” Mr. Garcia said.

ies, furniture, discount goods

and pet supplies that have

benefited from people staying

at home, brokers say.

But some specialty retailers

have seized on opportunities,

too. Sever Garcia, who relo-

cated his accessories and

travel items store from down-

town Brooklyn to Manhattan’s

upscale Tribeca neighborhood,

said his new landlord offered

three months free rent and

other incentives.

This has helped him remain

area.

Gazit also plans to invest

$15 million to $18 million to

retrofit the space, according to

filings by its Israeli-based par-

ent with the Tel Aviv Stock Ex-

change.

Home Depot’s total gross

rent will be $9.5 million, up

from the $5.8 million that Bed

Bath&Beyondispaying,the

filing added.

Tenants looking for new

real estate have consisted pri-

marily of big sellers of grocer-

SoLa Impact, a real-estate firm that runs three funds totaling $180 million, is building an affordable-housing project in South Los Angeles.

SOLA IMPACT/THE BLACK IMPACT FUND (2)

designated low-income com-

munities.

Critics of the program say

it sometimes misses the mark,

like when states earmark

neighborhoods where develop-

ment is already taking place.

That could give investors a

significant tax break without

creating many new jobs or

more affordable housing in

poorer neighborhoods.

President-elect Joe Biden

has suggested overhauls, in-

cluding requiring more de-

tailed reporting on job growth

and poverty reduction. Mr.

Muoto said he has raised

questions about opportunity-

zone investments that haven’t

delivered benefits to dis-

tressed local communities.

Mr. Muoto’s Black Impact

Fund consists of two separate

funds—one targeting $500

million in opportunity-zone in-

vestments and another one

with a $500 million goal for

making investments near des-

ignated opportunity zones. He

said areas near these zones

can benefit from spillover ef-

fects such as asset apprecia-

tion. By offering a non-oppor-

tunity-zone fund, he can also

raise money from pension

funds and endowments that

are interested in social-impact

investing but already benefit

from other tax incentives.

Mr. Muoto, who left Nigeria

after receiving a scholarship

from the Wharton School of

the University of Pennsylvania,

said there is a stigma that

these neighborhoods are un-

safe or unruly.

“The perception that these

are going to be hard places to

operate in, it’s not altogether

untrue,” he said.

But he said he has found a

process that can work. The

first step he takes is building

affordable housing, and then,

offering access to education.

SoLa Impact has a foundation

Newmark. “Historically, the

most active buyers have been

in the luxury sector.”

In a recent example, Swiss

high-end clothing retailer

Akrispurchased three build-

ings on New York City’s Madi-

son Ave. for $45 million—a de-

cade-low price for the ritzy

neighborhood on a per-square-

foot basis—including the

building that accommodates

its Manhattan store.

Other retailers are taking

advantage of the times to up-

grade their rental space.

Home DepotInc. is planning

to relocate its basement store

in Manhattan’s Upper East

Side a few blocks away to a

four-story store currently oc-

cupied byBed Bath & Beyond

Inc. The home-furnishings re-

tailer, which has struggled

with falling sales for years,

isn’t renewing its lease as it

works to close 63 stores by

the end of its current fiscal

year.

“We chose this location be-

cause it’ll be convenient for

residents on the Upper East

Side and offered the space we

need just as our existing lease

expired,” said Margaret Smith,

a spokeswoman from Home

Depot.

The landlord,Gazit Hori-

zonsInc., said it was able to

finalize a 20-year lease amid

the Covid-19 pandemic by of-

fering Home Depot high ceil-

ings and an ample loading

Struggling shopping malls

are finding an unexpected

boost from bargain-hunting

retail operators.

Such was the case in Stam-

ford, Conn., where the Stam-

ford Town Center mall lost

popular tenants like H&M, Ap-

ple Inc. and Talbots to a com-

peting shopping center that

opened last year only 8 miles

away.

In October, home-furnishing

companySafaviehpurchased

Town Center mall.

Safavieh plans to open a

home-design center and relo-

cate its nearby home-furnish-

ings store to the mall, said

Arash Yaraghi, whose family

runs the Port Washington,

N.Y.-based company.

But, he added, “price is al-

ways the deciding factor.” Sa-

favieh paid $20 million for a

property that was appraised at

$64 million last year, accord-

ing to a Stamford government

website.

The coronavirus pandemic

and its debilitating effect on

shopping centers are provid-

ing growing retail operators

with an opportunity to achieve

something many have hoped

to do for a while—become

owners.

“We have seen retailers ze-

roing in on buying opportuni-

ties,” said Ariel Schuster, vice

chairman at real-estate firm

BYESTHERFUNG

Retailers Seize

Chance to Become

Property Owners

Stamford Town Center in Connecticut was recently bought for $20 million by a home-furnishing company.

STAMFORD TOWN CENTER

that offers scholarships and fi-

nancial-education programs

such as mock stock challenges.

To ensure the communities

benefit from the Black Impact

Fund, 13% of fees and asset

appreciation will go to a non-

profit entity that will perform

social-impact work and build

housing for purchase at cost in

areas where the new fund in-

vests. It will be modeled after

SoLa’s nonprofit, which pro-

vides students in the Watts

neighborhood of Los Angeles

with scholarships to colleges

and vocational schools. Recipi-

ents learn skills that could

help them make a living, Mr.

Muoto said.

The community and educa-

tional programs also earn the

trust of residents who, in turn,

make the effort to take care of

the area and pay rent on time,

he added. “When you really

align with the community, it

does not dilute your returns.

They solidify your returns,”

Mr. Muoto said.

During the pandemic, hous-

ing for lower-income commu-

nities has outperformed mar-

ket-rate housing in coastal

areas as the shortage of such

affordable homes resulted in

lower churn rates and better

returns.

Developing projects in mi-

nority neighborhoods can be a

good deal, especially if land is

cheaper and there are tax and

infrastructure incentives. With

a comprehensive plan, “you

make your returns on the buy,

on the way in,” said William

W. Towns, adjunct professor of

social impact at Kellogg

School of Management at

Northwestern University.

A California developer is try-

ing to raise $1 billion to invest

in Black and Latino communi-

ties. If successful, it would be

one of the largest commercial

real-estate funds ever to focus

on minority neighborhoods.

Martin Muoto, chief execu-

tive of the real-estate firm

SoLa ImpactLLC, runs three

funds totaling $180 million.

They focus on affordable hous-

ing and some commercial real

estate in minority neighbor-

hoods around South Los Ange-

les. The funds, which raised

money from individual part-

ners in large investors like the

private-equity firm General

Atlantic, have recorded dou-

ble-digit average annual re-

turns since the first fund

launched in 2014.

Now, Mr. Muoto is trying to

use a similar approach in cit-

ies across the U.S. that suffer

from a shortage of affordable

housing and from what he said

are regulatory barriers that

make it tougher to build. His

new Black Impact Fund is fo-

cusing on large metropolises

like Philadelphia and Atlanta,

as well as midsize cities like

Fresno, Calif.

SoLa has been investing in

opportunity zones, a program

created by the 2017 federal tax

overhaul that allows investors

to defer and reduce taxes if

they reinvest capital gains in

BYESTHERFUNG

Developer Has Big Affordable Plans

Real-estate executive

aims to raise $1 billion

to invest in minority

neighborhoods

Martin Muoto, center, with tenants at a SoLa development in Los Angeles.

dented backdrop marked by

rising numbers of Covid-19

cases and hospitalizations

that persuaded many people

to stay home and avoid large

gatherings.

Even so, Mr. Shay said that

while 55% of people indicated

they monitor what is going on

with the virus in their commu-

nities, they don’t expect it to

affect their holiday spending.

More than half of people

surveyed, according to NRF

and Prosper Insights, bought

clothing over the shopping

weekend. Just under a third

purchased toys and a little

more than a quarter bought

electronics.

People between ages 35

and 44 spent the most money,

said Phil Rist, executive vice

president at Prosper Insights,

mostly buying gifts.

NRF had earlier said it was

expecting holiday sales for last

month and this month to rise

between 3.6% and 5.2% from a

year ago.

Continued from page B1

Shoppers

Reduce

Spending

THE PROPERTY REPORT

A bankruptcy judge has de-

nied a request to temporarily

stop the already approved sale

of the operator of New York

Sports Clubs and Lucille Rob-

erts gyms to a group of lend-

ers and an entity managed by

an investment banker.

Judge Christopher Sontchi

of the U.S. Bankruptcy Court

in Wilmington, Del., said Mon-

day he would deny the motion

for a temporary injunction

prohibiting the closing of the

acquisition of nearly all the

assets ofTown Sports Inter-

nationalLLC in a deal valued

at about $85 million.

Town Sports had hoped to

close the sale last Friday to a

group of term-loan lenders

andPeak CreditLLC, a multi-

member limited liability com-

pany which has New York-

based investment banking firm

Lepercq de Neuflize & Co. as

its managing member. But the

closing was delayed when the

lenders requested that the

judge settle a dispute over

credit bidding and clarify his

sale order, according to court

papers and lawyers at a hear-

ing Monday.

The dispute arose with Peak

Credit after the term lenders

were said to be disappointed

with the capitalization struc-

ture of the buyer, a newly

formed acquisition vehicle

called New TSI Holdings Inc.,

resulting in the lenders refus-

ing to make a credit bid and

arguing that Peak didn’t meet

the requirements under the

sale agreement.

“We can’t let perfect be the

enemy of good,” Seth Van

Aalten, a lawyer representing

the unsecured creditors com-

mittee, said during the hearing

Monday held by phone and

video.

“There is no other buyer

here. And there is no alterna-

tive to this transaction.”

Town Sports and the com-

mittee also argued that the

matter was an intercreditor is-

sue that could continue to be

negotiated or litigated after

the closing. The judge agreed.

The judge during Monday’s

hearing issued an order autho-

rizing the lenders and Peak to

move forward with the credit

bid and close the sale.

Town Sports, which filed

for chapter 11 bankruptcy pro-

tection in September, had

more than 600,000 members

belonging to its nearly 185 fit-

ness clubs in March.

The plan under the sale is

to keep about a third of those

locations.

BYAISHAAL-MUSLIM

Sports

Clubs Sale

Allowed

To Proceed

Town Sports had

filed for bankruptcy

protection in

September.