STAR Property

The 750,000-square-foot Legends at Village West, Kansas City, Kan., was not just another retail and entertainment center when it rolled out with 15 retailers in November. What makes the project unique is that it was funded in part using a nascent form of financing called sales tax revenue, or STAR, bonds. Kansas City and Wyandotte County issued the bonds. Repayment is secured by sales tax proceeds from the retailers in the project and guaranteed by the merchants’ good credit ratings. Legends at Village West, developed by Kansas City, Mo.-based RED Development, is actually one portion of Village West, a 400-acre tourism district. Village West’s developer, Zimmer Real Estate Services, Kansas City, Mo., obtained between $200 million and $300 million in STAR bonds to fund Village West. The project contains a Cabela’s outdoor sporting goods store, a Nebraska Furniture Mart and a NASCAR racetrack called the Kansas Speedway, built in 2001. Other states have taken notice of Kansas’ innovation and are setting up similar programs. Nevada approved STAR bond legislation in May 2003, and Oklahoma did so in May 2004. Washington is expected to finalize its legislation this year. Alabama, Indiana, Missouri, North Carolina and South Carolina are considering passing laws that will allow use of the bonds, says Rick Worner, executive vice president of investment banking at New York City-based Oppenheimer & Co.

CMBS flow to slow ...

Market professionals in the CMBS sector expect that higher domestic interest rates will dampen the pace of CMBS issuance in 2006, according to JPMorgan. The bank predicts that domestic CMBS deals will total $148 billion by year-end, down slightly from the $158.7 billion estimate for 2005. International issuance should amount to about $85 billion.

... mixed-use deals to rise

Expect a lot of mixed-use properties to change hands in the U.S. this year. Sixty-one percent of real estate investors plan to acquire, develop or redevelop mixed-use properties, while 44 percent plan to acquire, develop or redevelop urban properties, according to a survey of 10,000 executives conducted by advisory firm REZA Investment Group. The respondents said the Southeast would be the region seeing the most mixed-use action, followed by the Northeast.

Short Hills, big deal

Taubman Centers refinanced its 1.3 million-square-foot Mall at Short Hills, in New Jersey, for $540 million, making it one of the largest single-mall financings ever done in the United States, the Bloomfield Hills, Mich.-based developer says. The 10-year loan carries a 5.5 percent fixed interest rate and reduces the company’s exposure to floating-rate debt to 12.5 percent of total debt and 6 percent of total market capitalization, says CFO Lisa A. Payne. Taubman had enough green left over from the deal to repay a $107 million construction loan on its Northlake Mall, in Charlotte, N.C., and to pay off a $102 million line of credit.

Current Issue February 2012