|SHOPS OF GRAND AVENUE Ashkenazy gave up its stake in the Shops of Grand Avenue in Milwaukee this spring after defaulting on a loan. (John Klein/Milwaukee Journal Sentinel)|
Troubled by the past
Financial woes dog firm seeking lease of Faneuil Hall shops
The New York real estate firm set to take over Faneuil Hall Marketplace in the next few months has faced financial troubles in the past year that led its lenders to repossess two shopping centers, in Florida and Wisconsin, issues that are now raising concerns about the future of the historic Boston property.
The Tampa Port Authority filed a lawsuit last year against Ashkenazy Acquisition Corp. that accused it of owing more than $300,000 in back rent and failing to adequately maintain the shopping center it leased, Channelside Bay Plaza. Ashkenazy lost control of Channelside last fall, and this spring, the company also had to give up its stake in the Shops of Grand Avenue in Milwaukee after defaulting on a loan.
Merchants at Faneuil Hall Marketplace are urging city officials to more closely scrutinize Ashkenazy and consider other potential buyers for the retail and restaurant complex. The marketplace is owned by the city of Boston, which leases three of the four buildings to General Growth Properties. The Chicago mall operator recently struck an estimated $140 million agreement to sell that lease to Ashkenazy. General Growth is required to give notice to the city when it transfers the lease, and Boston officials could potentially hold up the deal if they determine there are problems with the arrangement.
“These reports of financial shortcomings on different projects raise serious concerns about the viability of this purchaser to operate the marketplace,’’ said Adam Cohen, a lawyer for the Faneuil Hall Merchants Association. “We trust the BRA to properly investigate Ashkenazy Acquisitions to determine its capabilities and financial soundness. We hope that any buyer of the lease from General Growth would be free of financial difficulties and also recognize the need for capital improvements and expenditures to improve the marketplace’s allure and mystique for its visitors.’’
Michael Alpert, president of Ashkenazy, said in an interview that the Tampa and Milwaukee shopping centers were the only problematic sites in its $5 billion portfolio of more than 100 properties. He described those two retail venues as “overleveraged assets in troubled markets.’’
The company plans to assume Faneuil Hall Marketplace’s debt — estimated at about $90 million — and put about $50 million of its own money into the deal for the lease.
“We will have a significant amount of equity’’ from the start, Alpert said.
Brenda McKenzie, director of economic development for the Boston Redevelopment Authority, said the city has reached out to people in Florida, Wisconsin, and other communities to talk about their experiences with Ashkenazy. Boston officials are hoping for a fresh start at Faneuil Hall after years of struggling with General Growth over the direction of the marketplace and what they say is a need to put more emphasis on local businesses.
“It is concerning,’’ McKenzie said of Ashkenazy’s track record in Tampa and Milwaukee. “But in real estate we have to look at the current times. We still have an open mind as we do our due diligence.’’
Ashkenazy is willing to talk with merchants about its vision, McKenzie said, but the company is waiting for General Growth to approve such a meeting. David Keating, a General Growth spokesman, declined to comment.
Alpert would not detail Ashkenazy’s plans for Faneuil Hall, except to say it will hire Jones Lang LaSalle as the local property manager.
“Faneuil Hall is a trophy. We do have the capital to invest in the property as needed,’’ Alpert said.
Some merchants in Tampa said they heard the same promises of partnership and investment from Ashkenazy when it acquired the Channelside Bay Plaza lease about five years ago.
“In the beginning, Ashkenazy was very excited about buying the center and talked about partnering with tenants. But they never did anything to make it happen,’’ said Guy Revelle, who runs two restaurants, a dueling-piano bar, and a bowling alley at Channelside. “All Ashkenazy looked at was the bottom line. They didn’t do anything to drive sales or improve the property.’’
Ashkenazy, which owed about $26 million to the bank for its purchase of Channelside, improved the occupancy rate from 40 percent to over 90 percent, according to Alpert.
“We have tremendous credibility,’’ Alpert said. “We create significant value, and we do what’s right by the properties time and time again.’’
Jenn Abelson can be reached at email@example.com.