FEATURE ARTICLE, SEPTEMBER 2007

STEADFAST LIVES UP TO ITS NAME
Steadfast Commercial Properties builds portfolio of regional malls in western U.S.
Susan H. Fishman

The 800,000-square-foot Everett Mall in Everett, Washington, recently underwent a multi-million dollar renovation.

Founded in 1994 with primarily an affordable multifamily housing focus, Newport Beach, California-based Steadfast Companies has grown into a four-pronged platform real-estate development and operating company, including Steadfast Residential Properties, Steadfast Commercial Properties, Steadfast Hospitality Group and Steadfast Business Properties, dedicated exclusively to office and industrial properties. The commercial division of Steadfast Properties currently has major office, industrial, retail and mixed-use developments in progress throughout California, Oregon and Washington. Lately, Steadfast Commercial Properties has narrowed its focus on retail, and the principals working within the commercial division have developed a combined total of more than 17 million square feet of commercial real estate.

Steadfast Commercial Properties has dabbled in power centers, community centers and neighborhood centers, but in recent years, the company has been focused on building a portfolio of regional malls, primarily in the western United States. Currently, the firm has two regional malls in the Seattle area, one in Albany, Oregon; and one in Northern California. The company generally looks for properties where it can add value, says Jim Yoder, senior vice president of Steadfast Commercial Properties.

“We look for solid properties that have just great real estate fundamentals — great location, access and visibility; convenient parking; great anchors like major department stores and theaters; good, solid trade areas that you can quantify with good incomes, good household sizes; and sizable groups of younger demographics — the Gen X and Gen Y sector. Increasingly in the future we’ll be looking at boomers, too, as that group moves from work to retirement — their spending has always been very strong.”

The 410,000-square-foot Yuba Sutter Mall in Yuba City, California, underwent a renovation in 2005, which included a new color scheme, lighting, signage and re-branding with new mall name and logo.

Steadfast Commercial Properties generally buys Class B malls and moves their sales up to the highest level of B mall or low A mall level sales per square foot. One of the company’s developments is Everett Mall, an 800,000-square-foot mall located in Everett, Washington, that recently underwent a multi-million dollar renovation. A long list of key national retailers have recently opened or signed leases at the center, including Regal Cinemas, Old Navy, Borders Books & Music, Bed Bath & Beyond, Best Buy, PetSmart, Finish Line and LA Fitness, which features a saltwater pool. Steadfast has also developed a 100,000-square-foot power center annex with a Best Buy and some other big box users in a peripheral area to the property.

“When we bought the mall, sales were about $300 per square foot, and we’ve grown that to about $382 per square foot,” notes Yoder. “Now our real focus is optimizing the merchandising inside the mall as we’ve repositioned some of the anchors.”

Another Steadfast property is a mall just south of Seattle, called The Commons at Federal Way in Federal Way, Washington. The 800,000-square-foot regional mall is anchored by Sears, Macy’s, Target and Century Theaters. With leasing well underway and a trade area of more than 500,000 residents with an average household income of $78,000, The Commons is well on its way to becoming a dominant retail and entertainment destination in the south Seattle market. Other tenants will include Borders Books & Music, PacSun, Champs, Famous Footwear, Lane Bryant, Catherines, Panera Bread, McGrath’s Fish House, TGI Friday’s, Filling Station Restaurant and Bar, Applebee’s and Red Robin. The re-leasing efforts follow a multi-million dollar interior and exterior renovation of the center. New retail/merchandising zones have been created and a food court remodel is nearing completion.

Yuba Sutter Mall is another Steadfast commercial property. The 410,000-square-foot regional mall is located in Yuba City, California, and underwent a renovation in 2005, which included a new color scheme, lighting, signage and re-branding with new mall name and logo. The department store line-up includes Sears, Ross, Gottschalks and JC Penney. National tenants include American Eagle Outfitters, Bath & Body Works, Pacific Sunwear, Hot Topic, Journeys and Fashion Bug.

The company is also currently working on another 400,000-square-foot development in Albany, Oregon. Having just completed the interior remodeling of the property, Steadfast is now turning its attention to leasing.

The Commons at Federal Way, in Federal Way, Washington, is an 800,000-square-foot regional mall anchored by Sears, Macy’s, Target and Century Theaters.

“We focus a lot on strategic planning,” notes Yoder, “and we formalize a very detailed plan on almost every aspect of the property. Our main company focus has been the people we hire – we strive to create conditions at all these properties that nurture teamwork, great communications and timely action. As we’re moving into more of an operating mode, we’ve rolled out a best-practices program that we’re sharing with all of our mall teams, and we’re trying to follow some of the great, big companies in the industry to understand what they’re doing and try to benchmark against them to the extent that we can.”

Recently, Steadfast completed permanent financing for three of its properties with about $210 million in permanent debt.

“We had these properties on shorter-term bridge loans or development and acquisition loans, so we’re really looking forward to operating, growing the cash flows and optimizing the properties,” says Yoder. “We’ve been buying a mall about every year and doing it with all of our own internal equity and capital. We have phenomenal relationships with lenders who are ready to do future deals, which grew out of our multi-family arm.”

Yoder adds that Steadfast Companies is always looking for opportunities across the country, not necessarily just in the western states.

“We’re extremely loyal to all of our relationships. Most of our properties have been bought off market, either through friends, brokers or property owners that we have relationships with, and we move quickly and thoroughly.”


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