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As The Crow Flies

As Trammell Crow Co. marks its 50th anniversary, the Dallas-based real estate giant has reason to celebrate.

By far the nation's largest commercial real estate manager, Trammell Crow Co. has more than 210 million sq. ft. of properties in its portfolio and recently had its first public stock offering. With 140 offices and more than 14,000 clients nationwide, Trammell Crow Co. is one of the country's top 10 real estate service companies and one of the biggest developers of commercial real estate in the world.

But for all its size and experience, the company isn't usually thought of as a shopping center firm. Company leaders hope to change that. Trammell Crow Co. is beefing up its retail services business with the creation of a nationwide retail division.

"We already have 32 million sq. ft. of retail space that we manage, and we are one of the largest in that business after the big real estate investment trusts [REITs]," says Trammell Crow Co. president George Lippe. "But we are working to significantly broaden our retail services. We see an opportunity there because nobody else has stepped up to provide comprehensive retail real estate services on a nationwide scale."

Coast-to-coast services Indeed, of all the U.S. property industries, the retail real estate services business remains the most fragmented. Until the growth of REITs, most of the nationwide retail developers and managers were regional mall firms.

And there are still few truly national companies that specialize in retail brokerage services. With the cross-country scope that Trammell Crow Co. first gained developing industrial buildings, the firm is trying to create a multi-level retail real estate company with operations in most major markets.

Trammell Crow Co. is growing its retail tenant representation business, representing companies such as PetsMart, OfficeMax, Blockbuster and Pearl Vision in everything from build-to-suit construction to lease negotiations. And it has disposed of surplus shop space for merchants such as Builders Square, Service Merchandise and Incredible Universe.

The company also is acting as a fee developer, building and operating shopping centers for investment partners and clients. It already does similar work for major industrial and office tenants and owners.

"Our history in the third-party real estate business has been good," says Lippe, who has been guiding Trammell Crow Co. on a course of corporate acquisitions and market expansions since the company went public last fall.

"We now have 450 institutional customers," he says. "And on the brokerage side, we have almost tripled our business in three years."

>From the 1950s until the late 1980s, Trammell Crow Co. handled the retail development and investment side of its operations the way it did all of its projects: through a complicated system of partners in offices around the country.

Retail, an equal partner In some markets, Trammell Crow Co. became a significant shopping center developer, while in others it stuck to its bread-and-butter warehouse and office construction and left the retail market to other players.

"Retail was without a doubt the most fragmented part of our business," Lippe admits.

Trammell Crow Co. signaled that it was changing its approach to the shopping center sector last fall when it spent about $28 million to acquire Cleveland-based Doppelt & Co., one of the country's best-known retail tenant rep firms. Doppelt's client list included firms such as HomePlace, T.J.Maxx, General Nutrition Centers, Marshalls, Tandy and Best Buy.

With the newly acquired expertise in the retail tenant rep business, the company set out to expand its Trammell Crow Retail Services (TCRS) division, which is headquartered in Denver. William Rothacker, a Trammell Crow Co. veteran of more than 18 years, was tapped in 1996 to head up the retail services division.

He sees as his mission to fully integrate the retail services offered by Trammell Crow Co. "In the old days, we were primarily a development company in retail like we were in everything else," Rothacker says. "We developed strip shopping centers and power centers, and building was our primary emphasis."

"Then during the development downturn, we shifted focus into the real estate service business," he says. "And in markets where we had a retail development basis, we did the same thing."

By the mid-1990s, Trammell Crow Co. was setting up a national retail build-to-suit program. The company has since built everything from OfficeMax stores in Puerto Rico to Dave & Busters entertainment centers in Michigan.

"About a year and a half ago, we sat down as a group and thought through what was our vision for the retail services business in the future," Rothacker says. "Because Trammell Crow was such a force in industrial and office, we decided retail could be a major growth vehicle for the company. We decided that we wanted to be strong in development and acquisition work, as well as pure service business like tenant rep, build-to-suit, dispositions and financial services."

Since then, TCRS has worked within its field offices to hire additional retail expertise and set up operations in major markets.

TCRS also is creating alliances with big public owners of shopping centers that need its services. In February, Trammell Crow Co. announced a strategic alliance with San Francisco-based AMB Property Co. to provide real estate acquisition, development, management and leasing services for the REIT's properties. AMB Property owns more than 33 retail centers with about 6.2 million sq. ft.

"We are planning to rehab centers across the country for AMB and create value and contribute properties to their very large retail portfolio," Rothacker says. "AMB is our largest alliance now, but we also have a lot of one-off partners. We have the ability to develop and create retail assets for some of our strategic financial partners. For that we get paid significant fees."Hamid Moghadam, president of AMB Property, notes, "Crow Co. pro bably has the best shot at creating a national full-service company."

Such an operation wasn't as important in the shopping center industry when it was dominated by local and regional merchants. "Now you have a lot of national companies that are the tenants in these centers," Moghadam says.

Because of those needs, TCRS isn't turning away from its traditional shopping center development.

"We are looking at projects throughout the country," Rothacker says. "We're doing $200 million to $250 million of retail development, out of about $1.5 billion for the entire company."

New developement also a factor One of Trammell Crow Co.'s largest shopping center projects is a $50 million-plus specialty center in San Antonio. Constructed on the site of a 75-year-old cement plant, the Alamo Quarry Market shopping center occupies a 53-acre site between downtown San Antonio and the airport.

"We're probably 95 percent complete, and we've been working on it for two and a half years," says Robert Barnes, managing director of the company's central Texas division. "It's really a special project that combines a historic site with new construction."

Trammell Crow Co. has built about 500,000 sq. ft. of retail, restaurant and entertainment space, utilizing historic buildings on the site and new construction.

"We wanted to retain the historic integrity of the property," Barnes says.

That meant preserving structures like the towering smokestacks of former Alamo Cement plants and re-creating other aging industrial buildings that could not be saved.

Tenants include Bed, Bath & Beyond, Whole Foods, Pottery Barn, Borders Books, an ACT III Theater and a fitness center. The project is owned by a joint venture of Trammell Crow Co., Alamo Cement and American National Insurance.

Other development jobs are not as historic but are nevertheless significant. Trammell Crow Co. already is doing tenant rep and build-to-suit work for OfficeMax, and has disposed of excess properties.

Now, Trammell Crow Co. is taking the relationship a step further, building a large telephone marketing center for the company in Dallas. Trammell Crow Co. managing director Ann Sperling, who works with Rothacker in the Denver office, says this multi-property approach is something more big retailers are seeking.

"As the national real estate landscape becomes more consolidated, people who need real estate services are becoming more eager to utilize firms that can help them in many arenas," Sperling says.

Of course, that means Trammell Crow Co. faces no end of competitors, both nationwide and in local markets.

"We compete with many firms but with very few in all the specialties," Sperling says. "There are not very many firms that can offer their clients as much diversity."

Rothacker sees even more potential business. "We think there are a lot of retailers that would love to outsource functions like facilities management or vendor management or lease administration," he says. "And not just the largest retailers, either. While everybody would like to get the major companies as accounts, we like to work with the smaller companies that have their growth in front of them."

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