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[IMGCAP(1)]EL SEGUNDO, CA-Former Somera Capital Management principals Steve Plenge and Michael Miller have launched a new venture called Pacific Retail Capital Partners with plans to acquire retail properties in major US markets. Plenge and Miller have teamed with private equity firm Lubert-Adler, which has capitalized the new venture and will provide up to $200 million of equity for the new acquisitions.

Plenge tells GlobeSt.com that Pacific Retail, which is looking for class B properties in major metro areas, is already chasing three off-market deals and an on-market property. Among the geographic markets at the top of the new firm’s list are Florida and other parts of the Southeast, Texas, the Northwest, California and the Chicago area. The partnership hopes to close three to five transactions per year, ranging from $50 million to $150 million per transaction, and will execute a value-added strategy based on improving and/or redeveloping the properties.

[IMGCAP(2)]Pacific Retail’s initial plans call for placing the $200 million of equity in the next two to three years, but the venture could invest the total within the next 18 months if deals move quickly and product is available, Plenge tells GlobeSt.com. The plan is to find shopping centers that can be improved to a class B+ or A- quality because such properties then become attractive to a large universe of buyers including REITs, institutions and high net worth individuals. Plenge and Miller, who founded the retail group at Somera five years ago and have a combined 45 years of industry experience between them, will be looking for centers that are under-managed but have strong fundamentals.

Plenge tells GlobeSt.com that current conditions in the economy and the capital markets–such as retail sales that fell from 5% to 15% in most markets the first two months of this year, the decreasing availability of debt and the higher cost of debt–work in favor of the new firm’s business plan. “All of that translates into a number of buying opportunities for us,” Plenge says.

Pacific Retail will aim to place debt of about 60% to 70% on its deals. Considering the upheaval in the capital markets, including the dramatic widening of spreads, Plenge says that debt is less readily available and is costlier than it was not so long ago, but the financing is nonetheless available for the right deals.

“There are a lot of balance sheet lenders out there, so there is debt available,” Plenge explains. “And in the asset size that we are chasing, where our sweet spot is probably in the $75-million to $125-million range, the loans are getting done.” He adds that in light of the slowing economy and declining retail sales, Pacific Retail “is going into these projects with our eyes open and adjusting our underwriting assumptions accordingly.”

Plenge serves as managing principal and Miller as principal at Pacific Retail. At Somera, Plenge was an executive vice president and Miller a vice president. The two, who have worked together for more than 14 years, decided to form their new firm after Somera chose to exit the retail investment business. While at Somera, the two oversaw the acquisition and redevelopment of nine malls, comprising approximately 8.5 million sf, and invested equity of approximately $250 million.

Plenge and Miller are working with the Los Angeles office of Lubert-Adler, a Philadelphia-based firm that has invested more than $4 billion of equity through five funds representing about $15 billion in assets. Plenge tells GlobeSt.com that the Pacific Retail principals feel fortunate to have the backing of Lubert-Adler, which is committed to the retail sector. “We think they’re one of the great private equity groups out there,” he says.

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