If you’ve ever tried to locate a store in Louisiana, you have probably experienced a mild fit of frustration. And you probably ended up using Stirling Properties to do the deal. In some ways, Stirling controls the Louisiana market. It’s a position the company has been working toward for years. And in an oddly configured market that’s made up of a huge area surrounded by a lot of water, small towns and private owners, it is not an easy job.

Southeast Real Estate Business recently visited Stirling at is headquarters in Covington, Louisiana, to get a feel for the company’s control of the market. While there, SREB met with Stirling’s executive committee, which consists of Jimmy Maurin, chairman; Marty Mayer, president and CEO; Chip Songy, executive vice president; Lewis Stirling, executive vice president; Craig Guidry, chief financial officer; Donna Taylor, vice president of asset management; Grady Brame, vice president of asset management; and Gary Tilley, vice president of commercial brokerage.

Development Background

Most people in the retail industry think of Stirling as a shopping center developer. And it is. But the company also has a large third-party management business, both retail and office, a commercial brokerage division, golf and residential development, and a residential brokerage division.

The company started in 1975 as Maurin-Ogden Development. In 1988, the company merged with Stirling Associates, a New Orleans-based brokerage firm, and changed its name to Stirling Properties. Throughout the 1980s, the company developed a number of grocery-anchored neighborhood and community centers. Stirling watched the market change in the late 1980s as the oil bust hit its market, losing over 60 percent of its small tenants during that period. Stirling managed to be one of the few real estate players of its size in Louisiana that didn’t go out of business or file for bankruptcy protection.

Since 1994, the company has acquired more properties than it has developed. It has learned how to act quickly on available properties, and that has paid off on many occasions. For instance, the company acquired three buildings in the United Plaza development in Baton Rouge by quickly assessing the properties and making an offer. That acquisition, coupled with other buildings Stirling was managing in the area, immediately made the company a major player in the office market in Baton Rouge, where it already had a significant presence in the retail market. Stirling is also able to make a quick judgement call on properties it acquires. By being in the market for 25 years, it has seen every property in the best of times and the worst of times, and seen how they perform under those economies.

Throughout its history, the company has maintained a heavy emphasis on retail development. In fact, retail remains the core of Stirling’s business plan. But in a limited market, Stirling had to grow to succeed.
“For our survival, and to grow our company and be able to retain employees, we had to diversify beyond retail development,” says Mayer. “We wanted to be the biggest fish in the little pond called the Gulf South.”
Today, Stirling employs about 200 people in 14 offices in Louisiana and Mississippi. The company manages about 7 million square feet of commercial real estate in those two states. The development/acquisition division is actively seeking and developing sites across the Gulf South. The company’s residential division, ERA Stirling Properties, had a volume basis in 2001 that was almost equal to the company’s commercial division.

What makes Stirling unique is that it can handle any type of real estate property or service in the market.
“We have spent 25 years developing shopping centers in the Gulf South, so we have a lot of knowledge about a lot of the small and medium markets here,” says Maurin. “We have a lot of contacts. When you build a shopping center in a small town, you get to know everybody very quickly.”

Third-Party Focus

Stirling’s portfolio is technically all third-party managed, though the principals of the company own interests in a number of the properties they manage. The third-party properties are operated by a separate asset manager to remove any conflicts of interest. Currently, the company has about 100 properties under management. The company has managed properties for such clients as Aetna Life Insurance, Southern Farm Bureau Insurance, AEW, United of Omaha, John Hancock, Mass Mutual, Lincoln National, Legg Mason, Archon Group and a number of private owners. The company also has a facilities management arm, which handles all real estate management for several local banks.

On the development side, Stirling has a number of regular investors who like to be part of its property developments.

In the past few years, Stirling has begun to develop a number of retail centers. It has a deal with Target to develop stores and centers for the retailer in Southeast Louisiana. The company helped negotiate, approve and develop the retailer’s first New Orleans store earlier this year. The company has three other Target-anchored centers that it is developing in the area. One of the centers it is developing with Target is in Slidell, Louisiana. Academy Sports, Ross Dress For Less, Dress Barn, PetsMart, David’s Bridal and Shoe Carnival anchor the 350,000-square-foot center. The company is also developing another 600,000-square-foot center in Mandeville, Louisiana, scheduled to open in October 2003. The company is bringing North Carolina-based department store Belk to anchor the center, along with Target, Marshalls, Ross Dress For Less and Petco, among others.

Redevelopment of retail properties has been another specialty of Stirling over the years. The company recently renovated Clearview Mall in Metairie, Louisiana, which re-opened on July 29. The 500,000-square-foot center was expanded to 625,000 square feet. It received a new façade and plenty of new retail names to serve a market with double-digit population growth that didn’t exist in the area when the center was constructed in 1968. Stirling was able to lure AMC Palace Theatres to the center, as well as Target, PetsMart, Bed Bath & Beyond and three locally-owned and operated restaurants: Semolina, Serranos Salsa Company and Zea Rotisserie & Brewery. Sears, one of the center’s original anchors, also tenants the center. Most of the retailers were new to the market. Target, being the revolutionary real estate user that it is, opened a two-story store that was previously department store space.

“Centers can take 18 to 36 months to turn around,” says Stirling. “You have to re-tenant, which is a challenge in this market, you’ve got to change the perception of the center and you’ve got to work out all of the issues that have cropped up with that property during its prior life.”

Stirling must be able to do major redevelopments on the properties it acquires or, generally speaking, it isn’t interested.

Discovering The Gulf Coast

Stirling helps a lot of new retailers discover the Gulf South market through its brokerage business. The big three national brokerages do not have a large presence in the Gulf South, so they often call on Stirling to help with tenant representation. Stirling shows retailers the entire market when they visit. It is usually a learning curve; retailers are often surprised at the small amount of retail in the market. Once they realize the market, and the powerful demographics offered, they usually pick up the phone and start looking for space.
“On the retail side, we do control a lot of the dominant centers in the market,” says Tilley. “Because of that, we are their first choice when it comes to entering the market.”

“New Orleans is a difficult market,” says Mayer. “It is surrounded by the lake, the river and swamps. The good point is that it has never been overbuilt because there is not a lot of land to build on, but the downside is that when expansion is needed, you have to assemble property, demolish existing properties and create space.”

Just like Target’s use of a two-story department store at Clearview Mall, space isn’t easy to find. Land cost is also high because of that scarcity. Locations that retailers want are usually locations that have already been developed. As a result, Stirling’s brokerage business spends a lot of time negotiating to buy-out existing leases and businesses to create space for expanding retailers. Since Stirling has both tenant rep and landlord rep brokerages, sometimes these deals are done under the same roof. Most of the property is owned locally, and most of the owners want local representation.

If you drove through a town like Lafayette, Louisiana, you’d see Stirling’s sign on shopping centers and residential real estate throughout. You would think they owned the town, and that’s just what Stirling wants you to think.

“Real estate is a very local business,” says Maurin. “Our business, especially the brokerage businesses, is driven by local market knowledge. Retailers want to hire the company with the most knowledge of the market.”

Expanding Office

The office market in Louisiana is dependent on what is going on in the market. New Orleans, for example, has a lot of supply on its hands since the oil crisis. The recent BP/Amoco, Exxon/ Mobil and Texaco/Chevron mergers have added to that headache. Baton Rouge has a strong office market, and Metairie, in the greater New Orleans area, is also strong. According to Stirling’s Tilley, there hasn’t been a major office building developed in the state since the late 1980s that hasn’t been owner occupied or single tenant driven.

Stirling has concentrated its office holdings in the two strongest markets in Louisiana, Baton Rouge and St. Tammany Parish. St. Tammany Parish is the area that’s north of Lake Pontchartrain from New Orleans. It is the fastest growing area in the state, and, combined with Baton Rouge, it is where Stirling has placed about 75 percent of its invested capital over the last 5 years. Stirling also has office holdings in Hammond and Lafayette. All told, the company has about 2 million square feet of office space under management.

Stirling is best known in St. Tammany Parish on the office side for its Northpark complex in Covington, Louisiana, which contains its headquarters. Stirling originally purchased the park in the 1990s, but has since added a new building. With its purchase of three buildings in United Plaza Office Park from United Companies in Baton Rouge, Stirling has continued to make a foray into the office market in that city. Though the three purchases were made at separate times, all were bought for well below replacement value. The three buildings total about 450,000 square feet of Class A space. The first building was well leased, minus the 20 percent of the building that was tenanted by the then-troubled United Companies. The average rents were only about $14 per square foot, when the average rent in the office park was $17.50 per square foot. The last building that Stirling purchased in the park was only about 30 percent leased.

“We don’t go on buying sprees,” says Maurin. “We buy on opportunity; we develop on opportunity. That means that some years the pipeline is full, and others it is empty. If the opportunity for acquisitions is not there, usually the opportunity for development will be there.”

“The office market in Louisiana is very segregated by pockets of land,” says Songy. “We are fortunate enough so that most of the buildings that we manage are in good markets and the occupancy rates average 93 percent.”

In the 1990s, Stirling became involved in golf course residential developments in Louisiana and Mississippi. The residential division was retained by a Japanese company to sell the homestead lots surrounding the Le Triomphe Golf Course near Lafayette, Louisiana. In 2 years, ERA Stirling sold the lots. That success led Southern Farm Bureau Insurance, based in Jackson, Mississippi, to contract with Stirling to market its similar developments in Jackson. Now, in Baton Rouge, Stirling is master planning a community surrounding University Club Plantation golf course, the home course for Louisiana State University men’s and women’s golf teams, located near LSU. The company is also underway with master planning for another golf course residential development in Bossier City. Stirling’s biggest challenges these days arise from which area it wants to concentrate on next. The company is being very careful not to bite off more than it can chew. The company restructured in 2000 so that it had a more diverse leadership. It created an executive committee, so that the company isn’t dependent on one person or family. It also allows employees who aren’t owners of the company a say in the decision-making process. Stirling is not a family business — there is a strict policy forbidding family members to work at the company — and it has the flexibility to change and respond to the market’s whims. There is a team atmosphere amongst all 200 employees, and roles and responsibilities of employees are constantly changed to create opportunity.

“We have a core group of real estate professionals that are based in Louisiana and Mississippi, who are extremely well connected within the marketplace,” says Songy. “We are really not interested in going outside that region. It is a small population base, about 10 million people, so there aren’t a lot of companies vying to compete with us. There’s just not enough people or land for them to justify the expense of opening an office. We’re filling the void.”

©2002 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.