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Developer’s Investments Recharge Stalled Projects

OLIVERMCMILLAN

CEO: Dene Oliver. Financial data: Not disclosed.

No. of local employees: 75.

Investors: Include Oliver and fellow principals James McMillan (chairman), Richard Paul Buss, William Persky, Daniel Nishikawa.

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Headquarters: San Diego.

Year founded: 1978.

Company description: Developer specializing in mixed-use projects combining residential and retail elements.

With a combination of scouting, financing and timing, San Diego-based OliverMcMillan has become something akin to the auto club of development firms — jump-starting and driving ahead with commercial projects that stalled under their original developers.

“We’ve been focused during the last couple of years on taking over broken deals,” says Jeremy Meredith, development director at OliverMcMillan, which for many of its 33 years has specialized in mixed-use projects combining residential and retail elements.

The company’s latest high-profile takeover project is The Streets of Buckhead, envisioned by its original developers as Atlanta’s answer to Beverly Hills’ glitzy Rodeo Drive, but which stalled-out in 2009 over financing issues as the Great Recession took hold.

Meredith said OliverMcMillan has finalized arrangements under which it will invest $300 million to complete the 8-acre project in Atlanta’s upscale Buckhead neighborhood, slated to include upscale housing and high-end retail stores among other elements in a six-block area.

That sum would be in addition to nearly $400 million spent by the project’s original Atlanta developers, led by prominent businessman Ben Carter, who began work in 2006 but whose lender took over the property two years ago.

After acquiring the real estate and a loan on the property, OliverMcMillan plans to start construction in late 2011, and has begun work to revise architectural plans and re-engage leasing efforts.

Experience With Revivals

This is by no means the first mid-project appearance by the local firm. In late 2009, OliverMcMillan acquired a 487-unit, 48-story condo-retail tower in Honolulu called Pacifica, which at the time was 40 percent complete. That $300 million project is now approximately 90 percent sold and moving toward an October 2011 completion.

Similarly, OliverMcMillan recently took on a stalled mid-rise condo development in the San Francisco Bay Area. During the last two years, it has restarted stalled and distressed projects totaling approximately $1.5 billion.

The company says the improving economy has prompted it to resume development on a $350 million mixed-use project in Houston, as well as the 50-acre Historic Guasti District property in Ontario and a 180-acre project in Coralville, Iowa.

The developer is also busy on its own local projects, such as a mixed-use revamping of Hazard Center in San Diego’s Mission Valley. In 2012 or 2013, it will begin work on a mixed-use urban development in downtown San Diego’s East Village neighborhood, including 250 residential units.

Meredith said the company strictly limits the new financing debt it takes on to start or revive projects, and it has a core base of dependable investors and financers to which it turns.

Careful Selection Process

The company scouts the country looking for well-located projects, and in some cases has been approached by struggling developers to come aboard. But it follows strict criteria when deciding whether to get involved in developments started by others.

“It has to make sense as an investment, but it also has to be something that we’ll do because we know that we can add value,” Meredith said.

Other prominent local mixed-use developments under way include Sudberry Properties’ Civita in Mission Valley, which recently obtained financing for its first apartments; and Pacific Station in downtown Encinitas, where developer John DeWald and Associates is adding the final retail elements to housing units already in place at a former warehouse site.

Though financing remains scarce for mixed-use projects, well-capitalized developers are operating in two real estate sectors that have recently been strong nationally and especially in the San Diego market — multifamily and retail. In San Diego County, new supply in both categories has been constricted by factors including land availability and construction financing issues.

Construction lending remains tight, though financing of building purchases has picked up. According to the Washington, D.C.-based Mortgage Bankers Association, overall U.S. commercial and multifamily mortgage origination volumes increased 44 percent in 2010 over the prior year, reaching $118.8 billion in closed loans.

The trade group cited historically low interest rates and generally improving economic fundamentals as key factors. In the fourth quarter of 2010, U.S. loans for retail properties rose 94 percent from 2009 and multifamily loans rose 81 percent, the association reported.

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