By: Greg Thomas - The Times-Picayune

- January 30, 2000 - The most recent player to enter the Central Business District office market is a private company that has amassed its 26-million-square-foot national portfolio of prime office space over the past 40 years the old-fashioned way -- by not following the herd.

As national real estate investment trusts, stock market companies flooded with capital from Wall Street, kept bidding up the value of office buildings here and nationally between 1996 and 1999, the privately held Shorenstein Co. of San Francisco was quietly "content to sit on the sidelines," said Douglas Shorenstein, chairman and chief executive officer.

His company's newest acquisition is the 761,500-square-foot Energy Centre at 1100 Poydras St.

The family company doesn't have the regulatory burdens or bureaucracies of large real estate investment trusts, hence when Shorenstein Co. is ready to move, "we can move very quickly....and the decision-making process is very fast," Shorenstein said.

The company is the largest owner of prime office space in San Francisco.

Warming the bench during a market drunk on capital and acquisitions is a strategy that has seemingly paid off here as Shorenstein paid an estimated $10- to $15-per-square foot less than the nearly $99-per-square-foot, or $75 million, Crescent Real Estate Equities LP paid for the same building in January 1998.

Shorenstein would not disclose the exact purchase price.

The Energy Centre, built in 1984, is the city's third-largest building in the 9-million-square-foot Class A office market here. Crescent and other REITs bid up the value of many local Class A buildings anticipating higher rents in the future, increases that never happened.

Instead, the value of REIT stocks plummeted and, locally, mergers, acquisitions and job cuts placed a few hundred thousand square feet of cheap Class A space on the sublease market, putting downward pressure on rental rates.

While Shorenstein bought the Energy Centre, it passed on an opportunity to buy Crescent's only other holding here, the Freeport-McMoRan building at 1615 Poydras St.

Crescent paid $71.70 cents per square foot, or $36.5 million, for 1615 Poydras in 1996, considerably less than its price for the Energy Centre.

Shorenstein viewed the building as a "one main tenant, one main lease" building vulnerable to a drop in occupancy, although Freeport-McMoRan has not indicated a move.

*** Bankruptcy called savvy move ***

The firm that owns Kenner Plaza Shopping Center at 3300 Williams Blvd. has filed for bankruptcy court protection from creditors.

Attorney Stephen Dwyer, representing firm owners Gowri and Mohan Kailas, said the filing is not a sign of a crumbling shopping center but rather savvy positioning over a failed attempt to get a Copeland's of New Orleans restaurant built on the property.

The problem stems from a clause in the lease of Burlington Coats that gives the retailer veto power over out-parcel development at the shopping center, Dwyer said.

The Kailases were making a deal with Copeland but Burlington Coats objected to the restaurant.

The bankruptcy filing helps protect the shopping center firm from claims while a deal is worked out.

The Kailas brothers paid $9.6 million for the 210,000-square-foot community shopping center in 1997.

The bankruptcy relates only to the Kailases' Kenner shopping center and not to their other holdings in the area.

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