April 20, 2021

Common Sense: Bearish Times for Bonds

The month of May, and this first week of June, were terrible for many fixed-income investors who have spent the last few years reaching for higher yields. If there was an index for fixed income with the household-name status of the Dow Jones industrial average or Standard Poor’s 500 index for stocks, the carnage in fixed-income markets would have been a big story and we’d all be talking about a bear market in bonds.

Consider the damage: mutual funds that invest in long-term United States Treasury bonds lost an average 6.8 percent in May, according to Morningstar, with the loss in principal wiping out years of interest payments. But that’s not the worst-hit sector. Higher-yielding bonds and fixed-income securities, to which investors have turned in droves in recent years, have suffered even more, especially mortgage-backed securities and emerging market debt, as well as just about anything that uses borrowing to boost returns.

Many individual securities and funds were hit much harder than the averages. Vanguard’s Extended Duration Treasury Index fund was down more than 6 percent in the last month. In the mortgage area, Annaly Capital management, a popular real estate investment trust that invests in mortgages, fell 8.7 percent, and an iShares mortgage exchange-traded fund lost 10.4 percent. Pimco’s Corporate Opportunity Fund, which is managed by the star analyst Bill Gross and which invests in a mix of corporate bonds and mortgage-backed securities and uses some borrowing, lost nearly 13.4 percent. Annualized, such declines are off the charts.

“There are many closed-end bond funds and mortgage finds that were just annihilated in May,” said Anthony Baruffi, a senior portfolio manager at SNW Asset Management in Seattle, which specializes in fixed-income assets.

This week, the bond markets’ jitters spilled into the stock market, with major indexes gyrating around the globe. The Dow Jones industrial average dropped more than 200 points on Wednesday, only to bounce back Thursday and Friday. High-dividend stocks, which many bond investors also looked to in their quest for income, were pummeled. Shares of Procter Gamble dropped more than 6 percent the last week in May.

The severity of the market reaction shows how skittish investors have become about ultralow interest rates. Bond prices fall when interest rates rise, with longer-maturity, higher-yielding and riskier bonds the hardest hit — the very assets that the Federal Reserve’s ultralow interest rate policy has encouraged income-seeking investors to embrace.

Fixed-income funds are where investors have traditionally looked for safety and low volatility, unlike stocks, and such precipitous moves are rare. To put this in perspective, the recent plunge in prices of fixed-income securities had analysts reaching back to 1994, when the Fed began raising rates and 10-year Treasury rates rose two and a half percentage points. That year, Orange County, Calif., had to declare bankruptcy after its bond portfolio plunged in value.

The sudden recent moves in the markets have left many experts scratching their heads, because, on the face of things, not much has changed in the overall economic outlook. This week’s employment number — American employers added 175,000 new jobs in May — was the average rate for the past year, suggesting slow but steady growth in the economy. Other measures released in May, like consumer confidence, consumer spending, and personal income, were generally positive, but nothing to suggest any imminent surge in economic growth.

“Last week’s sell-off was very indiscriminate,” said Jonathan A. Beinner, chief investment officer for global fixed income and liquidity at Goldman Sachs Asset Management. Added Mr. Baruffi, “I was surprised at how severe the market reaction was.”

Article source: http://www.nytimes.com/2013/06/08/business/bearish-times-for-bonds.html?partner=rss&emc=rss

Wave of Investor Fraud Extends to Ordinary Retirement Savers

The victims are among the millions of Americans whose mutual funds and stock portfolios plummeted in the wake of the financial crisis, and who started searching for ways to make better returns than those being offered by bank deposits and government bonds with minuscule interest rates.

Tens of thousands of them put money into speculative bets promoted by aggressive financial advisers. The investments include private loans to young companies like television production firms and shares in bundles of commercial real estate properties.

Those alternative investments have now had time to go sour in big numbers, state and federal securities regulators say, and are making up a majority of complaints and prosecutions.

“Since the crisis, we’ve seen more and more people reaching out into different types of exotic investments that are a big concern to us,” said William F. Galvin, the Massachusetts secretary of the commonwealth.

Last Wednesday, Mr. Galvin’s office ordered one of the nation’s largest brokerage firms, LPL Financial, to pay $2.5 million for improperly selling the real estate bundles, known as nontraded REITs, or real estate investment trusts, to hundreds of state residents from 2006 to 2009, in some cases overloading clients’ accounts with them.

LPL said it agreed, as part of the settlement, to reform its process for selling such alternative investments.

There are few good statistics on the extent of the problem nationally. But cases are mounting in the offices of regulators like A. Heath Abshure, the securities commissioner in Arkansas, where a majority of the 66 open securities cases involve complex investments sold to less sophisticated investors looking for a steady return.

J. Bradley Bennett, chief of enforcement at the Financial Industry Regulatory Authority, or Finra, Wall Street’s self-regulatory group, said that for the last two years, 10 staff members have looked at the “proliferation of these products, to understand how they are being sold.”

“It’s got our attention,” he said. “We recognize the trends.”

Brokers promoting bad investments to unsophisticated investors is nothing new. But while the easy prey used to be people looking to get rich quick, the pool has widened to include savers looking for ways to earn the kind of income once reliably available from traditional investments.

Regulators are warning investors that the dangers are unlikely to recede, given the Federal Reserve’s pledge to keep interest rates near zero and the push among financial firms to earn more revenue from so-called alternative investments marketed to retail investors. Brokers are eager to sell these investments because they often bring in higher commissions than standard mutual funds and stocks.

The money that retail investors have in alternative investments in the United States, ranging from baskets of commodities to mutual funds that employ sophisticated trading, more than doubled from 2008 to 2012, to $712 billion from $312 billion, according to McKinsey Company. Many of the products hold out the promise of higher returns while ostensibly being immune to the volatility of stock markets.

The phenomenon of investors’ actively moving money in pursuit of higher interest rates, known as chasing yield, is reverberating through the economy. Jeremy C. Stein, a Federal Reserve governor, said in a speech on Thursday that he worried that investors desperate for yield could be creating a bubble in widely available investments like junk bonds.

Mary Beck, a furniture business consultant in Pasadena, Calif., said that in 2008, as the stock investments in her husband’s I.R.A. began to fall quickly, the couple moved $470,000 to a new product recommended by their broker.

While the offering was unfamiliar — part ownership in a fleet of luxury cars — Ms. Beck bought the pitch because her broker had been around for years, and the product offered what seemed to be a modest annual interest rate of 7 percent.

“We knew that 12 percent wasn’t realistic, but 7 percent seemed realistic,” Ms. Beck said. “To us, it was a very conservative way to ensure that we’d increase our savings.”

Soon after they stopped receiving interest payments, the Becks lost their money when the venture went bankrupt in 2012. Ms. Beck and her husband have been reconfiguring their retirement and are planning to work longer.

Article source: http://www.nytimes.com/2013/02/11/business/wave-of-investor-fraud-extends-to-ordinary-retirement-savers.html?partner=rss&emc=rss

Inside Asia: Rents Rising Along the Byways of Singapore

SINGAPORE — Far from the crowds in the glitzy shopping malls of Singapore, Cynthia Neo runs a bridal boutique tucked away in a nondescript industrial building in an old housing estate, pushed off the main street by pricey retail rents.

The owner of JC Bridal Collections, Ms. Neo pays one quarter the rent she once spent on a shop in the heart of Chinatown, where a string of restaurants, hotels and retail shops meant a steady stream of shoppers.

But rising rents may be creeping into the industrial parks too. Prices for industrial properties have surged 27 percent this year since a government focus on residential investment pushed speculators into factories and warehouses.

Residential property developers are starting to wade into the light industrial market too, trying out upscale “lifestyle” office parks that look like posh condominiums.

Some established industrial players say valuations are getting too high.

“It’s been our assessment that the market has started to get a little hot,” said Nick McGrath, chief executive of AIMS AMP Capital Industrial, which is listed in Singapore.

“We’ve used the strength of the market in the last 12 months to sell properties, rather than buy,” Mr. McGrath added, saying that AIMS AMP, a real estate investment trust, has shifted its focus to improving existing assets, rather than buying more.

Singapore’s government has introduced six rounds of measures to cool rising home prices, including an additional stamp duty aimed at foreign buyers and a cap on tenures for all new residential property loans.

Those actions succeeded in capping property price increases this year — the residential market is up just 0.96 percent for the year through October — but they did not bring about the 10 percent fall that some analysts had predicted.

Now the government is turning its attention to industrial property. In July, to make land prices more affordable to businesses, Singapore capped lease terms for industrial sites sold under a government land sales program at 30 years instead of 60.

Singapore’s light industrial parks, typically simple midrise buildings with a few standard facilities like cargo elevators and unloading bays, are home to small and midsize startups, wholesale businesses and other offices.

But rising shop rents have made industrial parks increasingly attractive to store owners who would normally prefer customer-friendly malls or pedestrian-filled shopping streets, and some have started converting part of the industrial space for retail.

The rising industrial property prices have not fully filtered through to rents in these buildings, which are up a relatively modest 6 percent this year, but when long-term leases are renegotiated, tenants may be in for some shock.

That could create problems for owners of small businesses, who are grappling with higher operating costs.

“Inflation and labor costs are already high. Some are worried about rents that may inadvertently increase in tandem with prices,” said Png Poh Soon, head of research at Knight Frank Singapore.

That may lead some businesses to buy industrial properties instead of renting. “Together with the investors, the increase in demand drove prices up amidst cheap financing, creating a self-fulfilling prophecy of higher prices and cost of doing business,” he said.

Pixal Culture, a photography studio that focuses on weddings, bought a unit in an industrial building in western Singapore in 2008, the owner Steven Yeo said. “It’s much easier, because landlords may get you out after a few years. Nobody can increase our rents.”

Inderjit Singh, a member of Parliament and an entrepreneur, asked the government last month what its plan was to keep industrial land affordable for small and medium-size enterprises. Local news media reported that the response from Lim Hng Kiang, the minister for trade and industry, had been that rising industrial rents had not reduced Singapore’s competitiveness.

Mr. McGrath said that he had observed more investors speculating in the industrial market’s subdivided space, where carved-up smaller units have commanded rents three to six times as high as his warehouses.

The sharp rise in industrial property prices has rung alarm bells for some but attracted new interest from developers. The construction firm Hock Lian Seng Holdings won a bid in June to develop a site in an industrial area in Singapore’s east.

Residential developers are also getting into the industrial game — and bringing some homey touches with them.

Oxley Holdings, which has built residential projects with units selling for $2 million apiece, started developing “lifestyle” industrial properties last year — complete with swimming pools, gyms and rooftop gardens.

It has inaugurated four such projects, two of which have been fully sold, indicating strong demand for units that are sold “strata-title” — the system of owning space in multistory buildings, despite high valuations.

Article source: http://www.nytimes.com/2012/12/04/business/global/rents-rising-along-the-byways-of-singapore.html?partner=rss&emc=rss

DealBook: Warburg Stays in Fray, but Off Public Market

Joseph P. Landy, left, and Charles R. Kaye, co-presidents of Warburg Pincus, which has been careful not to depend too heavily on leveraged buyouts.Richard Perry/The New York TimesJoseph P. Landy, left, and Charles R. Kaye, co-presidents of Warburg, which has been careful not to depend too heavily on leveraged buyouts.

When mega-buyouts were booming several years ago, private equity firms raced to go public. Today, the stock market has punished those firms that succeeded.

Shares of the Blackstone Group, which was first out of the gate, have dropped in value by more than half since their June 2007 initial public offering. Kohlberg Kravis Roberts and Apollo Global Management, which reached the market later, have fallen more than 22 percent this year.

Agonizing over its stock price is not something that Warburg Pincus plans to do.

In an interview in the firm’s Midtown Manhattan offices this summer, Warburg’s co-presidents, Charles R. Kaye and Joseph P. Landy, insist they will stay private.

“We like being investors,” Mr. Kaye said. “We don’t necessarily want to go into the multi-asset class gathering or multi-asset class management path and be public.”

To translate: The world’s largest firms — Blackstone, K.K.R. and Apollo — are now giant, publicly traded money managers overseeing not only multibillion-dollar private equity funds, but also big hedge funds, real estate investment operations and various other businesses. By slapping their brands on an array of products, these firms have diversified their revenue, in part to please analysts and shareholders.

“They’re moving in other directions that were not part of their historical base, or where they created names for themselves,” Mr. Landy said.

Warburg plans to stick to its knitting, investing out of one giant global fund and keeping itself off the stock market. The firm is scheduled to begin raising money for a new $15 billion vehicle in the coming weeks, according to people briefed on the matter.

It is a path that Warburg has followed for four decades, before the term “private equity” even existed. And it is a model that most of the private equity industry, which manages some $2 trillion, still follows.

Yet it is largely Blackstone, K.K.R. and Apollo that define a popular vision of the modern private equity shop. The firms’ top executives have become celebrities, their donations and lavish parties appearing in the gossip pages. The main building of the New York Public Library in Midtown Manhattan is named for Stephen A. Schwarzman, the head of Blackstone. On Wednesday, Duke announced that David M. Rubenstein, a co-founder of the Carlyle Group, whose I.P.O. is expected later this year, plans to donate $13.6 million to the university’s library system.

Mr. Landy and Mr. Kaye are not exactly wallflowers. Mr. Landy serves on the national executive board of the Boy Scouts of America and Mr. Kaye is the former chairman of the Asia Society in New York.

But for Warburg, keeping its firm private is a matter of maintaining business focus. That means investing in companies in a variety of stages, from venture investments like the Canadian oil explorer Canbriam Energy to classic leveraged buyouts like the takeovers of Neiman Marcus and Bausch Lomb.

By contrast, the publicly traded private equity firms are building out new businesses to buttress their steady stream of management fees. Historically, those annual payments — typically 1 percent to 2 percent of assets — were a small portion of these firms’ earnings. Instead, they depended on lumpier performance fees, taking a share of the profits on successful deals.

Some large investors, including the nation’s biggest pension fund managers, have expressed reservations about private equity firms as public companies.

“We don’t really have a problem with private equity funds going into new businesses,” said Donald Pierce, the interim chief investment officer of the San Bernardino County Employees’ Retirement Association, a $6 billion fund. “But the real question is whether moving away from their core focus will affect their returns.”

Though its roots stretch back to the venerable E.M. Warburg Company, Warburg Pincus dates to 1966, when Lionel I. Pincus and John Vogelstein created a partnership aimed at investing in a variety of companies. Today it manages more than $30 billion with offices in nine cities including Shanghai and São Paulo, Brazil.

The firm has only one main investment fund at any given time, unlike competitors who raise specific funds for, say, mezzanine debt or Asian real estate. During the financial crisis, the firm, along with other private equity shops, saw an opportunity in the battered banking sector. It committed $579 million from its fund to large minority stakes across four banks: Webster Financial, Sterling Financial, National Penn and Banco Indusval of Brazil.

By investing from one pool of money, Warburg executives say they are trying to avoid having to invest for investing’s sake — buying a tech company simply because they are sitting on money in a technology-focused fund that needs to be deployed. Warburg also has less of a central focus on leveraged buyouts, the classic private equity transaction in which a firm borrows large amounts of money to take companies private.

“We’ve always had this broad mandate so that when the L.B.O. world falls off a cliff, we don’t need to do L.B.O.’s,” Mr. Landy said, referring to leveraged buyouts. “This whole diversified strategy at the core of what we do allows us the kind of flexibility that many of these firms are trying to get today.”

Executives say that strategy has helped the firm realize some of its biggest hits. This year, Warburg and Blackstone held an I.P.O. for Kosmos Energy, an oil producer focused on fields in West Africa. Beginning in 2004, Warburg led three financing rounds for the company, totaling about $1 billion.

Kosmos’s May I.P.O., in which its owners sold a 10 percent stake, raised more than $594 million. Warburg’s 42 percent stake alone is now worth $1.9 billion on paper.

But the firm has had its misses as well. None has been more prominent than its $815 million investment in MBIA, a publicly traded mortgage bond insurer, made as the housing bubble was rapidly deflating in late 2007.

At the time, Warburg executives felt that they could catch the proverbial falling knife, investing in a troubled company at the moment that its problems were coming to a head, and riding the recovery to a tidy profit. But MBIA’s woes, rooted in its insuring subprime mortgage investments, only worsened as the financial crisis deepened.

“We fully vetted the thesis, but I wish the returns would have been better,” David Coulter, one of Warburg’s lead partners on the MBIA deal, said, adding that Warburg still hopes to eke out a small profit from the investment.

A crucial reason the largest buyout firms have gone public is to address problems with succession. By issuing public stock, the firms’ founders can more easily cash out their holdings, allowing them to step aside for new leaders.

Blackstone, Carlyle and K.K.R. are all run by executives in their 60s and have not announced clear succession plans.

Warburg has already transitioned to a younger generation. In 2000, Mr. Pincus and Mr. Vogelstein handed off the firm’s leadership to Mr. Kaye and Mr. Landy.

With Mr. Kaye now only 47 and Mr. Landy just 50, the two plan to stick around for at least a little while longer.

Article source: http://feeds.nytimes.com/click.phdo?i=47880e03ff9c5f2eb34c7fbf3114b13e

Square Feet: A Closer, and Skeptical, Look at Nontraded REITs

Cole took this unusual step after the Townsend Group of Cleveland, an adviser to the state pension board, reviewed the investment at the request of public officials and said it was unsuitable for a pension fund. Townsend’s long list of reasons included the excessive fees paid by investors and the company’s lack of liquidity and “appropriate policies for investment valuation,” public documents show.

The events in West Warwick brought unwanted attention to a relatively small and little-known sector of the real estate industry that has been around for more than a decade but has grown rapidly in recent years. Nontraded REITs are securities that are not listed on any exchange and are sold through financial advisers, which receive generous fees. Recently, this sector has been receiving heightened scrutiny from both the Securities and Exchange Commission and the Financial Industry Regulatory Authority, or Finra.

In May, Finra filed a complaint against David Lerner Associates, a broker-dealer in Syosset, N.Y., accusing the company of aggressively marketing $300 million worth of shares of the nontraded Apple hotel REIT to unsophisticated and elderly customers without telling them that the income from the stock was insufficient to support the dividends. Lerner has called the charges “baseless.”

Since 2004, the nontraded real estate investment trust sector has more than doubled and now has more than 63 sponsors, according to Blue Vault Partners, a research firm in Cumming, Ga. Last year, these sponsors raised $8.5 billion, a 30 percent increase over 2009. As much as $10 billion may be raised this year, approaching the $11.8 billion in investment at the peak of the market in 2007, Blue Vault said.

Like their publicly traded counterparts, nontraded REITs invest in real estate and are supposed to distribute at least 90 percent of their taxable income to shareholders annually in the form of dividends. REITs generally pay no corporate income tax.

But critics of nontraded REITs say there are a number of troubling features about the trusts, including high upfront fees that lower the value of the investment by as much as 17 cents on the dollar. Sales commissions and fees are typically 9 to 10 percent, and there are also charges for leasing, management and acquisition of commercial buildings. Critics also cite a lack of transparency about how the companies value their real estate holdings, inherent conflicts of interest because the sponsor generally invests little in the REIT but owns the entity that collects the fees.

Investors are told that nontraded securities, which have limited liquidity, allow ordinary people to participate in real estate investment while earning a higher dividend than what the traded ones offer, free from the volatility of the stock market. According to this pitch, investors are spared the anxiety of worrying that their shares, usually sold at $10, will go up and down.

Stacy H. Chitty, a former nontraded REIT executive who is now a Blue Vault partner, said much of the fluctuation in the stock market was driven by emotion. “It’s this little occurrence here, this little occurrence there,” he said. “Share price is not an accurate picture. In nontraded instruments you don’t have that daily up-and-down swing. It’s a long-term proposition.”

But nontraded trusts are now required to update their net asset values every 18 months after their initial offering, and their own disclosures to the S.E.C. show their values dropping well below the price at which the shares were originally issued. For example, one REIT, American Realty Capital Trust, recently reported that its shares, which had been sold at $10, were now worth $6.62. The sponsor, American Realty Capital of New York, raised $2.3 billion in the last 18 months, according to its chief executive, Nicholas S. Schorsch. Other sponsors, including Cole, have reported similar declines in share price, public records show.

“One common sales tactic we object to is the suggestion that they are eliminating volatility simply because they don’t tell you what the value is,” said Michael McTiernan, a lawyer for the S.E.C.’s corporate finance division. “It’s not that it’s not volatile. It’s just that you don’t know.”

Article source: http://feeds.nytimes.com/click.phdo?i=8ada12391d505fa56421908d5db32572

Square Feet: Blocks From the President, Developers Plan Big

And after years of planning, the most ambitious of the downtown projects is finally under way. Construction began in March on CityCenterDC, a $700 million complex envisioned as a modern-day Rockefeller Center, with 2.5 million square feet of office, residential and retail space as well as a public plaza and park. Completion of the bulk of the project is expected in late 2013, according to the two real estate companies, Hines Interests of Houston and Archstone of Englewood, Colo., that won development rights in 2003.

One of the largest downtown projects in the nation, CityCenterDC will fill 10 acres, all city-owned except for the land beneath two condo buildings. Bounded by New York Avenue and 9th, H and 11th Streets NW, the site was once occupied by a convention center that was demolished in 2004 (a year after the larger Walter E. Washington Convention Center was built nearby), leaving a giant parking lot in one of the city’s most desirable locations, only two blocks from two of the busiest Metrorail stations.

“This really is the hole in the doughnut,” said William M. Collins, a senior managing director of Cassidy Turley, a national brokerage, which is not involved in CityCenterDC.

CityCenterDC is one of several major projects around the country that were stalled by the recession. But while construction has yet to begin developments like Grand Avenue in Los Angeles and Atlantic Yards in Brooklyn (except for the Nets basketball arena, where work is under way), CityCenterDC was able to move forward because of a recent $620 million equity investment by the real estate arm of the Persian Gulf state of Qatar. The Qatari Diar Real Estate Investment Company is now the project’s principal owner.

The complex will be made up of six buildings, 10 and 11 stories in height in keeping with the District of Columbia’s 130-foot height restriction. At their base will be 185,000 square feet of retail stores facing the street. An additional 110,000 square feet of retail space is planned for the project’s second phase, which will also include a luxury hotel.

To integrate the site with its surroundings, the sections of I and 10th Streets that were cut off to make way for the old convention center will be restored. Alleyways, largely restricted to pedestrians, will run between buildings and provide space for smaller stores.

The two office buildings, with a total of 520,000 square feet, and two condominium buildings, with 216 units, were designed by the prominent London architect Norman Foster’s firm, Foster Partners, whose other projects have included the reconstruction of the Reichstag in Berlin. The two rental apartment buildings, with 458 units, were designed by Shalom Baranes, a local firm that worked on the redevelopment of the Homer building in downtown Washington at 13th and F Streets NW.

Even though nearly 7,000 new rental units are scheduled to be completed in Washington in the next few years, prospects are good for the apartments because of their central location, said Gregory H. Leisch, the chief executive of Delta Associates, a real estate consulting firm that advises Hines and Archstone. Condo prices in the city center have risen 1.8 percent in the past year, to an average of $710 a square foot.

The demand for office space from law firms and other private tenants — the space will be too costly for government tenants, said Bill Alsup, a senior vice president of Hines — is improving, according to Cassidy Turley. But Hines suffered a setback last July, when the national law firm Skadden, Arps, Slate, Meagher Flom renewed its lease at 1440 New York Avenue NW, rather than fulfilling an earlier plan to lease 350,000 square feet at CityCenterDC. “It would have been very nice to have had a major tenant commitment prior to the start of construction, but it wasn’t critical,” said Mr. Alsup.

Tom Fulcher, an executive vice president at Studley, a brokerage that represents tenants, said most large Washington law firms with leases expiring in 2015 and 2016 had made their real estate decisions because large blocks of space can be scarce in a city without skyscrapers. One exception pursued by the developers is Arnold Porter, which is searching for about 335,000 square feet. But the project’s biggest challenge, said Jason Jacobson, a group vice president at Archstone, will be getting the retail mix right. Downtown has a lot of “fast fashion, geared toward younger people,” he said. “Our goal is to bring it up a notch.”

Gerry Widdicombe, the director of economic development for the Downtown D.C. Business Improvement District, a group that helps to market the neighborhood, estimated that Washington residents spent as much as $1 billion a year in suburban shopping centers because of a dearth of stores within the District of Columbia.

The developers are seeking a mix of stores, including apparel, home furnishings and electronic goods, said Mr. Alsup, whose company developed and manages Galleria malls in Houston and Dallas. About one-third of the space will be limited to stores new to downtown, he said. Mr. Jacobson said some space along the alleys would be made available to local fledgling retailers.

Not surprisingly, the developers are trying to persuade the retailer highest on everyone’s list — Apple, which has one store within the District of Columbia, on Wisconsin Avenue in Georgetown — to open a much bigger store of 15,000 square feet or more.

John Asadoorian, a regional retail broker, said CityCenterDC’s leasing goals demonstrated how downtown had matured. “Ten years ago, you probably could not have talked about the type of retail they are trying to attract,” he said.

Even before the Qatari investors became involved, Hines and Archstone determined that leasing to banks would not help them create lively shopping streets, Mr. Alsup said. But as it happened, their hesitancy on bank branches meshed with the policies of their financial partners, who adhere to the restrictions of Shariah, or Islamic law, including the ban on collecting interest. Restaurants will be able to serve liquor, but retailers whose primary business involves selling alcohol will not be allowed, Mr. Alsup said.

In their marketing materials, Hines and Archstone say they intend to provide “an authentic place for urban residents to socialize outside their homes.”

But some planning specialists have wondered if people in downtown Washington will view the plaza, which will be situated between the condo and rental buildings, as public space for them to enjoy. “Putting the plaza in the middle of a large development just feels more private,” said David Dixon, who is in charge of planning and urban design at Goody Clancy Associates, a design firm in Boston.

Mr. Jacobson said the developers planned to offer programs in the plaza and would make it welcoming with public art and landscaping. “People will find it to be inviting,” he said. “I realize we have to convince some people. Hopefully, we’ll do a better job over the next year or so.”

Article source: http://feeds.nytimes.com/click.phdo?i=ed4bcf552c62ccefa4aa9e0019e3d1a8