Ron Barness

Real Estate Power Player, Ron Barness, Talks About the Dismissed Investor Lawsuits

The real estate market crash has devastated many around the U.S., especially in Phoenix, where prices had been drastically inflated until the real estate bubble exploded a few years ago. For Ron Barness, one of the biggest players in the Phoenix commercial real estate market, the crash meant losing everything.

In 2008 & 2009, a number of civil lawsuits were filed against Ron Barness, principal and CEO of Barness Papas Investments (the parent company of Retail Brokers, Inc.) and his business partner at the time, Alex Papakyriakou.  Those judgments were filed by a handful of investors who alleged that Ron and his partner did not accurately report earnings and the sales of property. At the time of this report, all but one of the investor lawsuits has been successfully dismissed by the Maricopa County Superior Court. The single outstanding investor lawsuit is working its way through the legal system and will likely be dismissed soon.

Any other outstanding lawsuits against Ron Barness are from lenders related to the personal guarantees that he made on his real estate investments. Barness says he is working diligently to clear his name of the suits, which came about after those few investors lost money in other real estate transactions and were hoping to take advantage of the legal system in a down market.

Barness’ 27-year real estate career includes acquisition, development and disposition of more than 300 shopping center investment properties, almost all of which included the involvement of nearly 1,000 individual investors or partners. Until the collapse of the Phoenix real estate market in 2007, not a single investor had ever lost a dollar with Barness. In fact, for nearly 15 years, investors enjoyed returns ranging from 15% – 30% every year.

When the market did begin to take a turn for the worse, all of Barness’ projects were negatively affected; each property suffered extreme vacancies that impacted cash flow. In an effort to protect each investor’s monies and to salvage his huge investment portfolio, Barness began to inject his family’s personal savings into the suffering projects.

“The sheer magnitude of the market collapse and the size of the portfolio I controlled ultimately led to the demise of my business and the loss of the projects,” said Barness.

Each of Barness’ projects were financed through a total of 27 different lenders, and most of the transactions were personally guaranteed by Barness and his wife, a testament to how deeply he believed in each deal. No investor ever had personal liability for any of Barness’ real estate loans.

“It has been a devastating ride that has taken everything I have made for myself out from under me and my family, but more than 99% of the investors I have worked with over the years have stood by my side, believing that I have done the best I could do,” said Barness. “Although I have been forced to start over, I am fortunate that I have a wonderful family who believes in me and gives me strength. And, I know that whatever any individual investor lost through investing with me pales in comparison with what I have lost trying to protect their investment.”

Barness is now working hard to re-establish his career by turning the hard truths of what happened in the real estate market into valuable lessons that make him a much more cautious operator.

Oct 1, 2007

By Ron Barness, principal of RBI and Barness Papas Investments and Ron Finkel, Senior Managing Director/Designated Broker of RBI

Although the housing market in the metro-Phoenix area seems to be gradually leveling off from its unprecedented recent growth, the retail real estate market continues to thrive as it has for the past few years. For the most part, the commercial real estate market seems to follow the overall performance of the economy, but is always a bit behind. The retail market has not yet (and most likely will not) hit the extreme highs that the Phoenix residential market hit last year, so it seems to be a relatively safe predication that it will not hit any major low points, either.

Phoenix continues to be a hub for retail development, especially with the revitalization of downtown Phoenix, in the Copper Square district, and with the massive expansion efforts and new growth in the West Valley. Copper Square will soon house some of the most high-end retail in the state, combining a wide mixture of entertainment, restaurants, shopping and more. As these new retailers join the established downtown area, most will have to adapt their traditional store layouts for the smaller spaces that are available downtown, which could have an effect on leasing.

Scottsdale’s downtown area is also being revamped with a $1 billion facelift. The area continues to be one of the Valley’s strongest retail markets, with more than 220,000 square feet of new shops at the Scottsdale Waterfront, most of which have already opened for business or will open before the end of 2006.

Additional retail growth has been sustained due to the ongoing and aggressive freeway expansions around the Valley. Retail is popping up everywhere alongside freeways and freeway exists, specifically in the West Valley. This is evidenced through projects such as Westcor’s Prasada and Estrella Falls. Prasada is a 4,200 acre master-planned community with an 800-acre commercial core and more than three million square feet of retail space, located near the intersection of the Loop 303 and US 60, and Estrella Falls is a 300-acre mixed-use development off the Loop 303. These projects join the new Glendale Arena at Westgate City Center in Glendale, which adds a whole new lot of retail development to the West Valley.

Rental rates for retail space will continue to rise, ranging from single-digit lows of $5 per square-foot to highs of $40 per square-foot in select submarkets, as more high-end retailers continue to break into the market. Vacancy rates are currently just below five percent.

Lifestyle, open-air centers, mixed-use and transit-oriented developments still continue to be the focus of developers. Transit-oriented development is playing an integral role in the retail redevelopment of downtown Phoenix as the Central Phoenix/East Valley light rail transit corridor shapes up to open in December 2008.

Smaller-anchored retail centers are thriving as well. Lesser-known groceries, fitness centers and hardware stores have become key players in neighborhood centers. Ace Hardware, for instance, has leased 120,000 square feet of space year-to-date throughout Phoenix, and has plans to expand further in the near future.

The massive increases in the Valley’s population combined with a strong economic forecast in 2007 indicates that retail development will continue to be a driving force throughout the year.