REAL ESTATE

Format for the Future

BY Katherine Boccaccio

It was fitting that the setting for the Retail Forum on Open-Air, held on Feb. 28, and hosted by Atlanta-based Jones Lang LaSalle Retail, was Atlantic Station in Atlanta’s midtown district. The 138-acre mixed-use development, codeveloped by Jacoby Development and AIG Global Real Estate, and managed and leased by Jones Lang LaSalle, is perhaps the open-air format at its finest and most comprehensive. Atlantic Station’s livework-play community is an urban smorgasbord of retail, office, restaurant and residential.

Developers and retailers aren’t debating the success of Atlantic Station-type developments or format siblings such as power centers, specialty centers, grocery-anchored centers and the ever-popular lifestyle centers. Rather, they’re replicating them as fast as possible. “We’re fairly built-out in terms of enclosed malls,” said Greg Maloney, CEO and president of Jones Lang LaSalle Retail. “The real opportunity is in open-air.”

Opportunities, according to Maloney, aren’t restricted to development. Property management is another area in which the open-air center presents wide-open growth possibilities.

During its retail forum, Jones Lang LaSalle announced the launch of a dedicated open-air division that will focus specifically on growing the company’s third-party management and leasing business in this niche sector. Three industry veterans, all formerly with Inland Real Estate, were hired to lead the initiative. Michael Longmore, Sig Arnesen and Chris Rehmet joined Jones Lang LaSalle as senior VPs.

“Bringing on board Mike, Sig and Chris adds a new dimension in our retail platform,” said Maloney, “and will enable us to better serve the needs of new and existing clients in the open-air sector.”

Open-Air Buzz

Even industry super-veterans with 20 or more years of experience are grappling with shopping center format terminology. Overheard at the Jones Lang LaSalle Retail Forum on Open-Air, held at trendy Twelve hotel in Atlantic Station: “We are defining open-air as power, specialty, lifestyle and grocery-anchored centers,” said one Jones Lang LaSalle executive.

Another industry attendee struggled to come up with a concrete explanation for what, exactly, is a lifestyle center? The consensus by all participants in the forum is that the shopping center industry needs more uniformity in its definition of the various formats, and no one need be concerned that his or her definition may not be “right.”

The plan is actually pretty straightforward. Jones Lang LaSalle, the third largest property management company in the country, has about 100 offices nationwide. The new open-air division will align itself with the company’s other offices, injecting open-air specialists into those pre-existing organizations. “This is an expansion of our services, certainly,” said Maloney, “but it is also a specialization.” Existing clients will also serve as service launch pads. “We will start with our 20 largest clients, garnering commitments from as many as possible to take over the property- management services of their open-air centers.”

Open-air centers, explained Maloney, present a tremendous service opportunity. “Developers self-manage their developments,” he said, “and with so many centers owned by third-party investors, even foreign owners, there is a gaping hole in on-site property management.”

Because open-air is the fastest-growing shopping center category, a division dedicated to its management is not only innovative, it’s strategic. “While open-air centers, unlike enclosed malls, don’t always require an on-site property management team, they do need management teams in the market,” explained Kristin Mueller, executive VP of business development for Jones Lang LaSalle. “Our new team’s niche experience will make us the only national firm with a dedicated division that can service the unique needs of openair owners.”

Mike Longmore, who will spearhead the new division, added, “The open- air format—especially centers such as Atlantic Station—is edging closer to the enclosed mall. And open-air will continue to evolve as it incorporates additional uses.”

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REAL ESTATE

Everything’s Coming Up Lifestyle

BY Michael Fickes

As retail developers ponder the next wave of lifestyle shopping centers, the original concept is morphing into hybrid lifestyle-power centers, mixed-use developments with lifestyle centers, daily-needs lifestyle centers and combinations of all of the above.

Across the country, developers are changing, adjusting and refining the lifestyle concept to fit different market opportunities and site capabilities.

Hybrids emerge: Cleveland-based Developers Diversified Realty entered the lifestyle business four years ago with the acquisition of Paseo Colorado in Pasadena, Calif. Since then, the company has purchased three more centers. Two more lifestyle operations will arrive when Developers Diversified closes its acquisition of Oak Brook, Ill.-based Inland Retail Real Estate Trust later this year.

Currently, the firm’s pipeline contains six new lifestyle centers, including some hybrids.

What’s a hybrid? “I think hybrids are what you will see in the future,” said Marc Hays, senior VP of easing, specialty centers, Developers Diversified. “We’re about to open one in San Antonio, called the Village at Stone Oak.”

Stone Oak spans 500,000 sq. ft., with 325,000 sq. ft. given over to power-center stores and 175,000 sq. ft. in a Main Street lifestyle format.

Power anchors at Stone Oak include Super Target, Hobby Lobby, Cost Plus World Market and DSW. Lifestyle tenants include Talbots, Chico’s, Coldwater Creek, J. Jill, Starbucks, Jos. A. Bank and Ann Taylor Loft.

“Not that opportunities for pure lifestyle projects don’t still exist—they do,” continued Hays. “But developers today need to lease to tenants that provide enough critical mass to bring customers back for more visits than they have in the past.”

Lifestyle leads to community: New York City’s New Plan Excel Realty Trust has developed twist on the hybrid concept. It is converting community centers to hybrids by adding lifestyle retailers.

In fact, New Plan recently created a position called head of lifestyle leasing. “The concept is to add lifestyle elements and tenants to community centers with appropriate demographics and anchors in place,” said Mike Carroll, executive VP of real estate operations for the firm.

Roosevelt Mall in Philadelphia illustrates New Plan’s concept. Despite its name, Roosevelt Mall is an unenclosed, outdoor community center anchored by a Macy’s. “We have added some soft-goods retail here,” Carroll said. “We’ve brought in a Deb Shop, Foot Locker and Foot Action, and we’re planning to add others.”

At New Plan’s Hillcrest Shopping Center in Spartanburg, S.C., the community center line-up includes Ross, Publix, Petco, Panera Bread and Marshalls. “A wing of this center offers lifestyle opportunities,” Carroll said. “We’ve signed Chico’s as our lead tenant in that wing.”

According to Carroll, New Plan no longer pigeonholes centers with terms such as “community” and “lifestyle” center. “These are our shopping centers, and, when appropriate, we’re changing the way we merchandise them,” he said.

Lending lifestyle to mixed-use: The Forest City Commercial Group in Cleveland has five lifestyle projects under development in the eastern United States. Each is part of a larger mixed-use development with distinctive architecture, landscaping and amenities.

The Village at Gulfstream Park in Hallandale Beach, Fla., for example, will include retail, office, restaurants and a casino, which takes advantage of the development’s location next to a racetrack.

Architectural styles play a key role in mixed-use projects. Gulfstream Park, for instance, will feature a Mediterranean style, while the Promenade Bolingbrook, near Chicago, will employ a Prairie style.

“Landscaping and amenities are important, too,” said Mark Bulmash, senior VP, East Coast development, Forest City. “One of the drawbacks to older open-air centers was that the designers didn’t pay enough attention to landscaping as a way to create context for retail.”

At The Summit Lehigh Valley in Bethlehem, Pa., the architectural theme salutes the region’s industrial past. Amenities include landscaped gathering areas oriented toward a picturesque local mountain range.

Forest City also uses public space in its projects. Victoria Gardens in Rancho Cucamonga, Calif., boasts a public library, an auditorium and a community meeting area. “You can create a retail center or a community,” Bulmash said. “A community reinforces activities like retail and gives projects vibrancy and long life.”

Lifestyles’ daily routine: Developers Realty Corp. in West Hartford, Conn., has five lifestyle-center projects in its pipeline, in Palm Coast, Deltona, and St. Augustine, Fla.; Plano, Texas; and Williamsburg, Va. All are mixed-use with retail, residential, hotel, office, restaurant and entertainment components.

Developers Realty leasing strategies include seeking retailers capable of becoming part of a customer’s daily routine. “We think you can build a successful lifestyle community around customers’ routines,” said David Dumeer, VP, Developers Realty.

“Within these mixed-use communities, residents can also attend church, go to the health club, take in a viewing at an art gallery, eat dinner and socialize, all within walking distance of their homes or offices,” said Dumeer.

In Plano, Texas, for example, Developers Realty is building a 1.2 million-sq.-ft. mixed-use community. The 600,000-sq.-ft. retail component will include high-end junior anchors, fashion tenants, restaurants and a regional grocery store. Mixed-use elements include a hotel, an office complex and residences. “Even though the surrounding market contains over 5 million sq. ft. of retail stores, pre-leasing on this project has been swift and exciting,” said Dumeer.

Another example is New Town Shops on Main in Williamsburg, Va., surrounded by commercial and residential developments and a network of hiking and biking trails. Bonefish Grill, Panera Bread, Opus Chop House, Maggie Moo’s, Ichiban, and a number of other national and local restaurateurs provide varied lunch menus for the area’s 50,000 employees.

High-quality national retail anchors and inline shops, as well as necessary services offered by tailors, travel agencies, banks, doctors, lawyers, luxury spas and other resources, all work together to cement New Town’s role in the area’s daily life.

Many faces of lifestyle: W/S Development Associates has developed a number of projects with variations on the lifestyle-center theme. “Project design depends on the location and the market,” said Brian Sciera, VP of lifestyle centers for the Chestnut Hill, Mass.-based company.

In the Shops At Blackstone Valley in Millbury, Mass., the company mixed power and lifestyle retailers.

But in Hingham, Mass., key power-center tenants had already located in surrounding towns, and a hybrid didn’t make sense.

At Hingham’s Derby Street Shops, Sciera’s team sought out anchors unique to the area, installing Barnes & Noble, a two-level Crate & Barrel, Kohl’s, a two-level REI and the first Whole Foods Market on the south shore of Boston.

They also brought in more than four-dozen national lifestyle retailers including Ann Taylor, Apple, Chico’s, Coldwater Creek, Victoria’s Secret, White House/Black Market and Williams-Sonoma. National restaurant names include Bertucci’s Brick Oven Pizzeria and Panera Bread.

Derby Street’s most interesting leasing strategy aimed at necessities retailers: a bank, barbershop for kids, liquor store, bakery and beauty shop. “If you can get retailers that will bring customers back a couple of times a week, you can become a habit,” Sciera said. “If customers are in the habit of coming to your project for groceries or coffee, they’ll come for jeans and a book.”

In the end, the lifestyle concept has blossomed into something much larger than a shopping center format. It has become a vehicle that has freed developers from the constraints of traditional formats and enabled them to tailor a design to the style, architecture and retail needs of individual communities.

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REAL ESTATE

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BY CSA STAFF

DEVELOPMENT

Regency Centers has acquired 13.09 acres of land in Portage, Ind. (35 miles southeast of Chicago), selling 7.7 acres of it to Kohl’s. The site will be developed as the first phase of Airport Crossing shopping center and will include an 89,911-sq.-ft. Kohl’s along with 12,000 sq. ft. of small shops and two outparcels.

ACQUISITIONS

The Mills Corp. and Brookfield Asset Management Inc. have announced an agreement under which Brookfield will acquire The Mills for about $1.35 billion in cash and assume another $7.5 billion in debt and preferred-stock liability. As part of the agreement, The Mills will merge into a newly formed subsidiary of Brookfield, and The Mills common stockholders will receive $21 in cash for each share of The Mills common stock.… Morgan Stanley has acquired five properties from Woolbright Development for $281 million. The five centers—Oak Grove Shoppes, Sea Ranch Centre, River Bridge Centre, Murdock Carrousel and Galt Ocean Marketplace—are all located in Florida.… Primestor Development has acquired Bell Gardens Marketplace, a 159,831-sq.-ft. grocery-anchored center in Bell Gardens, Calif.

SERVICES

Property Works, Decatur, Ga., has been selected as the lease-management service provider for BCSE, which operates Just Brakes of Dallas. The 140-unit chain will use a blend of Property Works’ software and lease-management services.

INVESTMENTS

CBL & Associates Properties announced an agreement with Bain Capital to invest in subsidiaries of Jinsheng Group, amall operator and real estate development company based in Nanjing, China. CBL and Bain Capital will acquire a significant minority equity interest through an initial investment of $60 million. Jinsheng Group owns or operates two home-decor shopping malls and two general retail shopping centers in Nanjing, and two home-decor shopping malls in Shanghai, totaling 7.1 million sq. ft. The company also has several development projects currently under way.

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