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A Tale of Two City Developers

BY Al Urbanski

If you live in a big city, you gauge your age by the changing real estate. As a kid and then as a teenager, I saw Shea Stadium and Giant Stadium being built. Both are now memories. Driving a New York City cab in the early ’80s, I rarely got a fare to Williamsburg and, when I did, I quickly turned around and headed back to Manhattan over the Williamsburg Bridge. That landed you on Delancey Street on the Lower East Side where turn-of-the-century (20th, that is) tenements still lined the street and where uptown gentry might only venture for cheap fashion or a corned beef sandwich at Katz’s Deli.

Over the past 20 years, those neighborhoods have served as landing pads for ambitious and creative young people forging their own big-city dreams. They’ve also served as blueprints for the reclamation of rundown neighborhoods in nearly every A and B metro in the United States.

Joseph Ferrara cut his teeth in New York real estate in the terraforming of Williamsburg and the Lower East Side. “We jumped into the East Village before anyone,” said Ferrara. “We did it in Williamsburg, offering the first ferry access. In Downtown Brooklyn, we broke ground on the first for-sale condominiums.”

The second-generation builder and principal of BFC Partners has turned his attention to his own home turf of Staten Island, the New York City borough voted least likely to ever be cool. Ferrara emphatically disagrees. He predicts that the Empire Outlets that BFC is building at the Staten Island Ferry terminus of St. George (rebranded as “The North Shore”) will become one of New York’s top tourist attractions, as well as a draw for outlet-deprived locals. It most certainly will be aided by a compelling billboard — the 630-foot-tall New York Wheel.

“The Wheel will be the world’s largest LED canvas, and every night it will put on an orchestrated light show,” Ferrara said. “The Staten Island Ferry, meanwhile, is already the No. 3 or 4 tourist attraction in New York. Every year, 23 million people ride it, and anyone accessing the terminal has to walk through my project.”

As Ferrara and BFC explore new ground in New York, Scott Smith and WRS Inc. will be reclaiming and repurposing one of the South’s legendary retail and entertainment centers, Underground Atlanta.

The subterranean site came into being in the early years of the 20th century when Atlanta built a bridge and elevated street level for freight train access to the Georgia Railroad Depot. Building owners moved their entrances to their second floors and the “Underground” thrived for years as a nighttime scene of bars and music halls. It faded when Atlanta relaxed its public drinking laws and then was transformed by Rouse into, essentially, an underground mall in 1987.

That lasted but 10 years, however; and in 2014, the city of Atlanta put the largely abandoned site up for sale. Smith and WRS came calling and this past March bought the property for $34.6 million with a plan to turn it into a mixed-use facility, including a dormitory building for nearby Georgia State University.

“We saw the possibility of building a community right in the heart of downtown Atlanta,” he said. “Mayor Kasim Reed and his staff shared the same vision to put this property back in play. This was the original shopping area of Atlanta, and we were confident it was something we could regenerate. With Georgia State, we have a built-in local audience of 40,000 people.”

Rouse’s redevelopment had thrived for its proximity to the World of Coca-Cola, one of the city’s leading tourist attractions, and the promise of the approaching 1996 Atlanta Olympics. However, once the Olympic Flame was extinguished, so too was the long-term viability of Underground Atlanta.

“It turned out to be just another mall, and you could find a mall anywhere,” Smith observed. “People had no reason to be there after 6 p.m.”

And so, like so many developers of retail projects, WRS will attempt to attract its own core of shoppers with residential towers and necessity-based retail at street level that will lead to more stores below ground. Smith’s and the city’s ultimate hope is to create a thriving new neighborhood packed with modern city-dwellers.

“Our timing is good, because there’s a tremendous movement to come back downtown,” Smith said.

Underground Atlanta and WRS are also helped by another growing movement that other developers will surely continue to benefit from — cities willing to make attractive deals on potentially prime real estate. “This will be the first time this property is on the Atlanta tax rolls,” he said.

What does this tale of two city developers say about the future of downtown retail? Perhaps Charles Dickens will forgive us for transposing his most famous opening line and posit that, perhaps, it is the worst of times and it is the best of times.

Al Urbanski
[email protected],
@AlUrbanski (Twitter)

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Center Stage at SPECS 2017

BY Marianne Wilson

Retail and restaurant executives, architects, suppliers and other industry professionals involved in store design/planning, construction and facility management gathered together for Chain Store Age’s 53rd annual SPECS conference.

The event, held at the Gaylord Palms in Kissimmee, Fla., focused on the evolution and innovation of physical stores in a digital age, and explored industry trends that are transforming how stores are designed, built, operated and maintained.

The show combined a packed slate of educational sessions with an exhibit floor, pre-scheduled individual business meetings and plenty of networking opportunities. The winners of CSA’s annual Breakout Retailer Award — Altar’d State, Bentley’s Pet Stuff, Sugarfina, MOD Pizza and Warby Parker — were honored during a special awards presentation.

The formal program kicked off with a keynote session that provided attendees with a look at the state of the U.S. economy. The SPECS Economic Summit was moderated by CNBC’s Ron Insana, who was joined by former presidential candidate and publishing giant Steve Forbes and Moody’s Analytics chief economist Mark Zandt.

Other keynote highlights included an address by Gen. Raymond Odierno, retired U.S. Army chief of staff, who discussed cyber security risks and risk-management strategies, with the latter drawn from his own career.

Sessions

The educational part of the program featured more than 25 individual workshop sessions, with many offering continuing education credits. The agenda covered a broad range of topics, from innovations and technologies that are transforming store development and maintenance to operational basics.

The program lineup also included a presentation on Samsung Electronics’ new Samsung 837 flagship, which offers customers the chance to test drive products in an immersive, experiential environment. Additional sessions provided attendees with an up-close look at the impact of virtual reality technology on the store design and construction process, and insight as to how the Internet of Things is impacting the customer experience and facilities management.

In addition, such core topics as project close-outs, hazardous building materials, ADA compliance, energy management were covered.

SPECS is a high-profile event, and the conference offered plenty of opportunities for attendees to collaborate with high-level decision-makers across the industry. There were business partnering opportunities both on and off the show floor, as attendees met at workshop sessions and for meals and evening receptions.

There were also one-on-one meetings at the Face-to-Face Information Exchange, which gave retailers a chance to meet with suppliers for pre-scheduled, time-efficient meetings.

Next year, SPECS returns to the Lone Star State. The 54th SPECS conference will be held March 18–20, 2018, at the Gaylord Texan in Dallas. Updates will be posted at specsshow.com.

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Takin’ It to the Street

BY Al Urbanski

“City of stars, are you shining just for me?” sings Ryan Gosling in this year’s hit movie musical “La La Land.” “City of stars, there’s so much that I can’t see.”

Those lyrics might just as well have been written for retail real estate developers who are beginning to see more potential in urban neighborhoods — both the thriving and the striving. People like Scott Smith, whose WRS Inc. is resurrecting Underground Atlanta as a mixed-use project. Like Pine Tree’s Peter Borzak, who is remolding the power center to fit in downtown Chicago. Like Joseph Ferrara of BFC Partners who’s building a luxury outlet center in the neglected New York City borough of Staten Island. All have seen something in these venues that others, like Gosling’s Sebastian, did not.

Ferrara, whose company played a marquee role in the resurgences of Williamsburg and the Lower East Side in New York, says that in BFC’s case, “it’s just consolidating years of experience into a borough that’s had a bad rap, that hasn’t had the kind of image that [retailers] want. It’s the developers that lead the way.”

Of course, the developers need the retailers to follow them (BFC has Nike, Nordstrom, and the world’s biggest Ferris wheel), but it can get tricky when they’re leading them down some dark alley or unknown urban cul-de-sacs. Malls still have relevance for suburbanites because they’re a known quantity with easy parking and a memorized collection of shopping options, and they offer similar comforts to chain retailers: good location, proven property management, promised traffic, and triple-net leases. But for large chains venturing downtown for the first time, the experience can be less “La La Land” and more “Midnight Cowboy.”

“The mall is controlled; the street operates with very different dynamics,” said Whitney Livingston, SVP at Madison Marquette, which is revamping its Pacific Place mall in downtown Seattle to cater to the needs of today’s city-dwellers. “From a retailer’s perspective, the mall has a manager and a marketing director to make the property work, and a high tide raises all ships.”

In the city, the onus is on retailers to establish a presence and lure shoppers to their doors, Livingston said. Pacific Place is an established Seattle shopping destination with a dedicated, upscale customer base. Its tenants include Barney’s, Coach, Kate Spade, and Michael Kors. But with locally based companies like Amazon and Starbucks creating lots of daytime traffic, Madison Marquette is making an attempt to incorporate its six-level mall into the street.

“We started thinking about this booming market and incredible pedestrian traffic and thought, ‘What if we created a situation where walking through Pacific Place was part of people’s everyday walk to and from work?’” Livingston said.

As a result, Livingston said, “We’re basically blowing up the entrances,” making them two levels high and enclosing them in glass and running skylights throughout the entire mall.

Working off much the same motivation will be Smith, who brought a two-year pursuit to a close in March with a $34.6 million purchase of Underground Atlanta. South Carolina-based WRS plans a mixed-use redevelopment of the property, including a Georgia State University dormitory and a full-scale redevelopment of the once-renowned, below-ground retail and entertainment center.

“There’s a tremendous movement now to come back downtown,” Smith said. “Our timing is good because the mind-set has changed. People want to walk out and go to work, walk out and go to school.”

Still, both of these projects are essentially downtown malls. Retailers establishing stand-alone locations in evolving neighborhoods face two basic options: be pioneers or be willing to pay a higher rent waiting for the pioneers to establish the customer base.

Chicago retail-scene veteran Paul Bryant, managing broker at Mid-America, credits Target for pioneering small-format urban stores in his town. But most large retail chains, he says, still play it safe in the big city and seek out established venues where the retail spadework has already been done. “It’s a lemming effect. Retailers want to go where everybody else is,” he said.

In Chicago’s growing West Loop neighborhood, McDonald’s Corp. is the “someone else” fueling a boom in real estate starts. Like so many suburban millennials, the company is leaving Oak Brook and moving its headquarters downtown to the former site of Oprah Winfrey’s Harpo Studios. Sterling Bay, the building’s developer, is offering up what it’s billing as prime, street-front retail space there. Food and beverage draws are already in place courtesy of The Boka Group, with restaurants such as Duck Duck Goat and Momotaro.

“It’s the Meatpacking District of Chicago,” said Bryant, referring to New York’s abattoir-turned-chic hangout.

Downtown Detroit, too, is on its way back thanks in large part to corporations with new downtown digs. Ilitch Holdings and its Olympia Development company not only built a new headquarters for Little Caesars Pizza there, but renovated the town’s famed Fox theater and is building a new hockey arena for the Red Wings in what it’s calling District Detroit. Quicken Loans erected a striking headquarters building on Woodward Avenue. Retailer and native Detroiter John Varvatos picked up on the wave and got in on the town’s renaissance early.

“He picked up several buildings for $10 a square foot, and you’re not going to get that price now,” said veteran Detroit broker Jim Bieri of Stokas-Bieri Real Estate, who had plenty of tips to offer retailers thinking of getting into Detroit while the getting’s still good. Most had to do with coping with thriving outside of a mall or shopping center.

“Every building you look at’s going to be different. That’s what you have to deal with in trendy urban environments,” Bieri said. “Retailers are used to triple-net leases, but here they’re going to find they may be responsible for the roof. And they should be prepared to pay rent before opening the store. In this environment, landlords want rent from day one.”

But there’s a plus to urban tenancy, as well, Bieri pointed out. “There are few options in the mall, but there are options on the street. You can get a five-year lease with a five-year option. In a mall you can maybe get a 10-year lease with a kick-out clause, but there’s hooks to it.”

Stephanie Skrbin, an Avison Young principal based in Los Angeles, adds to Bieri’s list of practical considerations, advising new urban tenants to pay attention to vehicle access near their city stores. “Some tenants are fine with pedestrian-oriented traffic, but some need parking on-site, so you have to know, is it subterranean? Street parking? Validated?” she said. “Loading access is also something to think about. For instance, will the loading area be able to accommodate the turning radius of a retailer’s truck?”

Studying local foot traffic patterns to identify busy and slow periods in a neighborhood is imperative, Skrbin said, as is being aware of what new local developments are planned. In a freestanding street location, retailers can set their own hours, something they have less control over in malls.

Some cities have taken it upon themselves to make things easier for new retail businesses to take part in their urban planning initiatives by formalizing the standards of said growth. The form-based Miami 21 Zoning Code dedicated to “New Urbanism” and “Smart Growth” has guided many redevelopments, including Swire’s massive Brickell City Centre that opened this year in the city’s financial district.

“We’re seeing a wide mix of retailers coming into Miami, including national chains, driven by where there’s opportunity,” said Kevin Zak, a principal of the architecture and design firm Dorsky + Yue. “Miami is a good example of a city having a vision to evaluate various districts and push growth in those districts with retail as an amenity.”

The trick is to make redeveloped districts appear to have evolved organically, and part of that responsibility lies with retail chains setting aside standard formats to make bold and unique statements on the street with their store designs and signage.

“Miami was one of the cities that had a vision to see where the city was going, but it’s up to retailers to determine how they’re going to stand out in these districts,” Zak said. “It comes down to the basics of retail — location and visibility. The store needs to be inspiring.”

Then, perhaps, retailers will be able to sum up their urban experiences the same way Sebastian from “La La Land” did: “City of stars, are you shining just for me? City of stars, you never shined so brightly.”

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