COVER STORY, JULY 2004

A RENEWED LEASE ON RETAIL LIFE
Retail owners must upgrade and expand properties to stay current.
Luci Joullian

Midwestern retail developers and owners use a mix of tenancy, location, creative redevelopment and customer service to make their centers stand above competitors.

What qualities make a shopping center continually successful?

Heartland Real Estate Business recently talked with representatives from some of the Midwest’s most lucrative centers to find out their formulas for creating and maintaining centers that keep shoppers coming back for more.

Los Angeles-based Westfield, which has a history of enhancing its existing portfolio, may redevelop Westfield North Bridge in Chicago. The company purchased the 685,000-square-foot center last year.

Los Angeles-based Westfield has thriving centers throughout the country and its Midwestern retail properties are no exception. The shopping center owner and developer uses a time-tested formula to ensure success for its centers, including Westfield Shoppingtown West County in Des Peres, Missouri; Westfield Shoppingtown Old Orchard in Skokie, Illinois; and Westfield North Bridge in Chicago.

“We focus on growth and value creation through redevelopment of our existing portfolio and the strategic acquisition of well-located properties that offer tactical market synergies, combined with equally strong potential for significant increases in performance and profitability through redevelopment and expansion,” says Catharine Dickey, Westfield’s vice president of communications.

This redevelopment strategy is evidenced in Westfield’s relatively recent re-haul of St. Louis’ Westfield Shoppingtown West County. The center was originally built in 1969. Westfield acquired the center in 1994, demolished it and in September 2002 opened a completely redeveloped and rebuilt West County.

The 1.2 million-square-foot center is now home to flagship stores for Famous-Barr and Lord & Taylor and to Missouri’s only Nordstrom and St. Louis’ only Galyan’s.

Dickey says that Westfield Shoppingtown West County perfectly illustrates Westfield’s hybrid style (“Hy-Style”) development and redevelopment model — combining the best of traditional fashion retailing with lifestyle concepts, dining, entertainment and customer service amenities.

Also ripe for redevelopment is the 1.8 million-square-foot Westfield Shoppingtown Old Orchard, 20 minutes north of Chicago, in Skokie, Illinois. Westfield acquired the center, originally built in 1956, in 2002.

The company may also redevelop Westfield North Bridge, located on Chicago’s Michigan Avenue. Westfield acquired the 685,000-square-foot center, anchored by a flagship Nordstrom store, last year. Original developers The John Buck Company and The Morgan Stanley Real Estate Funds opened The Shops at North Bridge in September 2000 as the gateway to Chicago’s North Bridge District.

“Although future plans have not been announced for either of the centers,” notes Dickey, “Westfield has a tradition and a track record of employing a strategic approach to growth and value creation with a focus on redevelopment, remerchandising and expansion of its existing portfolio, as well as introducing enhancements and amenities designed to add to the customer experience.”

Enhancing the customer experience is what Jeffrey R. Anderson Real Estate is all about. Tracy Nemenz of the Cincinnati-based company says that Anderson’s Geneva Commons, which opened in late 2002 in western Chicago, aims to cater to its customers’ busy lifestyles.

“This lifestyle shopping center offers the stores and restaurants consumers want with the convenience they need,” says Nemenz of the 440,000-square-foot Geneva Commons. “The center has continually added tenants and services in response to customer demand.”

With sales of approximately $450 per square foot, Nemenz says that the upscale center, which services the high-growth, high-income Chicago suburb of Geneva, is designed to accommodate the busy lifestyle of today’s consumer. Crate & Barrel will join Geneva’s retail lineup, which now includes stores such as Galyan’s, Pottery Barn, Ann Taylor, Williams Sonoma and Coach, in 2005.

In downtown Chicago, Urban Retail Properties draws in tourists and residents alike to its 900 North Michigan center by catering to those with a taste for the finer things in life.

Located on the upper end of Michigan Avenue, right in the heart of Chicago’s luxury tenancies, the center features Bloomingdale’s as anchor and retailers including Gucci, Stuart Weitzman, Max Mara, Williams Sonoma and a flagship Coach store.

Opened in 1998, the 66-story, 2.7 million-square-foot 900 North Michigan includes the 450,000-square-foot, six-level 900 North Michigan Shops, 18 floors of office and 20 floors of condominium space and is also home to a 300-room Four Seasons Hotel. In its basement, the center also includes a 45,000-square-foot Equinox Health Club, along with an adjacent Mario Tricoci day spa.

“In the truest sense of the word, it’s really a vertical mixed-use development,” says Ross Glickman, Urban Retail Properties’ CEO. “It’s just a great collection of uses.”

In addition to praising the project’s retail appeal, Glickman also credits the ease of ingress and egress to the center and its ageless, state-of-the-art design for the center’s success.

“The antiquated nature of some centers is a problem,” he says, “but this center was built with that ageless concept in mind and it has sustained itself for the last 16 years accordingly.”

With about $700 per square foot in sales, Urban Retail keeps 900 North Michigan shops fresh “by understanding the market demographically and putting in the tenants that feed to that market,” according to Glickman.

Feeding the market is exactly what makes The Forbes Company’s Somerset Collection so successful. Located in Troy, Michigan, the Somerset Collection offers customers a tenancy mix that no other local center can, says Nathan Forbes, managing partner of Southfield, Michigan-based The Forbes Company. The center is home to Detroit’s only Neiman Marcus, Saks Fifth Avenue and Nordstrom stores and also houses a flagship Marshall Fields store.

“Oakland County has a tremendous average household income with large expenditure potential,” says Forbes of his center’s clientele. “It’s got great demographics and a very sophisticated, well-traveled, well-educated, well-heeled consumer.”

But it’s not just the anchors that make Somerset a unique retail experience — about half of Somerset’s inline shops are exclusive to southeast Michigan. And, perhaps, the most distinctive feature of the center isn’t its tenant mix, but its architectural design.

Originally built in the late 1960s, Somerset’s first building was expanded in 1992. Forbes built a second, adjacent center in 1996 and linked the two, which total 1.5 million square feet, via a 700-foot-long elevated moving skywalk.

It’s this sort of singularity, both in tenancy and architecture, that keeps the customers coming back and Somerset’s average sales per square foot at more than $600.

“We’re always putting in the latest merchandising concepts,” says Forbes. “We’re always adding unique elements to the shopping center.”

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Chicago-based General Growth Properties’ built Coral Ridge Mall, a more than 1 million-square-foot shopping center with 125 stores, in Coralville, Iowa.

Chicago-based General Growth Properties’ Coral Ridge Mall also thrives by using a mix of traditional department stores and smaller specialty stores. The more than 1 million-square-foot center houses about 125 stores ranging from big boxes like Dillard’s to discounters like Target to smaller clothing retailers like Ann Taylor Loft, Express and Abercrombie & Fitch. A National Hockey League regulation size ice rink, a 10-screen theater and various restaurants add to the center’s entertainment value.

Located off Interstate 80, a little more than 100 miles from Des Moines, in Coralville, Iowa, location is another important factor working in favor of the successful Coral Ridge, which opened in 1998. Rob Wyant, senior vice president of asset management of General Growth Properties, says that “most of the retailers at Coral Ridge would have to go to Des Moines” if not for the construction of his center.

“If you drew a 50-mile ring around Coral Ridge, prior to our opening, most of the shoppers were going to the old mall in Iowa City or were driving to Des Moines,” says Wyant. “What happened is that we created a product, a retail destination that kept a lot of the dollars from leaving the immediate vicinity and going to Des Moines.”

Wyant notes that the many developments that have sprung up around Coral Ridge since its construction prove its viability in the eastern Iowa marketplace.

“Shoppers are attracted to our center, and when you have the shoppers coming to your property, then the retailers want to follow. We’re going to spend a great deal of effort to ensure that we’re always bringing the best retail to Coral Ridge and give the shoppers what they want.”

It’s this combination of location and a unique retail mix that make Coral Ridge such a success.

“Usually, when you have a few of those things going for you, you can create an excellent shopping center,” says Wyant. “But, when you start with great location, excellent department stores, excellent small shop leasing and an entertainment component, you start to have all the stars line up for a great retail environment.”

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