As green space dwindles in mature markets, owners and developers focus on redevelopment rather than new construction.

Edens & Avant, the Columbia, S.C.-based developer of grocery-anchored shopping centers, boasts 18 retail projects underway up and down the East Coast. However, only five of those centers are new. The remaining 13 are redevelopments.

Developers and owners across the country find themselves in similar circumstances. The trend for the near future, they report, appears to be toward redevelopment rather than new construction.

Two decades ago, most developers expanded their business by building on greenfield sites in suburban areas. But that dynamic has shifted, notes Richard Green, vice chairman of operations for Los Angeles-based Westfield America Inc. The company's primary thrust is to acquire existing opportunities and redevelop them.

"Now is the time to look at some of those centers that are 20 years old," Green says. "We know consumers go in there. The access roads are fine. We just need to figure out how to get more people there. That's less risk than going to some untested site down the street."

Reaching the limit? While there is still plenty of ongoing greenfield development, many metro areas have already reached the outer limits of suburban expansion. Meanwhile, cities that are still growing such as Atlanta or Phoenix now face greater pressure to control sprawl. Coincidental to all this is a slow, but growing, reverse population migration back to the cities and to older, closer-in residential areas.

Terrence Tallen, a vice president and national director of leasing with Burnham Pacific Properties in San Diego, notes that it is extremely difficult to find developable land in mature markets such as Chicago, New York, Boston, or Washington, D.C. The same is true on the West Coast in places like Seattle and nearly all the coastal communities in California, Tallen says.

Even if one does find a bit of land on which to develop new retail, the old days of easy zoning and land assemblage are now history. Time costs money, and it takes a lot of time to assemble parcels of property attached to different owners, work through lengthy zoning processes and fight community activists and environmentalists. Most of those hurdles can be avoided with redevelopment of existing properties.

Opportunity across the board Redevelopment should not be limited to the revitalization of old malls. It works well for community and neighborhood centers, and even some strip centers.

CenterAmerica Property Trust out of Houston develops grocery-anchored neighborhood shopping centers. "Redevelopment is the lifeblood of our company. We buy shopping centers and redevelop them," says Scott MacDonald, CenterAmerica's president and CEO.

Although there's a slight difference as to how lenders approach different types of projects, CenterAmerica finds that the process for obtaining financing for redevelopments isn't radically different from the process for funding new projects. The company uses bank-issued lines of credit for both.

Tallen notes that financing for a new development will include a construction loan instead of a short-term loan. "That will be replaced by a take-out loan which is also the permanent financing on the project," he explains. "There really isn't the temporary construction loan for a redevelopment. There, you are more often dealing with conventional debt or mezzanine financing."

Solid returns In the past five years, encompassing 150 million sq. ft. of space, the average investment return from redevelopment for CenterAmerica has been a little bit above 12%. "That would be difficult to achieve today," says MacDonald. Today's returns are more in the 11% range.

That 11% figure gets bandied about quite a bit. For example, The Rouse Co. hasn't pursued much new construction, with the exception of downtown or village centers. But the Columbia, Md.-based firm did go after one new project in Coral Gables, Fla., because it expected a solid 11% return on that investment. "That's a good return for a new center," says David Tripp, Rouse's vice president of investor relations and corporate communications. "We would build all new properties if we were sure we were going to get 11% on cost."

Rouse hasn't seen much opportunity to get an 11% return on new centers. So in the early '90s, the company decided that its retail properties should all be high-end, dominant centers with three to five department stores, in good locations and in major markets. At the time, 65% of its centers were at "C" level.

"We decided we would either renovate, expand or modernize properties that could be moved from the `C' category to `A' or `B,' or else we would dispose of our interests," notes Tripp. "We had 51 properties back then and we disposed of 30 of them. Now, 83% of our properties are `A' or `B.'"

Cutting the red tape Chattanooga, Tenn.-based CBL & Associates Properties counts 30 malls in its portfolio, three of which are under redevelopment.

"We have gone to redevelopment because its gets longer and more difficult to go through the process to build a ground-up project," says Michael Lebovitz, senior vice president of mall projects. "And there are some excellent interior locations as with our Parkway Place mall in Huntsville. What drove that development was the market demanded a full-service mall. The old mall could not salvaged."

Which leads Lebovitz to caution that, while much can be achieved through redevelopment, "you cannot make redevelopment successful in a poor location." It always comes down to location, location, location.

It's rare that the motion picture elite turns out for the unveiling of a new real estate development. But since this debut happened to be in Hollywood, why not?

One of the country's great movie palaces, Grauman's Egyptian Theatre, opened in 1922 with "Robin Hood," starring Douglas Fairbanks. The extremely ornate theater was host to a number of Hollywood premieres, from Cecil B. DeMille's 1923 silent classic "The Ten Commandments" to Barbara Streisand's "Funny Girl" in 1968.

Despite their grandeur, such old theaters eventually went out of style, replaced by modern megaplexes. The Egyptian closed in 1992, and like the rest of Hollywood Boulevard on which it sits, the theater fell into physical degradation, including suffering serious damage in the 1994 Northridge Earthquake.

Eventually, Los Angeles' Community Redevelopment Agency bought the property for $1.5 million. The non-profit American Cinematheque was looking for a home and the CRA sold it to the group for $1. The money needed to restore the Egyptian came from public and private sources. Contributions included $3 million in private insurance money, $2 million in federal money for restoration of a publicly owned building, an urban renewal loan from the U.S. Department of Housing and Urban Development, matching grants from the National Endowment for the Arts, and private donations.

Reopened in 1998, the restored Egyptian not only features a 650-seat auditorium and 75-seat screening room, it also boasts a restaurant with sidewalk cafe and retail shops.