The South has risen again. For decades, the region suffered the hardships of having an agrarian-based economy. Once companies recognized that the South harbored lower labor costs, they flocked to the region. As of January 1997, Georgia had gained 1 million new residents in the '90s, with the population estimated to increase by 11.3% in the next decade. The rising number of people has left developers with the goal of providing stores and services to a ready, demanding market. How are they doing? To find out, the Shopping Center World staff convened a roundtable meeting in Atlanta. What follows is an edited transcript of that roundtable discussion.SCW: Erick, The Mills Corp. has filed an application to rezone a 225-acre site in greater Atlanta for the development of a 1.5 million sq. ft. center, Sugarloaf Mills, to be located at I-85 and Sugarloaf Parkway in Gwinnett County. It will combine more than 200 retail stores under one roof. Already in Gwinnett County we have the Mall of Georgia and Gwinnett Place Mall. Can Gwinnett County support three malls?

Erick Collazo: We look at our demographics and income by zip code. We felt that Gwinnett County offered the best potential as far as population and income growth in the Atlanta region. One of the questions we get asked about is the proximity to the two existing malls. We believe we are a major destination not only for the Atlanta region but also outside the Atlanta region. We will drive more customers to that location, creating critical mass. From our perspective, it's a different tenant mix from the existing projects. We believe we will draw not only to our project but also to the other two existing malls.

SCW: What thought is given to the impact on road infrastructure?

Collazo: Fortunately, our traffic generation on this particular site does not impact the interstate and does not impact the existing improvements that will be in place by the time we start mall construction. We are meeting with the Atlanta Regional Commission and we have offered a park-and-ride. We're also offering shuttles. Also, we are going to be involved in offering employee shuttle discounts to allow employees who work in the project to use the bus service in Gwinnett County, which is slated to start in the year 2000. They can use the MARTA system to be able to commute back and forth to reduce the number of trips.

We also focus on tour buses. For example, at Sawgrass Mills we have about 6,000 tour bus visits on an annual basis. Bringing the customers down on tour buses decreases the amount of traffic trips. Also, when you look at consolidating and putting so much square footage under one roof, the customer tends to make fewer traffic trips. Our information said that customers at a regional mall stay for an hour. In the Mills project, they stayed three and a half hours.

SCW: What is the driving factor at this time to develop? Is it the job growth, which is creating more discretionary income?

Collazo: We had been researching Atlanta for the past three to four years. The right site came along with the right access to the interstate.

SCW: Mark, you had mentioned the Marketplace at Mill Creek (a 22-acre, mixed-use project opposite the Mall of Georgia being developed by North American Properties). Given the volume of retail in that area, how do you see all this shaking out?

Mark Toro: I can't say I wasn't shocked and surprised to see another regional mall proposed in Gwinnett County. At 1.7 million sq. ft., the concept that the Mall of Georgia is proposing - upscale Nordstrom, Lord & Taylor, entertainment - is something very special and unique and what they bill as the next coming of retail. That's going to be a significant magnet for the local populous. The Mall of Georgia demographics put the edge of the trade area in South Carolina, and I would think that the Mills Corp. clearly has a trade area that large. So the concentration of retail will be staggering.

We are looking at our project as being a traditional mall peripheral power center opportunity, much like you see at North Point, at Gwinnett Place, at Town Center, at virtually every regional mall in America. The difference in our case, as is the case in most projects around the Mall of Georgia, is that we are able to congregate 600,000 sq. ft. on one site and provide a multi-use component.

SCW: Erick, what has been the local government reaction to the Mills proposal?

Collazo: Somewhat supportive. They are concerned about the traffic issue and the air-quality issue. We met with all the local commissioners, and we are addressing some of their concerns.

John Lumpkin: In terms of development in general in the Southeast, it would be interesting to have a dialogue this morning other than the site specific. I'd be interested in talking about necessity retail service-oriented businesses. Our business is necessity, and in necessity goods it is positive.

Jeff Fuqua: Speaking to that topic, five years ago before Publix was in this market, Kroger had its market share and was dominant, but Publix came in and opened 60 stores on top of them. Kroger is still the second largest chain in the country. This is still their most profitable market, even after Publix opened 60 stores on top and this was their most profitable market before Publix came in. So you have to wonder, you think there is overbuilding in the grocery market? They are still very profitable.

Collazo: I have seen where there are grocery delivery services that have started up where you can actually order your non-perishable groceries through the Internet. Do you think that will affect your grocery business as far as your development?

Fuqua: I talk to the grocery guys, and they don't think so. They are set up to do that kind of thing if they have to, and they do that a little bit. They don't think it's going to be such a big deal.

Michael Quinley: Publix, Kroger and Harris-Teeter offered that service. Shoppers could fax in their lists and someone would deliver the groceries. We asked, "What impact is that going to have on your store potential in the next year?" They said "none." They said that is just another customer service that we need to offer to stay competitive. The Internet, the e-mail and that whole medium will continue to go that same way.

Toro: Not only in non-perishable grocery goods but also hard goods. There was an announcement that Home Depot is about to jump on the Internet and do sales. Circuit City and Best Buy, electronics retailers and anybody else that sells hard goods have the potential to do business on the Internet. We're concerned about the kind of impact that may have on the location of stores.

Quinley: It speaks to how a lot of retailers are going to start to adapt to technology as well as product type. On the food side, you start to see bigger departments being devoted to deli, florist and pharmacy; it starts to impact the overall development of a neighborhood center because you've got a Kroger now that wants to have a pharmacy, a florist and a bank. You've just eliminated some other uses you've got in your overall development.

Fuqua: We opened up a Publix at Perimeter at Hammond Drive and Peachtree-Dunwoody, and that's essentially an office district. A lot of people thought that it would not be a good grocery store site. They opened up way above projection, and that's because they have an enormous florist area that caters to the three major hospitals there. They have an enormous deli/prepared foods area, and they cater to all the office parties. Not a lot of people live at that intersection, but there are 7,000 people going home after work. They are stopping there before they go home.

SCW: Mitch, talk to us about the former Atlantic Steel site (situated in Midtown Atlanta adjacent to the confluence of I-75 and I-85 and developed by Jacoby Development). How big is the project, and when will it be completed?

Mitchell Jacoby: We are looking at a mixed-use project. It's over $2 billion project and will probably take 15 to 20 years to bring to fruition. It includes approximately 15 million sq. ft., comprising 6 million sq. ft. of office, 1,000 hotel rooms, 5,000 apartments, 1.5 million sq. ft. of high-tech, and we are talking about doing a research triangle with Georgia Tech. We've talked to several large groups that are very interested in coming aboard with us. I think Post Properties is committed to 1,200 apartments.

We got involved in the Atlantic Steel site a little more than a year ago. It is a project that my brother Jim floored me with, as he does many times. He saw the need, as have a lot of people over the years, for that area but no one really had the fortitude. What really scared them most was the environmental hazards and traffic patterns, how to get to the project because of the interstate that goes right by it and cuts it off from downtown and Midtown.

Everyone sees the need for cleaning that project up, everyone sees the need for a brownfield reorganization. I don't think there is another piece of property like this in America - being at a major downtown intersection.

SCW: How many acres is this?

Jacoby: It is 138 acres, and Georgia Tech has about 20 to throw into the computation.

SCW: Moving on to REITs. Michael, if you weren't investing in your own REIT, what REITs would you be looking at and why?

Quinley: JDN. We look at that all the time, and if I was going to do any investing, I like Weeks Corp. a lot.

William Kerley: We at JDN would focus on those REITs that develop because it is our belief that development is what creates the shareholder value. Mills, Cousins, ourselves, companies that focus on the development process in retail. Or Post Properties would be another good one in apartments, and Weeks in industrial. If you look at real estate, it is the development process that creates the value, not necessarily the long-term ownership.

SCW: Some industry experts say that the focus on REITs has been acquisition to this point, but that as we move forward property management is going to take on heightened importance. Do you concur?

Kerley: Not really. What we would concur with is that management of the real estate process is extremely important, but if you are talking about management in the sense of caretaking of the properties, no. Everybody in this room does a good job of managing properties. What creates value is taking an existing property, whether it's raw land or an existing shopping center, and changing the nature in some way either through new development or redevelopment. If it's management in that sense, yes. If it's property management in the sense of making sure rents are collected, no.

Lumpkin: How you manage that real estate, how you develop and process, how you integrate all that together is important. The whole ball of wax.

SCW: Projects such as Ybor City in Tampa and Atlantic Steel in Atlanta represent redevelopment of infill areas. Are we moving away from the trend of development farther and farther out from the cities?

Toro: We have a project in Fort Walton Beach, Fla., where we took an old school site that had been relocated, purchased it, tore it down and built a shopping center. It is difficult now to find infill opportunities that are cost-effective because of the cost of acquiring land and - in some places - cleaning it up. In Richmond, Va., for instance, we carved out six little parcels, sewed them all together and came up with a 450,000 sq. ft. site that is built out virtually on all sides. It is much more difficult and costly, but typically the rental income is higher and supports the higher project cost.

Quinley: We have several projects on our drawing board right now that are all urban infills, and they are vertical construction. They are mixed-use with office, apartments and retail. Of what we have on our drawing board, probably six of the 14 properties are urban infill developments, all vertical construction.

SCW: John, over the past 25 years, Edens & Avant has developed and renovated over 8 million sq. ft. of retail space. What have you learned during that time about renovating? What works and what doesn't?

Lumpkin: If you can take a property and add economic value to it, that can be a better proposition than going out and developing from the ground up. Recycling properties is important. As grocery anchors expand, as different formats come into play, the ability to take existing real estate and expand or reconfigure it helps you keep the tenant and enhance your economic return. In the last 18 months, we expanded or are in the process of expanding some 14 grocer anchors in lieu of having to move them.

SCW: From a historical perspective, are grocery-anchored centers more popular than ever and why?

Lumpkin: Well, it's necessity. It's always been our focal point.

Fuqua: Compared with other retail investments, it's more attractive. Your grocery store tenants typically have pretty good credit, and they make up the bulk of your cash flow, so you can lose small tenants and still cover your debt service. They are a staple.

Kerley: We all have to agree that given your comments earlier about Publix coming into town and putting down 70 stores, Wal-Mart building superstores that drive huge grocery volumes, some grocers are going out of business. It just doesn't happen to be particularly the grocers that we own. It tends to be the independent grocer at the fifth, sixth or seventh position in the marketplace. That's what creates the obsolete retail. So, I wouldn't necessarily 100% agree to the proposition that a grocery-anchored center is therefore safe. It depends to a great degree on who the grocer anchor is. If you have one of the top three dominant players in the market or a very strong niche player like Harris-Teeter here in Atlanta, you probably have a safe grocery-anchored shopping center. If it's an independent grocer, you may well lose that grocer to competition.

SCW: Barry, what is the appetite for power centers in greater Nashville?

Barry Dotson: There is a lot of activity in the middle-Tennessee area, particularly Nashville and its surrounding areas - Franklin, Brentwood, Cool Springs is exploding. I know of four power centers that are either coming out of the ground or will be coming out of the ground very quickly. These are good-sized projects, probably 250,000 sq. ft. up to 600,000 sq. ft., so we may see 1.5 million sq. ft. to 2 million sq. ft. just in Cool Springs alone. In Hickory Hollow, we've got 160 acres. The first phase will probably have about 800,000 sq. ft. In the Rivergate area, there are two projects under way. The Mills project is an enormous project at Opryland.

SCW: When you are locating a power center, what are the most important criteria?

Dotson: Power centers obviously require more property, excellent accessibility, visibility. We try to get the best location with the easiest access for the customers. The Nashville area is just coming of age. We've just now seen some of the anchors that we haven't had in the past.

SCW: Who are those anchors?

Dotson: Target's been there for some time, but they are making some changes. Wal-Mart is moving up in some situations to the super Wal-Marts. The warehouse clubs are getting competitive. The theater groups have just gone crazy to some degree in our area. In one fell swoop, we're seeing these 60,000 sq. ft. to 100,000 sq. ft. entertainment centers just go up.

SCW: Marty, do you concur with what Barry said about site location?

Marty Navarro: We take a similar approach in looking at properties for investment. However, we believe in use-determined value. Our job is to determine where the demands are in the marketplace and what uses are not met, and then take that approach to look for acquisition opportunities. Once we've determined that there is a market with an unsatisfied demand, such as home improvement or entertainment retailing or grocery, we'll send our local people out to find the right site.

Often we find ourselves in a situation where the appropriate site might be an industrial park, so even in the land business we are in the redevelopment business. We have a 60-acre tract of land across from the Citadel Mall in West Ashley in Charleston that had low-end apartments on the property, and it's really our job to come in and redevelop that property. We are increasing and improving the infrastructure by bringing roads in, doing some demolition and keying it up for local developers or national developers and users.

SCW: What time period do you look at once you purchase that property to make it, to generate income?

Navarro: Typically it's an 18-month process to get a return of the investment and a 36-month to 40-month return on investment. The yields so far have been above average.

Jacoby: That's something that most of us don't want to do because we are not speculating. That's an area of risk/reward business.

Navarro: It is a combination of the high-tech approach we take, and the hands-on local knowledge. Combining the two really does shorten that investment period and reduces the time-risk factor traditionally associated with land investment.

SCW: Do retail REITs face any obstacles different than other REITs?

Kerley: Retail REITs or retail companies or owners over the past couple of years have faced some misconceptions by investors. You would be amazed at the number of times I've heard from investors and analysts that they are certain by looking at statistics that the United States needs no additional retail, that it is clearly overbuilt. Yet, if you go and talk to the retailers themselves and you go and study individual market demographics, there is a very clear need for new retail.

SCW: Some REITs believe that Wall Street tends to categorize them only as strip centers, power centers, etc.

Kerley: We have a shopping center in Greensboro, N.C., that has a Target, a Kohl's, a Kroger and then many local shop tenants. Is that a power center, a discount center or a neighborhood center? The answer is really yes, it is. It's a very good retail center for that market. That mix may not work everywhere. It works extremely well at that shopping center. I am sure that people here have seen that trend of blending, and we just can't make statements that power centers are good or bad.

Lumpkin: Barry was talking earlier about the project he has. I was thinking that it is all of the above. There is a market for those different formats and different tenant types.

Dotson: We are seeing some of the major department stores, high-end department stores talking to us about going into, for a lack of a better word, strip centers or power centers. In the past, they wouldn't even think about it.

SCW: What's prompted them?

Dotson: Lack of opportunities in regional malls.

Navarro: Belk is a good example of that too, trying to go into some of the smaller markets where there are smaller prototype stores and doing a real good job at it.

Dotson: Absolutely. In Nashville, we have two major department stores talking to us that do not have an opportunity of going into either of the malls. In the Hickory Hollow area, they have the ability to cast out all the players there such as J.C. Penney and Sears. This is a fashion department store, somewhere in the neighborhood of 140,000 sq. ft.

SCW: Jeff, in terms of entertainment, what's the trend beyond the movie theater?

Fuqua: If you think about true entertainment centers, you could probably count only 25 in the country that are bona fide entertainment centers. A theater with restaurants up front is an entertainment concept, but it is not an entertainment center. If you look around, there is not a center like that in Atlanta. There are probably three or four that opened in Florida in the past few years, but there really aren't many bona fide entertainment centers with all the theaters, all the theme restaurants and all the themed retailers.

In this Ybor City project, we were working with 50 different tenants that I've never heard of before. They were so obscure, and so many stores were so unusual, but it's really creating a village environment.

SCW: Can you give us an example of one of these obscure shops?

Fuqua: There are restaurants like Tu Tu Tango. You just have never seen them before, except in these types of concepts such as Coco Walk.

SCW: What's going to happen to these movie theaters if as many of the megaplexes go up as planned throughout our cities?

Fuqua: Just to give you an example, at North Point Mall AMC did a new theater four or five years ago. It was 14-screen with partial stadium seating. They would like to get out of that and do a 24-screen, all-stadium seating complex. That technology is already out of date. I don't know if that could happen again, but it has killed all of the small players. You are going to go to the best theater in the market. A five-screen, first-run theater, you can get the same film or get as good a film as the 24-screen megaplex, but you're seeing all the tired theaters. They are going down.

Navarro: Greenville, S.C., for example, has had 30 screens, which everybody thought was adequate. And then Cobb Theatres came in. Of course, Regal Cinema bought the Cobb project and came out with a 20-screen, stadium-seating project in a well-located area along I-85. It has really changed the landscape. Now you drive past the Greenville Mall and it's packed.

* Erick Collazo, vice president and development director, The Mills Corp., Arlington, Va.

* Barry Dotson, chief manager/ chairman, Phoneix Associates, Murfreesboro, Tenn.

* Jeffrey Fuqua, president of development division, The Sembler Co. St. Petersburg, Fla.

* Mitchell Jacoby, vice president of leasing, management and construction, Jacoby Development, Atlanta

* William Kerley, senior vice president and CFO, JDN Realty Corp., Atlanta

* John Lumpkin Jr., president and COO, Edens & Avant, Columbia, S.C.

* Marty Navarro, vice president of sales and marketing, RealtiCorp, Greenville, S.C.

* Michael Quinley, vice president of development, Cousins Market Centers, Atlanta

* Mark Toro, president, North Americian Properties LLC, Atlanta