Making a megaplex theater the center of its retail concept has been the ticket to success for Boise, Idaho-based Hawkins-Smith Commercial Developers.
Hawkins-Smith entered the entertainment-center market in a big way in December 1997 when the Boise Spectrum -- anchored by the 21-screen Edwards Cinemas -- lit up this medium-size market in southwest Idaho.
Sporting seven miles of neon, the multiplex theater and entertainment complex sold 600,000 tickets in 60 days. That's nearly two tickets per person in the metropolitan area, according to Steven C. Smith, who joined Gary R. Hawkins as a partner about a decade ago. And Boise itself, though by far the state's largest city, has a population of only 165,000.
With 106,000 sq. ft., the Edwards 21 Cinemas features 4,500 seats, wall-to-wall screens, 10 indoor box offices, stadium seating, state-of-the-art digital sound, and architectural themes for each of the five main theaters, which range from Egyptian to Chinese, Grand Palace and Hollywood. Other amenities include handpainted murals, a mirrored ceiling in the lobby, a 100-foot-long concession stand and two satellite concession stands at each end of the building.
Adjacent to the theater are 46,000 sq. ft. of retail space and a 3-D IMAX theater currently under construction. The 30-acre site also includes a 150-room Ameritel Inn, which opened in October, and several restaurants, including Cracker Barrel, Chuck-A-Rama Buffet and McGrath's Fish House. Yet another restaurant, On the Border, is under construction.
The focal point of the $60 million complex, which is drawing traffic from a 25-mile radius, is a sculpture of a family flying a kite. Every few minutes after dark, the fiber-optic string in the kite changes colors. The developers have taken to heart an old saying in the theater business: "A show begins on the sidewalk."
Sea change in sentiment By all accounts, the Boise megaplex has exceeded expectations. The theater generated the 14th highest sales nationwide for "Titanic," which was playing in five of the megaplex theaters on opening weekend. The Boise theater also has become one of the top money-makers in the Edwards chain of 85 cinemas.
"The Boise Spectrum has surprised everybody in the industry," Smith says. "It changed the view of mid-markets. They had no idea Boise could do what it's done. The increase (in ticket sales in Boise) has gone up 47% since before it opened. Boise absolutely surprised everybody."
At first, Hawkins-Smith wasn't interested in the theater concept. The prime property at the southwest corner of Overland Road and I-84 -- Idaho's busiest freeway interchange with a traffic count of 115,000 cars per day -- initially was intended for the area's first Wal-Mart store.
"It took so long to build the interchange, Wal-Mart decided to move down the street," Hawkins says. "We had been contacted by four theater chains in the meantime to go in there. We went around and looked at other complexes."
One of the four theater suitors was Edwards Theatres Circuit Inc., a company founded in 1930 that claims to have opened the country's first multiplex and to be the nation's largest family-owned and operated theater chain.
"(Hawkins-Smith) had tied up one of the better pieces of property in the market, so we started negotiating with them," says Mark Stoner, director of real estate for the Newport Beach, Calif.-based theater company whose name appears on more than 80 theaters comprising 650 screens. In late 1995, Edwards had opened the 21-screen Irvine Spectrum in California, one of the first megaplexes in the country.
Hawkins-Smith previously had been concentrating on developing power centers, and Smith's initial reaction was that retail and theaters don't mix. "I was the one who was negative," Smith admits.
But the theater owners persisted. "These theaters kept calling us," Smith says. "We flew to Dallas to look at the AMC Grand and we saw (Edwards') Irvine Spectrum -- and then we were convinced."
The duo was able to move fast, in part because of the flexibility that comes with being a general partnership rather than a corporation. "My partner and I can be on a plane in an hour," Smith says. "We can fly out to a site and have it under contract within two hours. There are no board of directors, no stockholders to answer to."
'Like playing Monopoly' Not only are Smith and Hawkins business partners, but they also have been buddies since Boy Scout days and continue to vacation together. The only difference is that now Smith looks forward to going back to work after a vacation -- unlike the days when he was a dentist.
Hawkins, a Brigham Young business graduate, started out in brokerage and in 1976 formed his own commercial real estate brokerage and development company, Hawkins & Associates, in his hometown of Boise.
For the next several years, Hawkins developed primarily neighborhood shopping centers and office complexes. He and Smith joined forces to develop several medical office buildings in the early 1980s, and Smith eventually sold his dental practice to become a full-time partner in the real estate company.
"It was like playing Monopoly all the time," Smith says. "I really fell in love with it." His favorite part is going to a new city and looking for a piece of ground, finding the site and negotiating for it.
The partners now laugh, however, about Smith's first attempt at acquiring property to build the area's first power center. Smith went door to door to individually buy 67 houses and seven vacant lots.
"He bought a whole subdivision that way," Hawkins says, laughing.
"I didn't know any better," Smith says. "I was a dumb dentist. Now, I'd tell you that you were crazy."
The purchases cleared the way for development of Franklin Towne Center, which offers 555,000 sq. ft. of retail space and is Boise's second largest retail center.
In turn, the development launched Hawkins-Smith into a concentration on power centers in bigger cities, Smith recalls, still a relatively new concept in 1987 when the Franklin Towne Center opened.
Since beginning to specialize in retail centers, Hawkins-Smith has developed long-term relationships with more than 60 national retailers, including Wal-Mart, Staples, Albertson's, Best Buy, Borders, Office Depot, Michaels and Walgreens.
The pace has quickened considerably for the company in the past few years. "We're normally satisfied with four or five projects a year; right now we have 26 under construction or in some phase of construction," Smith says.
As an owner-developer, Hawkins-Smith is involved in everything from site selection through construction, leasing and property management. In the past five years, the company's brokerage and leasing division has leased and/or sold for clients more than $100 million of property. The company also manages close to 1 million sq. ft. of space in the Boise area. The company has developed 70 total projects and has nearly another 1 million sq. ft. under construction.
While the company has developed property in communities as small as 25,000 residents, it prefers areas with a population of 350,000 to 1 million.
"We'll continue to look at secondary markets. There's more opportunity there and it's what we're comfortable with," Hawkins says, adding that the firm avoids "glamour markets" dominated by larger developers "who can live with less return than we can."
Theaters build traffic The retail markets in Idaho, Utah and Oregon have been exceptionally strong, says Hawkins. Space at the Boise Spectrum is leasing in the $20 to $22 per sq. ft. range, which includes taxes, insurance, common area maintenance and security.
Encouraged that a concept like Boise Spectrum can work in secondary markets, Hawkins-Smith has taken the idea on the road. By the end of this year, the company will have developed nearly 4 million sq. ft. of commercial property in 11 states in the South and West, with the majority of projects in Idaho, Oregon and Utah.
Hawkins-Smith soon will begin construction on an entertainment center on I-40 in North Little Rock, Ark. Located on a 34-acre site, the project will be anchored by a 22-screen Edwards theater and will include two or three hotels. The company also is developing centers anchored by 14-screen complexes in the Idaho cities of Idaho Falls and Nampa.
"The entertainment center is what's hot now; for a while it was the power center," Hawkins says, adding that he expects the trend to last at least another few years.
Edwards' Stoner also predicts the trend to continue, especially in secondary markets. "Certainly there are a lot of markets becoming saturated," he says, "but there are also a lot of markets that have been overlooked across the country."
Edwards this year will design a total of 14 theaters, varying in size from 14 to 22 screens, for a total of 222 screens. The Boise Spectrum was the first Edwards theater outside California.
"We're looking at a variety of opportunities. It's just a question of which to move forward with," Stoner says, noting that entering more entertainment-oriented centers has become a priority for Edwards.
With good reason. An ICSC study shows a movement away from conventional mall development toward mixed-retail and entertainment concepts catering to consumers with less time. Cinemas are considered excellent traffic builders and can strengthen a center as a destination as well as differentiate it from a variety of competitors, according to a study of 11 centers.
In fact, the decision to build the Boise Spectrum was based partly on research suggesting that moviegoers are more affluent than general shoppers and are likely to make a purchase before or after seeing a movie.
Megaplexes (theaters with 16 or more screens) have become the industry standard since AMC Entertainment Inc. opened a 24-screen cinema in Dallas in 1995, according to the Wall Street Journal. Although this wasn't the first megaplex, it began the boom. At the end of 1997, the country had 149 megaplexes with 2,801 screens, according to research by ACNielsen EDI Inc. Box-office receipts reached $6.2 billion last year.
"We've never seen anything move as fast as theater complexes have moved across the country," Smith says.
Tenant-driven approach The Boise Spectrum complex has more than 600,000 sq. ft. of GLA, with another 25 acres poised for development across the street.
In addition to the Edwards 21 Cinemas, retailers in the Boise complex include a sports bar, do-it-yourself pottery studio, art gallery, video arcade, fast-food vendors, and shops specializing in comics, movie memorabilia and candles.
"We're learning as we're going," Hawkins says of the tenant mix. "There seems to be lots of demand on the food side. For retail, you need more mass to get more retailers."
There is no magic formula for success when it comes to the balance among screens, retail outlets and restaurants, Stoner says: "Every market is unique. You really have to evaluate it in regard to competition and demographics. From there, you develop the concept."
Edwards is completing an adjacent 280-seat 3-D IMAX theater due to open in March. The screen in the $2.25 million theater is six and a half stories high and 85 feet wide. The film frame is 10 times that of a conventional movie.
While Hawkins-Smith owns the projects, Edwards is in charge of the theater concept as well as the design. Hawkins-Smith hires local architects for its projects, with the exception of the theater design, which is done by Edwards. "They do a beautiful building," Hawkins says.
Edwards also has found the relationship beneficial. "They're an excellent company," Stoner says of Hawkins-Smith. "They're responsive to what our requirement needs are, and they are a competent and qualified developer. They understand the markets we're working in."
Indeed, Hawkins-Smith prides itself on maintaining goodwill with tenants. "We've always been tenant driven," Hawkins says. "Wherever tenants tell us they want to go, we go there." The company, which self-manages the majority of its properties, has 58 employees, mostly in Boise, though satellite offices have been established in Portland, Seattle, Albuquerque and Tulsa because of client demand.
Another characteristic that sets the company apart is that it holds on to the property it develops. "We don't sell many things," Smith says. "By the end of the year we will have developed 4 million sq. ft., and we will have retained over 2 million of that."
The company aggressively seeks to attract employees with diverse backgrounds, including specialists in the disciplines of development, lending and property management.
Neither of the partners can predict what the future holds for the retail arena, but they agree it won't be boring.
"In the past 10 years, retail has changed more than in the 20 years before that," Smith says. "None of the category-killers -- PetSmart, Home Depot, Staples -- were even around 12 years ago. It's a brand-new industry. The next 10 years will be every bit as interesting."