Brett Hutchens: Why mixed-use lifestyle communities aren't going anywhere soon
There's sketchy agreement in the development community about exactly which components are needed to build a lifestyle project. Brett Hutchens, president & CEO of Casto Lifestyle Properties, says the product type, initially defined by tenancy, has in recent years evolved into a new definition that includes office and residential. An affiliate of Casto Corp., which has been in business since 1926, the company has a portfolio of more than 20 million sq. ft. of commercial property and nearly 7,000 residential units throughout the Midwest and Southeast.
In September, Casto entered into a joint venture with JPMorgan Asset Management's Strategic Property Fund, which is acquiring 50% of Casto Lifestyle Properties' interest in five of its existing properties that have an estimated value of $300 million. With Casto's expertise and JPMorgan's strong financial foundation, Casto plans 16 new lifestyle projects totalling $300 million over the next seven years. Recently, NREI spoke to Hutchens about the evolution of lifestyle properties.
NREI: How does Casto define lifestyle centers?
Hutchens: To me, it's not defined by the tenancy. It's defined as much by the uses as anything else. And we think that it should be mixed-use, and if it is mixed-use and you have a place to work and you have a place to live and a place to shop and be entertained, then that in and of itself creates a lifestyle environment.
NREI: Where does Casto find opportunities in this niche?
Hutchens: We get calls from communities, probably one a week, that would like a mixed-use project. Another example was when Wal-Mart recently came to us because it was having a very difficult time getting a property that it owned zoned. But Wal-Mart officials believed that if it's part of a larger mixed-use project — and the Wal-Mart store could be scaled down — then they could probably get it approved. And I think they're right.
NREI: Why do you think communities want these lifestyle projects?
Hutchens: Lifestyle projects are very popular among planners today because of the heavy vehicular traffic. It's interesting that in the late '50s and early '60s, the zoning codes were rewritten to separate all of the uses. You had office over here, residential over here and retail over here, and it caused people to drive a lot. Then with the outer belts that kept coming in, the cities just kept moving farther out and the drive time between all of those functions increased. The concentration today is to minimize that drive time.
NREI: How has lifestyle development changed over the past 10 years?
Hutchens: I think the big surge in lifestyle development at the outset was that it was defined more by the tenancy than it was by the type of development product. It was all about Talbots, Ann Taylor and Chico's, and all of those tenants that landed in those projects that were called lifestyle centers. We're probably in the segment that looks at these things as mixed-use with a grid system, with a street system where people can actually live. There are many, many lifestyle centers that are just defined by tenancy that would not have office and would not have residential. But in the last two years, the product I've seen is more like what we're doing, and more in the tone of mixed-use. I think that's where it's headed.
NREI: What kind of a return is Casto realizing on lifestyle communities?
Hutchens: At the time we did Winter Park Village , we expected over 10% return on cost and the project is exceeding that goal.