The soft real estate market has made investors and lenders wary of backing high-risk ground-up developments. Redevelopments, however, remain in vogue. Entitlements are secured. Buildings and parking lots are in place. And existing tenants guarantee at least some cash flow. The challenge for owners is to turn the projects into something special. The following are four examples of stellar small center redevelopments. The projects spotlighted are 500,000 square feet or less. (For examples of large-scale developments, check our February 2008 feature “Regional Mall Makeovers”) Each project has its own unique twist. One exemplifies the importance of public/private partnerships. Another shows how it is possible to work on a brownfield site. The third challenged the developer to work with 16 individual structures. And another looks at how mixed-use trends can be incorporated in very small properties.
WESTBEND
The mixed-use WestBend development in Fort Worth, Texas, traveled an arduous four-year road to ground-breaking. The cause: the complexity of uniting three parcels of land held by different owners.
Spearheaded by Fort Worth's Trademark Property Co., the $100 million project on the banks of the Trinity River will feature 100,000 square feet of retail and restaurants, topped by a 135-room hotel and 30,000 square feet of class-A office space.
WestBend sits in a promising section of Fort Worth. “This strategic area of Fort Worth has been underdeveloped for years,” says Terry Montesi, a founding partner with Trademark. “We hope to be the catalyst for continued redevelopment to the area.”
Trademark's senior partner Tommy Miller credits the city of Fort Worth with recognizing the need for redevelopment in the area and shepherding WestBend to fruition. It owned an underused parking lot that it sold to Trademark, helping to form the development's seven-acre parcel of land.
A partner in the project held the second parcel, and the owner of the third, a steakhouse, will incorporate its restaurant into WestBend.
The city also injected crucial capital into the project by agreeing to share WestBend's tax revenues with Trademark.
Location: Fort Worth, Texas
Owners: Trademark Property Co., RP Partners and Consolidated Restaurant Operations Inc.
Developer: Trademark
Size: 350,000 sq. ft.
Cost: $100 million
Architects: Field Paoli, Perkowitz + Ruth, Gensler and Gideon Toal
Completion date: 2010
STAFFORD PARK
With its brand-new big-box stores and expansive parking lot, nothing about the mixed-use Stafford Park development in Stafford Township, N.J., hints of its past — having two leaky landfills and being home to several dozen snakes protected by state law.
The landfills have been sealed, the snakes relocated and the project has inspired Stafford Park's developer, the Walters Group, to take a greener approach to its business.
Stafford Park “really changed our whole outlook and philosophy on how we build things,” says Ed Walters, president of the Barnegat, N.J.-based company. The $400 million Stafford Park will conform with Leadership in Energy and Environmental Design (LEED) standards. The 100,000-square-foot development, with a 90,000-square-foot lifestyle center and residences is expected to be completed next year.
The Walters Group wasn't always as gung-ho about greenness. It initially sought LEED certification to help Stafford Park win approval from the New Jersey Pinelands Commission, an agency that protects the surrounding Pinelands Natural Reserve.
Stafford Park hit a snag when 60 or so Northern Pine snakes were found living in the landfill where the project now stands. Since the state recognizes the snakes as a threatened species, Walters plans for the site would have been spiked. Working with an expert, however, the firm transferred the snakes to three custom-built subterranean burrows at an adjacent state forest.
Also, the $31 million rehab required sealing the landfills (to prevent runoff) and installing a ventilation system. The Walters Group plans to enhance Stafford Park's LEED certification by installing solar panels atop three of the center's stores to provide 30 percent of their electricity. And, a proposed 6-megawatt solar farm and wind turbines could boost the project's renewable energy to 50 percent of its total usage.
Project designers, Cleveland-based Herschman Architects, anticipated some hurdles but “it hasn't been as bad as we thought,” says Eric Cox, project manager with Herschman. “Based on the points we did achieve, I would say it's definitely been a positive experience.”
“I spent my whole career doing things a certain way,” says Walters, “Then, all of a sudden you look around and it's time to look at how we build things that are more environmentally sensitive.”
Location: Stafford Township, N.J.
Owner/developer: The Walters Group
Size: 100,000 sq. ft.
Cost: $400 million
Architects: Herschman Architects (retail), The Martin Architectural Group (residential)
Completion date: 2009
CUMBERLAND CROSSING
Things have come full circle at Cumberland Crossing, in Valparaiso, Ind. After selling the land in 1970, Vale Park Development LLC once again owns the 173,000-square-foot shopping center.
Much has changed in the almost four decades since. Once on the outskirts of Valparaiso, the Cumberland Crossing was further exiled by a highway that routed shoppers to new big-box centers located more than a mile away, says Mike LaRue, broker for Cumberland Crossing. As time passed it fell into neglect and was sold to three different developers who invested little in its upkeep.
Potholes studded the parking lot, buildings needed maintenance and storefronts sat empty, says Bill Hanna, Valparaiso's city manager. “It just was not attractive from a consumer standpoint, and we felt like it was affecting property values in the adjacent area in a negative way.”
In 2005, city officials decided it was time to turn the area around and sought a redeveloper for the site it had acquired through eminent domain. The next year, Vale Park Development, a unit of Valparaiso-based Urschel Development Corp., bought the land. Today, Vale Park, working with Naperville, Ill.-based Hitchcock Design Group, is rebuilding the property from the ground up as a $35 million lifestyle center. Vale Park donated the land for the revamped facility, which is slated to open in May 2009. Burger King, Dairy Queen and Hallmark are among some of the tenants renovating stores to complement Cumberland Crossing's makeover. Now, Vale Park hopes to attract an upscale supermarket. Phase two of the development will begin in 2009 and a potential third could incorporate building on an adjoining site occupied by Kmart.
As the city of Valparaiso envisioned, Cumberland Crossing's burgeoning redevelopment is positively influencing its surroundings. Developers are upgrading two nearby shopping centers, which is also enabling rent increases to reflect improvements as well as Cumberland's higher rates, says LaRue.
The city too, is helping to pave Cumberland Crossing's renaissance by improving the roads leading to the center and putting in a new traffic signal.
Now the revamped Cumberland Crossing can serve the community's retail needs as intended almost 40 years ago.
“It's one of those kinds of things that you can enjoy being involved with because it actually needed to be done,” says LaRue. “It's filling a real need — it's not trying to create a need.”
Location: Valparaiso, Ind.
Owner/developer: Vale Park Development LLC
Size: 173,000 sq. ft.
Cost: $35 million
Architect: Hitchcock Design Group
Completion date: 2010
METROCENTER MALL
When Highland Development Co. acquired numerous parcels of land totalling 28 acres in Phoenix encircling the Metrocenter Mall, combined, the properties on them were 75 percent vacant. That alone, not to mention the acquisition comprising 16 separate buildings, posed special challenges.
La Quinta, Calif.-based Highland paid more than $32 million for the seven parcels and has resold 14 of the buildings. It was able to enhance its profits by dividing the parcels into single-tenant properties with its own parking and investing nearly $4 million in improvements to lure a higher-caliber roster of tenants that includes Shoe Pavilion, Wells Fargo and Red Lobster.
“Each one had their unique characteristics and challenges in terms of leasing,” Highland president Greg Hoxworth says. “Since we were dealing with so many different properties, we had to have a much broader view of who the tenants could be and had to position each property appropriately to attract the tenant.”
Hoxworth notes Metrocenter Mall's previous owner, Westcor, got sidetracked from maintaining the mall's tenancy when the firm was being bought out by Macerich Co. in 2005. Further complicating matters, tenants fled Metrocenter to relocate at centers in the fast-growing outlying suburbs.
Highland based its investment in part on expectations that Macerich's purchase and a $40 million renovation would boost traffic to the 1.3-million-square-foot Metrocenter Mall and, by extension, the ancillary properties. Macerich's efforts have worked to draw more inline tenants to Metrocenter, Hoxworth says, but Highland has had a tough time leasing its buildings, which has been exacerbated by the mall's struggle to secure additional anchors.
The downturn and its negative impact on cap rates has also reined in Highland's profits. Add to that, Hoxworth says, Arizona's crackdown on undocumented immigrants has further hindered leasing activity by driving away an important customer base.
But Highland is “probably as well equipped as anybody” to lower its rates in an effort to attract tenants, says Brian Ward of Phoenix-based Retail Brokers Inc. The firm is seeking to lease about 10 spaces in four of Highland's buildings. The firm has reduced rates by as much as 25 percent.
Location: Phoenix, Ariz.
Owner/developer: Highland Development Co.
Size: 375,000 sq. ft.
Cost: $4 million
Completion date: Summer 2008