Forest City Enterprises is gearing up for one of the busiest development cycles in the company's history.
Forest City expects to begin construction on nearly 5.5 million sq. ft. of retail space in 2000. "What has distinguished Forest City over all these years, certainly over the last 40 years, is the fact that the company's built on real estate development," says Charles A. Ratner, president and CEO of Forest City Enterprises Inc. "We believe acquisition is an important part of the real estate business and an important part of growth. But we believe the place where we make the greatest difference is finding opportunity for ground up development."
Forest City Enterprises Inc. is a $3.8 billion NYSE-listed real estate company based in Cleveland. The firm is principally engaged in the ownership, development, acquisition and management of commercial and residential real estate throughout the United States.
The company's portfolio of property investments includes interests in 16 million sq. ft. of leasable space in 42 retail centers, 34,032 residential units in 114 apartment communities, 7.2 million sq. ft. in 24 office buildings and 2,936 rooms in nine hotels. This diverse portfolio is operated by regional offices in New York, Los Angeles, Boston, Tucson, Denver, Washington, D.C., and San Francisco.
The volume of construction projects in the pipeline is the culmination of several years of hard work. "These are not projects that we have been working on just in the last year or two," says James A. Ratner, president of Forest City Commercial Group Inc. "These projects are a result of a plan that we devised many years ago." For example, Forest City Ratner, an affiliate of the company, kicked off its retail development program in New York City in 1994. This year, the company expects to have $1.6 million in retail projects under construction in the New York area.
Forest City also continues to immerse itself in planning for future projects. The company has been selected to develop a regional shopping center in Rancho Cucamonga, Calif. The approximately 1 million sq. ft. center is tentatively scheduled for a 2005 opening.
"We are very aggressive in our development," says Emerick J. Corsi, senior vice president of development, Forest City Commercial Group Inc. "We have a good game plan in action, and we are very clearly focused on our current projects."
Target markets The United States is certainly adequately stored, if not over-stored. But Forest City still sees ample room for new development. "The focus of our development is really on U.S. hot spots and filling the voids," Corsi says.
Forest City focuses on growing markets, such as California's Inland Empire. The company opened The Promenade in Temecula in October. The 780,000 sq. ft. mall is within a 20-minute drive for 340,000 residents of the region. The market was underserved in retail and presented a rapidly growing residential base. "Those two factors made this location look very good," Corsi adds. "Results from the mall's first months show that our strategy was right on target."
The company's focus on underserved markets has sparked projects across the country, ranging from New York to Utah to San Francisco. "The trick is to find market segments that are under-stored and underserved," Charles Ratner says.
Forest City Ratner's aggressive retail development in New York City is a prime example of that strategy. The boroughs of New York, not including Manhattan, boast twice the disposable income of Chicago. Yet the residents of boroughs such as Brooklyn and Queens were leaving the area to shop in New Jersey or Long Island for lack of retail, notes Ratner.
Brooklyn, for example, had not seen a new shopping center development in 30 years. Forest City Ratner recognized the need for retail in those areas and initiated a successful retail development program in the New York City area.
Forest City also has been instrumental in re-introducing department stores and big-box retailers to urban centers across the country. "Retailers are adapting to locations that they would never have considered in the past," Corsi says. In fact, department store and big-box expansion are fueling many of Forest City's current retail developments.
"We're seeing retailers that are very aggressive. Department stores want growth, and there are not a lot of developers out there developing," Corsi says. Forest City is one of the few developers building retail centers with critical mass that attract department stores such as Dillard's, Sears and Nordstrom.
Tailor made One of Forest City's strengths is its ability to tailor projects to meet the needs of a particular community, customer base andeven site specifications. As a result, there are no prototypes at Forest City. Projects range from urban redevelopment in San Francisco to a new open-air center in Richmond, Va.
"You have to develop product that uses some commonalities, yet is custom-created for each environment," James Ratner says. For example, Forest City is building a new power center as part of its Stapleton Airport redevelopment in Denver. "We think it's going to be responsive to existing demand, as well as demand that Forest City is creating over time with its efforts to build a strong residential base."
In San Francisco, Forest City carefully designed the Market Street redevelopment project to provide a new retail base, preserve the architectural integrity of a key historic building, and link two vital economic areas' needs for that market.
In Richmond, Forest City is building Short Pump Town Center, a 1.1 million sq. ft. lifestyle center. The company decided on the lifestyle format due to the mild climate and strong demographics where household incomes average $74,000. "The only success you can have is to create a unique format," Ratner adds.
One common thread that runs throughout Forest City's myriad projects is its willingness to tackle complex developments. Complicated projects often require substantial investment in both time and capital in the early stages. Few developers are willing to assume those risks, but those are just the projects that Forest City thrives on. "We look for those projects. That's where we think we have the most value to add," Charles Ratner says.
Forest City has a successful track record in tackling problematic retail developments. That expertise also has proved to be profitable.
In addition, such challenging projects are increasingly prevalent as existing urban markets continue to mature. "We think that the urban opportunities presented in these markets keep getting stronger, and we're well positioned to take advantage of them," Ratner asserts.
New York Forest City Ratner, an affiliate of Forest City Enterprises, operates in the New York metro area. Since 1994, the company has built nearly 2 million sq. ft. of retail that includes 14 shopping centers, as well as the $100 million 42nd Street retail project. In addition, Forest City Ratner plans to have 1.6 million sq. ft. of retail projects under construction in 2000. The bulk of the firm's retail activity has been focused on New York's boroughs.
With the exception of Manhattan, New York's boroughs have significantly underserved retail. Brooklyn has a population of 2.6 million, yet is home to only five department stores. According to industry averages, for every million people in the United States there are 42 department stores, notes Sandeep Mathrani, executive vice president and director of retail development at Forest City Ratner.
Forest City's Ratner's first project in the boroughs was the Atlantic Center in Brooklyn, a 400,000 sq. ft. power center. Currently, the company is moving forward with Phase II that will add 350,000 sq. ft.
Due to limited retail supply in the area, the stores that Forest City Ratner has opened have performed extremely well. Retailers are reporting sales twice the national average, at about $450 per sq. ft., while average sales exceed $800 per sq. ft. at Queens Center Mall, Mathrani says. That success has helped Forest City Ratner woo new tenants.
The company also is currently working on a 450,000 sq. ft. redevelopment adjacent to the Queens Center Mall. The new project, Queens Place, will feature tenants such as TJ Maxx, Macy's Furniture, Best Buy and Target. The Best Buy store marks the first New York City store for the big-box retailer.
One of Forest City Ratner's best-known projects in New York is its 42nd Street entertainment and retail development, which is part of the Times Square Redevelopment. The 42nd Street project features 13 different levels of shops and restaurants, as well as an AMC megaplex, HMV Records and a Madame Tussaud's Wax Museum.
"When this project was conceived four years ago, 42nd Street was not a proven area. It was a pioneering area where many people did not have a positive imag e," says Bruce Ratner, president and CEO of Forest City Ratner.
The 42nd Street project is one of the most complex the firm has ever tackled. "We must have gone through 10 different redesigns," Ratner says. The challenge was making all of the components fit into a complex layout. Once Forest City Ratner decided to proceed, its goal was to produce a development with substantial critical mass that catered to both tourists and New Yorkers, and that also had a strong entertainment component.
Pittsburgh Forest City has two major retail projects under way in the Pittsburgh area, including a major expansion of the popular Station Square in the heart of downtown Pittsburgh. Station Square is a mixed-use project with retail, entertainment, hotel and office components. The property features more than 135 specialty shops and restaurants in 189,000 sq. ft. of retail space, as well as 433,000 sq. ft. of office space.
"Station Square continues to be a major entertainment center for Pittsburgh," says Brian Ratner, senior vice president, East Coast Development at Forest City Commercial Group Inc. The riverfront property features docking space for boat traffic, as well as a variety of restaurants such as Houlihan's, Grand Concourse, The Cheese Cellar and Hooters. Station Square is already home to one of the most successful hotels in Pittsburgh, Sheraton Station Square, and Forest City plans to add another 100-plus rooms, as well as two additional parking decks and 60,000 to 90,000 sq. ft. of street-level retail.
The expansion coincides with the city's plans to add two new stadiums. "We think now is a very good time to enhance Station Square, which is already a stronghold in Pittsburgh," Ratner continues. Station Square is billed as "Pittsburgh's place to play," and Forest City hopes to attract additional entertainment-oriented tenants, including three to five new restaurants.
In addition to the restaurants and hotel, Station Square features an outdoor amphitheater that hosts a variety of summer events. Construction is expected to start in spring or summer 2000, with completion anticipated by spring 2001.
A second Pittsburgh project is The Mall at Robinson Town Center, which is scheduled for completion in fall 2001. This is the newest development in Greater Pittsburgh's largest retailing district. Located at Parkway West and Highway 60, the mall is centered in the fastest-growing employment corridor in the region and is located just five minutes east of the Pittsburgh International Airport.
The 1.2 million sq. ft. center will be anchored by Kaufmann's, Sears, JCPenney and two other major players. In addition, the mall will serve the largest concentration of employees outside the downtown area.
One of the key advantages to The Mall at Robinson Town Center is its interstate location. Other area malls are accessed through a variety of winding roads. Because of the interstate access, The Mall at Robinson Town Center expects to draw from a wider trade area that extends into West Virginia and Eastern Ohio. The total trade area is estimated at nearly 500,000 people.
Another unique feature of the mall is that Forest City helped to build up the surrounding trade area before beginning construction. "The peripheral development came up first," Brian Ratner says. Forest City built Robinson Town Center, a 700,000 sq. ft. power center in the early 1990s. In addition, the firm sold land to big-box users such as WalMart, Sam's Club and Best Buy.
Atlanta Forest City broke ground in October on The Mall at Stonecrest, a 1.3 million sq. ft. shopping center located in suburban Atlanta. The state-of-the-art development is expected to create a new shopping destination in the rapidly expanding eastern Atlanta region.
"We're really well located," says Brian Ratner. "There are not many areas in the country where you'll find demand for shopping centers anymore, but this is one of them."
The mall will be located in a trade area that is growing faster than Atlanta as a whole. The area has seen 15,000 single-family housing starts in the past six years, and the mall is expected to serve a population projected to surpass 440,000 by fall 2003. "Atlanta is a tremendously fast-growing area," Ratner adds. "This looks like it will be the next big growth area."
Located at Turner Hill Road and I-20, The Mall at Stonecrest will showcase a multi-screen, stadium-style Regal Cinema and two levels of shopping, featuring more than 120 specialty shops. Anchors include Dillard's, Parisian, JCPenney, Sears and a fifth retailer that has yet to be announced.
The project design includes a large open-air plaza. "We're very pleased with the architecture," Brian Ratner says. "We want to make it a real gathering place where people can come before or after a movie or just to congregate." Completion is slated for 2001.
Richmond, Va. Forest City's new Richmond project follows the lifestyle center format. "We are a major believer in retail developments," continues Brian Ratner. "It's just a matter of the marketplace environment for a particular project."
For example, Station Square is more of an urban retail entertainment center, while Richmond is suited for a high-quality commercial retail center. "What we try to do is tailor a particular project to the market, demographics and accessibility," Ratner adds. "You can't do the same thing in every place. You have to do different things to accommodate your marketplace."
Short Pump Town Center will comprise 1.1 million sq. ft. of premier retail space with four anchors, as well as an additional 325,000 sq. ft. for specialty shops and restaurants. The open-air complex will also showcase the new Edwards Theater, a 117,000 sq. ft., state-of-the-art megaplex featuring 20 screens, multiple concession areas and stadium-style seating for 5,000.
"People are embracing the opportunity to gather, and lifestyle centers are a popular option - particularly when you have a climate that allows this opportunity," Ratner says. "We studied trends in the industry and felt this was the most appealing to people."
The center was named for the historic Short Pump Tavern, which once served as a stagecoach stop between Richmond and Charlottesville. The 150-acre mixed-use development is located just 12 miles from downtown Richmond on West Broad Street at I-64.
The Short Pump Town Center's 10-mile trade area has grown from a population of 191,574 in 1980 to 279,427 in 1997. "We're looking for the home tenants, fashion tenants and other lifestyle tenants that are drawn to these new centers," Ratner continues. "We want to accommodate as many different types of tenant categories and different people as we can." Completion is expected by fall 2002.
Salt Lake City The Grand Salt Lake Mall is a 1.5 million sq. ft. value-oriented megamall expected to break ground this summer and open in time for the 2002 Winter Olympic Games. The Salt Lake market is one of the fastest growing regions in the country. In the past seven years, the population has grown nearly 20%.
The mall will be located at the I-80 and 5600 West interchange, 10 miles west of downtown Salt Lake City, close to the airport. Forest City also chose the location to capitalize on the area's high volume of tourism traffic. In 1997, more than 17 million tourists visited Utah and spent $4 billion. It is anticipated that tourists will generate 30% to 35% of mall revenues.
Grand Salt Lake Mall will feature 16 anchor and major stores, as well as more than 200 specialty stores and a wide variety of restaurants and entertainment venues. "Right now, we're out talking to tenants, and we're getting great feedback," says Brian M. Jones, president of Forest City Commercial's West Coast Division. The project will be geared toward families, entertainment and value-retail tenants. "The demographics show that it's a very family-oriented area, as well as a large tourist destination."
San Francisco The redevelopment of the historic Emporium Department Store building at 835 Market St. is a $400 million project that features more than 1.6 million sq. ft. of retail, hotel and office space. "This is the type of project we do best, an urban infill, adaptive re-use project," Jones says.
The Market Street project represents a major redevelopment for both Forest City and the city of San Francisco. "It's in a redevelopment area and there is absolutely no doubt that when it opens it will have a dramatic impact on Market Street," Jones says. The building will connect two key areas of San Francisco in what has traditionally been know as "North of Market" and "South of Market."
A five-level Bloomingdale's will anchor the complex with a new 360,000 sq. ft. store. Forest City will add premier space for retail on five levels for exclusive specialty shops and a grand gourmet food emporium. Plans also call for a movie theater, entertainment, restaurants and a five-star luxury hotel. Construction began in mid-1999, with the project slated for fall 2002 completion.
The original Market Street building was constructed in 1897. Forest City plans to retain the facade fronting Market Street, as well as the 102-foot-wide glass and steel dome and rotunda at the top of the building. The dome will be lifted two floors to make room for additional office space. Currently, the top three floors house existing office space, and Forest City plans to add an additional 170,000 sq. ft. of office space.
"What's so interesting about this project is that we're matching old with new," Jones says. Forest City is retaining components of the 1897 architecture, as well as blending in contemporary features. "It will be an outstanding project in design," he adds. Because it is a downtown project, Forest City also is focused on creating a pedestrian-friendly property, as well as one that caters to other transit sources ranging from bicycles to San Francisco's underground train system.
Denver Forest City is moving forward with the Herculean task of transforming Denver's former Stapleton Airport into one of the nation's largest mixed-use urban communities. The project involves more than 2,935 acres, with the $4 billion project expected to take more than 25 years to fully develop.
Ultimately, Forest City's master plan calls for 12,000 homes and apartments, as well as the development of more than 13 million sq. ft. of new commercial space that will be complemented by regional and neighborhood parks and open space.
Forest City's initial development at Stapleton will involve 275 acres south of the former terminal complex that will have 1,100 homes and 900 apartment units, with the first housing available for occupancy in late 2001. The first retail project is a $40 million, 800,000 sq. ft. power center that will be completed in August 2002. Tenants are expected to feature general merchandise, home improvement and warehouse club stores. "Right now, we're establishing the infrastructure, then we plan to start seeding the project with residential," Jones says.
Redevelopment projects such as this are a key focus for Forest City. "I think we are adept at it because we know that it takes a tremendous amount of staying power to be able to see these types of projects through to the finish," Jones says. Forest City also understands what cities and communities want, how they work and how to interact with them to bring projects to fruition, he adds.
Expansion strategy Redevelopment and expansion is a significant component of Forest City's growth strategy. "In order to be able to take on all the opportunities, we've had to solidify our base," says David LaRue, executive vice president and COO at Forest City Commercial Group Inc.
That strategy has resulted in current expansion activity under way at Galleria at South Bay in Redondo Beach, Calif.; Antelope Valley Mall in Palmdale, Calif.; Galleria at Sunset in Henderson, Nev.; The Tucson Mall in Tucson, Ariz.; and The Promenade in Temecula, in Temecula, Calif. "We're focusing a great deal of money to make sure our existing assets are strong and relevant in the marketplace," LaRue adds.
Forest City spent considerable resources toward profitable ends when it added a new theater in 1997 to Galleria at South Bay in Redondo Beach, Calif. Sales more than doubled for many tenants.
"That success, in both occupancy and sales, is a great example of how proper investment in properties can generate returns, not only for us as mall owners, but also for the tenants," LaRue says.
Last year, at the highly successful, 10-year-old Antelope Valley Mall in Palmdale, Calif., Forest City expanded with a 148,000 sq. ft. Dillard's, the first in the southern California market.
"We've added that high-end department store to a market that has made a tremendous comeback," LaRue says. "It gave a big boost to the property, which was already doing very well." The Dillard's addition has pushed the mall's critical mass to six department stores and more than 1 million sq. ft.
The Galleria at Sunset in Henderson, Nev., is a 900,000 sq. ft. center that opened in 1996. "Henderson is the fastest-growing market in the United States, and sales have continued to reflect that growth," LaRue reports. "Due to the strength of the market, we decided to look at expansion opportunities."
Forest City is working on a 95,000 sq. ft. expansion that will bring a lifestyle mix of tenants to the center, such as home and fashion retailers. "We had the opportunity to offer that marketplace these additional stores and continue to grow our asset base," he adds.
Currently, Forest City is evaluating how to redevelop or expand its 1.3 million sq. ft. Tucson Mall. "We are looking at this expansion opportunity in order to take the property, which is clearly the market-dominant center, and continue to position it as the dominant center," LaRue says. "We've found that when you rest on your laurels, you end up resting behind someone else who comes in and recognizes the opportunity." Forest City expects to add another department store anchor or a theater to the Tucson Mall.
The goal to improve properties is consistent even among Forest City's new centers. The Promenade in Temecula is one example where the firm is reinvesting in a shopping center that's less than one year old.
The Promenade in Temecula in Temecula, Calif., is a 780,000 sq. ft., two-level, enclosed regional retail, dining and entertainment complex. Although the mall just opened in October, Forest City is already looking at expansion opportunities for the successful project. Forest City plans to add a fourth department store, as well as an additional 40,000 sq. ft. in small-shop space.
Continual reinvestment also ensures that Forest City shopping centers remain viable in their communities.
The Promenade is the only regional shopping center serving the market between Los Angeles and San Diego. "Although we opened this property assuming the market was there to support what we were offering, we were nevertheless overwhelmed by the response from both the city government and the residents," LaRue adds. Typical for a company with a knack for picking retail winners.
Forest City Enterprises Inc. is a $3.8 billion NYSE-listed real estate company based in Cleveland. The firm is principally engaged in the ownership, development, acquisition and management of commercial and residential real estate throughout the United States.
The company's portfolio of property investments includes interests in 16 million sq. ft. of leasable space in 42 retail centers, 34,032 residential units in 114 apartment communities, 7.2 million sq. ft. in 24 office buildings and 2,936 rooms in nine hotels. This diverse portfolio is operated by regional offices in New York, Los Angeles, Boston, Tucson, Denver, Washington, D.C., and San Francisco.
The company's Class A and Class B common shares are listed on the New York Stock Exchange under the symbols FCEA and FCEB.