COVER STORY, MAY 2008

SELLING THE CENTER
In today's retail climate, developers are targeting projects in the population bullseye.
Jia Gayles

Though retailers are casting a more discerning eye on proposed projects, retail development remains a worthy endeavor for those willing to exercise patience, do the homework and chose the optimal location near a tried and true MSA (Metropolitan Statistical Area) or an underserved market. “In the markets we’ve chosen, there is already a population base,” says Geoff Smith, vice president of development at Chattanooga, Tennessee-based CBL & Associates. “The developers that are going to have a hard time getting out of the ground during the next 2 years are the ones who have to convince retailers that their building permits are actually going to come to fruition.”

GBT Realty is building The Paddocks of Frankfort in Frankfort, Ky.

“Uncertainty does affect the retailers’ decisions toward location in second- or third-tier markets,” says Craig Cole, vice president of development services for Brentwood, Tennessee-based GBT Realty. “We shifted our site selection process and focused on sites that are easier for retailers to approve in this kind of economy…basically we focused our efforts on major MSAs and established markets.” One of GBT’s latest projects is The Paddocks of Frankfort, a $65 million, 600,000-square-foot regional shopping center in Frankfort, the capital city of Kentucky. The development is situated on 89 acres at the intersection of Interstate 64 and Highway 127/Lawrenceburg Road. GBT researchers identified the local market as an underserved area with strong demographics, citing the fact that many residents were forced to drive to Louisville to fulfill their retail needs.  “There has been a lot of excitement about the project. There is a pent-up demand, and [the residents] are anxious for us to get there,” Cole says. The project is expected to create 1,300 new jobs in the city and will feature a 180,000-square-foot discount department store, several 20,000- to 45,000-square-foot co-tenants, 100,000 square feet of specialty shops and retail, a movie theater and eight outparcels to include stand-alone restaurants, banks and other retailers. As part of the development, a new intersection will be constructed on Highway 127 at the main entrance. Nashville, Tennessee-based Maxwell Johansen Maher Architects is designing the project, which Cole describes as an upscale powercenter. “[In an] upscale powercenter, the anchor tenants and the junior boxes enjoy the visibility of a powercenter, but you still get the wide sidewalks, outdoor seating areas and attractive architecture with the smaller shops that visitors enjoy,” he says. “Also, what’s unique about this site is its visibility along the highway and interstate. It’s a rare find.” Currently, the development is in the planning stage and is expected to break ground in spring 2009 and open in early 2010.

Jim Wilson, chief executive officer of Montgomery, Alabama-based Jim Wilson & Associates is also heralding the call of an underserved market in a joint venture with fellow Montgomery developer, Helms Roark. Gateway Towne Centre, a $100 million, 150-acre open-air retail center, will be built in Moody, Alabama, located 10 miles east of Birmingham. “Birmingham is growing in all different directions,” Wilson says, “and we saw this area as the next in line to be built out.” Moody is in St. Clair County, which has grown 8 percent in the last 2 years, and the town currently has 2,000 homes under construction and 12,500 residents. The retail development will be situated at the intersection of Highway 41 and Interstate 20. The developers estimate the final build-out will be from 400,000 to 1 million square feet, dependent on market demand. The overall design of the project will have some of the popular main street-type feel, but primarily be a big box center. “We’ve got several tenants secured,” Wilson says, “[but] if we’d been doing this 3 or 5 years ago, we’d probably be way down the road because [they] were a lot more aggressive. We’re just having to work through that.” The project is currently in the early stages and retailers have been slower to respond than usual, “The economic downturn has slowed us down some.” Wilson says. “We got pushed back a little bit, but we expect to move some dirt by the fall.” Targeted merchants will be big box, including, national retailers in fashion, home improvement and electronics. Plans also call for a grocery store, a bookstore, an office supply store and a discount warehouse. Citizens of Moody are thrilled by the project, which will keep their sales tax dollars in the city, “We’ve gotten an overwhelming response,” Wilson says, “everyone is excited that the dollars generated in Moody will be spent in Moody, therefore improving the infrastructure.” The project is projected to complete in multiple phases by 2009.

A major growth corridor in the Nashville, Tennessee, MSA is getting a new $100 million retail development, The Paddocks at Mt. Juliet, courtesy of a joint venture partnership between Atlanta-based The Gipson Company and RECAP Commercial Development Fund, in conjunction with a closed-end fund managed by Germany-based Hannover Leasing GmbH & Co. KG. The center is located at the intersection of Mt. Juliet Road and Pleasant Grove Road in Mt. Juliet, which is 17 miles east of Nashville. According to a study by the Tennessee Policy Center for Research, Mt. Juliet businesses have grown by 60 percent since 2002, and the city was ranked first in economic vitality for the state. Developers pounced on the opportunity to build the 140-acre development, which is estimated to reach 800,000 to 1.2 million square feet at build-out, in the underserved corridor. “You have Nashville proper and The Hermitage, and then everything was skipped between there and Lebanon. As bands of residential have developed outward from Nashville, Mt. Juliet is the natural next step for retail development,” says John Gipson, manager of The Paddocks at Mt. Juliet LLC. The project will feature a Wal-Mart Supercenter and a Lowe’s Home Improvement Warehouse, which are scheduled to open by year-end, along with several small shops, restaurants and banks. The retail destination will be completed in four phases, which began construction in April. Phase 1 will include 420,000 square feet of retail. Phases 2 and 3 will begin construction in 2009. The entire project is slated for completion in 2010. Tenants include Starbucks, Dollar Tree, Dots, Game Stop, Route 21 and Merle Norman. Hardee’s, Shoney’s, Buffalo Wild Wings and Cheddar’s, a casual dining restaurant, are located on outparcels. As far as the economic downturn’s affect on the project, Gipson says, “The tenants that were interested are still involved. We’re not ready with phase 2 or 3…but by the time we’re ready to pursue those people [I think] they’ll be back if they were out.” Chattanooga, Tennessee-based EMJ Corporation is the general contractor for the project, and Alpharetta, Georgia-based architect Robertson/Loia/Roof is designing the project. Another developer also has flocked to the burgeoning corridor. Crosland recently developed Providence Marketplace across the street, which features Target, Belk, PetSmart and Best Buy, among others national retailers.

A joint venture is developing Hammock Landing in West Melbourne, Fla.

In West Melbourne, Florida, CBL & Associates Properties and Amherst, N.Y.-based The Benchmark Group are teaming up on Hammock Landing, a 750,000-square-foot open-air shopping center to be situated on 78 acres at the northwest intersection on Interstate 95 and Palm Bay Road. Both companies were competing for the land, which was previously held by a family trust. Benchmark was successful in making the land purchase, and CBL then proposed a 50/50 joint partnership. The intersection is one of the most heavily trafficked in Brevard County, and construction for the expansion of Palm Bay Road to six lanes is underway. “During the past couple of decades the market has grown toward the I-95,” says Geoff Smith. “We felt that there was an opportunity to build a large community center that would be more convenient to the majority of households in [the area].” In addition to the 78 acres purchased by the joint venture, 28 additional acres have been purchased that will comprise a second phase. The shopping center will be anchored by Marshalls, Linens ‘n Things, Michaels, and Petco, as well as two other major anchors and more than 120,000 square feet of small shops and retail. The center broke ground in January and is projected for completion next spring. “We’re fortunate that this market is already densely populated, and the housing is already there,” Smith says. “We are not held hostage to the [same] possible growth that a lot of other newer centers are who started off a couple of years ago and are now trying to break ground. They were created because of expected housing growth, which in most cases hasn’t panned out.” According to Smith the project is also positioned for success because West Melbourne is near the Kennedy Space Center and is populated by many residents employed in the engineering, aviation and state industry related businesses. “They have great incomes and are well educated,” Smith says. “Until now they have been forced to shop less conveniently.” EMJ Corporation is the general contractor, and the project is being designed by Chattanooga-based Artech Design Group. The center will feature a village-like atmosphere through clustering of retailers and restaurants. “We starting with a traditional powercenter or community center tenant mix,” Smith says, “but we’ve made a large effort to group the smaller retailers away from the big boxes in order to pull away from the linear strip approach.” CBL is also working with The Benchmark Group on The Pavilion at Port Orange, a 550,000-square-foot open-air shopping center in Port Orange, Florida, which is expected to deliver in fall 2009.

The retail market is cautiously moving forward as developers and retailers alike carefully consider the pros and cons of a suitable location, which will be heavily determined by its demographics and proximity to a metropolitan area. “We develop [centers] across the Southeast,” Cole says,” and what we are seeing will all retailers is a focus on deals that are in major MSAs. By responding to the retailers site selection focus, we are actually working as many deals right now as we ever have.” For those willing to cater to retailers’ changing needs in a soft market, development will continue prosper.

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