Three States, Many Opportunities
Ask any developer about the state of affairs in Florida, and he’ll tell you the economy is hurting. But that doesn’t mean there isn’t opportunity—in fact, there’s lots of opportunity. And ditto for Alabama and Georgia. These three growing, retail-rich states are providing plenty of development, redevelopment and acquisition targets.
Building a Florida icon: U.S. Capital saw tremendous potential in the Plantation Fashion Mall property, a south Florida site that serves as an integral component of the City of Plantation’s master plan to create a Midtown District. Springing from the site of the former mall is 321 North, a $350 million residential, office, shopping, dining and entertainment project on 33 acres.
“We have found Plantation to be central to expanding retailers’ criteria, both in terms of our project and market composition,” said Wei Chen, CEO of the Plantation, Fla.-based U.S. Capital Holdings, “and we have had tremendous response from iconic retail and entertainment companies interested in entering or expanding within the state of Florida.”
Launching a development as ambitious as 321 North—which is part of the Leadership in Energy and Environmental Design (LEED) for Neighborhood Development pilot program—hasn’t been without challenges. According to Chen, inheriting the legacy of a project that had previous owners (Plantation Fashion Mall) has meant carving a new image for the project. “The good surprise, though, has been the positive support we have received from the City of Plantation and Broward County,” he said.
The fact that 321 North is a green groundbreaker hasn’t hurt its relationship with city and county officials. 321 North will embody new urbanism by featuring energy-efficient design throughout all components. Plans also call for greenways, open spaces, an onsite filtration pond and more.
Customers will find more than an environmentally friendly mixed-use project. They will enjoy indoor and outdoor shopping, dining, entertainment, culture and art, together with significant office and residential components. It will feature no big-box retail in its 613,500 sq. ft. of leasable space; instead 321 North will focus on junior anchors and a larger variety of smaller stores, including European boutiques and stores that have a U.S. presence but not a strong one in Florida.
Grand opening for the retail is slated for 2010.
Growing through relationships: Regency Centers has seen the Florida slowdown, but the Jacksonville, Fla.-based developer has found opportunity among the challenges. “We are very fortunate in the fact that the anchors have stayed with us on our deals in Florida,” said Paul Maxwell, VP of investments for Regency. “We are well-poised to take advantage of the fact that we don’t need financing, we have the capital to move in on the right deal, and we have solid relationships with a lot of our anchor retailers.”
Caligo Crossing, in Coconut Creek, Fla., is an example of an anchor-developer partnership that will benefit an entire trade area. “This is a project in which we partnered early on with Kohl’s,” explained Maxwell. Kohl’s bought its own eight acres on which it will have a 98,000-sq.-ft. anchor store, and Regency will have about 10,000 sq. ft. of small-shop space, featuring Mattress Firm and several strong regional tenants such as Stormann’s Coffee and Ultimate Nails.
“We typically do bigger centers than Caligo Crossing,” said Maxwell, “but this is one that allowed us to develop a strong relationship with Kohl’s and prove that we can be the developer to get things done for them, particularly in south Florida.”
Cocomar, at the northwest corner of Atlantic and Lyons in Coconut Creek, and Beacon Lakes in West Dade County, represent future opportunities with Kohl’s, as both sites are under contract and Regency is pursuing anchor interest from Kohl’s as well as Target, Lowe’s and others.
Regency still continues to find its bread-and-butter opportunities throughout the state.
“We truly believe there is still development opportunity in Florida,” said Maxwell. “We are a very strong grocery-anchored REIT. We love having the right grocery opportunity and the right grocery anchor in our center. And we definitely are going to continue to pursue those opportunities.”
Southeastern value: DLC Management may be based out of Tarrytown, N.Y., but its strong Southeastern growth has led to a full-scale presence in Atlanta. According to president Adam Ifshin, and VP of leasing for the Southeast Mike Puline, the company’s value-oriented position has propelled its growth in the region.
“Our market is, from a leasing velocity perspective, very strong,” said Ifshin. DLC typically owns centers in middle-class neighborhoods, in dense, predominantly infill, older suburban markets—particularly in the Atlanta metro area and in Florida—that are frequently multi-ethnic. “We’ve seen surprising strength in ethnic and value apparel,” said Ifshin. While conventional apparel retailers are struggling, concepts such as Rainbow Apparel, CitiTrends and the Cato Co., said Ifshin, are aggressively expanding.
A national discount-apparel retailer played a direct role in shoring up a DLC-acquired center in Florida. “We acquired Highland Square shopping center in Jacksonville, Fla., last October, and in November or December found out that a 26,000-sq.-ft. anchor tenant had filed for Chapter 7 bankruptcy,” said Puline. Leveraging a strong relationship with the discount apparel chain—a TJX Cos. concept—DLC made a deal in short order to fill the space. “From a credit and tenant-mix standpoint, it makes the center that much more desirable,” Puline added.
In Atlanta, another tenant switch provided the same impetus for success. Sprayberry Square, in Marietta, Ga., had a dark Kroger anchor when DLC acquired the center—and the grocer’s space comprised about half the GLA of the center. DLC did a deal with L.A. Fitness and is completely remodeling the center, to boot. “With the new facade, parking lot, new lighting and a new anchor, I think the center will compete far more effectively and attractively with its surrounding competition,” said Ifshin.
Filling in with niche retailers—such as a swim shop, perhaps a day spa, coffee shop and a high-end deli—that complement L.A. Fitness will transform the center into one of upscale convenience.
Upturn from a downturn: Casto Lifestyle Properties, based in Sarasota, Fla., and an affiliate of Columbus, Ohio-based Casto, has found itself faced with far more opportunities in the Southeastern states than the economic conditions would indicate.
“The economy is giving good operators or good companies a host of opportunity,” said Paul Rutledge, executive VP, Casto Lifestyle Properties. “The great thing about being a three-generational company is our history and our ability to grow strategically, which have put us in the position of looking at a lot of opportunities.”
That’s not to say that Casto hasn’t, like every developer, faced obstacles, particularly in Florida. “I would argue that it’s rather like if Florida gets a cold, everybody sneezes,” said Rutledge. “Florida’s issues make a great model for going into places such as Georgia and the Carolinas where perhaps the problems aren’t as large.”
Road access and transportation, as well as services and utilities, are obstacles that every developer faces in Florida, and throughout the Southeast. “It’s about finding that balance between growing successfully and efficiently, and maintaining the perpetual taxing and expansion of services; those are our challenges,” said Rutledge.
Strategic redevelopments, retrofitted to meet the needs of the contemporary customer, have found rousing success in the Southeast. Casto’s circa-2000 redevelopment of Winter Park Village, in Winter Park, Fla., still stands today as a remarkable project—one that has become somewhat of an icon of redevelopment for malls and strip centers, said Rutledge. “The concept, which includes office, residential and great retail, has withstood the test of time,” he added. A more contemporary Casto project—Park West Village, in Morrisville, N.C., illustrates a progression of the Winter Park model that Casto is now finding success within the Carolinas. “It is a retrofit project that incorporates mixed use and a Main Street design, as well as big-box retail. It fully addresses the consumer shopping trip.”
Positioned for greatness: John Bemis, executive VP and director of leasing and development for Atlanta-based Jones Lang LaSalle (JLL) Retail, has plenty to say about the vibrancy of retail in Alabama, Florida and Georgia. “In Alabama, the climate is outstanding, with the influx of automotive jobs, a huge stainless-steel manufacturing plant and an Air Force-awarded refueling-tanker contract,” said Bemis. In Georgia, the outlook is as bright. “A growing population and retail sales at or above the 2007 levels put the state in a strong position,” he added. Yet, for Florida, “The state has felt the sting of the housing crunch.” Bemis has observed, however, that the most negative impact has been felt by the second-home owners and that full-time residents of the state have experienced the slowdown to a lesser degree.
Jones Lang LaSalle, the largest property-management company in the country, has a prolific presence in the Southeastern states. Leasing and managing these properties has presented the company with advantages as well as challenges.
“Atlantic Station in downtown Atlanta is one of the best examples of taking an environmentally challenged site—a former steel mill—and using a great development to reverse the stigma of an entire area,” said Bemis. JLL developed, manages and at one time leased the live-work-play mega complex, and it has set a trend for other mixed-use projects around the nation.
Paradise City, in Myrtle Beach, S.C., is one of those developments that will find huge success, no matter what challenges lie ahead. The Next Step Partners-developed mixed-use project is positioned adjacent to Hard Rock’s first themed amusement park—Hard Rock Park—and will play off the entertainment extravaganza with a shopping and entertainment destination with the feel of an old Southern town.
In Florida, Kendall Town & Country in Miami features a 290,000-sq.-ft. lifestyle center around which a 465,000-sq.-ft. town center wraps. “It’s an interesting tenant mix,” said Bemis, “with Publix, 24 Hour Fitness, Marshalls wrapping around a lifestyle component in the middle.” The anticipated completion date for the center is fall 2009.
All three centers illustrate the opportunities that abound in the Southeast. As for Alabama, Florida and Georgia: “All three will be incredibly positioned when the nationwide economy recovers,” said Bemis.