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COLORADO GOLD RUSH

Three developers seek to build centers in growing Fort Collins/Loveland area

BY DEBRA HAZEL

It could be seen as a measure of the promise of the Fort Collins/Loveland, Colo., market that three major retail developers each have sites there on which they want to build. The question is, what will get built, and where? It’s all come down to a race to see who can sign tenants up first, the developers say.

This region 60 miles north of Denver and 45 miles south of Cheyenne, Wyo., has grown to the point where it can sustain a significant retail project. Lifestyle center mainstays Poag & McEwen and Bayer Properties have already found competing locations. And CBL & Associates Properties, better known for its regional mall portfolio, has a site too, right across from Poag & McEwen’s — though CBL has made no specific project announcement yet.

“It’s no secret that we are talking to many of the same retailers,” said David Silverstein, executive vice president and general counsel of Birmingham, Ala.-based Bayer. “And it’s unlikely that some will do two stores at the same time. The retailers are in the position to decide which project moves forward.”

To make things even more interesting, General Growth Properties has announced a deal to acquire Foothills Mall in Fort Collins. Many believe that the Chicago-based company will renovate and/or re-lease the 802,000-square-foot project, which is anchored by Foley’s, J.C. Penney, Mervyn’s and Sears.

Just a few years ago, it would have been inconceivable that the area could support even one upscale project. But technology and health-related companies have continued to expand there, raising incomes and population levels. Fort Collins’ largest employers include Agilent Technologies, Eastman Kodak, Hewlett-Packard and Poudre Valley Health Systems. According to the city of Fort Collins, the city’s 2003 population was 130,500, and median family income was $65,000 a year. In 1997 the city’s population was 106,250, and its median family income was $50,900.

Add in the neighboring towns of Greeley, Longmont and Loveland, and the argument for more retail makes still more sense. Even so, the total trade area has only about 500,000 people, hardly enough to justify the more than 1.5 million square feet of retail that has been proposed, the developers acknowledge.

“For a market that is not that large, it has gotten a lot of attention,” said Stephen D. Lebovitz, president of Chattanooga, Tenn.-based CBL.

The first center was Poag & McEwen’s Shops at Centerra, which the company announced in December 2002. The developer proposes up to 700,000 square feet at the east side of Interstate 25 and U.S. 34 in Loveland.

Then last August Bayer announced plans for up to 700,000 square feet in a center it would call The Summit Front Range, in Fort Collins at the intersection of I-25 and Harmony Road, less than 10 miles from the Loveland projects.

Bayer’s proposal: The Summit Front Range.

“We were asked by some retailers to do something in northern Colorado,” Terry McEwen, president of Memphis, Tenn.-based Poag & McEwen, said. The company is no stranger to Colorado, having developed The Shops at Briargate, in Colorado Springs, and Aspen Grove, in suburban Denver, last year.

After spending several months reviewing the market, Poag & McEwen found its location at the Centerra mixed-use complex in Loveland being developed by locally based McWhinney Enterprises. Several office buildings already exist there, with more to come. An events center and ice hockey arena are being planned for just north of the retail center, as is a 12-story Embassy Suites hotel.

“This is becoming the downtown of northern Colorado,” McEwen said.

Thomas Mathews, a CB Richard Ellis vice president in Denver, agrees.

“This is the crosshairs of the northern markets in Colorado,” Mathews said. “This makes a lot of sense. You can access Greeley and smaller markets such as Windsor and Johnstown.”

The first phase of the Poag & McEwen project calls for 350,000 square feet, and there is potential for up to 700,000 square feet. The various components of this project, designed by Alpharetta, Ga.-based Dougherty Schroeder and Associates, will be laid out in a Main Street configuration.

“It will tie into the environment around it, with water and trees,” McEwen said. “We’ll also have a mile and a half of frontage on Interstate 25, with exits on the north and south ends.”

Loveland is on the trade area’s south side, commutable to Denver without the hassles of the city.

“It’s a better lifestyle, more affordable,” McEwen said. “We’re very high on the project, not just because of today, but because the market is growing so fast.”

Bayer began researching the area about three years ago as part of a nationwide search for locations for its Summit projects, says Silverstein.

“We began to look at markets where there is a regional void, where customers are underserved,” he said.

The site it found at I-25 and Harmony is part of an office campus owned by LSI Logic Corp. Bayer put 50 acres under contract and may add 50 more at a later date.

“Fort Collins has been the retail hub of northern Colorado, and the site has great access from I-25,” said Silverstein. Hewlett-Packard has offices immediately adjacent, and new schools are being built nearby.

The first phase, which Bayer hopes to open in the fall of 2005, would range between 350,000 and 450,000 square feet. The project designer is CMH Architects, of Birmingham.

Some note that the town of Loveland is known to be easier on development, but Fort Collins is working actively to tip the competition among the developers in Bayer’s favor. The city zoning board changed the tract’s zoning to permit the Bayer development. It also wants to encourage the Summit project by hastening the review process and deferring fees, says John Fischbach, Fort Collins’ city manager. The potential sales tax revenues are simply too good to pass up — or to lose to Loveland.

“According to our economic study, we would gain approximately $1.5 million in revenues,” Fischbach said. “If the development is in Loveland, we would lose $2.5 million. That’s a $4 million swing.”

At this point, which center gets built will depend on the leasing, the developers say.

“All of the folks are striving to be the first to get the deal,” Mathews said. “It’s extremely competitive.”

Poag & McEwen already has Foley’s, Galyan’s and P.F. Chang’s lined up, and a theater will be signed shortly.

Bayer has a deal with Dillard’s and a letter of intent from Wild Oats Market, says Silverstein, and is working on the specialty retailers and restaurants.

In keeping with CBL’s usual practice, Lebovitz declined to name any tenants before any formal announcement of the development is made. But he says the “winner” firm will probably be known over the next few months.

Not surprisingly, tenants are taking advantage of this competition to negotiate favorable rents.

“Some retailers want to wait and see [who’ll win],” McEwen said. “Others know where they want to be and are leveraging to get the best deal.”

None of the developers said they had a deadline for their commitment.

“We’re pleased with how it’s progressing,” Silverstein said. But “the Summit requires that we have a cluster of tenants. If we’re not able to get that, we’re not going to build a specialty project.”

Project development of any kind requires patience, says Lebovitz, and projects can change; if one of the other lifestyle centers is built, his project could become a power center.

“We’ve been in situations where it looks like a project won’t happen, and then it does,” Lebovitz said. “Until the leases are signed, until the retailers make their decisions, there’s no reason to go home.”

But even when this contest is over, it won’t really be over for two of the developers. Poag & McEwen and Bayer are in competition (see story) to build a lifestyle center in Pennsylvania’s Lehigh Valley.

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