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A DEVELOPER DOES IT FOR CHARITY, HOLLYWOOD REMAKES ITSELF, AND AMERICAN GIRL FINDS A NEW PLACE

In real estate he trusted

Developer J. Michael Gladstone never lived to see the grand opening of his magnum opus, the San Fernando Valley’s Northridge (Calif.) Fashion Center. But when the unmarried and childless Gladstone died in 1971, he bequeathed his $8 million real estate portfolio to a testamentary trust that today funds a trio of world-famous medical research institutes dedicated to finding cures for diseases ranging from AIDS to Alzheimer’s. Gladstone took a huge risk in the late 1960s, liquidating nearly all his assets to buy 72 acres of land for a then-revolutionary concept: a two-level, enclosed mall with on-site parking. He died unexpectedly, just as the mall’s steel infrastructure was being erected. In the three and a half decades since, the trust’s managers have multiplied its original assets 25 times over to about $220 million, largely by continuing to invest in and manage real estate. Just last year the trust sold two California neighborhood shopping centers it had developed, in San Luis Obispo and Chino Hills, for a significant return on behalf of the J. Gladstone Institutes, which operates out of a high-tech Mission Bay, Calif., building on the University of California San Francisco campus the Gladstone trust financed and developed itself. The capstone of Gladstone’s career, Northridge Fashion Center, continues to do him proud. The 1.5 million-square-foot center is one of the most profitable malls in the portfolio of current owner General Growth Properties.

Hooray for Hollywood

It’s still an address everyone recognizes, but the Sunset and Vine section of Hollywood, Calif., has seen better days. Now, thanks to a revitalization effort, the neighborhood has a chance to return to its former self. Central Hollywood Coalition, a nonprofit corporation, has created the Sunset & Vine Business Improvement District, with a budget of $1.23 million, to rejuvenate the area. More than half the budget is dedicated to security. Landscaping, beautification and marketing are priorities too, says Donald Duckworth, president of Duckworth Consulting and the interim executive director of the BID. The district sits on 130 acres in the heart of Hollywood and comprises 253 land parcels and 127 owners. A 2004 census counted 138 retailers in Hollywood and 128 accommodations and food services businesses in the area. Each owner will pay a share of the BID expenses. “The area doesn’t quite have the spark yet in its step,” said Duckworth. “Everyone’s looking forward to this project to bring back the community and a resurgence in Hollywood.” Meanwhile, the area is already seeing renewed interest from businesses. Film processor Technicolor is building a six-level office at Sunset and Gower, and W Hotels plans to open a 296-room facility in 2009 at Hollywood and Vine. Duckworth says the BID will spur even more development. “It’s part of the complete package,” he said. “The companies don’t want to invest in an area that has detracting factors.”

Holding the bag

Handbags are hot among women in the U.S., but Japanese women’s passion for purses is cooling off, according to a survey by Cowen & Co. According to the firm, year-on-year U.S. handbag sales will rise 2 percent this year, versus a 41 percent increase in 2006. American women paid an average of $161 for a handbag in 2006. “Price points are increasing in both markets, and significantly more in Japan,” said Elizabeth Montgomery, a senior research analyst at Cowen. “Consumers are not willing to spend that much money.” Indeed, Japanese women, who spent an average of $247 for a purse last year, say they plan to spend 25 percent less on handbags this year. One factor is the weakened yen and Japan’s stagnating economy. Another is the dilution of brand impact among Japanese consumers, who have been inundated with Gucci and Louis Vuitton logos and are looking for a more unique bag, even if it isn’t a mainstream brand, says Montgomery. In the U.S., though, consumers are still willing to splurge on big names, she says, with Coach being the No. 1 choice.

Girl whirl

Chicago’s American Girl Place never had a problem drawing traffic, but now the doll destination is moving to an even more magnificent location: General Growth Properties’ Water Tower Place, in the heart of the city’s famous Magnificent Mile. The Mattel-owned retailer, a household name among girls age 3 to 12, has sold some 12 million American Girl dolls and 111 million American Girl books since 1986. The company plans to move from its former 40,000-square-foot digs on East Chicago Avenue into a two-level, 52,000-square-foot space formerly occupied by Lord & Taylor. The store, which opens in the fall of 2008, will contain a dining area and a theater. American Girl’s two other stores, in Los Angeles and New York City, are doing blockbuster business, observers say. “American Girl Place Chicago redefined retailing when it first opened in 1998,” said Wade Opland, American Girl’s vice president of retail, in a press release. “The move to Water Tower Place, one of the nation’s most recognized shopping centers, provides us with even greater opportunities for growth, such as offering a fun new experience for girls, expanding our café to include a private dining area, and, ultimately, serving more customers.” The unit at The Grove, in Los Angeles, quickly overtook the original Chicago store in sales volume after its opening in June. And the New York City American Girl Place saw lines stretching outside the store and down Fifth Avenue during the holiday season.

Postcards from Argentina

Tourists are engaged in more than sight-seeing in Argentina, and shopping centers are harvesting the fruits. Following the 2002 devaluation of the Argentinean peso, tourism has become the country’s fourth-largest money earner, generating some $3.3 billion last year. Argentinean officials figure that the country drew a record 3.9 million tourists last year, and they are hard at work to boost that to 6.7 million by 2016. Brazilians top the list of visitors, followed by tourists from Chile, the U.S. and Spain, in that order. During the Argentinean fiscal crisis of 2000-2002, the country’s mall operators sought to offset a sharp drop in domestic sales with travelers drawn to Argentina by the weak peso. Though the economy has since rebounded and Argentineans are spending once more, tourism remains important. Apparel, shoes and leather accessories top the shopping lists of travelers, say executives at Alto Palermo, a major mall developer and the operator of 10 malls. “Argentinean goods are in high demand because of their high quality and design originality,” said Rubén Janowski, tourism and hotel manager at APSA, as Alto Palermo is commonly known. “They can now be purchased at very attractive prices.” On average, a tourist spends $123 in a visit to one of APSA’s shopping centers, versus the $40 an Argentinean shells out, Janowski said.

At the Patio Bullrich mall in Buenos Aires, tourists account for 35 percent of customer flow. Elsewhere in the city, foreigners make up 25 percent of the shoppers at the Abasto Shopping mall, and 19 percent at Alto Palermo. At GalerÃas PacÃfico foreign visitors generate 60 percent of sales, according to Veronica Guirguet, the mall’s marketing and advertising manager.

Ethnic opportunities

As America’s Asian and Hispanic populations explode, more developers are building shopping centers designed to appeal specifically to those minority groups, and lenders are more willing to finance those ventures. For example, Morgan Stanley has agreed to invest $50 million in La Plaza North America, a Seattle-based group of real estate veterans that plans to develop six to eight Latino-themed centers in the states of Oregon and Washington during the next couple of years. La Plaza has already made its first purchase, the 77,000-square-foot Midway Crossings in Kent, Wash. The company plans to redevelop the center, which is in a majority Hispanic neighborhood, to include a Latino grocery store and an open-air farmer’s market. In Austin, Texas, where Asians are the fastest-growing minority group, Duc Mihn Lu hired developer Larry Nelson Co. to build The Asian Center, a 50,000-square-foot neighborhood center that will be anchored by an Asian supermarket. The Asian Center will join a bevy of other Asian retail centers in north Austin, including the 180,000-square-foot Chinatown Center. Meanwhile, in suburban Atlanta, Palm Beach Gardens, Fla.-based Ram Development Group recently sold the 330,000-square-foot Plaza Fiesta Mall to Dallas’ Sarofim Realty Advisors for $55 million. Ram had spent about $5 million and seven years converting the property to a Latino theme that increased traffic and attracted anchor Marshall’s. “As the demographics of this area change,” said William Mathieu, a partner at brokerage firm Powell Goldstein, who helped broker the deal, “more projects of this kind will probably be built.”

Gulf Coast getting New Urbanist makeover

The rebuilding of the storm-battered Gulf Coast offers a rare opportunity for mixed-use and smart-growth developments to take root in the region, officials say. “We have to replenish our housing stock for real Mississippians along with the developments that are transforming our coast into a destination resort,” said Mississippi Gov. Haley Barbour. “Retail is also critical for our recovery.” Mississippi’s Gulf Opportunity Zone Act, which offers tax incentives for rebuilding in 47 of the state’s counties, has attracted several developers that are seeking approval for such projects. One is Paradise Bay Resorts, a joint venture between New York City-based Racinelli Development and Pascagoula, Miss.-based developer Roy (Tippy) O’Bryant. Paradise Bay wants to build a so-far-unnamed, 1,200-acre, master-planned community near the casinos outside of D’Iberville, Miss., that will include several thousand homes and 2 million square feet of retail and other commercial space. The first phase will include a regional power center set to open by early next year. Just down the coast in Livingston Parish, La., Creekstone Cos., of Baton Rouge, La., and Montgomery, Ala.-based Jim Wilson & Associates are planning a 471-acre community called Juban Crossing, scheduled to open next year with 1.2 million square feet of retail space, 385,000 square feet of offices and about 1,000 residences. Both projects will put New Urbanist principals of density and diversity to use. “Our vision is total harmony with the smart-growth concepts outlined for the renewal of the coast,” said John Racanelli, CEO of Racanelli Development. “Open-air lifestyle centers throughout the property will have a tenant mix of specialty, restaurant and entertainment retailers.”

Bra boom

Young women are buying more lingerie these days, and Victoria’s Secret may not have a corner on the market for long. American Eagle Outfitters announced plans to open 15 stand-alone stores for Aerie, its lingerie and loungewear sub-brand aimed at 15-to-25-year-olds. American Eagle launched Aerie in September in all of its American Eagle stores, including 18 side-by-side stores, and on the chain’s Web site. The company also tested three Aerie stand-alones. “We see an exciting growth opportunity in the intimate apparel market, and based on our success and strength in this category, we are accelerating our real estate expansion plans for Aerie,” CEO Jim O’Donnell said in a press release. Teens are an important growth market for lingerie retailers, according to a recent study by The NPD Group. The Port Washington, N.Y.-based research firm reports that teens buy about five bras a year on average. Those teens spent about $76 on bras last year, up from $62 the year before, the firm says. Specialty stores are benefiting from the increase. Teen bra purchases in specialty stores rose 3 percent between 2005 and 2006.