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THREE FIRMS VIE TO BUILD MINN. LIFESTYLE CENTERS

BY JIM MCCARTNEY

WOODBURY, MINN. — Three developers are vying to bring a lifestyle center to the Woodbury area, a fast-growing, well-to-do suburb about eight miles east of St. Paul, but few analysts believe there’s room for more than one such center.

“All three are viable developers,” said Mike Scott, a retail broker at United Properties, a Bloomington, Minn., development and real estate services firm. But that doesn’t mean their projects will be if they’re all built. Scott said he doubts that the market has room for more than one lifestyle center, though he opined that one of the three, a hybrid that would include large-format power center tenants, could survive alongside one of the others.

Such doubts are not deterring the developers, however. All three — Robert Muir & Co., Madison Marquette and a joint partnership between Opus Northwest and Kansas City, Mo.-based power center specialist RED Development (RED is an acronym for the names of three of its original founders, but has since come to mean “retail, entertainment and dining,” according to Amy Kraft, RED’s marketing manager) — boast that they can begin construction this year and open next year.

“I’d say Muir and Madison Marquette have the best sites, while the Opus-RED Development [project] is less desirable, because access isn’t as good,” Scott said.

Even an officer of one of the developers doesn’t see all of them surviving.

“Maybe two of the three could go,” said Tim Murnane, a vice president and general manager at Opus Northwest, a division of Minnetonka, Minn.-based Opus. “It’s ultimately up to the retailers.”

The developers all hope to draw most of their trade from Woodbury, which has over the past decade become one of the fastest-expanding suburbs in the United States. It would also be the closest retail center for the growing number of people just across the border in western Wisconsin. Woodbury is no more than 15 to 20 miles away for many of these Wisconsin residents; the Twin Cities is their nearest metropolitan area.

Just a year or so ago, all the talk in the Twin Cities retail development community focused on who would build a regional mall in Maple Grove, a suburb 20 miles west of downtown Minneapolis. But the developers — there were three at one point — all have scrapped their plans, and a regional mall in that area appears to be a long way off at best, Scott said. With few regional malls being built anywhere in the country these days, lifestyle centers are the current hot thing. The proposal furthest along is the one by Bloomington-based Muir, which has already won city approval to start work on a 225,000-square-foot project. The 19-acre site lies near Interstate 94 in Oakdale, a small suburb just north of Woodbury.

The project is called The Shoppes of Tamarack, echoing the nearby 750,000-square-foot Tamarack Village power center that Muir developed in the mid-1990s. (Muir also built Woodbury Village nearly a decade ago, a 450,000-square-foot community center anchored by a Target discount store and a Rainbow grocery store.)

The Shoppes of Tamarack would have 200,000 square feet of retail and 25,000 square feet of second-story offices, as well as “tuck-under” parking — that is, one level of parking underneath the center, said Kelly Doran, a Muir principal. The firm also expects to bring four major restaurants to the site. “We’re having discussions with all kinds of tenants, most of them recognizable names,” Doran said, though he declined to name them.

Woodbury offers attractive demographics. There are projections of nearly 94,000 households within a seven-mile radius by 2006, according to Muir. The area’s average household income in 2000 was just over $70,000.

Doran said he hopes Muir will begin construction this spring and that the project will be ready to open by next summer.

Meanwhile, at press time Madison Marquette was expecting to close a deal in April to buy the 240,000-square-foot Prime Outlets at Woodbury mall two miles east of the Muir site from Baltimore-based Prime Retail, said Joan Suko, vice president of marketing at Madison Marquette. The firm has recently developed lifestyle-type properties in such states as California, Florida, Missouri and Texas.

Madison Marquette plans to convert the mall into a 320,000-square-foot lifestyle center hybrid, with some large-format retailers that would each occupy 20,000 to 25,000 square feet of space. The mall has struggled in recent years, unlike outlet malls farther away from the city, according to a recent United Properties market report.

Some of the existing 30 tenants in Prime Outlets at Woodbury — Casual Corner, Eddie Bauer, Foot Locker, Geoffrey Beene and Samsonite — might remain as off-price tenants after the retail makeover.

The developer submitted its plans to the city of Woodbury in February and expected to complete the review process this spring, said Dwight Picha, Woodbury’s community development director. Madison Marquette expects to start demolition of some of the outlet buildings by late spring or early summer and complete the first phase late this year. The rest of the project would be ready in the spring of 2004. The company, which has initially referred to the project as Woodbury Town Centre, will tap the community to pick out a final name later this year, Suko said.

Opus Northwest and RED Development are in the early planning stage for a 350,000-square-foot lifestyle center just south of I-94 near Radio Drive. The Opus-RED project is on the south side of I-94, while the Muir site is on the north side. The Madison Marquette site is on I-94 and Woodbury Drive, about two miles to the east of the other two sites. Opus at press time had a 28-acre site under contract and expected to break ground this summer, to open by the fall of 2004.

Late last year Opus Northwest and RED broke ground on the Twin Cities’ first lifestyle center, a $90 million project in Maple Grove called The Shoppes at Arbor Lakes. That 400,000-square-foot center is scheduled to open in the fall, with such tenants as Bath & Body Works, Borders, California Pizza Kitchen and Victoria’s Secret. Murnane said Opus would like to bring similar retailers to Woodbury. Opus-RED planned toÊdo a traffic study of the site this spring, but had yet to submit development plans to the city as of mid-March, Picha said.

“We are talking to many of the same tenants we are bringing to Maple Grove,” Murnane said. “Williams Sonoma, Pottery Barn, Ann Taylor and Talbots are a few we’re talking to.”

RED has retail projects in Kansas City, Kan.; North Kansas City, Mo.; and Middleton, Wis., all opening this year.

The competition among the three developers is intense. Doran, whose project is the only one lying outside Woodbury, says the city is considering a moratorium on new retail development and doesn’t have enough liquor licenses for a new lifestyle center. Lack of a liquor license would spell big trouble for a lifestyle center, because the format relies heavily on white-table restaurants.

Not so on both counts, says Picha, Woodbury’s development official.

“I’m not aware of any discussion of a moratorium,” he said. “We have three liquor licenses available now, but we’re asking the state to allow more.” Minnesota allocates liquor licenses based on population, Picha said, and since Woodbury is growing so fast, getting the extra licenses shouldn’t be a problem.

But analysts continue to have their doubts that all three developers will be toasting the opening of their projects.

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