Shopping Centers Today -> May 2007
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A FRESH START FOR AN OLD PRO

FORMER GAP REAL ESTATE GURU ALAN BAROCAS STRIKES OUT ON HIS OWN

By Dees Stribling

Alan Barocas is a newly minted retail consultant, but with a distinction: He has years of experience in both retailing and retail real estate. After 25 years at Gap Inc., Barocas left a year ago to launch Alan J. Barocas and Associates, in Atlanta. The firm already has a sizable client list that reflects his diversity of experience.

Barocas and Associates (for the time being, actually, the firm is just Barocas and his daughter, an administrative assistant) is supplying real estate advisory services to The Howard Group, which is developing the 700,000-square-foot Grand Boulevard mixed-use project, in Florida.

The concern advises retailers as well, including sports apparel purveyor Under Armour with its expansion and British retailer SpaceNK Apothecary with its U.S. rollout. Clients also include property owner PREIT and global real estate services provider Jones Lang LaSalle. “The motivation to leave The Gap was twofold,” he said. “My office was in Gap headquarters in San Francisco, where I’d moved six years previously to become senior vice president of real estate, but I wanted to be closer to my wife and kids, who were still on the East Coast. Also, I was 57, and I’d been with the Gap a long time. I thought it was time for page two.”

As a young man, Barocas had not dreamt of a career in real estate or in retail, though he did work some summers at his father’s business in New York City’s garment district, where he watch the interactions between buyers and sellers. Out of college, he worked at Gimbels department store for some years, eventually becoming a buyer himself.

His career at Gap began in 1981, when the company was sizable — roughly $600 million in annual revenue, with only one brand — but not the $16 billion, multibrand behemoth it is now. His time there coincided with the company’s tremendous growth and the rollouts of its Gap Kids, Banana Republic and Old Navy brands, which produced in the company a near-insatiable appetite for retail real estate. Barocas started in the field operations group as a district manager, which he says introduced him to Gap’s corporate culture. Later he worked at the company’s distribution center in Kentucky. That two-year stint gave him insight into the distribution function, he says, “a part of a retail company that everyone relies on, but which often has little visibility.”

His real estate career at Gap began in 1987. One of his mentors there, James V. O’Donnell, who is currently CEO of American Eagle Outfitters but was an executive vice president of Gap at the time, steered him toward a position at the New Jersey office as a leasing rep. By this time, the company had launched Gap Kids and Banana Republic, and Barocas’ job involved site location and negotiation within his territory for all the brands. “Jim saw my potential and gave me the opportunities to reach it,” Barocas said.

Barocas cites the influence of two other mentors during his rise at Gap real estate: Gap founder Don Fisher and company Senior Vice President Steve Kaplan. “Don taught me that this business isn’t rocket science — it’s about quality and location,” Barocas said. “Steve, a great negotiator, taught me to be tough but fair and never take anything personally.”

In 1994 Barocas opened Gap’s Atlanta office, and then was promoted to vice president of real estate for the South and Southwest regions. Later he took responsibility for the Midwest as well. In the mid-1990s, he was involved in the inception and rollout of Old Navy. In 2000 he became senior vice president of real estate, overseeing that function for the entire company and relocating to San Francisco. Soon he was managing about 30 leasing agents nationwide. “Real estate was one of the primary drivers for the growth of all the brands,” he said. “But we did go through some highs and lows. Starting in 1998, there was a period of exceptional growth — we opened close to 1,200 stores in the next two and a half years. That year we were challenged to roughly double the size of the company, and it was all about increasing market share. We learned quickly how to do that.”

After the spurt, however, the company’s growth hit a wall. “It was the combination of a number of factors,” he said. “That’s about the time I took over real estate. We’d improved our market share in the previous years, but we’d also cannibalized ourselves with overaggressive growth and had some merchandizing misfires as well.”

To turn that around, he cut the real estate staff through attrition and redirected the remaining personnel away from the deal and toward asset management. In short, this was a transition to the real estate strategies of a more mature retailer. “We spent more time evaluating our existing stores and quantifying what we could do to improve their performance than growing new ones,” he said. “We created a market-driven strategy. In other words, we maximized market share, but not at the expense of improving profitability in our existing assets. In site selection, we adopted a sensitivity to existing assets that we hadn’t had before.”

As for his new firm, the earliest days involved helping emerging retailers simply get on the map, Barocas says. Now the objective is to help them take a more “holistic” approach to their real estate, through a matchup of the branding, merchandising and real estate strategies, he says.

For his owner/developer clients, Barocas brings a retailer’s perspective to the evaluation of tenant mix and similar tasks. “I’ve also been asked to evaluate portfolios,” he said. “Owners have asked, ‘What are our strengths and weaknesses?’ And I’m even starting to have conversations with private equity investors in retail real estate, and once again it’s about bringing that retailer perspective to the table.”

Besides cultivating a clientele for his own firm, Barocas says part of his new professional life is contributing to the profession on the whole, just as he did in the past. “At the Gap, I had the opportunity to lead and mentor people, and I enjoyed that very much,” he said.

He is actively involved with ICSC, teaching a real estate strategy course for the University of Shopping Centers and the Executive Leadership Series. He also works with the association’s Realty Associates Program, which helps minority candidates enter the commercial real estate business.

Barocas says his consulting business is off to a good start, but that he is not sure how it will evolve. And yet, this does not bother him in the least. “Sometimes I feel like I’m on a ship, traveling first-class, though not exactly sure where it’s going to take me,” he said. “But that’s the exciting part.”

ON THE PRIVATE SIDE

JOSEPH TAGLIOLA FINDS PRIVATE DEVELOPMENT A REFRESHING CHANGE FROM PUBLIC REITS

By Joel Groover

Vivid memories of Christmas shoppers jockeying for a glimpse of Santa at a bustling Colorado mall, or of wooden roller coasters soaring through the night sky at Elitch Gardens, a legendary amusement park built on a Denver farm in 1890, may seem of little use in the hard-nosed world of retail leasing. But having worked in that business for the past 20 years, Joseph P. Tagliola, CLS, wonders whether his childhood recollections of these magical gathering spots somehow helped determine not just the trajectory of his career, but also his success in it. “For some reason, those memories just kind of stuck in my mind,” said

Tagliola, who was hired only last November as retail president of Turnberry Associates. This Aventura, Fla.-based private development firm created the 2.4 million-square-foot Aventura Mall, where annual sales per square foot reach $1,150 (nearly triple the 2006 national average of $403). “I never knew I was going to be in the mall business, but I had always had this attraction to where people congregate, where they go to spend their time.”

That’s not a bad preoccupation to have, actually, in a shopping center industry that has become obsessed itself with cracking the code of what drives people to gather, linger and spend. Indeed, the 42-year-old Duke University graduate joins Turnberry Associates after spending seven years contemplating just such questions, as a senior executive vice president at Los Angeles-based Westfield America. A big part of Tagliola’s job was shaking up tenant mixes at older malls, often as part of major redevelopments like the

$150 million makeover of Century City, in Los Angeles, which opened last September, or the ongoing $360 million expansion of Topanga, in Canoga Park, Calif.

“My main focus wasn’t necessarily on ‘Can we get this or that tenant?’ or ‘Can we make it look cool and put out some branding?’ ” he said. “I was interested in bringing whatever tenants or uses to that property that would cause a person to get out of their house, put their wallet in their pocket and drive there and spend two hours. It didn’t matter whether that was a theater, restaurants, high-end fashion or Costco.”

Tagliola got his start in the mall business as a secretary in the Atlanta leasing office of Australia-based development firm L.J. Hooker. He was promoted to full-fledged leasing agent within three months, and by the time he was 25, he had become the high-end fashion specialist at Taubman Centers. Subsequently, he worked closely with such industry veterans as Jeremiah W. O’Connor, managing partner of New York City-based O’Connor Capital Partners, and Stephen R. Karp, founder of Boston-based New England Development.

“Joe has a great reputation in the industry,” said Jackie Soffer, a Turnberry principal, whose father, Don, founded the firm in 1967. “When we decided we wanted to bring someone in, we targeted some of the top people across the country. He was at the top of our list.”

But why leave Westfield America, a $17.9 billion mall REIT with 59 centers and an ambitious acquisition and redevelopment program, for less-well-known Turnberry Associates, which has $7 billion in assets and is essentially a family-run business?

The answer may again have something to do with Tagliola’s longstanding fascination with fun places like amusement parks. (At times in his career, he has been tempted to try his hand at developing resorts, he says.) According to Tagliola, Turnberry’s multifaceted approach to development jibes perfectly with his own view of the ideal way to bring a retail property to life: surround that property with uses that complement its tenants and public spaces to create a powerful draw.

Tagliola lauds the Soffer family for creating what he calls “the Turnberry lifestyle.” Similar slogans pepper the marketing materials of many real estate firms, of course. But with Turnberry Associates, the lingo may indeed be apropos. What is now the upscale community of Aventura, for instance, took root 40 years ago when Don Soffer bought 785 acres of swamp and marshland in North Dade County. Today Turnberry’s holdings in this city of about 30,000 include three hotels, three class-A office buildings, three power centers and the Turnberry Isle Resort & Country Club.

The company’s four major residential projects in Aventura include Turnberry Isle, where a private club serves 1,030 luxury condos, and Porto Vita, where 377 luxury condos fill two Mediterranean midrises, two 32-story towers and 24 waterfront town houses. “This is one of the most prominent residential areas and, as a result, commercial areas in south Florida,” said Jonathan Kingsley, managing director of the Miami office of Grubb & Ellis. “Aventura Mall is the ‘Main and Main’ of the Aventura market.”

Turnberry’s surrounding developments are as important to the vitality of the mall as its tenant mix of five department stores, 250 specialty shops and a 24-screen AMC cinema, says Tagliola. “I was walking through the center on a Tuesday morning the other day, and it was packed. It was almost like Christmas,” he said. “So it is not just about the retail offering that you have within the center. It is everything that you put around it that helps facilitate and generate that type of excitement and traffic and, ultimately, retail sales.”

The latest expression of Turnberry’s development philosophy is Town Square Las Vegas, a 1.5 million-square-foot retail, dining and office development with 22 buildings on 117 acres south of Mandalay Bay on the Las Vegas Strip. Locally based Centra Properties is a co-developer on the project, which was 80 percent leased and more than halfway built at press time. It is slated to open this fall with 150 retail shops, at least 12 restaurants and 352,000 square feet of class-A office space.

Anchoring the open-air, village-style retail corridor will be Borders, Fry’s Electronics, Rave Motion Pictures, Robb & Stucky and 24-Hour Fitness, with a lineup of smaller shops, including such lifestyle center staples as Abercrombie & Fitch, Banana Republic, Chico’s, Cold Stone Creamery and White House Black Market.

Town Square is not a lifestyle center as conventionally understood, however, Tagliola says. “It is a large project,

$600 million plus,” he said. “It’s very different from a traditional, smaller lifestyle center, which could be $70 million or $100 million. We’re virtually building a small town.” The strategy behind Town Square, with its public piazza, 42 park benches and large playground, is to fill a void in the marketplace by creating a family-friendly gathering place where people can shop, dine, see a movie or just relax outside. “If you look at Las Vegas, where do you go after you’ve done the casino thing, the Cirque du Soleil thing? There really isn’t a place,” Tagliola said.

Overseeing the leasing for that project is just one of many items on Tagliola’s to-do list. Another of Turnberry’s Las Vegas developments is a new version of Miami Beach’s classic Fontainebleau Hotel, a famous Rat Pack hangout during the 1950s and ’60s. The firm also owns the original Miami Beach hotel, which it is renovating. Tagliola is targeting luxury and bridge retailers for the duplicate project’s 300,000-square-foot retail component. He says this new, 68-story Fontainebleau will be the tallest hotel, resort and casino in Las Vegas. “The coolest part of this is, stacked on top of the retail and the casino, 100 feet up in the air, will be the world’s largest elevated pool — 31,000 square feet,” Tagliola said. “You’ll have our nightclub operator there, a series of restaurants. You’ll be able to look down the Strip at night, from 100 feet up in the air, and it will be the hottest place in Vegas.” Construction begins next year.

Back in Florida, meanwhile, Turnberry, which has developed about 20 million square feet of retail space in total, is moving forward with a 205,000-square-foot expansion of its Destin Commons lifestyle center and has received preliminary approvals for a 1.5 million-square-foot lifestyle center in the city of Davie. The company plans to add a 167,000-square-foot Nordstrom and a 150,000-square-foot wing of new stores and restaurants to Aventura Mall next year. The property doubled in size in 1997 and underwent a $20 million expansion last year.

But the hiring of Tagliola does not signal that Turnberry is about to embark on a retail acquisition or development spree worthy of a heavy-hitting mall REIT, says Jackie Soffer. “We’re in the business of branching out and taking opportunities,” she said. “We’re not trying to grow at a super-fast rate, just a healthy rate. If opportunities present themselves to us, then that is where we go.”

This approach has earned Turnberry a reputation for being astute and skilled, says John Crossman, a longtime Florida market watcher and managing director of Crossman & Co., an Orlando, Fla.-based commercial real estate firm. “It is very hard to do mixed-use vertical development in south Florida and some of these other dense markets, which have very intense political challenges to them,” he said. “It can take years, and clearly they are doing it in a very successful way.”

For Tagliola, the atmosphere at the new firm will probably take some getting used to. Jackie Soffer jokes about Tagliola having to listen to family arguments, for instance. (She and her brother Jeffrey, also a Turnberry principal, developed the sold-out, $650 million Turnberry Place luxury condo tower in Las Vegas.)

Even if Turnberry is half the size of Westfield, however, its appearance belies its true strength, says Kingsley. “They have the look and appeal of sort of a small, local-type firm, because they’re accessible and you see them out in the community,” he said. “But they’re on a major national level in terms of the worth of the assets they have developed and own. They’re very prominent. They could have sold out those assets time and time again to REITs and institutions, yet they have kept their discipline, which is impressive as well.”

Indeed, Tagliola cites the firm’s private status as one of the reasons he took the job. Unfettered by Wall Street imperatives to maximize cash flow, Turnberry fills prime common areas at blue-chip Aventura Mall not with moneymaking carts and kiosks, but with its new Rainbow Valley children’s playground and large, ornate holiday displays right out of the movie A Christmas Story. “We have this huge center court, and there is a train that you can ride in,” Tagliola said. “It goes through some buildings, and Santa kind of hangs out in the middle there. Traditionally, within our business it would be very enticing to say, ‘Look at the revenue you could generate with other uses there.’ ”

When Tagliola looks at these throwbacks to another era, he might well get a feeling of déjà vu.



RAYMOND NASHER, 85, NORTHPARK BUILDER

By Debra Hazel

Shopping center pioneer Raymond D. Nasher, who died in March at 85, was not famous merely for his real estate creations, which include the large NorthPark Center, in Dallas. He was also an enthusiastic collector of modern art, and his collection is regarded as among the best in the world.

Some of that art is on display at NorthPark, as well as at the Nasher Sculpture Center Museum he built in Dallas toward the end of his life.

To his tenants at NorthPark, Nasher was more than a landlord; he was a friend and mentor whose eye for detail was as useful in business as in art. “He set very high demands on himself in delivering a product unparalleled in retail,” said Richard Eiseman, owner of Eiseman Jewelers, an early tenant at NorthPark. Eiseman’s father signed the original lease. “When I think of Ray, I see him walking the center with his hands clasped behind his back, wearing a beautiful silk tie and pocket square and a warm smile. Ray would visit our private salon to talk. He’d look you in the eye and nod, and you’d think it was a sign of approval [about your ideas]. He was digesting it and would make a comment that would make you look a little deeper.”

Nasher was born in Boston in 1921, and he was an art lover from childhood. After graduating from Duke University and serving in the Navy in World War II, he settled in Dallas, where he began building homes. There, in the early 1960s, he found a site for a regional mall, on which he opened NorthPark in 1965.

Meanwhile, he and his wife, Patsy, a native of Dallas, began collecting art; they started with sculptures, which were more affordable than paintings. The Nashers bought works by Alexander Calder, Barbara Hepworth, Joan Miró and Henry Moore, among others. Nasher found a way to merge his passions for real estate and art by installing works at NorthPark, an effort that complemented its high-end tenants.

Nasher was an early supporter of the shopping center industry, serving as an ICSC trustee from 1965 to 1969.

“He was a great friend of ICSC and did a wonderful thing for us some years ago,” recalls John T. Riordan, an ICSC past president. “Contrary to its policy, and to the consternation of its chair, Katharine Graham of The Washington Post, he got the National Gallery to allow ICSC to have a private party just steps from the Capitol. I think half the Senate, most of the House and even one or two Supreme Court justices attended.”

Nasher was chairman of the National Commission of Urban Development during the Johnson administration, and later he was a delegate to the U.N. General Assembly. He also served on the President’s Committee on the Arts and the Humanities and on the Council on Foreign Relations.

Patsy Nasher died in 1988, but Raymond Nasher continued to collect art and run the center. In 1995 he sold his stake in NorthPark to his daughter, Nancy Nasher Haemsigger, and her husband, David. They continue to operate the center, last year expanding it to 2.2 million square feet. (In June 2004 they sold a 50 percent stake to The Macerich Co.) Besides Nancy, Nasher is survived by his daughters Andrea Nasher and Joanie Nasher, and three grandchildren. “Though it is a loss, the direction of the center is in very good hands,” Eiseman said. “His legacy is in very good hands.”


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