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DDR TACKLES TWO PROJECTS IN LONG BEACH

By Dave Bodamer

DDR is turning Long Beach Plaza into CityPlace, an urban power center.

Building a half-million square-foot retail project in a major urban setting presents a challenge to any developer. But try doing two projects that large within a mile of each other — simultaneously. Developers Diversified Realty (DDR), Cleveland, Ohio, is doing just that, building more than 900,000 square feet of retail separated by just five blocks in Long Beach, Calif.

The two projects have completely different purposes.

CityPlace is a sort of urban power center, and The Pike at Rainbow Harbor is an entertainment retail project. CityPlace contains 475,000 square feet and is the redevelopment of the Long Beach Plaza, which was demolished in December 2000. The Pike contains 450,000 square feet and overlooks Queensway Bay in south Long Beach. CityPlace is under construction now with an opening date set for mid-2002; The Pike should break ground later this year, with a targeted opening of late 2002 or early 2003.

“These are two very different projects in focus and in presentation,” said Keith W. Browning, DDR’s vice president of leasing for western states. “The proof for any product comes from the retailers. They’ll tell you quickly whether or not you’re delivering the right product. We’ve had a really positive validation of both.”

DDR’s original intention was not to build two major projects in the same market at the same time. The situation arose because the opportunity to develop CityPlace came along while the company was already in the midst of trying to make The Pike a reality. DDR began pursuing the $100 million Pike in earnest in 1997, about two years before it completed its purchase of Long Beach Plaza for the purpose of redeveloping it.

The Pike
The site that The Pike inhabits has been a target for developers for years. It sits adjacent to the town’s convention center, which hosts more than 200 shows a year. It is within walking distance of Long Beach’s main business district, and it is close to the city’s aquarium, which is one of its main tourist attractions. The site’s place on Queensway Bay also affords it views of passing boats.

Several developers looked into the site prior to DDR’s buying it, but failed to come up with a scheme that fit the rigorous environmental and aesthetic requirements put in place by local, state and federal agencies. The presence of water around and on the site necessitates a permit from the Army Corps of Engineers as well as from state environmental agencies, all of which DDR is still working on obtaining.

On some projects California requires a certain percentage of the budget be spent on “aesthetics.” To meet that requirement, DDR is incorporating a pedestrian bridge modeled after a wooden roller coaster into the project. The idea came about because the site was the home of a Coney Island-style amusement park called The Pike.

Dealing with those complexities, along with trying to nail down a movie theater tenant, which DDR was able to do in April when Crown Theatres agreed to build 15 screens, has already pushed the starting construction date back 18 months. DDR now anticipates breaking ground on The Pike late this year with its opening scheduled for late 2002. In fact, even though DDR began working on it later, CityPlace is on course to open before The Pike.

Restaurants will dominate the project. Selections will range from the Islands restaurant, California Pizza Kitchen and Prego’s on the more casual side to Guaymas, an upscale Mexican eatery and Harry’s Bar on the higher end.

CityPlace
During its pursuit of The Pike, DDR began considering the CityPlace project. CityPlace will inhabit the site of the Long Beach Plaza mall, which was constructed in the 1970s by the Hahn Co, and cover eight blocks. Some retailers, including Ross Dress For Less, which will be a tenant in CityPlace, enjoyed success at the site, but overall the mall struggled. DDR purchased the mall in January 1999, demolished it in December 2000 and immediately began construction of CityPlace. The Pike and CityPlace sites are connected by Pine Avenue. Browning said he sees the two projects as anchors to a five-block long retail district.

CityPlace is essentially an urban power center, Browning said. It will feature a 125,000-square-foot Wal-Mart, a 58,000-square-foot Albertson’s, a 30,000-square-foot Nordstrom Rack and a 27,000-square-foot Ross Dress For Less as anchors. Wal-Mart has modified its prototypical building to include a corner entrance, mock display windows and an art deco facade. The Jerde Partnership of Venice, Calif., designed the future mixed-use project.

It will also feature approximately 240,000 square feet of specialty retail. Rather than being an enclosed structure, as Long Beach Plaza was, CityPlace will be an open-air development. DDR is also opening several streets to auto traffic that had been closed since Long Beach Plaza was originally built.

“By definition it follows all of the typical components you would find in a power center,” Browning said. “We just put it in an urban environment. We still put it adjacent to a parking structure, like you would in the suburbs; it’s just a vertical structure instead of a lot. … One of the things that gave us a leg up was that a lot of tenants appropriate for power centers had gravitated into the old mall and had performed very well.”

A local broker, who previously served on the Long Beach City Council for 12 years, expressed more confidence in the $75 million CityPlace project than The Pike.

“Cityplace is a move in the right direction,” said Jeff Kellogg, project manager for the Long Beach branch of New York City-based Newmark New Spectrum, which provides retail consulting services to the city of Long Beach.

He noted that the site The Pike is inhabiting has been plagued with difficulties for the companies that have attempted to build there.

The Pike’s proximity to CityPlace raises questions as to whether there are enough retailers for both projects, added Kellogg.

But, Browning said The Pike and CityPlace are so different that finding tenants and steering them to one project or the other has not been much of a problem at all.

“Doing both at the same time has given us the opportunity to keep them focused and make sure there is no overlap,” Browning said. “That hasn’t been a tremendous challenge with the products being so different.”

Another advantage DDR sees to the situation is that once the projects are open, some of the management functions could be overlapped.

“This will give us some opportunities from the operations standpoint,” Browning said. “We could have a larger group taking care of maintenance or security to take advantage of some efficiencies.”

However, DDR will not do any joint marketing of the projects. It is targeting two different audiences with the difference in price scales, with CityPlace at the lower end and The Pike at the upper end. Moreover, Browning said that for CityPlace DDR would be relying on Wal-Mart and Albertson’s to do a lot of the marketing for the center themselves.

Nordstrom officials said they are excited to be part of the project. “We are thrilled to have the opportunity to serve this community by joining CityPlace,” said Kelly Cole-Berka, Nordstrom Rack vice president and southwest general manager.

A common thread to the projects is that both will have residential components. CityPlace will have 328 apartments and condominiums on the upper level. A 138-room hotel is also part of the development. The Pike is within walking distance of a residential complex being constructed by Houston-based Camden Development that will include about 600 apartments and condominiums.

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