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RISING ABOVE THE REST

Starwood Wasserman’s University Square defies taboo with four levels of retail

BY SUSAN THORNE

Vertical malls, common in Asia, are less so in the United States.

One developer is challenging America’s retail acrophobia with its rollout of University Square, a four-story shopping center that was completed this spring in the Cleveland suburb of — appropriately — University Heights.

Multistory shopping centers are common in Europe and Asia, where space is at more of a premium, but they’re rare in the United States. There are advantages, however, to such a layout that U.S. shoppers will come to appreciate, says David D. Wasserman, a principal at Providence, R.I.-based Starwood Wasserman, University Square’s developer.

“If you think about it, it’s much more convenient than shopping in a 600,000-square-foot shopping center that’s spread over five acres,” he said. “You avoid the traffic nightmare of driving first over there to the Gap, here to T.J. Maxx, then on to Target, Kaufmann’s and the grocery store. Here you can make those five trips with one stop.”

The project, which was about 80 percent leased at press time, replaces an aging, stand-alone Kaufmann’s department store and accompanying parking lot with a 620,625-square-foot, value-oriented enclosed mall that includes a brand-new Kaufmann’s. Instead of surrounding the mall with parking, University Square does it the other way around — it wraps the retail around a multilevel parking garage.

Though, as a rule, U.S. mall design precludes putting retail higher than the second floor (conventional wisdom says people won’t climb higher than that to shop), there are some notable success stories among vertical malls in America. These include The Rouse Co.’s seven-level Water Tower Place, Chicago, and Pine Street Development’s five-story Pacific Place, Seattle.

But Starwood Wasserman is taking a different approach with its retail layout. Rather than separating the levels by merchandise type or price point, as many vertical malls do, University Square organizes its four retail floors as separate shopping destinations. Kaufmann’s anchors the ground floor , while a Tops supermarket anchors the second floor. T.J. Maxx ’n More and the rest of Kaufmann’s are on the third level, and the third anchor, a two-level Target on floors three and four, is connected by a special escalator that accommodates clip-on shopping carts, like those used at hypermarket-anchored centers in Europe. Specialty retailers include Applebee’s Neighborhood Grill & Bar, Foot Locker, KeyBank and Pier 1 Imports.

“Every level has to stand on its own,” Wasserman said. “Enclosed malls often have weak levels, but we tried to get away from that.”

Visitors can drive directly to the store of their choice by means of speed ramps, without having to spiral upward through multiple levels of parking, and once inside, they will find plenty of escalators and elevators. Signage on the exterior brick facade helps shoppers find the level and location of a particular retailer right from the street.

“That’s better than a mall,” Wasserman points out. “Often in a mall you don’t see the store identified [on the exterior] in relation to its position in the center.”

The center’s layout has a big fan in Beryl E. Rothschild, mayor of the two-square-mile city, which has a population of 14,900 and a median annual household income of $61,635.

“We’re thrilled, because we have a development here that’s going to be very productive for us and for the people that shop there,” Rothschild said. “It’s a stunning design, and it’s European in the way it makes better use of land.”

The retail mix, though basic rather than luxury, is a good fit with the local demographic, she says, recounting a conversation she had with two wealthy residents of University Heights. “They were excited about having Target and T.J. Maxx to shop in,” she said. “I didn’t realize they would shop at those stores.”

Starwood Wasserman’s initial plan did not involve anything nearly as ambitious as a multilevel mall. The company bought the Kaufmann’s property in 2000 from Royal Ahold, which was considering the site for a supermarket, and struck a deal with Kaufmann’s to redo its store as part of a new, two-level center.

“But as we started to work with the site and realized its sales potential, we saw an opportunity to do more,” Wasserman said. One source of inspiration was the company’s previous experience with a multilevel project in Pasadena, Calif., called Shops on the Lake, where two stories of retail and parking are configured around a heritage Macy’s store. That center, which opened late last year, is successful, though Wasserman declined to disclose its sales per square foot.

The city of Cleveland, recognizing the value of a viable retail complex, signed a $40 million tax increment financing agreement with the developer (based on a bond issue by the Cleveland-Cuyahoga County Port Authority) to finance the public parking garage. (Tax increment financing is an arrangement by which municipalities raise financing for a project, usually through a bond issue, which is subsequently repaid with the increased tax revenue generated by the project.)

Photo: C.H. Pete Copeland © 2003, The Plain Dealer.

Shopping carts in malls — let alone on escalators — are a rarity in the United States but common in Europe.

University Square’s location is a favorable one, says Mark Rantala, vice president and director of retail services at the Westlake, Ohio, office of real estate services firm CB Richard Ellis. The trade area was previously underserved by retail. The nearest competitor is Severance Town Center, about two miles away in Cleveland Heights. Canyon-Johnson Urban Fund, Beverly Hills, Calif., owns the center, on the site of Cleveland’s first regional mall, which was redeveloped as a power center in 1998. Its tenants include Borders, The Home Depot and Wal-Mart. Rantala says the area’s spending power is sufficient to support both centers.

While he would not disclose specific figures, Wasserman did say that the retailers are ahead of their sales projections thus far. Based on historical data and information from the Port Authority, he predicts that annual sales for Kaufmann’s, Target, T.J. Maxx and Tops altogether will total about $125 million.

Rantala, too, sees success ahead for the center.

“University Square will likely succeed, in large part because of the [population] density and income levels,” he said. “But any shopping center when it opens is not at a fully mature sales level, and University Square will likely take longer than most centers to reach its stride because of its unusual format and the need for people to become comfortable with the parking garages.”

Of course, that could happen soon enough, he speculates. Come January, University Square’s snow-free parking may look very good indeed.

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