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SHOPPING THE SHORE

Atlantic City uses retail to shed dowdy image and boost revenues

BY DONNA MITCHELL

Gordon Group Holdings, co-creator of the world-famous Forum Shops, Las Vegas, plans to work its magic on a now shuttered mall (above), transforming it into The Pier at Caesars (top).

Kim Butler is excited, and it’s easy to see why. As the general manager of Atlantic City Outlets/The Walk, she is overseeing a project that represents huge changes afoot in Atlantic City.

The Walk, as the 320,000-square-foot retail and entertainment project is known for short, is one of three major projects that will bring in a total of over 900,000 square feet of retail and entertainment space by the summer of 2005. This new space will be a major upgrade from the meagerness of the city’s existing offerings — mainly the souvenir and novelty stores that line the Boardwalk. Some of the new development has opened already; customers began shopping at Siganos Plaza, a small strip center along the Boardwalk, in mid-June.

“There is a lot of energy and excitement,” says Butler. “It is great to be in on the ground floor of that.”

Atlantic City is trading up. The city that welcomed casino development in the late 1970s as a means to prosperity is now looking to retail to add panache and bring in even more revenue. From the Boardwalk to the Marina District, building frames and mounds of dirt foreshadow the retail and entertainment centers that will soon transform the landscape.

The city even got a new slogan; in mid-October “Always Turned On” replaced “America’s Favorite Playground.”

“It is a significant concentration of retail space in a small geographic area,” said James Kennedy, executive director of the Casino Reinvestment Development Authority, or CRDA. “It will completely change the impression of the city over time.”

Much of this retail development was encouraged by the Urban Revitalization Incentive Program, created legislatively in 2001 and funded by a portion of casino revenues and taxes. Besides retail development, CRDA also invests in housing and other economic initiatives, locally and statewide.

Atlantic City’s image has been that of a weather-beaten gambling stopover, and this still rings true, in part. In 2002 the city’s then-12 casinos generated about $4.3 billion in gaming revenue, equaling that of Las Vegas’ 30 casinos. But Atlantic City falls way behind its desert cousin in nongaming revenue, taking in an average $300 million annually, versus Las Vegas’ approximately $4.5 billion, says Dennis C. Gomes, president of resort operations at Phoenix-based Aztar Resort Operations. Aztar owns The Tropicana, one of the city’s casino and hotel developments. After gamblers leave the casinos, they encounter little beyond a few family-owned restaurants wilting under the glare of the casinos.

“The city itself is commuter-based,” said Jeff Cohen, a principal at Philadelphia-based Fameco Real Estate. “[Many people] are there for a weekend or an afternoon.” But the new retail developments could change all that by inducing those visitors to plan longer trips, he adds.

The Walk spans seven city blocks along Michigan Avenue and part of Atlantic Avenue, connecting the cluster of casinos to the new Atlantic City Convention Center. As such, it will have a considerable impact on visitors’ perception of the city, says Butler.

The Tropicana plans to offer retail, restaurants and a spa at its casino.

“[Patrons] are treated very well in the casinos,” Butler said. “They are offered a variety of amenities.” But she notes that visitors are not exactly encouraged to go outside. “We want that experience to carry over, for them to feel special in a wonderful, colorful environment where the shopping is phenomenal.”

When the Walk is completed in the spring, it will offer about 70 manufacturer outlet stores, including Guess, Nautica, Osh Kosh and Wilsons Leather. The builder is Baltimore-based Cordish Co., a developer of mixed-use projects along the East Coast, and the designer is Carter & Burgess Architects, also based in Baltimore.

Cordish does not have a casino development partner, unlike the developers of some of the other retail projects. Instead, Cordish is working with CRDA on the $71 million project. The agency bought the site from the city and made it available to Cordish through a 99-year ground lease. CRDA also kicked in $32 million in funding and is negotiating a PILOT (or payment in lieu of taxes) agreement under which, as site owner, it would pay a reduced rate to the city rather than full taxes to the school district and to Ocean County, says Keith Mills, director of planning and development for Atlantic City.

The Walk will also feature an entertainment district called A.C. Live, whose restaurants and nightclubs will light up Atlantic Avenue on a site abutting the Caesars Atlantic City casino-hotel. This proximity to Caesars is no coincidence, says Butler; the objective is a destination for gamblers and residents alike.

The Walk is considered a linchpin of Atlantic City’s retail and economic progress. The project sits partly in a special improvement district the city created along a two-mile stretch of Atlantic Avenue, funded with a tax on local businesses to pay for beautification and facade improvements, says Mills.

The casinos themselves are working to expand the retail offerings at their own properties. Near the Boardwalk, The Quarter at Tropicana, a 220,000-square-foot mixed-use project, is taking shape. The Quarter will house more than 40 retail, restaurant, entertainment and spa offerings, says Gomes. Aztar also plans a 502-room hotel tower and 45,000 square feet of meeting space in the expansion.

Inspired by the romance of Old Havana, the Quarter will abound with architectural touches of the Cuban capital in its post-World War II heyday, complete with a faux sky, says Chuck Bragitikos, a partner at Philadelphia-based MRA, a retail and entertainment consulting firm recruited by Aztar. The designers are Newport Beach, Calif.-based Wimberly Allison Tong & Goo and Atlantic City-based Sosh Architects. Kravco Co. is the leasing agent for the project.

The $245 million Quarter ($30 million of that comes from CRDA) will feature covered pedestrian walkways linking Tropicana’s casino and hotel properties, which are spread over four city blocks. One 130-foot-wide pedestrian bridge spans Pacific Avenue, with shops lining the walkway, while a 600-foot-long covered area runs several blocks along Brighton Avenue.

The Borgata Hotel Casino & Spa will include some high-end shopping.

Inside, multilevel stores will line a street-like corridor. Retailers will include include Chicos, Mondi and Swarovski, a purveyor of crystal figurines.

MRA will hire musicians, artists and other performers to liven up three interior courtyards.

Tropicana, like the other casinos, is aiming its new retail offerings at the more than 25 million adults who reside within 150 miles of the seaside community, but says it also hopes the locals come in and check out the surroundings.

“There will be a nice mix of retail and dining,” said Sherry Amos, vice president of entertainment, media services and business planning for Aztar. “Now there really is not a place for them to shop.”

Aztar expected to open the Quarter in the spring, but a fatal construction accident in October has thrown that into doubt.

There is development off the Boardwalk too. Gordon Group Holdings is building a mixed-use project called The Pier at Caesars, through an entity called Pier Developments, says Scott Gordon, president of Greenwich, Conn.-based Gordon Group, co-developer of The Forum Shops at Caesars Palace in Las Vegas.

Retail will occupy the first two levels; restaurants and entertainment will fill the third. A pedestrian walkway will connect the second level to the casino at Caesars Atlantic City, and a 20,000-square-foot space at the end of the pier will hold banquet rooms and management offices. The project is going up on the site of the Shops on Ocean One, a mall that closed in December 2002.

The Pier at Caesars will be encased in glass walls, creating a striking effect against the Atlantic Ocean. Based on a 1920s and ’30s beach theme, the project’s first level will incorporate the look of the Boardwalk, says Gordon.

Park Place Entertainment, Las Vegas, owns the pier and leases the property to Gordon Group. Park Place is also Pier Developments’ casino partner on the project and will receive $30 million from CRDA to help finance its investment, which is estimated at $120 million.

There is also a small amount of high-end retail at the $1.1 billion Borgata Hotel Casino & Spa, located on 40 acres in the Marina District. When Boyd Gaming Corp. and MGM Mirage opened the Borgata in July, it was the first casino-hotel to open in Atlantic City in 13 years (and also brought the city’s casino total to 13). Its 22,000-square-foot Retail Piazza has men’s and women’s apparel shops and a Starbucks.

George Siganos’ Plaza — a cut above the Boardwalk’s T-shirt stores, he notes.

Some of the new retail developments coming on line are too upscale for many of the city’s 41,299 residents, whose 2003 average household income was just $41,104, according to Claritas, a San Diego-based market research firm. One exception is the Walk, with its moderately priced outlet stores. The other is the 25,000-square-foot Siganos Plaza. Opa Bar & Grille anchors the $3 million project, which has some local tenants among its retailers, including Tiki Liki Surf Shop and Beach Apparel, Lady of Leisure and Wacky Bear Factory. This center is an attempt to improve on the T-shirt, souvenir and novelty shops that have dominated the Boardwalk, says George Siganos, president of Northfield, N.J.-based Siganos Boardwalk Properties. The developer is also considering improving another block along the Boardwalk, says Julie Hayles, president of Brigantine, N.J.-based S.E. Marketing.

But there have been setbacks. Of the six retail-related projects that CRDA approved two years ago, only the Quarter and the Pier at Caesars were proceeding at press time.

Among the stalled projects was a restaurant-entertainment venue that was to go up on the site of The Steeplechase Pier, one of Atlantic City’s historic amusement areas, which was torn down five years ago. But the developer, Resorts Atlantic City, changed hands. The new owner, Los Angeles-based Colony Capital, decided in 2001 to incorporate retail into the lobby of a new $127 million hotel tower elsewhere on the site, says a company spokeswoman.

At press time, plans were still unclear for the nearly 193,000 square feet of restaurant and neighborhood space that Sands Casino was supposed to build around its property.

Meanwhile, officials at Trump Hotels & Casino Resorts did not return calls for comment about the 500,000 square feet of retail space it was supposed to build on the old Trump World’s Fair Casino site, demolished in 2001.

Things were also uncertain at press time for the Harrah’s Atlantic City casino and The Showboat Casino Hotel, both of which were supposed to add 75,000 square feet of retail.

Still, there is optimism about the projects that are going ahead. Before these got under way, Atlantic City’s offerings were so skimpy that area retail brokers had hardly anything to latch on to or to study, said Fameco’s Cohen.

It looks as though things are going to be different now.

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