CONTENTS

December 2007

• FEATURES
• Mixed-use grapples with its weakest link
• Theory has it that mixed-use developments would withstand a real estate slump better than single-use properties. Now the theory is being tested. By Joel Groover
• Less risky business
• The U.S. House of Representatives has passed a measure to extend the Terrorism Risk Assurance Act . By Kerri Linden
• Thriving in Foreclosure City, USA
• Stockton, Calif., has seen more foreclosures per capita than any other city in America, but that doesn’t appear to faze its retail landlords. By Jennifer Hopfinger
• Another U.S. developer heads to Brazil
• CBL has signed a joint venture with Brazil’s Tenco Realty to develop, acquire and redevelop shopping centers across Brazil. By Kerri Linden
• A new frontier for real estate derivatives
• The day is not far off when U.S. real estate investors will think in terms of “going long” or “short.” They are doing it already in other countries. By Dees Stribling
• The industry learns to blog, pod and video
• News release, snooze release — marketing executives have discovered that blogs, pods and video-sharing is the way to get the word out these days. By Rodger Brown
• Big deals
• A look back at the acquisitions and mergers that most got our attention over the past year. One deal created one of Europe’s largest landlords. By Steve McLinden
• Where are they now?
• We revisit some of the year’s big issues, including EuroREITs, border restrictions and hot new retail concepts, some of which got cool receptions. By Kerri Linden
• Multiple Hats
• Some landlords are consolidating leasing and marketing functions under one executive.
• Finding green contractors
• With sustainable development still in the pioneer stages, good green contractors can be difficult to find. By Steve McLinden
• The world improves itbuss iness districts
• BIDs — business improvement districts — are a North American concept that are now catching on elsewhere in the world. Britain has 54 of them. By Steve McLinden
• Development by ballot box
• Every proposed development would need the approval of voters if a group called Florida Hometown Democracy gets its way. By Dees Stribling
• Retail on Wall Street
• Posh retailers are following the money and opening stores on Wall Street, and some are already finding the move has paid off, despite mortgage market and bonus squeezes. By Jesse Serwer
• Decking the malls
• Tastes can differ sharply when it comes to holiday decorations. What are some of the rules landlords impose to avoid aesthetic anarchy during Christmas? By Kathy Showalter
• Latin America’s mixed-use embrace
• Mixed-use centers are sprouting across an increasingly affluent Latin America as developers seek to make full use of ever-pricier sites. By María Bird Picó
• Micronesia shops for retailers
• As tourists flock to Micronesia from Asia and elsewhere, so do retailers. By Steve Bergsman
• Peru’s retail boom
• A measure of Peru’s sustained economic development is the number of shopping centers going up around the country, fueled in part by a flood of foreign investment. By María Bird Picó
• Drought dilemma
• Water issues could hurt new retail developments in the Southeast.




• DEPARTMENTS
• Center Stage
• General Growth Properties has restored Oakwood Center, and with it the morale of a whole community near New Orleans.



• The Common Area
• Parking lots as billboards, malls as art galleries and other notable topics from the world of retail real estate — including four-legged landscapers



• Retailing Today - A look at some tenants of the tenants that, sooner or later, might come knocking at your mall


• Rethinking food stamps
• Retailers are hailing technological improvements to the food stamp program.
• Juiced up
• The Juice It Up franchise is doing just that, with plans to open 50 juice bars a year.
• Spencer’s rides again
• Actually, the chain of knick-knack stores never closed, though it did hit a slump. It’s back.
• Girl-powered
• Love Culture This new concept wants to win the hearts of fashion-forward but frugal young women.
• Fat fighters
• Clinics offering weight-reduction cosmetic treatments are increasingly setting up shop in centers.
• Larger-than-life fitness
• Life Time Fitness facilities are so big they are better described as health malls than gyms.
• Gottschalks’ diet
• While other department store chains swell through consolidation, Gottschalks plans to shrink.
• Space Apothecary hops the pond
• The U.K. beauty retailer is planning for a major U.S. presence.
• Ecko’s next step
• Marc Ecko made a fortune selling his merchandise without opening a store. Now come the stores.
• Russian risqué
• Russia’s Wild Orchid lingerie retailer has opened its first stores in Western Europe.
• Power to the consumer
• Mexico’s biggest appliance retailer also wants to be its customers’ favorite bank.
• Greener still
• Energy ratings like those on appliances are now being applied to retailers.
• Hallmark plays a card
• America’s leading greeting card company has revamped its stores.

• On the Ground
• On the Ground: Williamsburg, Brooklyn
• On the Ground: Kuala Lumpur
• On the Ground: Champs-Elysees

 

• ICSC News
• Delegates attending October’s Fall Conference donned work clothes and tools, and helped fix up homes and schools damaged by Hurricane Katrina.



• News Makers
• Maitland Bruce oversees the U.S. bank’s expansion into Europe.
• Macerich’s Tracey Gotsis is exploring new frontiers in marketing.



• The Bottom Line
• Various reverberations from the subprime mortgage meltdown are being felt by retail estate executives. Investors are increasingly referring to themselves as bears, and open-air vacancies are up slightly.

Art galleria

Do shopping centers have too much white space? A custom mural might help. Richard Solomon’s Art on a Grand Scale uses a collective of artists to make customized pieces of art that are then enlarged digitally, printed on vinyl and put on the wall. “This is not something I invented,” Richard Solomon said. “But I saw the applicability and took the technology, and we’re using it to make art for public and private spaces.” Clients can choose from Solomon’s stable of 33 artists, award–winning illustrators whose works have appeared in top publications and galleries. The styles range from classical to near–caricature to abstract. The artist then produces a scaled–down original that is scanned and given optional coatings for texture and for ultraviolet and graffiti protection. Solomon has completed 35 projects and is currently completing a 140–foot–long piece for Barnes & Noble’s store in the Tribeca area of New York City, among other projects. Prices vary, depending on artist and specifications, but they generally run from about $10,000 to roughly $100,000. Murals can be created and put up in three to eight weeks. “We’re hoping that mall owners will see this as something really cool,” Solomon said. “We’re not selling stock art off the shelf. You can always have a reproduction of something made; you can go to the Met and have someone reproduce a Rembrandt for you. That’s not what we’re doing. We’re taking a vision of what someone wants in the space and making it. You’re buying a look and a feel.”

Medicine mall

Many a consumer has, at one point, ventured to a mall to shop sorrows away. Now, thanks to the massive health care center going into One Hundred Oaks Mall, Nashville, Tennessee, shoppers will be able to find a fix for other ailments as well. Slated to open next summer, the 436,000–square–foot Vanderbilt Health Complex is an extension of Vanderbilt University’s Medical Center and intended to alleviate crowding at the main facilities. The One Hundred Oaks health center will capitalize on the mall’s vacant interior space and acres of parking to provide a vast assortment of outpatient services, including dermatology, pediatrics and neurodiagnostics, as well as the Vanderbilt heart clinic. “What we’re doing is creating a mall–like environment for health care,” said Frank Mihalopoulos, managing partner of One Hundred Oaks.

Because these are all out–patient clinics, Mihalopoulos says, the mall expects to see a significant surge in visitors, particular at midday, when retail traffic is typically lowest. As a result, Mihalopoulos says, many existing tenants have begun to expand and renovate their stores in anticipation of an influx of shoppers.

But the improvements are not limited to the stores. The 40–year–old mall, which Mihalopoulos describes as “not the most attractive–looking structure in Nashville,” is itself undergoing an extensive overhaul, while nearby roads are being expanded and rerouted to accommodate increased usage. Finally, security measures are being reassessed and improved at Vanderbilt’s behest. The community is rallying behind the project. “One Hundred Oaks was the first mall in Nashville, so there’s a lot of sentimentality attached to it,” said Mihalopoulos. “I’ve been in the business for roughly 30 years, and I’ve never seen so much excitement for a project. It’s having a tremendous impact on everyone involved.”

Parking lots become billboards

Shopping centers are turning their parking lots into advertising vehicles, through a marketing concept called parking stripes — strips of vinyl used as parking divider lines and containing printed messages. “The parking stripe is a relatively new venture and is targeting retail environments as an advertising venue,” said Greg Parsons, director of specialty leasing at Developers Diversified Realty Corp. “Products, consumers and brands are all located in a shopping center, so it makes sense.” The stripes, which cost about $50 each, can help advertisers sell a product before a customer even enters the shopping center, says Parsons. “An advertiser can target a brand or a concept when the person is walking into the mall, to touch them right when they’re already influenced,” said Parsons. Advertisers are interested. Nationwide Insurance has used the stripes in Glimcher Realty’s Weberstown Mall, in Stockton, Calif. Seven of New Hyde Park, N.Y.–based Kimco Realty’s shopping center parking lots in the Northeast began advertising the television show Desperate Housewives this fall. And DDR has the stripes at eight of its centers in the Midwest and on the West Coast. Golden, Colo.–based Parking Stripe Advertising, created the product. The adhesive sticker stands up to extreme heat and cold and does not fade from exposure to the sun. At the end of the contracted ad period, the stickers are removed and disposed of or recycled. “The stripes can benefit the mall as an additional revenue stream,” Parsons said. “It’s a grassroots type of exposure that’s a new and different opportunity.”

Free speech rears head in mall case

The question of whether shopping centers should be considered private property or public forums under the First Amendment’s free–speech clause is before a court again, this time in California. This latest case, Fashion Valley Mall v. National Labor Relations Board, stems from a 1998 incident in which a Teamsters union affiliate involved in a dispute with the San Diego Union–Tribune newspaper was distributing leaflets outside a Robinsons–May store, urging shoppers to contact the paper’s owner. The store was a Union–Tribune advertiser. The San Diego mall ejected the union representatives, charging that they had failed to complete a permit application that stipulates mall rules — one of which forbids advocating boycotts. The case is now before California’s Supreme Court, which heard Thomas Leanse, of the Chicago–based Katten Muchin Rosenman law firm deliver amicus curiae testimony on behalf of ICSC and the California Business Properties Association. Leanse argued that shopping centers are private property and that shopping center owners should be allowed to protect their business interests. “This isn’t Speaker’s Corner in Hyde Park; it’s not Pershing Square in Los Angeles,” said Leanse. “These are privately owned shopping centers, and the protestors directly interfere with business.” The court is scheduled to rule within 90 days.

What makes the case important, says Leanse, is a 1979 ruling in California, Robins v. PruneYard Shopping Center, in which the court extended the right of free expression to large shopping centers, likening them to town squares. “It is unlikely the 1979 precedent will be overturned,” Leanse said. “But we argue that the shopping center has rules, and they are rules we can enforce, like the no–boycott rule.” There have been similar cases in other states in which landlords have prevailed. In 1998 Minnesota’s Court of Appeals overturned a lower court’s ruling in favor of an animal–rights group that staged anti–fur protests outside a Macy’s and got evicted. The U.S. Supreme Court ruled in 1972 in Lloyd Corp. v. Tanner that because shopping centers are private property no citizen has the automatic right to engage in First Amendment activities there. The Supreme Court amended this position in 1980, ruling that such activities are protected in states whose constitutions extend a broader protection than the U.S. Bill of Rights. This has resulted in a series of cases in state courts in which groups ranging from labor unions to the Ku Klux Klan have claimed the right to demonstrate or distribute literature inside malls. All but a handful of those cases have resulted in verdicts favoring the property owners.

The waiting game

No one needs a researcher to reveal that shoppers hate to stand in line. But a survey from the Mystery Shopping Providers Association of wait times in 29 U.S. cities and 10 retail segments provides some useful statistics on waiting. The average U.S. wait time at retail stores is four minutes and 20 seconds, for instance. St. Louis has the fastest–moving lines among American cities, with an average wait time of two minutes and nine seconds. The slowest is Houston (eight minutes, three seconds). Not surprisingly, customers get in and out of quick–service restaurants the fastest, with an average wait of three minutes and one second. By comparison, shoppers waited an average of seven minutes and 41 seconds to pay for purchases at wireless communications stores. Grocery stores averaged three minutes and 39 seconds, while department stores averaged four minutes and 39 seconds. The survey found that nationwide, the best time of day to shop is between 8 a.m. and 11 a.m., as mornings have the shortest wait time — three minutes and 33 seconds.

The study also measured return ratios, meaning the likelihood that respondents would return to a location based solely on the wait time. A high return ratio represents consumers who are satisfied with the wait time or who expect the longer waits in any case. A low return ratio, on the other hand, represents consumers who expect a shorter wait time and are disappointed in that expectation. Of the segments studied, grocery stores scored the best return ratio, at 88.61 percent, while wireless communications stores scored the worst, at 71.14 percent.