Property Redevelopment and Repositioning

5/17/2016

REINVENTION: Property Redevelopment and Repositioning

Yaromir Steiner Steiner + Associates

RECon – Las Vegas 22 May 2016

Presenter

Yaromir Steiner, CRX - Past Trustee, ICSC - CEO, Steiner + Associates, Columbus, OH

Presenter

• Born in Istanbul, Turkey • Educated in Toulouse, France • Experience in the U.S. – Houston, New York, Miami, and Columbus, OH

2. Toulouse, France

4. New York, NY 6. Columbus, OH 1. Istanbul, Turkey 3. Houston, TX 5. Miami, FL

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Project Experience

CocoWalk, Miami, FL Centro Ybor, Tampa, FL Newport on the Levee, Newport, KY Newport Aquarium, Newport, KY

Adventure Aquarium, Camden, NJ Easton Town Center, Columbus, OH Easton Gateway, Columbus, OH The Greene, Beavercreek, OH

Bayshore Town Center, Glendale, WI Peninsula Town Center, Hampton, VA Zona Rosa, Kansas City, MO Liberty Center, North Cincinnati, OH

In Summary: 5 Urban Infill Projects

CocoWalk, Miami, FL Centro Ybor, Tampa, FL Newport on the Levee, Newport, KY Newport Aquarium, Newport, KY

Adventure Aquarium, Camden, NJ Easton Town Center, Columbus, OH Easton Gateway, Columbus, OH The Greene, Beavercreek, OH

Bayshore Town Center, Glendale, WI Peninsula Town Center, Hampton, VA Zona Rosa, Kansas City, MO Liberty Center, North Cincinnati, OH

In Summary: 2 Redevelopment Projects

CocoWalk, Miami, FL Centro Ybor, Tampa, FL Newport on the Levee, Newport, KY Newport Aquarium, Newport, KY

Adventure Aquarium, Camden, NJ Easton Town Center, Columbus, OH Easton Gateway, Columbus, OH The Greene, Beavercreek, OH

Bayshore Town Center, Glendale, WI Peninsula Town Center, Hampton, VA Zona Rosa, Kansas City, MO Liberty Center, North Cincinnati, OH

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In Summary: 5 Green Field Projects

CocoWalk, Miami, FL Centro Ybor, Tampa, FL Newport on the Levee, Newport, KY Newport Aquarium, Newport, KY

Adventure Aquarium, Camden, NJ Easton Town Center, Columbus, OH Easton Gateway, Columbus, OH The Greene, Beavercreek, OH

Bayshore Town Center, Glendale, WI Peninsula Town Center, Hampton, VA Zona Rosa, Kansas City, MO Liberty Center, North Cincinnati, OH

Presentation

This presentation is biased by our experience:

• Large repositioning projects: > 1,000,000 square feet; • Suburban locations; • Anchored by department stores; • Public Private Partnerships with over 20% of costs funded publicly

Presentation

This presentation will focus and draw from common themes:

• The nature of the shopping trip and its impact on design; • Technical considerations: - Clearing the site and eminent domain; - Increased storm water detention; - Consideration of mixed-use; - Legal structure for vertical integration; - Parking analysis in mixed-use; - Design guidelines • Case Study – Bayshore Town Center (Glendale, WI)

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THE NATURE OF THE SHOPPING TRIP AND ITS IMPACT ON DESIGN

Shopping Classification

Understanding the nature of the shopping trips and their impact on retail environments will allow us not only to address the transformation at a regional retail environment’s level but also to deal with retail environments at the level of neighborhoods, villages, and even streets.

The Greene Town Center, Beavercreek, OH Mashpee Commons, Mashpee, MA Park Avenue, Winter Park, FL

Shopping Classification

When repositioning retail, it is essential to understand the classification of the shopping environments based on the nature of the shopping transaction.

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Shopping Classification

Is the transaction for goods and services “Need” based or “Want” based? “Need ” “Want ”

Shopping Classification

“Need ” based shopping transactions: • Provide for objective and basic needs • Use the first dollars of every household income • They represent a decreasing percentage of the expenditures as the household income is higher • The purchase decisions are driven primarily by rational criteria • Require high frequency of visits to the retailers

Shopping Classification

“Want ” based shopping transactions: • Provide for subjective and aspirational needs • Funded from the discretionary dollars of the household income • Highly variable between low and high income households • The purchase decisions are driven primarily by aspirational criteria • Lower frequency of visits than “need” based trips

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Shopping Classification

Classification of shopping transactions: Summary

Nature of Shopping Trip “Need ”“Want ” Type of Purchases Basic Aspirational

Decision Driver Objective & Rational Subjective & Aspirational

Household Dollars First Excess (discretionary)

Frequency of Visits Higher Lower

Example

Shopping Classification

“Need ” vs. “Want” based shopping environments:

“Need ” “Want ”

Liberty Center

Kenwood Towne Centre

Florence Mall

Cincinnati, OH Cincinnati, OH

Local Trade Areas Regional Trade Area

Shopping Classification

“Need ” vs. “Want” based shopping environments: “Need ” – Retailers that provide Value for Dollar “Want ” – Experiential and Aspirational Retailers

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Shopping Classification

“Need ” vs. “Want” based shopping environments:

“Need ” “Want ”

Convenient Local Access Convenient Regional Access

Shopping Classification

“Need ” vs. “Want” based shopping environments:

“Need ” “Want ”

Functional Design Aspirational Design

Shopping Classification

Classification of shopping environments: Summary

Nature of Shopping Trip “Need ”“Want ”

Trade Area Local Regional

Retailers Value Driven Lifestyle Driven

Retailer Example

Access Local Regional

Design Functional Aspirational

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Shopping Classification

“Need ” based financial model: • Rents primarily based on costs • Longer term leases with options • Better credit tenants • Financially focused management • Limited and predictable capital expenditures • Portfolios of Kimco, Regency, Weingarten Realty

Typical Power Center

Shopping Classification

“Want ” based financial model: • Rents primarily based on tenant sales • Shorter leases with no options • Lower credit tenants • Experience delivery focused management • Extensive and variable capital expenditures • Portfolios of Taubman, Simon, GGP

The Greene Town Center

Shopping Classification

Classification of financial model: Summary

Driver of Shopping Trip “Need ”“Want ”

Rent Base Cost Sales

Lease Terms Longer Shorter

Credit Stronger Weaker

Management Focus Financial Experience Delivery

Capital Needs Limited/Predictable Extensive/Variable

REIT Example Kimco Taubman

Financial Instrument Bonds Stocks

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Shopping Classification

Contribution to community value….. • “Need ” based shopping environments are a part of the basic amenities or infrastructure of a community: i.e. streets, sidewalks, utilities, sewers, garbage collection, etc. • “Want ” based shopping environments define and add value to a community and contribute to its economic development.

Shopping Classification - Conclusion

Conclusion: • A successful mixed-use development (from a street to a regional project) must be conceived to be responsive to the ‘need ’and ‘want ’ transactions of its trade area. • The ‘want’ retail environments that add significant value to a community must be conceived to be responsive to the changing existential aspirations of its customers. • Whereas the ‘need’ retail, while not adding extra value, must be accommodated consistent with its functional requirements.

A Question That is Always Asked….

How do we integrate “Need” and “Want” uses in a single project?

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Deciding How to Integrate “Need” and “Want” Based Retail

• ACCESS - “Need” requires local access, “Want” depends on scale of project

Peninsula Town Center Bayshore Town Center • FEASIBILITY – The process is similar - Non-retail uses are generally enhanced by “want” retail - Retail should always be studied as a single use independent of non-retail uses

Deciding How to Integrate “Need” and “Want” Based Retail

• FOOD venues are different in “Need” and “Want” environments. “Need ” – fast, casual, and convenient “Want ” – celebratory and special occasions

Deciding How to Integrate “Need” and “Want” Based Retail

• PARKING criteria differs……. “Need ” – Requires adjacent parking & functional “Want ” – Pleasant parking experience; pedestrian walkability

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Deciding How to Integrate “Need” and “Want” Based Retail

• AESTHETICS differ “Need ” – Environment attractiveness is a ‘nice to have’ but not “Want ” – Environment and architecture MUST be necessary; functionality and low maintenance is key attractive and aspirational

Deciding How to Integrate “Need” and “Want” Based Retail • NON-RETAIL USES are impacted differently. “Need ” – Functionally Enhanced “Want ” – Lifestyle Enhanced Uses that enhance are mostly high Residential, hospitality, and office uses frequency are always enhanced by ‘want’ uses. lifestyle uses (i.e. grocery, convenience, take-out)

Deciding How to Integrate “Need” and “Want” Based Retail

Integrating “Need” and “Want” Retail: Summary

Shopping Classification “Need ”“Want ”

Access Convenient & Local Regional

Independent of Independent of Feasibility non-retail uses non-retail uses

Food Venues Quick Casual Celebratory

Parking Functional Pleasant

Environment Attractiveness Nice to Have Essential

Non-Retail Uses Functionally Enhanced Lifestyle Enhanced

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TECHNICAL CONSIDERATIONS

Technical Considerations

Technical considerations: - Clearing the site and eminent domain - Increased storm water detention - Consideration of Mixed-use - Legal structure for vertical integration - Parking analysis in mixed-use - Design guidelines

Technical Considerations: clearing site and eminent domain

Peninsula Town Center BEFORE (Coliseum Mall) Peninsula Town Center AFTER

Hampton, VA

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Technical Considerations

Technical Considerations: increased storm water detention

Storm water management regulations have evolved over the last decade and will continue to do so.

• For example, in 2003, Ohio EPA implemented new requirements for post-construction storm water management for projects disturbing > 1-acre of land • Regulations attempt to detain storm water runoff for protection of stream channels, stream erosion control, and improved water quality • Prescribed best management practices consist of storage of storm water runoff, in addition to that required by local detention/retention regulations • Estimates of this additional storage volume vary between 1,400 cubic feet/acre for high density residential projects to 2,200 cubic feet/acre for commercial projects • Additional costs for an underground storage scenario can be estimated between $10,000 - $15,000/acre

Technical Considerations: increased storm water detention

Storm water management regulations have evolved over the last decade and will continue to do so.

• Redevelopment or expansion of projects begun prior to 2003 are not exempt and must comply with these new regulations by implementing post-construction water quality management practices • Storm water regulations will continue to evolve and future regulations may require: - post-development runoff volumes be reduced to pre-development levels - official testing and reporting of storm water quality - new and innovative best management practices

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Technical Considerations: increased storm water detention

Storage Under Garage, Easton Pervious Pavers, Easton Gateway

Pool at Unity Chapel, Liberty Center Roof Garden, Liberty Center

Technical Considerations

Technical considerations: - Clearing the site and eminent domain - Increased storm water detention - Consideration of mixed-use - Legal structure for vertical integration - Parking analysis in mixed-use - Design guidelines

Technical Considerations: consideration of mixed-use

Advantages of mixed-use development: - The mixing of uses: o retail o hospitality o office o residential o civic creates a symbiotic and synergistic environment

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Technical Considerations: consideration of mixed-use

Synergy/Synergistic The creation of a whole that is greater than the simple sum of its parts.

Symbiosis/Symbiotic A relationship of mutual benefit or dependence.

Technical Considerations: consideration of mixed-use

Liberty Center The Greene Easton

Easton Fenlon Square, Easton Bayshore Town Center

Technical Considerations: consideration of mixed-use

Synergistic

• The most common benefit is infrastructure sharing: - common areas - parking - utility - infrastructure

Example : A public park can benefit restaurants, residential, office, retail, community events, etc.

Liberty Center

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Technical Considerations: consideration of mixed-use

Symbiotic

• Retail is mostly justified independent of other uses • Whereas retail significantly increases the feasibility of other uses

Liberty Center Easton The Greene

Technical Considerations

Technical Considerations: legal structure for vertical integration

• Mixed-use often requires integration of multiple uses in single buildings

• Very often office, apartments, entertainment, hotels over retail

Americana at Brand, Glendale, CA CityCentre, Houston, TX Bayshore Town Center, Glendale, WI

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Technical Considerations: legal structure for vertical integration

residential

office

hotel

Liberty Center

Technical Considerations: legal structure for vertical integration

Example: Office integration at Liberty Center

Technical Considerations: legal structure for vertical integration

Example: Office integration at Liberty Center

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Technical Considerations: legal structure for vertical integration

Example: Office integration at Liberty Center

office office

retail retail

Technical Considerations: legal structure for vertical integration

Vertical integration transaction:

• Sale (no capital gain!) or contribution of parcel to third party developer • CC&R (Covenants, Conditions and Restrictions) Agreement • Development and Use Agreement • 99-year master lease of the retail condominium • Purchase options of the retail condominium

Technical Considerations

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Technical Considerations: parking analysis in mixed-use

• In mixed-use environments the parking calculations must take into account both the timing of the parking needs and the potential for sharing.

• In our “biased” experience the global number varies between 4 and 5 spaces per 1,000sqft.

Technical Considerations: parking analysis in mixed-use

TPS Parking Requirements Retail PARTIAL EXCERPT OF STEINER PARKING Timing and Proximity Shared Free-standing (not sharing) 4.00/1000 sf Parking Requirements GUIDELINES In-line (integrated) tenants 3.75/1000 sf For large scale (>500,000sf) retail Anchors (greater than 30,000 sf) 3.25/1000 sf dominated mixed-use projects Restaurant Free-standing (not sharing) 13.0/1000 sf In-line (integrated) restaurants 12.0/1000 sf Fast food (free-standing) 8.0/1000 sf Food Court and other impulse food tenants 0.0/1000 sf Entertainment Night Clubs or similar assembly (not shared) 20.0/1000 sf In-line (integrated) 10.0/1000 sf Cinema Free-standing 1/3 seats Integrated 1/4 seats

Technical Considerations: parking analysis in mixed-use

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Technical Considerations