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RICHMOND RIVALRY

Taubman Centers, Forest City open dueling projects

BY DEBRA HAZEL

Stony Point Fashion Park

Short Pump Town Center

RICHMOND, Va. — At a time when the number of new regional shopping centers opening each year can be counted on one hand, two new open-air projects, totaling nearly 2 million square feet, open here this month. But after a long and often bitter battle, even the developers themselves question whether the market can handle so much new space at one time.

“Nobody could be naive enough not to think about that,” said James A. Ratner, executive vice president of Cleveland-based Forest City Enterprises, the co-developer of Short Pump Town Center, the larger of the two centers. “It’s a concern shared by everyone.”

The $360 million Short Pump, opening Sept. 4, and the $115 million Stony Point Fashion Park, set to open Sept. 18, both aim to serve a market clamoring for higher-end stores. The decline of local department stores has left affluent consumers with few alternatives; for years shoppers have driven more than 100 miles to Tysons Corner in McLean, Va., or traveled to New York City or Chicago to find upscale stores.

“For the past 20 years, Richmond had been without high-end retail,” said local office developer Tommy Pruitt, managing partner of MJGT Associates, co-developer of Short Pump.

The market is also seeing an influx of higher earners, including executives from Phillip Morris USA, which is expanding its presence by relocating its headquarters from New York City. The metro-area population has passed the critical 1 million mark, according to the Greater Richmond Partnership, and locally based real estate brokerage NAI Commercial Partners expects that to grow an additional 6 percent by 2006.

So it wasn’t surprising that both Bloomfield Hills, Mich.-based Taubman Centers (which already owns and manages the mid-market Regency Square in the city) and MJGT-Forest City would consider building upscale regional mall retail in western Henrico County. What surprised many is that Forest City’s 1.3 million-square-foot Short Pump and Taubman’s 690,000-square-foot Stony Point both got built.

Other regional centers in the area are Chesterfield Towne Center, Cloverleaf Mall, The Shops at Willow Lawn, Southpark and Virginia Center Commons. But despite the more upscale nature of Short Pump and Stony Point, observers question how much higher-end retail a market of 1 million people requires.

“That debate has been going on ever since both projects were announced,” said Ned Massie, president of Grant Massie Gallier, a Richmond-based real estate brokerage and consulting firm.

Each developer, of course, insists that the market will support its own center. Both projects are open-air, reflecting the trend toward lifestyle centers. The anchors at the two-level Short Pump are Dick’s Sporting Goods, Dillard’s, Hecht’s, Lord & Taylor and Nordstrom. The smaller tenants include Bebe, Coldwater Creek, Crate & Barrel, H&M and Pottery Barn.

Lord & Taylor, unlike the other anchors, which opened when the mall did, is scheduled to open next fall. That remains unaffected by the retailer’s late-July announcement that it will shut 32 units, according to mall executives.

“We have an obligation to fulfill and will continue construction,” said Sharon Bateman, a spokeswoman for The May Co., Lord & Taylor’s St. Louis-based parent company.

Short Pump’s larger size (at press time, it had five anchors and 92 stores, versus Stony Point’s three anchors and 90 stores) means it will have a larger market, including 7 million people and an average annual household income of $85,000, says Douglas Lund, senior vice president of East Coast development at Forest City.

Moreover, he notes, the Short Pump area is where the residential and commercial growth is taking place. The Innsbruck Corporate Center, with several office buildings and hotels, is less than 10 minutes away, and an upscale residential community is under construction across the road. Housing in the area has been increasing at 2.5 percent to 3 percent annually.

“This will be the South Coast Plaza of the mid-Atlantic,” says Craig S. White, the center’s general manager, referring to the benchmark Costa Mesa, Calif., center that set out to become first to surpass $1 billion in sales a few years ago. “We’ve got critical mass.”

Stony Point, for its part, sits in an existing high-end residential area. Within a 15-mile radius, the average yearly household income for the trade area (population 735,000) is $60,365. That will rise to $69,356 by 2006, according to the developer.

The single-level center may skew even tonier than its rival, anchored as it is by Dillard’s, Galyan’s and Saks Fifth Avenue, with April Cornell, a Betsey Johnson fashion boutique, Coach, Johnston & Murphy and Skechers USA among its smaller shops.

“We’re in a relatively small market,” acknowledges Roderyck B. Blake, senior development manager at Taubman. “We’ve done very well, and the other side has a great lineup as well.”

Perhaps the greatest testimony to growth is that, between them, the centers will open with 10 sit-down restaurants new to the market. At Stony Point those are Brio Tuscan Grille, Champps Restaurant & Bar, Copeland’s Cheesecake Bistro, P.F. Chang’s and Rio Grande Cafe. Short Pump is bringing in California Pizza Kitchen, Copper Grill Lobster & Steak House, Firebird’s Rocky Mountain Grill, Maggiano’s and Tara Thai. Shoppers can choose between the centers based on appetite alone.

But the competition has exacted a price. With some 740,000 square feet of small-shop space available, tenants pitted the rival centers against each other to negotiate favorable rents, the developers acknowledge. Forest City’s Lund ruefully notes that rents at Short Pump probably dropped “a couple of bucks” because of the jockeying. Nordstrom and Lord & Taylor originally planned to go into Stony Point, but then defected to Short Pump.

Leasing, however, was only one battle in what has been a heated, highly litigious, often bitter struggle between the two centers.

Taubman had been looking at the market since the early 1990s and acquired the 826,000-square-foot Regency Square on Richmond’s west side in 1997, Blake says. The original plans called for building a 1.2 million-square-foot, upscale enclosed mall at Chippenham and Stony Point parkways, 10 minutes south of Regency and the James River. Nordstrom and Lord & Taylor were considering the mall as their entry into the market.

Meanwhile, Pruitt, with no previous experience in retail development, planned a regional center roughly 11 miles north of the Stony Point site, at a 147-acre property in the Short Pump area of West Broad Street, just off Interstate 64. The Pruitt family had owned half the property since the 1920s; in the mid-1990s the Pruitts met with various developers, including the Ratners of Forest City. The families hit it off, and a joint venture was formed in 1996, with Forest City taking on the development role.

From 1996 through 2000 Forest City researched the market, designing and redesigning the center as the number of anchors grew. Justifying the space meant building something entirely new: a two-level retail center without a roof. (Atlanta-based Thompson, Ventulett Stainback & Associates was responsible for the design.)

Taubman canceled its regional mall plan after losing Nordstrom and Lord & Taylor to Short Pump, shifting to an open-air, lifestyle-oriented center.

Then Taubman filed suit against Short Pump, charging that the structure of a $22 million Henrico County, Va., community development bond issue was illegal. To Taubman, it was a matter of fairness, according to Blake. Taubman had previously asked Henrico County for funds to improve Regency, but was turned down.

Despite the legal challenge, Short Pump broke ground in November 2000, and its developers had plans to open in the fall of 2002.

“We began development, even though we were looking down the barrel of a couple of lawsuits, and more followed,” Lund said. “We took a risk. But we were pretty certain of victory.”

Taubman saw some legal success early on, but later rulings, all the way to the Virginia Supreme Court, favored Short Pump. In June of this year, as the centers neared completion, Taubman dropped all litigation.

“We came to the conclusion that we raised the issues,” said Blake. “Our time and resources were better spent doing other things.”

Neither party will reveal how much the litigation cost the developments (Lund did gulp when asked), but the brouhaha was certainly behind the delayed openings.

Stony Point broke ground in February 2002, well after Short Pump. But, insists Pruitt, Short Pump is a more complicated construction project. The developers wanted to take advantage of Richmond’s generally mild climate, but at the same time opted to try to offer some shelter from the occasional weather aberration. Consequently, the covered walkways lengthened construction time, as did the canopies on the second floor and the center’s many elevators and escalators.

“We didn’t know what we were getting into when we started doing an open-air center,” Pruitt said. “And a second level is a whole different animal.”

Both centers borrow from traditional Virginia architecture. A dramatic entry bridge at Short Pump leads into Central Park, a landscaped open courtyard with fountains reminiscent of historic downtown Richmond, and the archways and brick walkways help orient shoppers. Obelisks and insets honor such locals as American Indian chief Powhatan and Edgar Allan Poe, as well as the eight U.S. presidents who hailed from the state. Models of the short-handled water pump for which the area is named are featured throughout.

“We wanted to reflect the look of Washington and Alexandria, Va., as well as Richmond,” Lund said.

The single-level Stony Point, designed by Boulder, Colo.-based Communication Arts, boasts two connecting retail districts. The Promenade, extending 1,000 feet between Dillard’s and Saks, features a main entry framed by a brick-and-wrought-iron gateway, capped with an urn-shaped beacon. Red-brick pavers and tree-shaded seating throughout are signature elements. South of the Saks court, The Park, a 450-foot-long walkway, connects to Dillard’s and features picnic coves, café-style tables and chairs, and trellises.

An information booth resembles a garden conservatory, with glass panels and a wire-glass awning. The Dillard’s Court includes a 250-square-foot chessboard, where guests can move 3-foot-tall teak chess pieces, while The Fountain Court, the centerpiece of The Park, features an interactive circular fountain that is illuminated at night. Surface parking accommodates 3,200 cars. A 100-foot nature buffer creates the feeling of an estate.

“We’re in an area with a lot of trees,” Blake said. “We wanted to take advantage of the parklike setting.”

Taubman is also spending several million dollars to renovate Regency Square, adding seating and play areas. Regency Square and Stony Point will share a general manager and a marketing director, allowing Taubman to market the two centers jointly.

Despite the concerns expressed by others about the market’s ability to accommodate the new retail, both companies predict healthy sales for their respective centers. Forest City says it expects $400 per square foot at Short Pump, insisting that the center’s interface on Broad Street and its proximity to both Interstate 64 (easy access to Charlottesville) and the coming Route 288 make it the superior site, enabling it to draw from up to 55 miles away.

Stony Point sales will be in line with Taubman’s portfolio average, which totaled $456 per square foot last year, Blake says.

But some in the region wonder whether there are enough affluent shoppers to support the luxury Saks store. Furthermore, though Stony Point is visible from Chippenham Parkway, getting to it requires taking a side road, Massie says. And he questions whether upscale consumers will want to cross a river to get to Stony Point — people don’t like going over bridges to shop, some retail experts say.

“Short Pump I understand,” Massie said bluntly. “Stony Point, I don’t.”

Brian Glass, director of retail brokerage at the Grubb & Ellis Richmond office, says he has some reservations about the Taubman project too. “In the long term, Short Pump will be the winner,” Glass predicts.

Nonsense, says Taubman. Being away from the highway enhances Stony Point’s parklike setting, Blake said. And its tenants will outweigh any reservations shoppers have about crossing a river.

Speaking in early July, Lund said he expected Short Pump’s tenants to be 80 to 90 percent open on Sept. 4, including 12 carts and three kiosks. Taubman declined to estimate how many Stony Point tenants will be open at its Sept. 18 ribbon-cutting.

Both developers say that area residents will initially visit both projects. The presence of the new centers will establish Richmond as a true shopping destination, they add. And all agree that the ones most likely to be hurt, at least at first, are the area’s existing centers.

“I’ve always said that if two malls open in Richmond, it’s good for Richmond,” Pruitt said.

Perhaps, but will it be good for the two malls? Now, finally, the retail world will get the chance to find out.

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