By Nellie Day
Integrating retail with entertainment districts and sports venues dominated the stage on Feb. 19 at InterFace’s “Entertainment Experience Evolution” conference at the JW Marriott LA Live.
Executives from sports and entertainment provider companies, Major League Baseball teams, development firms, architects and REITs came together to offer the best advice they’d received when undertaking some of their most ambitious projects. The diverse group also shared the lessons they wished they’d learned the easy way.
Below is a compilation of their best advice.
1. Test the Market —Innovative concepts and new-to-market retailers have to start somewhere, but their big break doesn’t need to involve a risky lease neither side is confident it can fulfill. That’s where incubation comes in.
“We are bringing shipping containers to the ballpark to test out concepts,” said Larry Baer, CEO of the San Francisco Giants and a participant in the “Leading the Way” panel. “We want to maximize our investment, and we can create an urban environment with great amenities. Big national chains don’t really work in retail in San Francisco the way they do in other communities. That’s why we do lots of incubation.”
The pop-up shipping container village called The Yard at Mission Rock will open in March in a portion of Giants Parking Lot A. It will feature local food and drink establishments, pop-up shops, public open space, cultural programming and events. Notable tenants will include Anchor Brewing, Off the Grid and Peet’s Coffee & Tea, with more names announced in the coming weeks.
The Yard will give fans and surrounding neighborhoods like South Beach and Mission Bay the opportunity to experience the future Mission Rock neighborhood on a smaller scale. The new Mission Rock district will feature a waterfront park, a mixed-use neighborhood that includes hundreds of new rental housing units, offices and homegrown retailers alongside a network of green streets, public plazas and promenades. It is scheduled for completion in 2020.
2. Play Up Public Space — Public space played a premium role at the EEE conference. Everyone from architects to developers, landscapers and investors emphasized just how important these seemingly non-moneymakers really are.
“We thoroughly believe in pocket parks,” said fellow panelist Don Wood, president and CEO of Federal Realty Investment Trust. “It’s amazing to me that the idea to offer small gathering places throughout a project really works as well as it does. It’s like an outdoor living room.”
Wood put this idea to work at Santa Row, a shopping and dining destination that also contains office, residential and hotel components in San Jose, Calif. The development features four pocket parks, which include a chess courtyard and hot dog stands similar to Central Park. Third parties have even created walking tours of Santa Row, highlighting the project’s most unique elements.
3. Capitalize on Slow Periods — Theaters go dark, teams play away games and bad weather can inspire people to stay home. As every shopping center owner knows, traffic ebbs and flows, but there are steps that can be done to address this problem.
“You need leisure-time activities,” said fellow panelist Barry Rosenberg, president of Steiner Ventures. “We may be primarily retail developers, but entertainment is a big part of what we do. Offer programming. When we first opened, we did a Christmas tree lighting. It brings a whole sense of community to the project. It started with maybe 100 people. Now, we have about 10,000 who come out for it. A lot of events we do become traditions.”
Baer agreed that visual stimulants such as films, concerts in the park or fireworks can animate any project’s ground-floor retail. Santa Row offers rainy day discounts whenever the news says there’s a 70 percent or greater chance of precipitation. It also offers run/walks, cooking events and exotic car shows.
Ted Tanner, executive vice president of real estate development for AEG and EEE’s keynote speaker, noted LA Live has held major events like the Los Angeles Food and Wine Festival. It also regularly hosts “Dark Nights,” which feature discount parking, $5 food and drink menus throughout the entertainment district’s restaurants, and live musical and artistic performances when no major events are scheduled.
Ted Tanner, executive vice president of real estate development for AEG, gives his keynote address at Entertainment Experience Evolution conference in Los Angeles.
4. Maximize Use — Many panelists noted that what started out as an idea for a new retail development soon morphed into an entire city center concept, complete with office, residential and hotel components.
“Projects nowadays can come full circle,” said Rosenberg. “It’s not just about retail and public spaces anymore. Now it’s the integration of truly mixed-use projects with office, residential and hotels. It’s creating a full community.”
Tanner noted that although LA Live was primarily an entertainment destination, it, too, soon came to include uses he never saw coming.
“We never set out to do hotels,” Tanner said, referring to LA Live’s JW Marriott and Ritz-Carlton. “We’re not hotel developers. But they do define and anchor us as a convention destination and as an urban resort downtown because we now have spas and other amenities.”
5. Mix Up the Retail —Tenancy is always one of the biggest concerns of any new retail-oriented project. Achieving that perfect balancing act of local and national names is never easy, panelists admitted.
“You have to have a very clear vision of what you want to have,” Rosenberg said. “Have a whole merchandising plan. Do an entire matrix of entertainment users. Get both local and regional tenants. Shoppers are not going to go somewhere because there’s a Gap there. You have to have local merchants, health clubs, theaters — things you just can’t get somewhere else. It’s all about locality and what it is you’re trying to bring to a town.”
Steiner’s new 54-acre Easton Gateway development in Columbus, Ohio, contains 583,000 square feet of retail, including Costco, Whole Foods, REI, SAKS Off 5th, Dick’s and more nationally known names. It has also, however, devoted 150,000 square feet to small and mid-sized retailers, including new restaurant concepts.
6. Be Prepared for Speed Bump (Lots of Them) — Projects that contain millions of square feet spread throughout multi-use assets that occupy entire city blocks take a lot of money, time and patience to build. The larger the project and the more facets involved, the bigger the headaches, many developers said.
“These things cost more,” Wood said. “They take longer to do, they’re way more complex. So there are fewer locations available that are economical. Socialization is more important today than it’s ever been. At the end of the day, everyone wants a cool, mixed-used project. Everyone. Who wouldn’t?”
Tanner agreed it takes patience and perseverance for large-scale projects to pay off. Most developers and investors, he believed, needed to be in it for the long haul.
“We made a big bet here in LA,” said Tanner, referring to LA Live. “We spent $3.5 billion and it took 10 years. We also endured two down cycles: the post-9/11 economy and the latest recession. People looked at us like we were crazy to open 700,000 square feet of mixed-use development.”
7. Secure the Right Debt and Equity Partners — It’s not just the developers who must sweat out these projects from start to finish, but the debt and equity partners as well. Unlike a $3 million to $5 million shopping center acquisition, these behemoths take a lot more work to secure financing.
“The harder and more complicated a project is, the more risky a project is,” said fellow panelist Dene Oliver, CEO of OliverMcMillan. “The harder, more complicated and riskier, the smarter the investor needs to be. You need a track record and relationships. The single biggest barrier to entry for these projects is debt and equity. It needs patient money, and the loans are large and they’re hard to come by.”
Oliver noted most lenders don’t want to put more than $50 million to $70 million into a single project. He said there must also be some recourse in the loans, and that developers often need more than 50 percent equity because they have to enhance the deal. When it comes to construction financing, Oliver said it will almost always involve syndicates.
Still, with all this advice to consider, the professionals attached to these massive projects spoke about them with a sense of pride and wistfulness — like they couldn’t wait to do it again.
“We have been incredibly blessed with LA Live,” said Tanner. “We don’t have a formula. We like to adapt, bring in new ideas, change out things that didn’t work before and make a true destination.”