COVER STORY, SEPTEMBER 2005

TEXAS RETAIL
Developers are showing more creativity with their projects.
Dan Marcec

Variety is the spice of life, so the old saying goes. The demand for retail continues to grow all over Texas due to continued population and business booms, so throughout the state’s retail market, this idiom rings true. Texas Real Estate Business has spoken with several developers statewide that  are taking advantage of the opportunity to build retail projects, and they are embracing their creative sides in order to undertake different types of development.

ARLINGTON HIGHLANDS

Arlington, Texas, is located approximately equidistant between Dallas and Fort Worth, Texas, and in many ways the market has been under-served, as demand has been unmet as far as high quality retail is concerned.

Connected Development Services, a division of The Retail Connection, is developing Arlington Highlands, a hybrid retail center located at Interstate Highway 20 and Matlock Road in Arlington, Texas.

“Arlington Highlands is a very exciting project from a design standpoint as well as from a tenant mix standpoint,” Fuller says. “This is one of the first projects of its kind in North Texas, and it marries the power center tenants with lifestyle tenants, restaurants and entertainment; it’s going to be a very high quality project.”

At full build-out, the project will encompass almost 1 million square feet. In the first phase, which will break ground in the next couple of months, 600,000 square feet of retail is planned. The tenant mix includes traditional power center users that wrap around the lifestyle center component, and eight restaurant and retail pad sites front IH-20. In addition, the development features a nine-screen dinner theater that shows first-run movies, and a park that runs approximately 1,000 feet long by 70 feet wide adorns the lifestyle component.

One of the most unique features of Arlington Highlands is that the project offers tenants completely new to the local market. Most of the deals for the junior power center anchors and the pad sites are closed, so right now leasing is more focused on the lifestyle component, where Fuller says there is a lot of opportunity.

Other unique aspects of the development are the architecture and the landscape. Good Fulton & Farrell is providing architectural services for Arlington Highlands, which features 100 percent stone masonry with some true two-story buildings, and the rest of the structures have two-story facades. The park includes two creeks, art installations, pedestrian bridges and outdoor seating.

“Obviously, this is a massive project, so it will have an important tax benefit to Arlington, but also there is a tremendous amount of off-site roadway improvements planned in conjunction with its development,” Fuller notes. “These aspects strengthen the importance of the super-regionality of the Arlington market and certainly they will bolster retail trade in the area; we hope and believe Arlington Highlands will be one of the signature properties in all of the metroplex.”

Fuller says that Connected Development Services plans to complete Phase I for the holiday season 2006, and plans for Phase II will be announced shortly thereafter in early 2007.

HILL COUNTRY GALLERIA

Hill Country Galleria is a 150-acre mixed-use development in the village of Bee Cave, Texas, which is located in southwest Travis County. Lincoln Property Co., Opus and International Development Management are developing the project, which breaks down with 740,605 square feet of retail space, 141,450 square feet of office space, a 300,000-square-foot residential component and a 35,000-square-foot municipal building.

“Hill Country Galleria is going to be a lifestyle center in the true sense,” says Robert Dozier, executive vice president of Lincoln Property Co.’s retail division. “Given the constraints and barriers to entry in Austin, Texas, large projects such as Hill Country Galleria are few and far between; it will serve the southwest segment of Travis County, which is under-served dramatically in terms of retail development.”

The retail component is anchored by Dillard’s, Barnes & Noble and a Cinemark theater, and there will be a grocery component as well. The commitments already received include typical lifestyle center tenants.

In addition, Lincoln is under construction on the Shops at the Galleria, a 600,000-square-foot power center across the street from Hill Country Galleria, which is located on the south side of Highway 71 with tenants such as Lowe’s Home Improvement Warehouse, PetsMart, Michaels, Linens ‘n Things, World Market, Pier 1 Imports, Best Buy and Old Navy.

These two developments stand to dramatically change the face of retail in the village of Bee Cave. “At this intersection, more than 2 million square feet of retail is underway,” Dozier continues. “It’s zoned, it’s entitled, and these projects will serve the fastest growing segment of this market, effectively filling a huge void that exists there today.”

THE BRAZOS TOWN CENTER

On the southwest quadrant of U.S. Highway 59 and FM 762, stretching south to Reading Road, NewQuest Properties is developing The Brazos Town Center, a retail development that is changing the face of Rosenberg, Texas. The project will encompass nearly 1 million square feet at total build out, consisting of big box retail, a grocery store, a movie theater, 34 pad sites and a residential component.

“Initially, our interest was spurred by a 200-acre land parcel owned by Mercantile Partners that housed The Home Depot,” notes Dean Lane, partner at NewQuest. “The land sat idle for several years, and the company wanted to exit the market, so that created an opportunity for us; in addition, we then acquired 200 more acres behind the property, providing all the land for this development.”

Upon its completion, The Brazos Town Center will change the face of retail development in Rosenberg, Texas.

The site plan calls for a major thoroughfare, Town Center Boulevard, that runs through the middle of the project effectively splitting off approximately 30 acres of retail in the front. The development is set up akin to a power center, and the route has created the 34 pad site opportunities, providing The Brazos Town Center with a unique flexibility that large centers don’t often enjoy.

“The most unique aspect of this project is what we think we can deliver from a mix standpoint,” Lane says. “In today’s developments, tenants often are spread out, but we’re fortunate to have a piece of property large enough to fit them all on one site. We are arranging them all together to create a shopping environment, and we can offer home improvements, entertainment, grocery, and a discount department store, which can be difficult to manage.”

EDA Architects is providing an upper-end design that features a country theme with stone and metal roofs, according to Lane.

Aside from the sheer size and the variety of options The Brazos Town Center offers residents and visitors, the ad valorem taxes from this project alone are going to triple what the city of Rosenberg brings in currently, thus heavily impacting the local economy.

Sugar Land Town Square is a unique mixed-use project that serves as the downtown destination for Sugar Land, Texas.

“We do a lot of research with our customer base out here, and one of the things the market desired was a shopping environment that was more akin to main-street retailing as opposed to a strip center with a great big parking lot in front of it,” explains Steve Ewbank, executive vice president of PCD. “The key here is that Sugar Land Town Square is a true town center as opposed to just an upscale retail project or ‘lifestyle center.’ Aside from the 250,000 square feet of upscale retail, the development features Sugar Land’s city hall, a full-service Marriott hotel, 450,000 square feet of Class A office space, two residential components and a 1.4-acre pedestrian plaza.”

The entire retail component of Sugar Land Town Square is designed as main street retail with residential and office space located above it. Currently, the tenant mix features a variety of national and local tenants. For Phase II, leasing is focusing on restaurants and women’s and men’s fashion apparel.

“Our mission is to create a downtown destination for everybody by creating an environment with upscale shops and restaurants to create nightlife,” notes Bruce Frankel, director of retail leasing and sales for PCD. “One of the biggest challenges in tenanting this project is the expansion occurring around it; First Colony Mall is at our back door, and The Marketplace is doing a small expansion to one side of us, making it competitive environment.”

Despite the competition surrounding the development, the unique amenities that Sugar Land Town Square offers certainly will draw plenty of visitors. The project includes a pedestrian plaza in which more than 80 events a year are scheduled, thus affecting the nightlife. In addition, the town square environment is only one of two in the entire Houston metro area; the city of Houston itself hardly features any main street retail.

Ewbank states, “There’s really nothing like this development in all of Fort Bend County, and the city of Sugar Land now has a place to call its own.”

TROPHY INVESTMENT SERVICES UNDERTAKES UNIQUE REDEVELOPMENT In west Fort Worth, Texas, Trophy Investment Services has redeveloped the Village at Camp Bowie, transforming it from a dated, deteriorating shopping center into a vibrant retail destination. Many developers are coming into Texas following the demand for retail, and understandably, they sit wild-eyed responding to the vast amounts of land available for their endeavors. Trophy Investment Services has decided to take a different angle, embarking on a massive redevelopment project to create the Village at Camp Bowie in west Fort Worth, Texas. “We became quite intrigued with the history of both the development and the community in researching the purchase of this land,” explains Bo Brownlee, principal at Trophy Investment. “The land had never changed hands, which is an interesting aspect unto itself, and the existing shopping center was the epicenter of west Fort Worth retail when it was built.” However, being under-managed, under-owned and losing all its energy, the project lost its appeal as tenants moved to more vibrant areas of town that were up and coming since the project’s initial development in the 1950s, ’60s and ’70s. “When we purchased the land, it was flat out ugly,” Brownlee continues. “People were looking at this land and had difficulty envisioning anything other than completely scraping the property and starting from scratch. There was no synergy among the tenants, and so eventually, we just hit the emergency brake, literally hit a brick wall and turned around to go the other way.” Trophy brought in architect Brad Nelson and consulted him on whether it could do anything besides simply bulldoze the existing space and start fresh. Fortunately, Nelson had just completed a project that had a nearly identical grid system, so he put together a master redevelopment plan. The property originally encompassed 285,000 square feet, which was remodeled as Phase I of the project. Phase II will include approximately 80,000 to 100,000 square feet that will begin once leasing is completed for Phase I. “The leasing was a little slower because the development initially was so unattractive, and we underestimated the negative effect it would have,” notes David Burgher, also a principal with Trophy. “Tenants would go out there to see the property, and they told us they’d be back next year because they didn’t think we could pull it off; now, though, we’re roughly 65 percent leased.” “It’s easier to sell a tenant on a rendering when you have a piece of vacant land than when you have an ugly building as your perspective,” Brownlee adds. In the end, the gamble paid off for Brownlee, Burgher and Trophy Investment Services. The Dallas Business Journal named Village at Camp Bowie its “remodeling project of the year,” and the development is attracting more and more tenants. “Phase I construction is finished, and now we’re gaining our foothold,” Burgher says. “Coming into an older in-fill location, the national tenants are a little more hesitant, so Phase II probably will feature more of the national names we expected.” Overall, Burgher adds that Trophy is just enjoying being a part of this redevelopment, and it’s enjoying doing something for the community as opposed to just allowing the property to deteriorate and affect other businesses up and down the street. “It’s just kind of fun to watch,” Brownlee says. “We’re not landing every tenant, but they’re taking empty spaces all around us, and it’s nice to see the energy and revival that our efforts have created.”                                                                                    — Dan Marcec

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