Shopping Center Business is the leading monthly business magazine for the retail real estate industry.
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ROUSE 90 • SHOPPING CENTER BUSINESS • December 2016 GLA and added an open-air, two-level restaurant pavilion, the flagship AMC, and are under construction with a two-lev- el 24 Hour Fitness," Harper says. "We saw a very sophisticated consumer who was traveling to San Jose or the peninsula of San Francisco to do shopping. Sales were around the low 300s when we started, and we expect after stabilization they'll be about $500 a square foot." The Shoppes at Carlsbad is also an ex- ample of Rouse's coastal strategy that is another highlight among the company's portfolio. The approximately 1 million square foot site was purchased in 2015 from Westfield for $170 million. Rouse is moving forward with a renovation that will create streetscapes and enhance the site's entertainment, dining and desti- nation qualities. The renovation will be complete in 2017. "We saw tremendous opportunity to ac- quire class A real estate, yet on top of that real estate was an underperforming mall that sat two miles from the ocean on 100 acres in one of the highest barrier-to-en- try markets in all of California," Harper says. After a high-profile shopping center project that would have been built near Shoppes at Carlsbad was halted by a pub- lic vote, Rouse now owns the dominant shopping destination and central gather- ing place in this affluent market with very little competition. "We will be creating significant value," Harper says. "And we've already begun the process in less than a year since we acquired the property. We will be trans- forming this mall into a powerhouse. Cer- tain parts will be open air. The rest will be a super-regional mall. And we're bringing lush landscaping and water fixtures and a beautiful streetscape. Westfield did a great job of bringing in Regal Cinemas and 24 Hour Fitness. Regal is the top per- forming luxury theater in all of California. It's really exciting." California provides a significant portion of Rouse's net operat- ing income, with a concentration of eight centers in that state. Harper says Rouse doesn't have con- crete objectives for acquisitions but rather seeks unique opportunities, rewards and embedded growth. "Now under this pri- vate umbrella, which we feel is the best route for Rouse in the future, we can be more entrepreneurial and we can do more value-add properties," Harper says. Rouse defines its style as a manager and developer as extremely hands-on, and Harper says one of his passions is being onsite at the assets, meeting with tenants and partnering with cities to develop plac- es people want to be and meeting the de- mands of how people want to shop today. The company has observed and re- sponded to the trend that retail is no longer about size, and that some brands are commonly outselling a department store in apparel volume out of a 20,000 to 25,000 square foot shop. "Retailers are shrinking their footprint," Harper says. "It's not about these 100,000 square foot monstrosities anymore, which I think provides a lot of opportunity for landlords to repurpose those boxes and drive their traffic." He says Rouse has been staying ahead of the shift toward the more entertain- ment-oriented retail experiences by add- ing a Regal Cinema or Cinemark Theatre to almost every center it has renovated as well as fitness clubs and national dining tenants mixed with local farm-to-table, chef-driven restaurant names. "Entertain- ment, lifestyle and dining are the key com- ponents to the future of retail," Harper says. "You can't buy a salad or work out online." Similarly as important are communi- ty-engagement marketing and branding initiatives, such as farmers markets or fundraising events, like 5Ks and other sporting events. At Fig Garden Village in Fresno, California, this past September, a wine walk featuring local winemakers raised proceeds that were donated to Habitat for Humanity. Fig Garden is an- chored by a Whole Foods Market, Lulu- lemon, Pottery Barn, Williams Sonoma, and a Madewell recently joined the tenant mix. Harper says as Rouse begins this new chapter, it also will be adding residential to some of its centers in California. "We have gained a blue chip owner with immeasurable expertise, relationships and resources who believes in our strategy and is fully committed to ensuring we have the correct platform and staff to successfully execute our business plan," Harper says. "We have 300 very committed employees across the country who are every excited for this next evolution of Rouse." SCB Rouse purchased The Shoppes at Carlsbad in 2015 from Westfield; the company plans an extensive renovation to enhance the center's already strong entertainment, dining and destination qualities.