Rising to New Challenges – Excerpt
Carl Cronan – Real Estate Florida
The question was put to Casey Cummings in front of thousands of his peers during the International Council of Shopping Centers’ 2008 Florida Conference on Aug. 18: What makes for a mixed-use development? The president and chief investment officer of Ram Realty Services in Palm Beach Gardens answered from several different facets.
For one thing, he told the audience in the crowded ballroom at the Gaylord Palms Resort & Convention Center in Kissimmee that few projects in rural areas or third-tier markets truly qualify as mixed use, no matter how much they may tout themselves. With the economic downturn affecting retailers’ expansion plans, he and other speakers observed, no one wants to wait anymore for a customer base to catch up to store openings.
“Those days are over, which frankly I think is positive,” Cummings says. “The newer mixed-use projects will be focused on the A sites in the A markets. They’re going to require a significant amount of density, preferably close to mass transit. Just by their nature, they need a certain level of intensity to work.”
Cummings knows first hand what’s happening on the mixed-use development front. Ram Realty is currently promoting Sheridan Station, a $500-million project in Hollywood that will combine office, retail, multifamily, hotel and parking space on 40 acres flanked by Interstate 95 and the Tri-Rail commuter line. An elaborate model of the project, complete with lights and a moving train, was on display at the ICSC conference.
Sheridan Station will eventually include a total of 300,000 sf of retail, 245,000 sf of office, at least 1,000 living units, a 150-room hotel and parking for 2,500 vehicles, of which 800 will be made available to Tri-Rail riders in Broward County. The first phase of construction involves a 120,000 sf office building that Ram Realty expects to generate about 400 jobs, ultimately growing to more than 1,000 employees.
Cummings, whose company has experience with other mixed-use projects around the country including Midtown in Palm Beach Gardens and Broadway Promenade in Sarasota, says other components are increasingly required for such developments besides living and shopping space. “I suspect we’ll see a healthy balance of those mixes going forward,” he says.
Three Or More Components Needed
While Sheridan Station touts four distinct commercial components (five, counting its planned parking structures), observers say most projects being dubbed mixed use seem content to stick with two. For example, a high-rise office or condominium/apartment development might promote itself as “mixed use” because it has a relatively small amount of retail space on its ground floor that might be intended more as an amenity for residents.
“If you have an office building with retail in the ground floor, it’s still an office building”, remarks John Crossman, president of Orlando-based Crossman & Co. and an active member of ICSC. He believes mixed-use projects should have three or more components in order to truly make that claim, either in marketing materials or on a sign marking a future development site.
Crossman, whose firm handles leasing and marketing for several mixed-use developments, says combining components and building vertically is the way Florida has to go now that available land is becoming scarce and redevelopment of existing sites is becoming more of a necessity. For example, Sheridan Station’s site used to be a mobile home park and rail transit station, but a giant water tower will be the only common link between that project’s past and future, along with a house built from coral rock in the early 20th century that Ram Realty pledges to preserve. Crossman emphasizes that mixed-use projects can be far more complicated than traditional development, which can be difficult enough. “My favorite expression about mixed-use development is that it’s not for the faint of wallet,” he says. “It’s something people talk about a lot, yet it’s very difficult to pull those projects off.”
While numerous projects purporting to be mixed use dot Florida’s commercial landscape, few are more ambitious or visible than Metropolitan Miami, a $1-billion project under way in Downtown Miami. The project consists of two major pieces: Met 1, a 40-story, L-shaped tower with 447 luxury condo units and retail/restaurant space on the ground floor; and Met 2, a 47-story structure containing 750,000 sf of class A office space and 358 luxury hotel rooms bearing the JW Marriott brand.
Metropolitan Miami will have 240,000 sf of combined retail space in both buildings, with tenants ranging from a supermarket and steak house to a fitness center and movie theater, according to Tom Weller, vice president with MDM Development. Parking is also planned on site for up to 4,000 cars, giving it an advantage over other urban projects in South Florida, he says.
“We’re filling a real need here in the core business district,” Weller says. “Even though we have different challenges within the project, each (component) feeds off the synergy of the other and the project as a whole.” White Met 2 isn’t scheduled to open until 2010; the project is already showing success from an office-leasing standpoint. Miami-based law powerhouse Greenberg Traurig announced in July that it would occupy 150,000 sf in the new building after its current lease at nearby 1221 Brickell expires. There are also reports in late summer that accounting firm Deloitte & Touche, now at Wachovia Financial Center, is considering leasing 50,000 sf though Weller wouldn’t confirm any names of tenant prospects.
From the condo sales side, Weller says all but 20 living units have been sold in the completed Met 1, with those under contract proceeding to closing and its first residents now moving in. Those first occupants will make a huge difference in attracting additional retail tenants, he says, adding, “It’s very hard to attract people when you’re weaving your way through construction.”
Because the project started before the commercial credit crisis became apparent last year, Weller says Metropolitan Miami hasn’t endured the same struggles now experienced by other mixed-use developers. “From a financing standpoint, we have not encountered any problems moving forward because of the diversity of the project,” he says, noting that Bank of America and Wachovia Bank are involved in both segments.
Initial Components Build Momentum
Other mixed us projects around the sate appear too be succeeding with their first components before the others are built. Tampa-based McKibbon Hotel Management Inc. opened two planned hotels this summer at Avion Park at Westshore, a 19-acre development adjacent to Tampa International Airport that will include 21,000 sf of retail and four restaurant outparcels.