Taubman has a 'gold standard' reputation
DENVER - Mall developer Taubman Centers is picky.
Every year, it reviews dozens of places to build upscale shopping centers. About 15 warrant a serious look and maybe one or two will end up bearing the Taubman name.
This year, Taubman picked Salt Lake City, signing a letter of intent with the LDS Church to redevelop and manage downtown's Crossroads Plaza and ZCMI Center malls.
Analysts say Taubman's persnickety reputation bodes well not only for Utah shoppers but for downtown overall. The Michigan-based company is known for building and managing well-run malls. Taubman is relatively small, but its 22 malls boast the highest sales per square foot in the industry. That draws retailers, who stand to make more money in Taubman centers. And the mix of stores lures shoppers, who also like Taubman's clean, safe environments.
Besides building malls, Taubman can build interest in a city. In some cases, its investments launch a snowball of development in surrounding neighborhoods.
"The quality of Taubman's development is just the best. They are viewed as the gold standard," says Ron Pastore, in charge of retail investment for AEW Capital Management.
As the church's consultant on its 20-acre redevelopment project, Pastore introduced church officials to Taubman, which had Salt Lake City toward the bottom of its "prospect list."
"They came in and explained the opportunity, so we accelerated our look at it," says Bruce Heckman, Taubman's vice president of development. "The more we looked at it, the more we liked it. We honestly think there's a genuine market there or we wouldn't be there."
High end, high praise: In Denver, Taubman turned the Cherry Creek Shopping Center into a top tourist attraction and a heavyweight contributor to that city's tax coffers.
The design of the mall belies its upscale nature. Cherry Creek mall manager Nick LeMasters - who once managed Davis County's Layton Hills Mall and will assist in Taubman's initial development of the Salt Lake City center - says Taubman malls are sophisticated, vanilla boxes. Sure, the floors are marble terrazzo, the elevators glass and the chairs and sofas stylish and new, but the focus is on the stores. Customers always face storefronts. Mall entrances from parking garages force shoppers to walk by retailers before they reach anchors Saks Fifth Avenue and Neiman Marcus.
With his company known as the "retailer of retailers," LeMasters is choosy about where he places stores and how goods are sold. Shops are arranged purposefully. One section includes those found in any mall and another carries moderate- to upper-end stores while the highest of the high end are clustered around Saks.
"There's only one Saks, one Neiman Marcus, one Tiffany & Co. [in Denver, and they are at Cherry Creek]," says Cartier manager Lance Frey, whose store recently was selling a 93-carat diamond necklace. "That's definitely why we're in this market."
Taubman stores were slow to add the free-standing kiosks omnipresent in other malls, and the ones they have don't sell schlock. One at Cherry Creek stocks $300 handbags.
"You don't see them hawking [to] customers," LeMasters says. "Our customer doesn't want to be intruded on."
Taubman's leases require retailers to upgrade their shops periodically with new paint, carpet and lights. In turn, Taubman updates its malls. Cherry Creek recently bought new furniture and lighting. It added 54-inch plasma-screen TVs, valet parking and shoe shiners. The mall also shifts with the times: The number of women's apparel shops has decreased as home furnishing and children's stores have increased. There are virtually no vacancies.
"The mall is always a work in progress," LeMasters says. "We can never be satisfied by the status quo. The minute we feel satisfied, that's when the danger starts."
Denver shoppers appreciate Cherry Creek's effort.
"It's clean. It's relaxing. It's in a great neighborhood. They have every shop," says Lauren Perin, a 28-year-old who likes to shop at Saks Fifth Avenue, Neiman Marcus, Diesel and Urban Outfitters.
"Everything's pretty high-end. If I need a candle that's good and won't drip, I [know I] can go to Restoration Hardware," says Suzie Kollar, watching her 5-year-old daughter play at the mall's indoor playground. "I feel like my kids are safe here playing with all these people I don't know."
In fact, it's jarring when teenagers get rowdy. Mall rats don't fit in with women pushing strollers and shoppers toting their Chihuahuas in Louis Vuitton carriers.
Are we worthy? Taubman typically has to convince cities that chichi crowds will come.
While Denver credits the company for putting the city on the fashion map, residents weren't always so confident. They questioned if their "cow town" was really cosmopolitan. That's happening now in Salt Lake City: Is "Mo-town" metro enough?
"They want high-end fashion. I just don't know how deep that market is," says James Wood, director of the University of Utah's Bureau of Economic and Business Research. "I just hope they can get the tenants."
Forget those fears, says Randall Shearin, editor of Shopping Center Business magazine. "This is what these people do for a living. If they don't see a market there, I don't think they would be involved in the project."
And Taubman's success can spill over. When Cherry Creek Shopping Center opened in 1990, a store owner across the street in the independent mixed-use shopping district called Cherry Creek North closed shop and posted the sign: "We've been malled."
Cherry Creek North was mauled - by shoppers, retailers and residents who have turned it into Denver's ritziest neighborhood. The number of stores has skyrocketed from 110 to 320, covering 16 blocks. You can attend a yoga class, get your nails done, have cosmetic surgery and outfit yourself and your home at Cherry Creek North.
Its newest development, Clayton Lane, includes an office tower, a Marriott luxury hotel, a Crate & Barrel, Whole Foods, Sears and 25 condos - one of which sold for $1.6 million.
"The whole area is the most desired residential area in the city," says John Huggins, Denver's economic-development director. "Cherry Creek North was there before. It wasn't until the [Taubman] mall came in that Cherry Creek North became more high-end."
Cherry Creek North has its own draws - most of its retailers are independent and locally owned, like the famed Tattered Cover Book Store. "There are nicer stores here, boutiques," says Becky Connor, a 20-something blonde shopping for her baby, Fiona.
Many shoppers frequent both. And Cherry Creek North shop owners say the mall helps their sales because it brings customers to the area. "Not only is it not a competitive atmosphere, it's a nurturing one," says Sheila Norris, an employee at Creator Mundi, A Gallery of Distinctive Sacred Art.
A similar story surrounds Taubman's MacArthur Center in Norfolk, Va. Located downtown, MacArthur replaced 17 acres of vacant land once used as a parking lot and is viewed as one of Norfolk's most important downtown developments.
Since the mall's arrival in 1999, the value of downtown real estate has jumped 50 percent. Housing developments are in the works and nearby Granby Street has transformed into a dining and entertainment district.
"It was deader than hell. That is totally changed," says Louis Eisenberg, chairman of Norfolk's Chamber of Commerce. "That mall turned it around. I shouldn't say the mall. Taubman turned it around."
Cathy Coleman, executive director of Norfolk's downtown business district, says while Taubman doesn't deserve all of the credit, it deserves a lot. When the company announced it was entering Norfolk, she says, "You could almost see people's shoulders go back. It reinforced for people that they were worthy."
Going down? There are signs of shopper discontent.
MacArthur recently added pedestrian fare like As Seen on TV and Payless ShoeSource. Norfolk Mayor Paul Fraim met with Taubman to discuss the retail mix, and the company is sending teams to reassess the market.
"They're trying to understand their customer base here," Fraim says. "We'd like to have Fifth Avenue-type retail. They are working to keep us happy."
In Denver, some Cherry Creek Shopping Center retailers bolted because mall managers added the likes of Forever 21, a moderately priced store for teen girls. "This mall was the mall to go shopping at," says Liz Walsh, manager of a clothing boutique that recently moved to Cherry Creek North. "It's gone downhill."
Taubman doesn't always choose correctly. Its mall in Plano, Texas, struggled to find a foothold - partially due to its opening a month before the 2001 terrorist attacks - though it is turning around. And the developer sold its Bellevue Center in Nashville, Tenn.
Heckman, the Taubman vice president, is more confident about Salt Lake City. That's why the company picked the project and is moving forward with plans to overhaul Main Street's two failing malls.
The question now: Will Utahns pick Taubman?
Headquarters: Bloomfield Hills, Mich.
What it does: Owns or manages 22 regional and super-regional shopping centers in 10 states. It will open two more by 2006 and is exploring a chance to develop the retail portion of a mixed-used development in South Korea called New Songdo City.
Sales: Highest in the industry at $477 per square foot in 2004, up 8.2 percent from 2003. The national average was $366 in 2004, up 4.2 percent from 2003.
Occupancy: 89.6 percent in 2004, up from 87.4 percent in 2003.
Net income: $12.4 million in 2004, down from $37.8 million in 2003.
Funds from operations (the primary earnings measure used by real estate investment trusts): $99.4 million in 2004, up from $85.5 million in 2003.
Mall tenant sales: $3.7 billion, up from $3.4 billion in 2003.
Sources: Taubman Centers Inc., International Council of Shopping Centers, newspaper articles