Western Real Estate Business recently focused on a few cities to see how their redevelopment efforts are progressing and what forces are at work in achieving urban renewal. From the privately led catalyst phenomenon in the Inland Northwest to the municipally backed residential conversion trend in the core of the West’s largest city, redevelopment movements originate from different sources and manifest themselves in different ways. However, the end goal is the same — the rejuvenation of real estate that merges profit-minded and community-based aims.

Spokane, Washington

The western part of Washington undoubtedly receives most of the state’s real estate attention, but one must look east in the Evergreen State for a major metropolitan rebirth. Spokane, the largest city between Seattle and Minneapolis, has welcomed more than $1 billion in redevelopment projects that have been planned, started or completed since 1999.

River Park Square, a $115 million destination retail center, sparked the rebirth of downtown Spokane, Washington.

The catalyst for Spokane’s business and cultural renaissance was River Park Square, a $115 million shopping, dining and entertainment center featuring the region’s only Nordstrom, a 20-screen AMC Theatres complex and 32 other specialty retailers. The impetus for the massive revitalization effort began in the early 1990s when two downtown retail anchors — Frederick & Nelson and JC Penney — left Spokane. The focus then turned to Nordstrom, a downtown fixture since the mid-1970s. Its lease was to expire at the end of 1999.

“Nordstrom said to us that something major had to happen to keep the retail [in Spokane] alive,” says Betsy Cowles, developer of River Park Square. “So that was the beginning of looking at what to do with revitalizing the downtown retail core.”

After years of planning River Park Square, arranging public support for it and completing the extensive financial package, Cowles and her company broke ground on the project in fall 1997, with the first phase opening in the summer of 1999.

“It was a unique construction project because Nordstrom had a store and didn’t want to close down while we demolished the two city blocks and rebuilt,” says Cowles. “So we had a shopping center that we had to completely redo while keeping it open.” The second phase, which was completed at the end of 2000, involved scraping the old 120,000-square-foot Nordstrom pad and building a new facility to connect to the first phase construction.

All in all, River Park Square features 373,000 square feet of retail space covering six levels. However, the effect of this destination retail development spans an entire city.

“In urban settings, if you have a catalyst project, there’s a lot of momentum that can happen around it and that was the vision that we had for River Park Square,” says Cowles. “Obviously, keeping Nordstrom in Spokane and keeping Bon Marche downtown was really important but it was also important because of what it would do for the rest of the downtown core. There’s been a real renaissance from one end of the downtown to the other. It’s quite amazing to see the number of older buildings that have been rehabbed. I think Spokane rehabbed more historic buildings in the last year than the entire state of Washington.”

Ron Wells, president and CEO of Wells & Company and long-time member of the Downtown Spokane Partnership, a private, non-profit corporation, is an expert on this revitalization trend in Spokane. “It’s really true — with more people renovating buildings it almost becomes contagious. Other people want to see their own buildings fixed up if there’s opportunity to do so.” As proof, Wells — whose development company specializes in the restoration and redevelopment of historic buildings — refers to the aforementioned enormous sum of investment dollars, most of which are private funds, that have poured into Spokane since 1999.

The twin 225-foot smokestacks in Spokane, Washington, mark the location of Steam Plant Square, a 74,000-square-foot office and restaurant redevelopment.

Wells’ signature Spokane redevelopment project is Steam Plant Square. It’s easy to find — just look for the twin 225-foot smokestacks extending into the Spokane sky. The steam production facility, which once housed Washington Water Power and produced heat for all the major buildings downtown, now features 74,000 square feet of office and restaurant space. Through a partnership with the utility firm, Wells & Company began redevelopment on Steam Plant Square in 1997 with tenants moving into the facility 2 years later.

The property exhibits dramatic architectural characteristics and is wired for the latest in high-tech business operations. Steam Plant Grille, which includes a brewpub, features a 65-foot ceiling that once accommodated the plant’s massive boilers. A stroll through the facility reveals much of the old plant machinery left behind, such as the coal bin that once held 1,100 tons of coal and the many chutes that fed the boilers. Three of the boilers are now dining rooms in the restaurant.

“[The power company] fairly early on agreed with me that the way to really make the place into something special was to save all the catwalks, pipes, tanks and boilers that they could and make it distinctive,” says Wells. “One tenant on the top floor has an incredibly dramatic conference room carved out of the interior of a boiler so the pipes frame the conference room all the way around. Then we have a conference room in another office that’s built inside one of the smokestacks — a dramatic and interesting space.” Tenants at Steam Plant Square include an Internet solution provider, a media production company and other tech-related firms.

Wells’ other contributions to Spokane’s rebirth can be found in the residential market where he estimates his company has renovated around 15 downtown apartment projects in the last 15 years, many of them turn-of-the-century buildings. He believes the conditions are right for a surge in housing in downtown Spokane due to the vibrant retail core and the city’s other attractions.

The historic Davenport Hotel, which reopened in 2002, lends its name to Spokane’s arts and entertainment district. It’s one of the many downtown attractions to come out of the city’s recent redevelopment movement.

The emergence of the Davenport Arts District has also boosted the attractiveness of downtown Spokane. The name Davenport comes from the elegant Davenport Hotel, which reopened last year to rave reviews. Numerous studios, clubs and theaters populate the five-block entertainment area, including the historic Fox Theatre, one of the largest art-deco theaters remaining in the West. Built in the 1920s, the theater is currently undergoing a $24 million renovation, which will be completed in late 2005. Spokane’s symphony orchestra will call the Fox Theatre home.

“There’s a very exciting energy around the arts and entertainment part of Spokane,” says Cowles. “In a couple years, we will have tremendous facilities from a huge arena that seats 20,000 people (Spokane Veteran’s Memorial Arena) to an opera house that seats 2,700 people (Spokane Opera House) to the Fox Theatre, which will be 1,500 seats, to the smaller theaters in the 400-plus neighborhood. It’s another piece of the downtown renaissance. It’s an exciting time and even when the economic times are tough we seem to have almost more than our fair share of good things happening.”

Downtown Los Angeles

The adaptive reuse ordinance, established by the Los Angeles City Council in 1998, was the real estate equivalent of a blood transfusion for downtown L.A. Bringing new life to Los Angeles’ core, the enactment authorizes downtown property holders that own buildings constructed prior to 1974 to redevelop their buildings into whatever is commercially viable. In addition, building codes were relaxed significantly to promote renovation and preservation.

“Before that, the city council had enacted these draconian building codes to a point where it was more feasible to just scrape the building and rebuild it than to go back in and renovate it,” says Mark Tarczynski, first vice president at CB Richard Ellis in Los Angeles. “Now that it’s in line with the state’s historical building renovation code, it’s more cost effective for the developer to renovate [a building] rather than scrape it and build a new one.”

The redevelopment opportunity this measure produced was enough to make Tom Gilmore leave his New York architectural firm and start up Gilmore Associates, which has redeveloped more than 500,000 square feet of buildings in downtown L.A. “Tom Gilmore began acquiring properties in the historic core and he renovated the properties and opened up these live-work loft developments,” says Tarczynski. “He filled them up within about 3 months. That kind of signaled to developers that there’s money to be made there. We’ve just been developing like crazy and nobody’s looked back since.”

The Brooks Brothers/Brockman Building at 7th and Grand Avenue in downtown Los Angeles, will be converted to loft-style condominiums.

The Brooks Brothers/Brockman Building, located at Seventh and Grand Avenue in the Financial District, is a fine example of the redevelopment course downtown L.A. is taking. Long Beach, California-based Urban Pacific Builders recently began converting the dilapidated 12-story, 135,000-square-foot structure into 86 loft-style condominiums that will feature polished floors, brick walls and large windows. Plans for the building’s rooftop deck include a pool, gym and gathering areas complete with grills and fireplaces. Built in the early 1920s, the Brockman Building will also have 7,800 square feet of ground-floor retail.

Another notable conversion project, according to Tarczynski, is the long-vacant 1100 Wilshire Blvd. building, which has never been occupied since its construction in 1986. Bob D’Elia, a condominium developer, is in escrow on the Class A office tower, located on the west side of the Harbor Freeway, and plans to redevelop it into 450 condominiums. “I think it will probably be one of the better projects in Los Angeles County,” says Tarczynski.

This residential conversion trend has caught on in other places in the City of Angels. The city council recently extended a form of the adaptive reuse ordinance to cover all of Los Angeles. Consequently, many developers are able to apply the same conversion approach seen downtown to areas like the Wilshire Corridor. An example of such a redevelopment project is the old Getty Oil Company building, which is being converted by Upside Investments into the Wilshire at Western, a 260-unit luxury apartment complex featuring high-end retail on the bottom three floors. The Wilshire at Western will open its doors to tenants this spring.

Due to the high vacancy rate in L.A.’s office sector and the moribund hotel industry, the only thing commercially viable in this redevelopment market is multifamily, most of which comes in the form of loft-style conversions. Tarczynski says the new multifamily units are approximately 90 percent rental and 10 percent condominium. “However, we see that shifting this year significantly because property prices have risen at a fast clip and now it looks as if condominiums are the only way to make redevelopment properties pencil,” he says. “We still have a very acute housing crisis in Los Angeles County and I believe that the interest rates are going to stay fairly low for rest of this year. Those two things combined, I think, are going to drive housing sales [and] drive people to look to downtown as a potential living alternative.”

While new entertainment and cultural attractions like the Disney Concert Hall, the Cathedral of Our Lady of the Angels and Staples Center have made a difference to restaurant business downtown, Tarczynski says the influx of residents to Los Angeles’ core originates from somewhere else.

“I don’t know that there’s any kind of a nexus between the cultural facilities and the demand for housing in downtown Los Angeles,” he says. “I think it has more to do with people readjusting their lifestyles and realizing that traffic just isn’t going to get better in Los Angeles County and Orange County. They’re sick and tired of driving 2 hours each way to and from their jobs.” Tarczynski is quick to point out that there are 500,000 people that come into and leave downtown everyday, a substantial market for multifamily redevelopers to target.

Covering all the residential needs, the CIM Group has targeted that market with South Village, a $250 million, 7.2-acre development located in the southwestern part of downtown. The first of four phases involves the $48 million conversion of three historic Southern California Gas Company buildings to The Gas Company Lofts, which feature 250 rental units with a retail component. The second phase will include the construction of a 50,000-square-foot Ralphs supermarket, with retail shops to each side and 300 new loft-style apartments on top.

“All in all, they’ve got about 1,200 units that are entitled for that project, which is about one-third of the market that Ralphs needs in the first place,” says Tarczynski. “So a third of their market is going to be right on top of them. I think that the supermarket is the last major obstacle to making the decision to live in downtown Los Angeles. I mean the first thing that everybody thinks about is, ‘Well, where do I get my food? I have to eat.’” With the opening of Ralphs, downtown’s denizens will no longer have to travel the 10 miles to the nearest supermarket.

Tarczynski predicts an interesting 2004 for downtown Los Angeles. With most speculative landlords out of the market and active developers taking their place, more and more renovation and revitalization in the urban core will be forthcoming. “We’re probably going to see around 2,500 new [residential] units come on line in the next 12 months, which is quite a lot,” says Tarczynski. “The interesting question is — will those units be absorbed or will they go looking for tenants or buyers? My opinion is that they will be absorbed.”

Riverside, California

The renovated Riverside Plaza in Riverside, California, will feature a Main Street U.S.A. component complete with restaurants, shops and a 16-screen Signature Theatre complex. The variety of styles and colors in the streetscape will add to the appeal of the regional mall.

For a city accustomed to rapid expansion, Riverside shows that it knows about smart growth. The large number of current redevelopment projects, which are recreating the city’s inner core, are evidence enough. Perhaps the signature example of this movement is the massive Riverside Plaza redevelopment, located on Central Avenue, just northwest of the 91 Freeway in the Magnolia Center area.

According to Bill Kenney of Kenney Company, developer of the project, the original community-based center was constructed in stages, starting in the 1950s. As the city of Riverside expanded, Riverside Plaza began to lag behind newer developments such as Tyler Mall, an enclosed mall with three department stores located on the west side of the city.

“Riverside Plaza had two department stores, but they weren’t in the dumbbell position,” says Kenney about the property, which was enclosed in the mid-1980s. “That is they weren’t at the ends. So it was a poor layout for a regional mall. The [previous] developer attempted to make Riverside Plaza compete with Tyler, which it really couldn’t do.”

In 1991, when Tyler Mall was renovated and redeveloped into the Galleria at Tyler, a super-regional mall with a new level and new retail tenant Nordstrom, Riverside Plaza went through a period of decline. Seven years later, Kenney Company got involved with the property.

“We looked at the trade area, we looked at the shopping center and we said it cannot compete with the Galleria at Tyler, so don’t even try,” says Kenney. “Our goal was to make Riverside Plaza the antithesis of the Galleria at Tyler. Make it everything that Tyler was not.”

When the Kenney Company went to work on Riverside Plaza, its tenants included Gottschalks, Montgomery Ward, a small Vons supermarket, Trader Joe’s and Sav-On. Kenney and his colleagues went about negotiating terminations with other remaining tenants before deciding on a shopping and entertainment niche that would elevate Riverside Plaza.

“There were some theaters [in the market] that were old and dated that would be closing, so we knew there wasn’t a place for people to congregate,” says Kenney. “People were spending their dollars at Tyler but weren’t spending their time there. Riverside Plaza has a very busy downtown during the day, but it isn’t energized at night or on the weekends. So it was our determination that bringing in entertainment, in the form of a state-of-the-art, surround-sound multiplex cinema, and creating a downtown type of area, a Main Street U.S.A., would create a project that would serve the needs of the community. It would bring something new and unique to Riverside, and would be non-competitive with the Galleria at Tyler.”

The new Riverside Plaza, featuring 500,000 square feet of restaurants, theaters and retail stores situated on 35 acres, will offer three different components to the consumer. One of those includes the grocery and convenience-oriented stores like the brand new Vons supermarket, Sav-On and Trader Joe’s. Kenney also knew there’d be a need for the mid-sized lifestyle retailers that don’t typically inhabit malls, so the developer designed a retail area around Gottschalks where there could be a power or lifestyle center setup. Finally, Kenney Company planned the Main Street environment featuring “a street with angled parking, with the cinema, retail, restaurants and shops along the main thoroughfare, just like you would find in small town U.S.A.” A 16-screen Signature Theatre complex will anchor this part of Riverside Plaza. The town center streetscape will charm visitors with an eclectic mix of colors and eight different architectural styles, including mission and renaissance motifs.

Architects Orange designed the project, and the general contractor is Anaheim, California-based Lyle Parks Jr. Inc.

Several challenges arose during the redevelopment planning process, including dealing with Montgomery Ward’s closing, devising the critical phases of the project that would keep current tenants operational and repeating the entitlement process. Plus, the volatile theater market during the construction delay added to the project’s complexity. Nevertheless, the Kenney Company personnel kept their focus on the redevelopment and how it would fit into the Riverside community.

“Our goal with Riverside Plaza is really to energize not just a dying shopping center, but a whole area within the city,” says Kenney, who points to the advantage of Riverside Plaza’s location just 2 miles west of downtown. “Our hope is that Riverside Plaza will evolve outside of its boundaries and re-energize the whole Magnolia Center area of Riverside.” Phase I of the redevelopment project is now complete with the balance of it — the Main Street component with the theaters and restaurants — to be finished this fall.

“We really do think we can have a place where people will gather throughout the day and on the weekends,” says Kenney. “They can also do their grocery shopping, take care of their pharmacy needs, dine and visit specialty shops — things that wouldn’t typically be in a regional mall. So we want to bring a different retail venue to Riverside than what exists today. Riverside Plaza has three separate but distinct pieces that all interconnect [plus] the fun atmosphere that you can’t get in a structured project like a regional mall.”

©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.