FEATURE ARTICLE, MAY 2007

CREATING THE TOTAL RETAIL CONCEPT
For a firm that has made innovation and flexibility a staple of its business model and success for over 30 years, The Festival Companies has remained remarkably consistent.
Randall Shearin

Mark and Rosalind Schurgin.

Whether it’s establishing industry-defining benchmarks in the relationships between leasing, management and architectural design, forging new and enduring partnerships between retailers and communities, or breaking ground on groundbreaking projects, Los Angeles-based The Festival Companies has maintained an unwavering commitment to delivering what company Principals Rosalind and Mark Schurgin call the “Total Retail Concept.” That concept, which marries quality design, innovative management strategies and a strategic retail mix with three decades of local, regional and national market-specific knowledge, represents the firm’s ability to provide an all-inclusive package of expert services and professional resources. The Total Retail Concept is more than just a professional philosophy; it is close attention to retail trends and consumer habits, combined with in-house expertise and innovation, which reflects the culmination of its years of experience in the shopping center industry.

Whether providing fresh insights into design and development or redevelopment decisions, adding value in a real estate advisory capacity, or applying big picture insights to specific projects in new and exciting ways, The Festival Companies combines the passionate advocacy of a committed and experienced developer with the operational savvy of a full-service third-party consultant. The firm services valued third-party clients with the same vigor, energy and demonstrated success that it applies to its own portfolio of properties. And with fully integrated in-house offerings that include everything from strategic planning, development and project management to leasing, marketing and financing, the Total Retail Concept represents The Festival Companies’ vision of what full-service retail development and management should be.

The consistency of that vision, and the diverse array of dynamic place-making solutions generated from its successful application, has earned the firm a reputation as one of the country’s foremost private real estate firms; an influential and vertically integrated national shopping center development, management and real estate advisory organization.

Transformation

Thirty years ago, Schurgin was a trusted and familiar name to those in the development industry. When the husband and wife team of Mark and Rosalind Schurgin decided to change that name, acknowledging the firm’s growth and natural evolution by officially transforming Schurgin Development into The Festival Companies, it was with the hope and expectation that the firm would continue to grow while retaining the same keen insights, and the same compelling combination of local knowledge and national perspective that was a defining feature of its early efforts.

If the impressive track record over the last few decades is any indication, those ambitions have been fully realized.

The Festival Retail Fund 1, L.P., closed on its first transaction — the $40 million acquisition of the Gucci building on Rodeo Drive in Beverly Hills — in January.

Since 1980, The Festival Companies has developed or added value to more than 110 retail properties nationwide. Its expertise in all retail property types, from regional malls, lifestyle centers and power centers, to urban in-fill and street retail, demonstrate the company’s comprehensive capabilities. With a current portfolio of approximately 13 million square feet of leasing, management, development and redevelopment assets, and the 2007 launch of a major real estate investment fund with Goldman Sachs as the lead investor, the firm is looking to the future with a well-founded sense of optimism and anticipation. That fund, The Festival Retail Fund 1, L.P., closed on its first transaction — the $40 million acquisition of the Gucci building on Rodeo Drive in Beverly Hills in January — and adds a major investment unit within the firm’s organization to leverage its expertise in retail and mixed-use investments nationwide.

“Our goal is to continue to expand into core markets and new service models, but to do so in a way that allows us to retain the level of professional flexibility and personal service that our clients and investment partners have come to expect,” says Rosalind Schurgin.

That same flexibility and specialized range of services are reflected in the firm’s corporate structure. The Festival Companies is comprised of several different companies, including Festival Development, Inc., Festival Commercial Real Estate Services and Festival Retail Fund 1, L.P., united under one umbrella. Each company is capable of functioning independently as well as providing collaborative, coordinated services. As president and executive vice president respectively, Mark and Rosalind remain intimately involved in the leadership and management of the firm. Headquartered in Los Angeles, The Festival Companies also maintains regional offices in Orange County and New York, as well as additional on-site offices at various locations throughout the continental United States and Hawaii.

Innovative Developers

From the start, The Festival Companies’ story has been one of forward-thinking innovation. The company has been at the forefront of many trends in the industry, being the first to bring retailers to new markets and introduce new concepts and formats that are commonly accepted today. By looking at each opportunity through its own unique eyes, Festival is able to proactively develop strategies and solutions designed to meet the unique needs of their respective markets.

Franciscan Metro Center is a 285,355-square-foot center in Los Angeles anchored by Best Buy, Costco and Toys “R” Us.

Examples include the power center concept. Festival created one of the first of what was then called a promotional center in Pliny Hills in 1980. Festival was also the first to introduce a Wal-Mart to the regional mall format and the first developer to bring major big box retail into high density, urban areas. While approximately 80 percent of The Festival Companies’ portfolio is in California, the firm remains fundamentally project-, client- and market-driven, and has created, developed and operated compelling retail destinations in 15 different states around the country.

As The Festival Companies has expanded its operational profile, evolving into a premier developer and third-party strategic consultant, the firm has continued to apply elements of its past successes into a cohesive and compelling professional narrative. The Total Retail Concept expands the boundaries of traditional working relationships, and facilitates the firm’s ability to provide single source retail commercial shopping center development and real estate advisory services.

The firm values its ability to evaluate core markets that are lacking retail options, and then practice the “strategic assembly of property” to create new opportunities within those markets. The Schurgins enjoy the challenge of complex, urban and high density projects, and consider factors like urban planning, design challenges and logistical and political factors to be fundamental pieces of the complex retail puzzle. That macro-level approach and hands-on sensibility, combined with a robust entrepreneurial spirit and strong creative drive, has earned the firm its reputation as a capable and innovative retail development and management expert with a finger on the industry pulse.

California Flair

The firm has been able to successfully impart a distinctive “California flair” of shopping center development to other parts of the country. With large facades, bold signage and vibrant architectural design that celebrates the retail energy within; these projects go beyond an architectural theme to establish a memorable and experiential sense of place. To illustrate the staying power of this approach, the Schurgins point to the example of Escondido Promenade. The first true power center in San Diego, the Festival Companies’-designed center maintains 100 percent occupancy 18 years after its grand opening, and still maintains some of the highest rents in San Diego.

Buena Park Downtown in Buena Park, California, is another Festival Companies’ property with a design that features Southern California’s first Wal-Mart, as well as The District, a dramatic 150,000-square-foot entertainment complex in the place of traditional department store anchors.

Buena Park Downtown in Buena Park, California, is another Festival Companies’ first, with a design that features Southern California’s first Wal-Mart and The District, a dramatic 150,000-square-foot entertainment complex in the place of traditional department store anchors.

Maintaining and expanding that national platform, and establishing ongoing national relationships may be a testament to The Festival Companies’ professional acumen, but the firm’s ultimate success is no big secret, according to Mark Schurgin.

“There’s no gimmick,” he says. “No matter what market we are operating in, it is all about the retailer. Our key focus has always been to create centers designed around the retailer first; to create a ‘retail showcase’ where the variety and excitement of the retail and mixed-use offerings never take a backseat to preconceived notions or artificial constraints.”

A commitment to that idea, to demonstrating the power of a dynamic retail mix to enliven and invigorate surrounding communities, has been the hallmark of a Festival Companies’ project and a key dynamic driving the firm’s ongoing successes. Drawing on their experience as developers, the firm has been able to successfully work with tenants, leveraging new and established tenant relationships to help generate dynamic new destinations.

 “We’ve been fortunate in the sense that our track record and reputation have made it possible for us to convince retailers to go into places they might otherwise have been reluctant to try, and to attract national tenants into underserved markets,” says Rosalind Schurgin. “Creating premiere, site- and project-specific retail environments and establishing a powerful sense of place is always our primary focus. Our goal is to create great spaces and memorable places; vibrant, activated environments that reflect the diversity and energy of a compelling tenant mix. We are never just looking to fill space.”

And the end results? The Festival Companies has been able to translate that commitment into a wide range of venues and concepts; from redeveloping and revitalizing older, underperforming properties into world-class destinations, to developing and implementing merchandising and repositioning strategies for major regional properties. The dramatic, multimillion-dollar redevelopment of the Royal Hawaiian Shopping Center on Waikiki’s prestigious Kalakaua Avenue [see sidebar on p. 320] is a dramatic example of the power of strategic redevelopment and merchandising. The $84 million four-level project, on the site of a former languishing three-block parcel of land in Waikiki and slated for completion in fall 2007, features global icons like Hermes, Fendi, Salvatore Ferragamo, and Bulgari, and high-profile restaurant tenants such as Señor Frogs of Cancun, The Cheesecake Factory and P.F. Chang’s, among its over 110 retail, dining and entertainment options.

“Things have worked out well for us — and for our retailers,” Rosalind explains. “Ultimately, we are not formula or format driven. We understand that every project is different, and that understanding community context and acknowledging community priorities is the best way to maximize property performance and add value. And we’ve had great experiences working with cities, municipalities and public/private partnerships. Our core priority and greatest asset has been our ability to package retailers together to create a unique shopping experience.”

Creating those experiences requires both a nuanced understanding of local conditions and an intimate familiarity with ever-evolving industry forces. It requires a diverse knowledge base. It requires a firm with the ability to look at retail trends, assess individual retailers, and then create new solutions that address those evolving needs. Whether redeveloping and revitalizing a fading center in an under-serviced high-density urban market, or creating a project like the Royal Hawaiian, a luxurious retail destination on some of the nation’s most valuable and prestigious real estate, The Festival Companies has shown that they can do just that.

Redeveloping An Iconic Global Destination Royal Hawaiian Shopping Center mixes high-end, world-class luxury retailers such as Hermes, Fendi, Salvatore Ferragamo, Bulgari, and Cartier, with local and unique retailers. Occupying three blocks along Kalakaua Avenue, one of the world’s most prominent and productive shopping avenues, the $84 million redevelopment of the Royal Hawaiian Shopping Center in Waikiki, Hawaii, represents not only the revitalization of an extraordinary retail location, but the reemergence of an iconic global destination. In the midst of a tourist resurgence, and major investment by both public and private sectors, the 4.5 million annual visitors to Waikiki are already enjoying some of the benefits of upgraded and renovated infrastructure, with extensive improvements to beaches, sidewalks and public facilities, and a new selection of renovated hotels, time share units and luxury condominiums. The redevelopment of the 310,000-square-foot, four level Royal Hawaiian Shopping Center located in the heart of Kalakaua Avenue’s retail shopping mecca, is redefining Waikiki’s shopping and entertainment experience and transforming the center into Waikiki’s gathering place. Scheduled for completion in fall 2007, this will be the first renovation for the Royal Hawaiian Shopping Center in its 25-year history. Scheduled for completion in fall 2007, this will be the first renovation for the Royal Hawaiian Shopping Center in its 25-year history. When Kamehameha Schools retained The Festival Companies in 2004 to form the redevelopment vision, a key part of that formula was recapturing its vital cultural and royal heritage while creating a new retail energy, that would restore Royal Hawaiian Shopping Center’s retail dominance in Waikiki. The result? A redevelopment plan intended to revitalize its four level street presence, using a comprehensive and boldly visionary remerchandising and design strategy to transform a faded icon into a dynamic luxury and lifestyle retail and entertainment destination. The Festival Companies implemented this redevelopment strategy over a three-phase construction plan that enabled the center to remain open and operating, while creating more than 100 new stores, restaurants and entertainment venues in the process. The resulting high-end retail mix, iconic design and high-profile location have created a unique destination — one featuring a sense of drama, elegance and prestige, and invokes cultural and retail synergy. Kamehameha Schools retained The Festival Companies in 2004 to form the redevelopment vision for Royal Hawaiian Shopping Center in Honolulu. The redeveloped Royal Hawaiian Shopping Center has attracted many firsts to Hawaii, among them are world-class retailers Kate Spade, True Religion, Furla and Tourneau. Other firsts include the most successful Cheesecake Factory in the U.S., Cancun’s Señor  Frog’s, New York’s W-Steakhouse and Waikiki’s first P.F. Chang’s. Mixing high-end, world-class luxury retailers such as Hermes, Fendi, Salvatore Ferragamo, Bulgari, and Cartier, with local and unique retailers, Royal Hawaiian Shopping Center appeals to its diverse world audience. Local residents and tourists alike are drawn to the vibrant mix of East and West, where a refreshing blend of international sizzle and local character make the revitalized center a place where guests can enjoy world-class shopping, or simply come in off the beach to enjoy authentic Hawaiian entertainment or a relaxed lunch in the center’s casual dining terrace. The completed center offers integrated access and retail exposure to the adjacent Royal Hawaiian Hotel and the Sheraton Waikiki. It will also be the permanent home of a new world-class live show created by Realizations of Montreal, together with renowned local Hawaiian show producer Roy Tokujo. The 310,000-square-foot, four level Royal Hawaiian Shopping Center is located in the heart of Kalakaua Avenue’s retail shopping mecca. The redevelopment of Royal Hawaiian Shopping Center is also an important milestone for Kamehama Schools as it seeks to honor the heritage of historic Waikiki. Centuries ago, many Hawaiian Ali’ii, including Princess Bernice Pauahi Bishop, the founder of Kamehameha Schools, spent many of their leisure hours on the grounds of the Center, formerly known as Helumoa. The Center’s place in history inspires the central theme for the renovation by recreating the Royal Grove as the new gathering place on Kalakaua Avenue where visitors and locals will enjoy cultural performances, Hawaiian history, legacy art and values. This 30,000 square foot open space located in the center of the project is landscaped with over 100 coconut palm trees, performance areas and water features that provide a distinct contrast to the bustling retail shopping environment along Kalakaua Avenue. Other features of the center’s complete physical and structural transformation incorporates a design and layout that adds exciting spatial and architectural elements, that accentuate the dramatic new lifestyle and entertainment options within. The center seamlessly blends two-story flagship luxury boutiques on the street level with natural open gathering spaces, retail arcades, and dining terraces. Elements of timeless Hawaiian architecture accentuate the contemporary energy and the array of retail, dining and entertainment options create a distinctive and defining sense of place. The Festival Companies’ and Kamehama Schools design inspiration “opened up” the center, blending distinctions between indoor and outdoor spaces. Using lanais — covered Hawaiian verandas — and inviting, coconut palm-lined, lushly landscaped pedestrian avenues, the redesign virtually turns the Royal Hawaiian Shopping Center inside out; creating a place where the interior and exterior spaces meet, overlap and interact in powerful and dramatic ways. The result is a destination that is visually and experientially dynamic. A venue that celebrates its new world-class entertainment options and retail icons that evoke luxury and style. And, an environment that has restored Royal Hawaiian Shopping Center as a landmark destination — not only for Waikiki, but also for the world. — Randall Shearin