A MODEL FOR 21ST CENTURY MALL TRANSFORMATION
By Terri Montesi
Anything worthwhile is worth waiting for and the newly renovated La Palmera Mall is a shining example. After two years of redesign and construction, the one-million-square-foot project has emerged as a model for mall revitalization.
The journey began in the summer of 2008 when Fort Worth-based Trademark Property Company, in partnership with Institutional Mall Investors, LLC, purchased the former Padre Staples Mall and immediately began work on its transformation. Trademark took a distressed 1970s conventional mall and has literally transformed it. A new mix of tenants and amenities were added, all of which greatly improve the experience. But it was not without obstacles. Undertaking a project of this scale can be a daunting task, even for the most seasoned professional. The strategy was to involve all of the leasing, development, finance and construction teams, many with substantial mall re-positioning experience. Trademark also used some of the most creative designers in the country. This put them on the path to success in Corpus Christi and serves as a blueprint for future projects.
The Art of the Deal
As all developers know, a great project idea is nothing more than a vision unless you have financial backing. Financing the La Palmera project was a challenging year-long process, primarily due to a rapidly
deteriorating credit market. As a result, the La Palmera project required a more conservative capital structure than the usual utilization of the existing permanent loan and substantial new equity. The financing for the redevelopment was negotiated and closed in July 2008, just before the onset of the financial crisis in September 2008.
Building Key Relationships
Community and local government support for a renovation project such as La Palmera is critical and Trademark faced a couple of initial challenges: Corpus Christi is a complex, diverse community and the former Padre Staples Mall had been owned by a family with a deep emotional attachment to the mall. Also, numerous promises to upgrade the mall had been made to the community over the years, none of which came to fruition. Therefore, it was imperative that Trademark become part of the community and deliver on commitments made. Prior to Trademark’s involvement in the Padre Staples acquisition, a major national developer was planning a competing project with tremendous public support. The developer was also attempting to lure Padre Staples’ department stores with the assistance of a $40-plus million public subsidy.
Extensive research was done to understand the market and numerous meetings and presentations were also held with city officials over a nine-month period to outline Trademark’s plan for La Palmera and solicit support for the project.
In March 2008, the City of Corpus Christi passed a $19 million tax increment financing agreement to assist with the development of La Palmera, essentially allowing the retailers to decide which project should happen. In this public-private partnership, a portion of the incremental tax revenue created by the development is used to finance public improvements, which made the project economics feasible.
Part of the pledge to Corpus Christi was to stimulate the local economy and create new jobs. The mall’s new tenants, including Grimaldi’s Pizzeria, P.F. Chang’s and Ulta, have added an estimated 361 new jobs with more than 175 of those full-time, along with over 1,000 construction related jobs over the past 24 months.
“LEED” the Way
The commitment to greener building and operating practices reflects the purpose of Trademark Property Company: To be extraordinary stewards, enhance communities and enrich lives. Incorporating those principles into the design of La Palmera was crucial for the company.
The company engaged firms with LEED experience on the design team. The greatest challenge with LEED was controlling project cost and documentation. Although Trademark did spend more money on LEED consulting and fees, they did not spend more on construction costs. The majority of the LEED requirements are best practices that would have been implemented even if certification was not pursued.
Most of the existing building was integrated into the design, thereby saving tons of building materials, which would have otherwise been sent to the landfill. The building materials that could not be reused were recycled, and the general contractor was required to document where scrap materials were sent. As a result of careful planning, La Palmera was pre-certified LEED-Silver Core and Shell by the U.S. Green Building Council, resulting in a reduction of the mall’s impact on the environment and higher indoor air quality. “While some sustainable strategies have additional upfront costs, sustainable design is generally within reach for most projects at little or no additional cost,” said Michael Murray of Beck Architecture. Trademark is actively working to implement similar efforts in their entire portfolio and is proud to lead the way for this type of redevelopment.
Construction and Keeping Everyone Happy
For 18 months the mall underwent major demolition and construction, all the while remaining open for business. For the onsite operations team, the biggest challenge was to manage expectations of shoppers, tenants and employees during the process. Timely and accurate communication was critical to all parties to ensure that the process went as smoothly as possible.
Graphics of the new mall were used extensively throughout the property as the process moved forward. The onsite team also utilized e-mail lists, electronic newsletters and Facebook to disseminate information. A public relations plan built good relationships with local media and kept them apprised of the progress.
Major highlights of the renovation and amenities include:
• A new outdoor main entrance featuring specialty shops, dining and a valet drop-off
• An ocean-themed Undersea Adventure children’s play area
• A new 600-seat La Palmera Cafes food court, featuring a 4,500-gallon aquarium
• 800-square-foot community room and new mall offices
• Free Wi-Fi in the food and center court areas
• Dozens of new skylights and clerestory windows, allowing more natural light
• New furnishings in the common areas, stone on floors, columns and walls, and all new landscaping
• Coffee Beanery coffee bar and 20-foot-diameter fountain in the center court
• Expanded Concierge located in the new West Court
• Two sets of new restrooms in the food court and near the children’s play area
Selling the Vision
It is easier sometimes to sell the vision of a new center without a history. The old mall lacked credibility with retailers because so little had been reinvested in the property over the years. Therefore, the biggest challenge for Trademark’s leasing team was getting existing and potential tenants to understand the vision for the planned transformation. To help “sell” the project to the tenants and customers, Trademark opened a preview center in the mall so that shoppers could see renderings depicting the new La Palmera. It was also the site for monthly tenant meetings, where attendees would sit on furniture designed for the common areas and food court. It was a helpful tool to communicate the vision and leasing strategy.
The efforts paid off. Since Trademark and partner IMI acquired the mall in July 2008, 25 new leases have been signed totaling 68,163 square feet as well as 28 renewals and relocations totaling 50,902 square feet, for a total of 119,065 square feet. New tenants include: Coach, Francesca’s Collections, Ulta, Charming Charlie, Dallas Cowboys Pro Shop and Vans. P.F. Chang’s and Grimaldi’s Pizzeria provide new sit-down dining in addition to an eight-unit food court which contains Subway, Stir Fry 88 and Villa Fresh Italian Kitchen. La Palmera also features new kiosk locations and updated retail merchandise carts throughout the mall. Management brought in a merchandise stylist to work with the individual cart locations and operators.
Promises Made, Promises Kept
The $50 million renovation is one of only a handful of recent major mall redevelopments in the country. Trademark maintained their commitment to the project, even when economic events would seemingly dictate otherwise. There’s virtually nothing being built right now, which helped La Palmera garner national attention. This project is an example of one that was needed and has a pulse on the community.
Trademark will capitalize on their La Palmera success as they work to revitalize other mall properties, including one in Santa Fe, New Mexico, which was recently acquired in partnership with a private equity firm. “We have been able to create an environment that is more than a mall: it is a leisure destination, said Grady Huff, formerly of CommArts, the design firm for La Palmera. You can shop, but you can also just come for a night out, meet a friend for coffee, bring the kids to play or take advantage of the many programs and events that we are providing for the community.” Trademark’s vision has come to life and La Palmera is well on its way to becoming a destination unparalleled in the region.
