COVER STORY, MAY 2008

BRIDGING THE GAP
The developers of Tucson Marketplace at The Bridges have worked tirelessly to enrich a downtrodden section of Tucson, Arizona.
Brian A. Lee

Tucson Marketplace will bring much-needed grocery-anchored retail to the south Tucson, Arizona, area.

Tucson Marketplace at The Bridges, a retail project of more than 1 million square feet in Tucson, Arizona, hasn’t broken ground yet, but it’s certainly broken through many development barriers. Starting construction in 2009, the project is already a triumph of teamwork, perseverance and vision. When the open-air retail, entertainment and lifestyle center opens in 2010, the real win begins with the many consumer, economic and community benefits that the dynamic, much-needed development will provide.

Tucson Marketplace at The Bridges is part of a larger mixed-use project that will no doubt become a major economic development engine in Southern Arizona. The Bridges, a master-planned, 350-acre development in south central Tucson, will be anchored by the Arizona Biosciences Park, the University of Arizona’s cutting-edge, research complex. KB Home/US Lennar Homes will develop approximately 700 distinctly designed homes, which will offer residents a unique place to live close to where they work and play.

On June 1, 2005 in Tucson, Eastbourne Investments Ltd., the lead partner in the Tucson Retail LLC joint venture featuring Retail West Properties LLC and Genesis Tucson LLC, purchased 112 acres fronting Interstate 10 between South Park Avenue and South Kino Parkway for $22.3 million. Nearly 2 years later, in late February 2007, the Tucson City Council approved of the development plans for the Tucson Marketplace site. In between was a long, arduous process to get the proper retail zoning for the project, an effort that involved countless hours of grassroots campaigning and land-use research and, of course, substantial time and money.

Partnering Up For a Unique Opportunity

Williamsville, New York-based Eastbourne Investments had entered the Phoenix market in the late 1990s, doing both land speculation and retail investment and development deals there. Frank Egan, Eastbourne’s president, met Randy Titzck, senior vice president at Genesis Tucson LLC, on the very first purchase Eastbourne ever made in the state of Arizona. Titzck was the lead broker on the deal and their business relationship blossomed from there, Eastbourne working almost exclusively with the retail tenanting and marketing expert. Egan had worked with Eric Davis, president of Retail West Properties and 30-year veteran of the retail development industry, starting in 2000 on a 120-acre development in Boise.

“Randy is very close to all the retailers in Arizona,” says Egan. “Both Randy and Eric are very skilled at the layout, the configuration, the positioning of the tenants and architectural features. With Eric having developed shopping centers before, it was really a good fit from an execution standpoint and Randy more from the user and conceptual standpoint.”

Tucson Marketplace will be the multifaceted 1 million-square-foot retail component of the 350-acre master-planned The Bridges mixed-use development in south central Tucson, Arizona.

Eastbourne Investments learned about the Tucson development opportunity through a partner in Phoenix in late 2004. KB Home was looking for a retail development partner for the project, and, after coming up dry with its first few targets, time was of the essence.

“We became involved at really the 11th hour and 59th minute,” says Egan. “The quid pro quo was that we had to put up a $1 million deposit literally the next day.”

Eastbourne Investments did so in January 2005, and the company closed on the property about 4 months later. Sinclair Oil Company sold the property, which was the site of the old Tucson Airport. The parcel is 2 miles north of the existing airport and 2 miles south of downtown. The joint venture had to act fast to seize the unparalleled retail development opportunity.

“We had a big meeting with the University of Arizona and KB Home and so on and were literally designing the ‘parcel-ization,’ so to speak, of the site,” says Titzck. “We had our architects and our entitlement people in. We were in a mad scramble because of the short fuse to close and had to start anticipating right then the nature of the retail development — depth, access and visibility. Hence we ended up with what we have planned today, which is basically 1 mile of frontage along Interstate 10 with two full interchanges. It was a pretty interesting 24-hour period, the evolution of the site. And from there we created what you see today — University of Arizona’s, KB Home’s and our involvement.”

Says Davis, “I thought this is a dream come true — great site in an underserved market on the south side of Tucson. It’s really infill. It’s like a brownfield but there’s no contamination.”

Another advantage is that the parcel is located in an empowerment zone, which allows retailers tax credits and other benefits for hiring residents within the district. The down side was that the property was considered to be in a historically bad neighborhood, one with a flooding issue to boot, according to Titzck.

“The neighborhoods around [the site] suffered because there was no vitality, there was nothing going on,” says Davis. “There was a tremendous push by the federal government, by the city to clean up these neighborhoods.”

To the Tucson Marketplace development team, these issues would seem relatively minor compared to its biggest obstacle to come. Tucson Retail LLC was rushing toward a standstill.

Numbers vs. Letters

The numbers pointed to development success for Tucson Retail LLC, but the letter of the law threatened to shut its project down before it even got started. It was the City of Tucson’s ordinance against big box retailers, specifically limiting the size of a grocery section in a retail store larger than 100,000 square feet.

“It was missing zoning — we had this big box ordinance staring us in the face,” says Davis. “It was the big boogie man [for us]. We had a clean site. It had all the entitlements. It had traffic, access and visibility but [according to the ordinance] you can’t have a big box. That was our challenge for 2 years.

Tucson Marketplace at The Bridges will include a lifestyle component.

The roadblock to development was made even more vexing when considering the results of a study performed by the city itself a few years earlier. “It specifically identified this piece of property as a place for a big box, power-center product,” says Titzck. “That was done maybe 4 or 5 years prior to us showing up. Ironically, it ended up that way.”

Says Davis, “They did expensive studies that said what we need is a power center on that site. I thought, ‘We’ve got the key to this whole thing. We’re going to come in here with a great project and revitalize to exactly what the script wanted.’”

Titzck points out that retailers have evolved to a much larger format since the late ‘90s when the city’s anti-big box ordinance was adopted. Many retail anchor tenants have added grocery components to their stores. According to Tucson Retail LLC’s tenanting and marketing expert, the ordinance not only prevented Wal-Mart from entering the market, it also blocked the Costcos, Targets and Sam’s Clubs of the world from setting up shop in the city.

“You started to see that it was affecting not just one major retailer but many,” says Titzck, who adds that the same City of Tucson study showed it to be one of the highest in terms of grocery prices in a comparison with eight other similar-sized cities in the Southwest. Davis mentions that it’s not uncommon to see residents of the neighborhood take a taxi two to three miles north to a Safeway store where they pay full-rate grocery prices.

Adding more fuel to the campaign against the big box restriction was an economic impact study performed by Jim Renzas that showed that Tucson Marketplace would produce 900 direct jobs, another 1,300 indirect jobs and $47 million in sales tax for the city in 10 years.

“So we were prepared to go to the city and talk about a sales tax guarantee,” says Davis. “Every time we came up with a new idea, a great reason, and convinced ourselves and everybody around us that this was the right thing to do we kept getting met with, ‘Sorry, we can’t do that because of this grocery problem.’” 

Power of the People

In the face of this development dilemma, Davis thought that Tucson Marketplace’s elevated design level would win the city council over. The development team had brought in DFD CornoyerHedrick architects Joe Murray and David Moore to create the project’s locally-influenced and timeless design theme.

“The city loved it,” says Davis. “Every time we showed it to [city representatives], they said, ‘We love your project, we love your design, it’ll be the greatest thing for the neighborhood, but I can’t vote for it.’ It was because of this big box restriction.”

Tucson Retail LLC’s zoning challenge went beyond old policy to fresh politics. Of the 83 different municipalities in the state of Arizona, says Davis, only two of them have partisan politics at the city level, Tucson being one of them. In November 2005, a few months after closing, the city council election did not go the development team’s way as the council’s anti-growth stance was solidified.

“We realized that in order to get where we needed to go it was going to be pure grassroots,” says Titzck. “It was getting the neighborhoods, the community leaders, the homeowners associations — everybody — into the mix to help us get the message across [about the project’s value].”

Davis and Titzck’s door-to-door effort began with a cataloging of the names of the businesses, schools and churches along the neighborhood streets surrounding their development site. The grassroots campaign included countless public meetings and outreach efforts, from breakfast Powerpoint presentations to church gatherings and even Easter parties in the park. Every commercial developer has heard the “not in my backyard” refrain of anti-growth residents and local representatives. Tucson Retail LLC encountered almost the exact opposite when touting its Tucson Marketplace project to the people it’d most affect.

“The four very well-organized neighborhood groups that surround our project are tight because they’ve faced adversity,” says Davis. “These people are on point, they know what they’re doing and they were a great resource. They would come to these meetings and say, ‘This center is what we need. We don’t want it, we need it’ became their mantra. I never had that happen before.”

In late 2005, McFadden Gavender Advertising was signed to handle the targeted marketing and PR efforts for the project. In March 2006, Tucson Retail LLC hired two political consultants, both a Republican and a Democrat, who knew the way the system worked and all the personalities involved. The all-out effort to win a majority approval by the Tucson City Council became known as “Operation 4 Votes.” During this same timeframe, the development team still had to design and implement the whole project plan in conjunction with KB Home and the University of Arizona. The resulting Planned Area Development document (PAD) cost about $1 million in consulting fees.

After the substantial amount of time and money spent, including more than 5 months of meetings with the Tucson, Hispanic and Black chambers of commerce and the Urban League; the extensive demographic and psychographic research and analysis; the hiring of various consultants; the $2 million in soft costs expended and the interest carry on the huge land loan, the project still lacked the votes it needed to gain approval. Tucson Retail LLC’s mixed-use partners suggested that the retail development team jettison the big box condition from the Tucson Marketplace PAD document. 

“We didn’t want to entitle the site and change our zoning if we couldn’t get our super center because that’s the way retail is going,” says Davis. “They’re selling groceries out of everything [these days].”

Says Titzck, “The evolution of retail has been going to now a mixture of general merchandise and grocery. In order to succeed and get a major project of any size, you need to have the ability to place those types of retailers in your project.”

With seemingly no hope left and every option exhausted, Tucson Retail LLC pulled out of the development plan in June 2006, knowing the land still had value under its original industrial zoning classification.

“We’d spent $24 million, and were many more millions into it,” says Egan. “We weren’t going to do this on a handshake. Tucson is a somewhat challenging environment to get things done in. We had the battle scars for the first year and a half to show for it. We weren’t going to go forward on anything less than certainty.”

Says Davis, “We determined that Tucson had a problem and Tucson was going to have to solve this problem. It wasn’t going to be the developer waving the flag anymore.”

Sticking to their principles — and retail development expertise — worked out in the end for the joint venture of Eastbourne Investments, Retail West Properties and Genesis Tucson LLC. Once word leaked out that Tucson Retail LLC had pulled its plan for the painstakingly planned and intensively researched retail, entertainment and lifestyle center, a groundswell of support emerged.

“We started getting calls from neighbors, from the business community, the chambers of commerce, church groups and homeowners associations,” says Davis. “I found myself on the phone with the editorial board of the Arizona Daily Star telling our story. I think common sense finally prevailed at the local level. We had laid enough fact and we had gotten into the skin of this thing to the point where it started to turn.”

By the latter part of summer 2006, the “heavy-duty influence” came down upon the Tucson City Council members. Ultimately, a way was found to make an exception for the location and Tucson Marketplace’s big box component. By November, the retail development team knew the project was on track. The development agreement was approved the following March.

“You feel good about the positive impact, and we’ve truly gained common ground with these people,” says Davis.

Gaining Momentum and Awards

For all the effort and commitment to boosting economic development in Tucson, the principals of The Bridges project were honored last November by the Metropolitan Pima Alliance with the 2007 Common Ground Award in the commercial/mixed-use category.

Achieving true synergy is the hallmark of any successful mixed-use property. The Arizona Biosciences Park will mean a built-in consumer base for the 1 million-square-foot Tucson Marketplace and a prime population for KB Home/US Lennar Homes’ residential component. The foundation of the whole mixed-use development, the life sciences facility will be located on 65 acres and could approach 2.5 million square feet at build out. The Bridges’ other features — an executive hotel, graduate-student housing and an innovative vocational school — will integrate even more consumer and residential segments at the master-planned development.

Handling the leasing through Phoenix-based Hogan & Associates, Titzck reports that, not surprisingly, retail tenant interest has been substantial since the completion of Tucson Marketplace’s zoning. The tenanting and marketing expert says that announcements of the lineup will not be made until a large grouping of tenants is signed, but he estimates that there will be 10 to 15 junior anchor-type users along with one or two big box anchors with grocery components. Tucson Marketplace will feature neighborhood, power and lifestyle components, including 200,000 square feet of shops, theaters and restaurants. The site plan includes buffering with open areas and parks as part of the flood control resolution.

When Tucson Marketplace opens in 2010, the infill development will not only benefit from the established demographics surrounding the property and the daytime and residential populations on it.

“We have one of the highest percentages of business densities in the immediate trade area in the city of Tucson,” says Titzck. “Also, on the south side of Tucson, we’ll pick up business from 15 to 20 to 30 miles away. The retail sales figures coming out of some of the projects on I-19, south of the 19 and I-10 interchange, are off the charts. They’re picking up that whole traffic flow. We believe we can pick up some of that, but we’ll also pick up most everything coming up I-10.”

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