Development

On the Waterfront

Mixed-use developments light up shore-side commercial real estate markets.

For most of history, people have been living, working, and playing alongside rivers and lakes. Among the first areas to be settled, early American waterfront developments were mostly industrial factories and warehouses, situated on shores for convenient access to transportation of people and goods, according to American Rivers, a national nonprofit conservation organization.

Today shore-side properties are being developed or redeveloped for other reasons. Cities such as San Antonio, San Francisco, and Chicago have rehabilitated their riverfronts to invigorate less-than-robust central business districts. "[These cities] decided to turn back to their waterfronts, redeveloping them for public recreation and open space, housing, and office and retail uses to revitalize sagging downtowns," an American Rivers report states.

To encourage states to pay more attention to their ailing waterfronts, Congress enacted the Coastal Zone Management Act in 1972 stipulating that states should implement programs to manage their waterfronts giving consideration to "ecological, cultural, historic, and esthetic values as well as the needs for compatible economic development." In 1980, the act was amended to include federal financial assistance, and by 1995 more than 300 waterfronts had benefited from the act, according to a Washington Sea Grant study. The redevelopments included public parks, museums, hiking trails, retail centers, hotels, tourist centers, and festivals, providing economic benefits to the local communities, the study found.

The desirability of waterfront locations continues to draw residents and tourists. For example, the condominiums in the Charlotte, N.C., River Center development are "a prime example of what lifestyle is most desired by the upcoming generations X and Y," says Edna Chirico, CCIM, owner of Chirico-Huber Properties in Charlotte, who is developing the project.

Waterfront properties are being developed into everything from luxury condominiums to retail lifestyle centers to town squares and tourist-driven boardwalks. Shore-side properties are evolving in small towns and large cities across the country. CCIMs nationwide are finding creative and varied ways to get involved in these projects.

An Economic Turnaround:


River Center
When the Charlotte Merchandise Mart's owners hired Chirico to find a new CMM location, she began by reviewing several possible local sites. Through her research she identified a property along the Catawba River situated seven miles from downtown Charlotte, four miles from Charlotte Douglas International Airport, and one mile downstream from the U.S. National Whitewater Center, an outdoor recreation and environmental learning facility slated to open this spring.

The undeveloped county park was a strategic location for the new CMM for several reasons, Chirico says. Primarily, the CMM, which hosted approximately 240 days of trade shows per year at its old location, would draw visitors to the economically depressed area. The new CMM also could stimulate additional development along the riverfront leading to an entertainment district. Chirico realized that using environmentally conscious development strategies would allow the project to set environmental standards for the region. "We will be dealing with 200-foot buffers and a new set of ordinance rules relating to absolutely no runoff into the river. All the green market standards and Leadership in Energy and Environmental Design standards will be required in these buildings," Chirico says.

River Center evolved into a public/private venture that includes the 250,000-square-foot CMM as well as 120 condominiums, 150,000 square feet of retail, a 200-room hotel, and a county park. In addition to funding received from the city of Charlotte and Mecklenburg County, the project will be partially funded by the developer whom Chirico found using her CCIM connections. As a small-business owner, Chirico realized the project would benefit from the involvement of a larger company. She brought the prospective project to Robert L. Smith, CCIM, president of Lockard Reed Development Group in Waterloo, Iowa, who quickly signed on. Smith found the project intriguing. He had worked on similar projects before, but this project varied from others in some important ways. "This is not your typical, uniform project. It involves moving an existing business [the CMM] as well as redevelopment ... the opportunity involved finding a way to maximize the use of this city-owned parcel in an environmentally friendly way that kept in line with floodplain issues," he says.

"About half the local portion of the sales tax generated by the exhibition center will be used to pay off revenue bonds - for infrastructure and the 250,000-sf exhibition hall. The hotel, condos, and retail will all be private sector, secured by Lockard Reed," Chirico says.

While construction is slated to begin later this year and exact financing amounts have not been confirmed, "the total economic impact of the exhibition hall construction [will be] $86 million, supporting a total of 836 jobs and $38 million in local income," an August 2005 University of North Carolina at Charlotte economic study estimates.

Rendering: Chirico-Huber Properties

A Public/Private Showcase:


Branson Landing
"They were the first to develop, so they are the oldest," says Robert R. Huels, CCIM, broker manager with CJR Commercial Group in Branson, Mo., explaining why waterfront properties such as the one he is part of in Branson need to be rebuilt. "The whole site had to be razed. It was a blighted area that needed to be redeveloped," Huels says of the land acquired for the project.

When the city bought a parcel of land on the banks of Lake Taneycomo it planned to build a convention center. But in the end, "It just didn't make economic sense. They needed a retail tax base," Huels says. The city instead determined the land should be used to create a waterfront entertainment district and the convention center was relocated to an adjacent property.

A tourist-attracting entertainment district was an especially appropriate use for the land considering Branson's demographics. While the city has a year-round population of about 6,000, Branson's 45 music theaters and excellent fishing opportunities attract nearly 8 million visitors a year, Huels says. The retail, restaurants, hotels, condominiums, convention center, and town square that Branson Landing will include are expected to attract up to 4 million visitors per year according to the project's Web site, www.bransonlanding.com. The total project will encompass 445,000 sf and its centerpiece will be a town square featuring a "water/fire/sound fountain" designed by Wet Design of Sun Valley, Calif.

Huels has been involved with the project from the beginning. "I helped formulate the early marketing and acquisition of additional land for the convention center," Huels explains. But as the project took off, it became clear that a professional marketing team was needed. "It would have taken years for me to do it on my own," he says. Urban Retail Properties Co. in Chicago was hired to work closely with Huels to market the property. As of last October, approximately 90 percent of the retail space had been leased with occupancy expected in April.

While finding interested tenants has not been a problem, Huels says the project has faced some obstacles. "There have been a lot of concerns from businesses in Branson. They are concerned about competition so we specifically designed it to avoid competing," he says. For example, they were careful to not include any music theaters on the property. "That would have been a mistake," Huels says.

A local company, HCW Development Co., was hired to develop Branson Landing, but a large portion of the financing came from local and state funds. In 2003 the Missouri Department of Economic Development approved the state's largest-ever tax increment financing district for the project, providing $54 million in funding over 19 years for the convention center and infrastructure. Politics were another challenge. A number of public meetings and discussions were held to discuss funding. "The city is issuing bonds that have to be repaid, which had to be discussed in public many, many times," Huels says.

Rendering: HCW Development Co.

A Private Partnership:


Post Falls Landing
"I became a CCIM because I wanted to sell this developer a piece of land," says Anne N. Anderson, CCIM, co-owner of Lakeshore Realty in Coeur d'Alene, Idaho. She ended up developing the land herself, but her contact with the developer, Harry A. Green, owner of Harry A. Green & Associates in Spokane, Wash., turned into a long-term professional relationship. Even though Green had a history of working on seniors housing and condominiums, "I knew he had this vision of a mixed-use development," she says. Finally, the perfect piece of land for such a development came on the market at the right price. "I heard another CCIM talking about this waterfront property [in Post Falls, Idaho] - an old lumber mill - that had been on the market for $6 million. It had gone down to $2 million," Anderson says. She immediately told Green about the property and they quickly purchased, closing on it for less than the asking price.

Anderson and Green came up with a plan for a town center and waterfront boardwalk, which developed into Post Falls Landing, a mixed-use project along the banks of the Spokane River that includes condominiums, retail, and office space.

While the project is privately funded and has received no urban renewal funds, the city of Post Falls has been very supportive, Anderson says. "The community of Post Falls has a zoning class ... that is designed for mixed uses within one area, permitting this type of design from the get-go." The city is also supportive due to the project's prime location adjacent to city hall, a public beach, and a public park. "We want it to be public and open to the community. The city has no real downtown and they have wanted to establish a town center," she says.Construction began in early October 2005, and the first phase of condominiums will be complete in May. So far Anderson primarily has focused on marketing the condominiums, which range in price from $370,000 to $800,000 per unit. "We knew the immediate market would be residential and the commercial will follow that," she says.

While interest in the condominiums has been strong, Anderson finds that potential tenants do have one concern: privacy. "There has been a lot of talk about 'lifestyle properties,' but we found that people want privacy and security," she says. In order to answer these concerns, the condominiums have been designed with enclosed courtyards that separate them from the boardwalk and other public spaces.

Rendering: Lake Shore Realty

Unique Prospects

Waterfront developments not only have the aesthetics of a shoreline view, they also have the advantages of a strategic location.
All three developments mentioned here are located near other cities or downtowns, but rather than compete with the nearby communities, each development offers something unique. Huels sums it up best: "Branson Landing brings with it a lifestyle not currently available to this area - living above restaurants, shopping, and nightlife."

Carolyn Bilsky

Area report is written by Carolyn Bilsky, associate editor of Commercial Investment Real Estate. Contact her at (312) 321-4507 or cbilsky@cciminstitute.com.

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