Water Tower Shoppes in Celebration, Fla., was not always the destination retail center that it is today. Just three years ago, Walt Disney Company (developer of Celebration) executives and most locals detested the “black eye” they drove past every day.
The property — built in 2004 and named for the iconic water tower that serves as a landmark for the entire community — had declined significantly and was 50 percent vacant and nearly derelict. The lender, GE Capital, had been forced to foreclose in order to protect its interests. Perhaps worst of all, the grocery store anchor space had been vacated by the former operator, and the remaining tenants were foundering.
GE Capital called in Orlando-based Crossman & Company — with whom it already had an evolving relationship — for advice on how to proceed. Scott Crossman, founder of the 23-year old company, accompanied his brother John to Water Tower Shoppes for an initial assessment. “It was a sad-looking property. Almost everything that could go wrong had gone wrong,” commented John, “and yet there was so much potential because of its location and surrounding trade area.” The Crossman brothers went to work and completely overhauled the property, ultimately attracting new retailers, increasing sales and going on to win the 2012 NAIOP Central Florida Chapter award for the best retail development of the year.
Enhanced color schemes, native landscaping and broad plazas enhance the center’s retooled small shop spaces.
When the Crossman team arrived on the property in early 2010, it faced numerous challenges. The grocery anchor, Gooding’s, had vacated its 33,000-square-foot store, the largest rental space in the center, in 2005. The Gooding’s departure created a domino effect that caused most smaller tenants to struggle, and many were behind in their rent payments. Maintenance of the property had fallen off considerably, and it had become an eyesore at the front door of the pristine, carefully managed Town of Celebration.
Since Celebration’s first residents had arrived in 1996, Disney had carefully cultivated an upscale, friendly, pedestrian-oriented image for the community. But the shopping center that should have been a showcase property had become, instead, a deteriorating asset that was shunned by the trade area. In order to “fix” the property, Crossman needed to quickly identify and procure a new anchor, then rectify or re-tenant the smaller shops. A complete physical makeover of the property was mandatory. The capital expense to fully remake the property was likely to be significant, and not without substantial risk.
A New Strategic Plan
Crossman initiated a full-scale evaluation of the property and developed a strategic plan for its redevelopment, which the owner approved. GE Capital, however, did not want to make substantial further investments in the property. It preferred to sell the center to a capable owner who would then invest the capital required to implement the strategic plan. Crossman brought Clarion Partners to the table, and eventually brokered the sale to Clarion from GE. Clarion fully supported Crossman’s plan, and engaged the firm to implement it.
The iconic water tower marking the entrance to Celebration serves as a landmark for visitors to the newly redeveloped Water Tower Shoppes.
Crossman began by approaching Publix, a large, successful regional grocer operating out of an older store on the opposite side of Highway 192 from Water Tower Shoppes. Although that store enjoyed a prominent location along the busy tourist corridor and substantial daily traffic flow, Celebration residents had to drive about a half mile down the busy highway and make a left turn to reach the store.
Crossman demonstrated to the grocery operator that Water Tower Shoppes was better positioned to serve the upscale consumers living in Celebration, because residents could get there from within the community — by car, bike, or on foot — and without having to cross the eight-lane highway. Publix saw that the new plan enabled it to better serve Celebration residents, who fit its customer profile for an upscale store, and agreed, conceptually, to relocate its existing store into a newly built prototypical facility on the pad formerly occupied by Gooding’s.
Converting the conceptual agreement to relocate into a binding lease became a lengthy process because many site considerations had to be resolved. The site’s existing layout, for example, did not provide enough parking spaces to meet the new grocery operator’s needs, and the parking spaces that were in place were constrained in an unacceptable manner. A long, wide colonnade that extended perpendicularly from the front door of the Gooding’s store toward the iconic water tower served no real purpose — and diminished the property’s functionality by chopping up the site’s traffic flow. It occupied land directly in front of the planned location for the new Publix store, and Publix wanted that land for its primary parking field. Eventually, Disney approved a plan that eliminated the colonnade and added crucial parking spaces.
Additional issues surfaced. Publix needed a configuration so different from the former Gooding’s space that Crossman decided to demolish the old anchor tenant building in favor of a new one with a larger footprint. The grocery operator also wanted better visibility from the highway (an outparcel building blocked the direct view), which resulted in further demolition. Finally, the new Publix store had to be ready to open just 11 hours after the old one closed.
With the support of GE, Crossman went to work resolving all of these issues, which enabled Publix to execute a long-term lease. After several months of work, Crossman presented both a signed lease and a building permit to Clarion simultaneously, clearing the way for Clarion to close on the property and begin funding the construction of the Publix store. Crossman immediately undertook the first of many demanding project schedules, all of which it would finish on time and on budget.
Retooling the Site
With the Publix decision finalized, Crossman was able to turn its attention to the morass created by the center’s struggling smaller shops. The developer crafted a new, more viable site plan that involved eliminating about 2,500 square feet of side shop space and tearing down or relocating several buildings. Crossman informed each of the existing tenants about the new vision for the center and the opportunities that would arise when Publix was in place. Some tenants — including Anytime Fitness and Planet Smoothie — chose to vacate their shops and left the property; others — including Quiznos and Best Cleaners — closed temporarily in order to relocate into new, more viable space in the restructured center. Several new tenants, familiar with the draw created by Publix and the buying power of the Celebration trade area, chose to move in. The leases of the existing tenants were either extended or rewritten, and new tenants signed long-term leases at much higher rates than tenants had previously paid.
Finally, Crossman was able to retool the layout of the site in ways that benefitted both Publix and the outparcel users. Doing so was a complicated process, since Disney, Publix and the outparcel tenants all had a say in any changes to the site plan. All parties’ (sometimes conflicting) interests had to be considered and compromises made. After unraveling this maze of constraints, Crossman was able to increase the parking ratio by about 12 percent and open new traffic lanes that allowed traffic to flow into and within the site more easily.
Managing the Redevelopment Process
Throughout the redevelopment process, Crossman maintained a high level of hands-on management. Both Publix and Disney held extensive levels of control and approval. The property is under a set of covenants, conditions, restrictions and obligations governed by the Celebration Company, which is owned by Disney. This meant the Celebration Company had to approve all site plans, architectural/aesthetic features, signage — even which tenants Crossman could lease to. Although both Publix and Disney recognized the mutual benefit of a redeveloped, high-functioning shopping plaza, each entered the process with detailed requirements that had to be balanced and managed.
Communications were continual. Although the redevelopment plan was quite detailed, numerous surprises emerged along the way. Celebration residents were actively and vocally involved in the makeover, and Crossman dedicated itself to ensuring they were well informed throughout the process. Because the small tenants were “constantly moving parts,” the Crossman leasing team met daily for several months. During that timeframe, the project was an “all hands on deck” effort for Crossman’s entire squadron of leasing, asset management and development specialists.
Upon completion of the redevelopment process in October 2012, Water Tower Shoppes emerged as a new 120,000-square-foot grocery-anchored center. The new, 49,000-square-foot Publix store opened at 8 a.m. on November 15, just 11 hours after the old one had closed the night before. Today, the center is more than 90 percent occupied. Its curb appeal, maintenance level, signage and traffic flow have been substantially enhanced. The property’s net operating income (NOI) increased by more than $1 million — from $700,000 to $1.72 million — in just 18 months. This increase in NOI was estimated to add more than $15 million in value to the property.
Crossman continues to lease and manage the property on behalf of Clarion Partners. “Publix is very pleased with their store’s performance, and we have continual interest in the available spaces,” noted Craig Katterfield, Crossman’s leasing agent for the property.
Celebration’s residents were pleased to have their front door completely rejuvenated. The new Water Tower Shoppes presents a more attractive entrance to the community, is easily accessed from within it, and offers residents and visitors a wider and more attractive array of retail offerings.
“The redesign of the Water Tower Shoppes has transformed it from merely a place of commerce to a part of the community,” stated Patricia Wasson, head of the community’s property owners association. GE and Clarion both count the repositioning as a success from their vantage points. “We’re proud of the project,” commented Scott Crossman, “because we were able to make our hands-on style pay dividends for all of the stakeholders. We had a lot of trials, but I still love to visit the property.”