Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
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some costly changes to an eight-story de- partment store building built in 1923. The 20 Pizitz stall operators will include purveyors of biscuits, waffles, coffee, dumplings, artisanal cheese, and Mexi- can, Israeli, Japanese and Hawaiian of- ferings. For the full-service restaurants, Bayer brought in an Atlanta outlet known for its Ethiopian cuisine and an Italian restaurant by New York City chef Akhtar Nawab and Park South Hospitality co-founder Matt Wagman. "We had to put in the exhaust systems to take care of the whole floor and vent it all out through the roof of this eight-story building, so the mechanical systems were expensive," said Jeffrey A. Bayer, president and CEO of the Birmingham, Ala.–based development firm. "Because the booths were small, we determined that we needed to have a food-prep area as well. We built that in the lower level, serviced by an eleva- tor and refrigeration areas." The price tag for this renovation, which includes 11,000 square feet of offices and 143 apartments, was about $66 million. Naturally, these upfront costs put up- ward pressure on rents. "The rent per square foot is high," Bayer said. But landlords' efforts to land best- in-class food tenants, up to and in- cluding bankrolling them as business partners, can make sense, given the benefits these operators can provide, says Bomar. He cites Atlanta chef Kevin Gillespie's Gunshow, located in the Glenwood Park neighborhood, as the kind of restaurant that excites local diners, drives traffic and generates lots of buzz on social media. Inspired by Brazilian churrascaria-style dining and Chinese dim sum, Gunshow's dishes are presented to diners at their tables on rolling carts and trays. "A hot chef is more in tune with consumer trends than anybody else," Bomar said. "If you can get that chef into your cen- ter, everything else is going to follow." This was part of the approach at Ava- lon, the 86-acre, mixed-use center in Alpharetta, north of Atlanta, Bomar says. "Avalon has pulled in restaurants from all over," he said. "Their Oak Steakhouse is out of Charleston [S.C.]. There isn't a Chili's or a Capital Grille up there, and Avalon is absolutely slamming it. People love it." Urban real estate developers such as Jeffrey R. Anderson, Michael Allan Domb and Jeffrey R. Chodorow are well known for routinely forming part- nerships with restaurants as part of the retail centers, hotels, condos and other projects they build. But not every devel- oper is keen on partnerships with restau- rateurs. Steiner & Associates has never taken an equity stake in a food tenant, Mastin says, although the mixed-use de- veloper has provided a lot of capital to some concepts in the form of tenant-im- provement dollars. "The restaurant busi- ness is still a very risky business with a high attrition rate, which is why financial institutions are more skittish about lend- ing to restaurants than other categories," she said. "We don't want to be in the res- taurant business. We want to be the best town center developer in America." Indeed, if partnerships between landlords and restaurants start to go south, the situation has the potential to become onerously complicated, thanks to conflicts of interest that can emerge, Orkin notes. "Let's say the restaurant is losing money and the landlord, who controls the space, wants to take that restaurateur out," Orkin said. "He has fiduciary responsibilities both to his landlord group and to his partner in the restaurant. When these partnerships are put together, you have to make sure you're prepared to address the eventu- ality that [the restaurant] doesn't work out as planned." The restaurant business, after all, is known for its high failure rate. A big part of the challenge, Mastin says, is staying ahead of the curve amid the ever changing tastes of today's demanding epicureans. Steiner & As- sociates relies on in-house restaurant- leasing specialists, as well as employees who are ardent foodies, to keep its res- taurant lineups current, she says. "It is important for us that we are always 46 S C T / N O V E M B E R 2 0 1 6 A restaurant planned for The Pizitz food hall, in Birmingham, Ala. F E A T U R E