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VOLUME 24 NUMBER 9 APRIL-JUNE 1994 RETAIL SCOTTSDALE PAVILIONS SCOTTSDALE, ARIZONA PROJECT TYPE A 1.1 million-square-foot power center with 16 anchor tenants and 69 smaller shops. Located on land leased from the Salt River Pimañ Maricopa Indian Community, Scottsdale Pavilions has pioneered the emerging regional power center concept and demonstrated the design and retailing possibilities of large-format discount centers. SPECIAL FEATURES Regional power center Pedestrian plazas or pavilions Contemporary architectural design Extensive landscaping and water sculpture Family entertainment zone DEVELOPER Vestar Development Company 2425 East Camelback Road, Suite 750 Phoenix, Arizona 85016 602-866-0900 DESIGN ARCHITECT Camdi International Design and Marketing Montreal, Canada EXECUTIVE ARCHITECT Leo A. Daly Architects and Planners 3344 East Camelback Road, Suite 201 Phoenix, Arizona 85018 602-954-0818

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Page 1: Scottsdale Pavilions Scottsdale Arizona · Scottsdale Pavilions has pioneered the emerging regional power center concept and demonstrated the design and retailing possibilities of

VOLUME 24 NUMBER 9APRIL-JUNE 1994

RETAIL

SCOTTSDALE PAVILIONSSCOTTSDALE, ARIZONA

PROJECT TYPE

A 1.1 million-square-foot power center with16 anchor tenants and 69 smaller shops. Located on land leased from the Salt RiverPimañ Maricopa Indian Community,Scottsdale Pavilions has pioneered theemerging regional power center concept anddemonstrated the design and retailing possibilities of large-format discount centers.

SPECIAL FEATURES

Regional power centerPedestrian plazas or pavilionsContemporary architectural designExtensive landscaping and water sculptureFamily entertainment zone

DEVELOPER

Vestar Development Company 2425 East Camelback Road, Suite 750 Phoenix, Arizona 85016 602-866-0900

DESIGN ARCHITECT

Camdi International Design and Marketing Montreal, Canada

EXECUTIVE ARCHITECT

Leo A. Daly Architects and Planners 3344 East Camelback Road, Suite 201 Phoenix, Arizona 85018 602-954-0818

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GENERAL DESCRIPTION

With more than 1 million square feet of retail space, Scottsdale Pavilions is one of the largestand most successful of a new breed of shopping center: the regional power center. Developedon Salt River Pima—Maricopa Indian Community (SRP-MIC) land, the project is also thelargest private multitenant project located on an Indian reservation in the United States.

In addition to its sheer size, Scottsdale Pavilions features an innovative architectural design.Besides its 16 anchor tenants and 69 shops, the Pavilions has 13 acres of landscaping at itsfront door—including two lakes and two large water sculptures—and a series of courtyardsand plazas furnished with benches and other shopper amenities. With both daytime andevening entertainment uses, the Pavilions begins to blur the line between a regional mall anda strip shopping center.

THE SITE

Scottsdale Pavilions is built on a 146-acre site just within the border of the SRP-MICreservation. On the east side the site is bordered by the mostly undeveloped desert land ofthe reservation. On the west side is the affluent community of Scottsdale. Thus the Pavilionssits on the edge of its market—essentially a 270 degree arc of population—rather than in themore traditional position in the center of a 360 degree market.

The project site is an assemblage of allotted land parcels, which, while part of the SRP-MIC,were owned individually by 47 Native Americans. At the time the developer, VestarDevelopment Company, took control of the site, the land was raw, with no roads and noutilities. The featureless site was strategically located, however, relative to the built-up andaffluent Scottsdale market. In addition, plans were underway for a north-south freeway, whichwas ultimately located on the east boundary of the Pavilions and is now under construction.

DEVELOPMENT PROCESS

The project was initiated at the instigation of two of Vestar's retail clients—Target and HomeDepot—who were interested in entering the Scottsdale market. Though Scottsdale had severalupscale shopping malls, its large and affluent population was underserved by discount orvalue-oriented shopping. At the time, there were no significant discount centers or standalonediscount outlets in proximity to 160,000 residents of the Scottsdale and Paradise Valley area.

Market studies by Vestar pinpointed the Pima Road area as the optimal location. In fact it wasthe only area near the target market with undeveloped land parcels of the required size. Atfirst, Vester considered sites inside the Scottsdale border, but it rejected these because oftheir inadequate size and municipal signage and related limitations.

The alternative, developing on Indian land on the east side of Pima Road, was daunting fortwo reasons: first, under federal law, the Indian community and its members could neithersell the land to the developer nor subordinate their interest in a land lease; and second,disputes that might arise in the course of developing and operating the center would have tobe resolved in tribal court, a condition that would be unacceptable to potential lenders.

Despite the apparent difficulties, Vestar pursued the idea and initiated lease negotiations forthe project. The negotiations took three and a half years to complete. The resulting lease wasfor a term of 65 years. In addition to ground lease payments, the agreement provided forsales and property tax payments to the community, an affirmative action plan for the hiring ofNative Americans to work in the retail stores, a contribution of a percentage of gross incometo community employment and scholarship funds, and a one-time contribution toward acommunity museum. The agreement also called for Vestar to purchase sand and gravel forthe project's concrete from local Native American sources.

Regarding the jurisdictional problem, at the request of the SRP-MIC, Congress approved alegislative provision that allowed the SRP-MIC to waive its right to tribal court mediation infavor of federal court jurisdiction. Thus the stage was set for the development of the

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Scottsdale Pavilions.

PLANNING AND DESIGN

Vestar saw architectural design as an integral part of the marketing concept for ScottsdalePavilions. The developer had several goals: to establish a unique and recognizable presence inthe otherwise relatively uniform southwestern design landscape; to create a high-qualityenvironment that would be attractive to the upscale Scottsdale population; and to use designto link the disparate power retailers into a cohesive and pedestrian-friendly whole.

To these ends, the design architect for Scottsdale Pavilions created an eclectic collage ofcolors, materials, and forms linked with a series of arcades and plazas. The stage for thisunique power center is set at the entry to the Pavilions. On either side of the entry road is a500-foot-wide swath of greenery, including two lakes. At the edge of one lake is a "waterwall," a large sculptural fountain that announces the Pavilions.

Buildings for major retailers and shops are finished primarily in combinations of stucco,Canterra stone tile, and perforated metal panels. While some anchor retailers insisted on theirtrademark facade designs, most allowed the center's designers latitude to plan theirstorefronts to work with the overall design concept.

Between the major retailers, the designers bumped out the sidewalk here and there to createsmall plazas for pedestrians to meet or rest. Sheltered by geometrically shaped colonnades,these pavilions are furnished with benches, landscaping, and in some cases fountains or otherfocal centerpieces. The Pavilions also includes an entertainment area on the north side of theproject. Uses include an 11-screen multiplex theater, a food court, a McDonald's Leaps andBounds, and a family entertainment center.

The developer originally conceived Scottsdale Pavilions as a 400,000- to 600,000-square-footcenter, to be developed on the north side of Indian Bend Road, the primary access road.Based on this concept, the center was designed in a sort of racetrack oval parallel to theaccess road, with a crossroad running through at the center.

Early on, however, it became clear that the pent-up demand in the Scottsdale market wasmuch stronger than anticipated. The Phase I anchor tenants were experiencingrecord-breaking openings and sustained high sales levels. Thus, a second phase of theproject, almost identical to the first phase, was developed on the south side of Indian BendRoad.

OWNERSHIP, FINANCING, AND MARKETING

The developer and owner of Scottsdale Pavilions is Vestar Development Company. Until 1989,Vestar operated as the commercial and industrial development division of The Estes Company,a diversified builder and developer that has been in operation since 1946. In 1989 seniormanagement of the division, in conjunction with a Midwest-based pension fund, led a buyoutof the division. The resulting company, Vestar, now owns and manages more than 5 millionsquare feet of shopping centers, primarily in Arizona and southern California.

Construction financing for Scottsdale Pavilions was provided on a miniperm basis. Two loanswere obtained from Bankers Trust, one for each construction phase. The loans provided 100percent financing, each with a five-year term at an interest rate based on the LondonInterbank Offered Rate (LIBOR). Permanent financing is currently being negotiated.

The first phase of Scottsdale Pavilions, 450,000 square feet, was 92 percent leased beforeopening day. Currently the center is 98 percent leased. Although some retailers wereoriginally skeptical of the 270 degree market, demand for space has proven strong, and rentsare typically higher than elsewhere in the metropolitan area. In addition to the major tenants,whose spaces range from 16,000 to 119,000 square feet, demand has grown in Phase II formedium-sized spaces in the 3,000- to 10,000-square-foot range.

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EXPERIENCE GAINED

With 16 major tenants, Scottsdale Pavilions has demonstrated the feasibility of theregional power center format. At this scale, however, walking distances are long, andpedestrian amenities, as in a covered mall, become a significant design requirement.

The combination of large size, the right anchor tenants, entertainment uses, andpedestrian amenities can make the power center competitive with regional malls as adestination, expanding the attractiveness of the center beyond the narrow focus ofdiscount shopping.

Scottsdale Pavilions has pioneered the construction of complex retail development onIndian reservation land, overcoming substantial legal and financial obstacles. Theexperience of Scottsdale Pavilions shows that a collaboration can be structured to benefitboth the developer and the Indian community.

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PROJECT DATA

LAND USE INFORMATION

Site Area: 112 acres1 Gross Building Area (GBA): 1,061,600 square feet Gross Leasable Area (GLA): 1,061,600 square feet Floor/Area Ratio (FAR): 0.22 Total Parking Spaces: 6,227 (all surface)

LAND USE PLAN

Acres Percent of Site

Buildings 24 16%

Paved areas (surface parking)

60 41

Landscaped areas 28 19

Nonretail areas1 34 23

Total 146 100%

RETAIL TENANT INFORMATION

ClassificationNumber of Stores

Percent of Total

Total GLA(Square

Feet)

Percent of GLA

General merchandise 17 6.85% 399,171 37.60%

Food service 13 17.81 42,012 4.14

Clothing and accessories

9 12.33 198,162 19.52

Shoes 5 6.85 15,301 1.51

Home furnishings 7 9.59 70,238 6.92

Home appliances/music 4 5.48 81,128 7.99

Building materials/hardware

1 1.37 119,820 11.80

Automotive 2 2.74 9,450 0.93

Hobby/special interest 5 6.85 24,213 2.39

Gifts/specialty 2 2.74 1,840 0.18

Jewelry 3 4.11 3,443 0.34

Other retail 5 6.85 8,596 0.85

Personal services 7 9.59 15,465 1.52

Recreation/community 3 4.11 72,761 7.17

Total 85 100.00% 1,061,600 100.00%

Average Length of Lease: 5 to 10 years (shops)

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Annual Rents: $14 to $24 per square foot (shops); $7 to $10 per square foot (majortenants) Average Annual Sales: $221 per square foot

DEVELOPMENT COST INFORMATION

Site Acquisition Cost: Ground lease

Site Improvement Costs (on- and off-site)

Excavation/grading $1,170,000

Sewer/water/drainage 1,260,000

Paving/curbs/sidewalks 2,170,000

Landscaping/irrigation 1,450,000

Fees/general conditions 1,250,000

Other 2,250,000

Total $9,550,000

Construction Costs

Superstructure $18,000,000

HVAC 5,000,000

Electrical 6,000,000

Plumbing/sprinklers 1,900,000

Fees/general conditions 4,000,000

Graphics/specialties 100,000

Tenant improvements 5,000,000

Total $40,000,000

Soft Costs

Architecture/engineering $2,496,500

Marketing 309,000

Legal/accounting 764,000

Taxes/insurance 175,000

Construction interest and fees 3,065,000

Other 1,951,000

Total $6,809,500

Total Development Cost $56,359,500

Total Development Cost per Gross Square Foot: $53.18

ANNUAL OPERATING EXPENSES FOR 1994 (Per Square Foot Per Year)

Taxes $0.45

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Insurance 0.05

Maintenance 1.04

Utilities 0.19

Management 0.23

Miscellaneous 0.50

Total $2.46

Note

1The site area the developers began with encompasses 146 acres, but the retail area itselfencompasses only 112 acres. The remaining 34 acres are devoted to entertainment areas, theopen space and lakes on the west side, and the main road crossing the property.

DEVELOPMENT SCHEDULE

Planning Started: January 1986 Ground Lease Established: July 1987 Approvals Obtained: February 1988 Construction Started: February 1988 Leasing Started: January 1987 Project Opened: March 1989

DIRECTIONS

From Phoenix International Airport: Take 44th Street north and turn east on MacDonald Road.Turn north on Pima Road and proceed to Indian Bend Road.

Driving Time: 20 minutes.

The Project Reference File is intended as a resource tool for use by the subscribers in improving the quality offuture projects. Data contained herein were made available by the Development team and constitute a reporton, not an endorsement of, the project by ULI - The Urban Land Institute.

Copyright 1994, 1997, by ULI - the Urban Land Institute1025 Thomas Jefferson Street, N. W. Ste. 500w, Washington, D. C. 20007-5201

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