Kent 360 - Kent, Ohio

Blog of Dave Ruller, Kent City Manager

Right Dimensions Project in Downtown Kent

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Right Dimensions Project in Downtown Kent

One of the reasons I wanted to start a blog was to make sure people had access to as much information as possible on important Kent projects.  Given the recent turn of events in the Right Dimension’s “Downtown Village” project, I thought I’d offer the inside of view of where it’s at and where I think it might end up.

The Site
The idea for a new downtown Kent retail project began in 2003-04 when a couple of local building contractors saw what they thought was a great opportunity to join together to revitalize the city block bordered by Haymaker Parkway, Depeyster, Water Street and Erie.

The parcels contained within this block were older buildings; most had active businesses in them but the buildings themselves were showing their age and did not really provide the modern amenities that most retailers were looking for in terms of building footprint, space configuration and parking.

The Project Team
The local contractors saw this as an opportunity to fill a retail market need in Kent and they decided to try to join together for the purposes of pursuing a retail development on this site.  The early estimates indicated that this would likely be a $15 – $20 million retail project.  At that cost they knew they had to find additional equity investors.

Through a family connection the local developers contacted some real estate folks in California who they knew were interested in getting into retail development and after a few meetings and discussions, the Right Dimensions team was born in November 2004.  This team brought together the California contingent with the local contractors who then proceeded to hire a Cleveland based design firm (City Architecture) to prepare concept plans that could be presented to the city for their consideration and support.

Memorandum of Understanding
After presentations of their retail concept with city community development staff, the Right Dimensions team was invited to present their concept to City Council.  City Council supported the project and entered into a Memorandum of Understanding on March 14, 2005 with Right Dimensions that outlined the basic parameters for the project and defined the contributions expected of each party.

In the MOU, the City agreed to contribute the city owned properties located within the project area, the city agreed to consider the use of Tax Increment Financing (TIF) to support portions of the development costs, and the city agreed to consider using the powers of emminent domain if necessary to gain control of the land within the project area.  The developer agreed to obtain ownership of the private properties (unless emminent domain was required), design the project, construct the project and fill the retail space.

The original MOU was good for 9 months with an option to extend for a time not to exceed another 6 months.  The MOU outlined a path forward to create a Development Agreement that outlined very specifically the contributions of the city and the developer to the project.  The agreement is essentially the contract between the city and the developer that would serve to guide the progress of the project throughout its duration.

The MOU established that the Development Agreement would only be prepared after the developer had acquired all the properties in the project area and had letters of intent for 50% of the retail space.  Once the developer reached those milestones the City and developer would then begin to negotiate the final terms of the development agreement.  Once the Development Agreement was signed construction would begin.

Lifestyle Center
The Right Dimensions project team created a vision for a “lifestyle center” development that provided specialty retail on the ground floor with mixed residential space on the second floor.  The idea was to offer an alternative to the “mall” experience and instead of a drive and shop experience, this projeect would integrate retail with residential in a more urban layout.  The concept was consistent with the latest trends using retail to revitalization downtowns and was also particularly attractive to the “creative class” that were considered the target audience for sustained economic growth. (Read two news articles on lifestyle centers:  The Mall Goes Undercover and Not a Mall, It’s a Lifestyle Center)

Using the lifestyle concept, the Right Dimensions team created architectural renderings of the lifestyle center in the Kent block.  They called their concept plan the Downtown Village and it included an underground parking structure with surface plaza “green space” that was surrounded by the retail residential mix.

Project Team Changes
As the project grew to an estimated $40 million dollars, it became apparent that the project would need additional capital investment.  The City hired a third party firm to perform a due diligence financial assessment of the Right Dimension’s Project Team’s financial capabilities and the report noted that the original team did not have the equity necessary to execute a project of this magnitude.

In December 2005, the Right Dimensions team was busy looking for additional investors for the project and they asked City Council to extend the MOU for an additional 6 months to allow them more time to find a large investor and to continue to negotiate property purchases in the project area.  City Council granted a 30 day extension for Right Dimensions to find a new equity partner and if they did that then they would have the full 6 month extension which would then expire in January 2006.

The 30 day MOU extension deadline was approaching in late January but the Right Dimensions team had yet to produce an equity partner needed for the project so the city staff was prepared to terminate the MOU.  Then, in early February Right Dimensions announced the addition of Catlin/Contrende Properties to their team.  A follow up financial assessment performed by the third party firm indicated that Catlin/Contrende was capable of executing a $40 million project so the 6 month extension was granted.  This extension would expire June 16, 2006.

Property Acquisition
By January 2006 the developer had secured ownership of a couple of properties and had obtained purchase options for a few others but a couple of large parcels remained that were proving difficult for the developer to conclude.  The developer asked for the city’s help to consider the use of eminent domain on these outstanding properties as agreed to in the MOU. Eventually terms were reached in principle to relocate one of the businesses in a land swap but the other property remained reluctant to sell.

Retail Market
A couple of years ago the city and the Kent Chamber paid for a quick analysis of the prospective downtown retail market.  That report indicated a specialty niche that was capable of producing a profit for the right mix of retailers in downtown Kent.  The Right Dimensions team hired another firm to further assess the retail trade area to identify growth opportunities from underserved markets.  The developer’s report also identified an underserved retail segment.

While the underserved market is clearly indicated from the demographic data, it is not a large margin market; in fact the margins of the retail project are thin.  As a result, the market has not developed purely on its own and incremental growth is not likely to happen without some form of stimulus.  The key to success in such a thin margin market is volume, both in terms of economies of scale in the development and sales volumes.  The strategy in the immature Kent market then is to make the revitalization project large enough to create the economies of scale that will make thin margins viable.  This is why the project grew from a $15 million project to $40 million project.  It was the best way to make the thin margins work.

The Right Dimensions team hired a retail broker out of Cleveland to market the prospective retail space.  The price per square foot on the project remains highly variable as the developer is still scoping out the project and laying out the prospective footprint of the structures and parking garage.  Current market rates for 20 – 30 year old space for downtown Kent is in the $10 range and the Right Dimensions team were hoping to be able to secure tenants in brand new, modern structures in the $15 – $20 range, although that range can vary quite a bit depending upon the final layout of the building and the tenant mix.

Developer’s Agreement
Although the MOU did not require the city to start negotiating a developer’s agreement until all the parcels were under ownership of the developer and 50% of the properties had signed prospective tenants, the city went ahead and offered to start working out the terms of the agreement to expedite the project which was already a year late.  The city hired expert bond counsel to negotiate with the developer’s attorney to lay out financial instruments that would make the project profitable for the developer and beneficial to the city.  The city had a series of meetings with the Catlin/Contrende equity partner to work the numbers and find a creative financing solution that ensured a profitable project for the developer and appropriate revenue return for the city.  As of June 2006 I would estimate that we had completed 40% of the developer’s agreement.

More Project Team Changes
In May 2006, the Right Dimensions team advised the city that the major equity partner, Catlin/Contrende, had decided to take a pass on the Kent project.  Catlin/Contrende had a due diligence period negotiated within the contract with Right Dimensions that allowed them withdraw from the project and in May they exercised that option.  Catlin/Contrende advised the city that while they consider the retail project viable, they were withdrawing due to internal issues with the Right Dimensions team.

With the loss of their major equity partner, the Right Dimensions team suffered a setback.  The existing MOU expires on June 16th and without the financial capabilities provided by Catlin/Contrende the continuation of the MOU is in jeopardy.

The MOU authorizes the city to obtain the properties within the project area that Right Dimensions had secured title to or had purchased options on.  So one of the options may be for the city to pick up where the developer left off and try to get the land under contract and use the land control to solicit a new developer with the financial backing to execute the project.

Lessons Learned
The Right Dimensions project has been a terrific opportunity for the city to gain experience working with both small and large developers to negotiate a project.  We understand the process that needs to happen to take a project from idea to reality.  We know how to use all the “tools” in the city’s economic development toolkit, including fairly sophisticated Tax Increment Financing.  And we know what developer’s need to make their projects work so we can anticipate and prepare for their needs better than ever before.

It is clear to me that there is an underserved retail market opportunity in downtown Kent but it is also clear that the margins are slim (given low property lease rates) so for any project to succeed it will need to be large enough to leverage the slim margins into profitabile returns over large volume transactions made possible through sufficient size of the project.

Getting that kind of sales volume and size will not happen incrementally by itself, otherwise the market would already be doing it on its own without government assistance.  Clearly the market needs a push.  Given the number of property owners even in this small block, each with different interests and intentions, it has proven very difficult for any one entity to try to accumulate enough land to make the project viable on its own.  Land acquistion of the scale necessary has not happened and was a major reason this project has struggled.  In the development world time is money and the enormous time it took to try to negotiate deals with property owners added expenses to a project that frankly didn’t have the luxury of extra expenses.

In the next month the city will take a serious look at where to go from here, and it may well be that Right Dimensions continues in some form, but either way if we really want downtown development to occur we need to be thinking about what we can do as a city to get it over the top and start the momentum needed to move it closer to success.  To me, that comes down to the land acquistion issue.

The Importance of Our River

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My River Ramblings
It’s safe to say that my armchair anthropology is unlikely to garner any Nobel nominations but still, at the risk of offending Margaret Mead, I can’t help but offer my thoughts of the relationship between rivers and people. From the first Bedouins settling in the Fertile Crescent, through the Yangtze, the Nile, the Thames, the Danube, and even Mark Twain’s Mighty Mississippi, people gravitate to rivers regardless of religious, cultural or political persuasion. Rivers transcend us.

More and more I’m beginning to think that the scribes made a transcription error and perhaps the proverb was supposed to read: “Where there are no rivers, the people perish.” For at every turn and around every bend, rivers have proven as adaptable to man’s purposes as they are to the boulders, logs and bogs that interrupt their flow. Rivers have provided people with a source of nourishment, security, commerce and inspiration. Even today, as the once prominent role of rivers to move commerce and power industry has waned, rivers court us with a new gift; a gift of place. Rivers are sacred spaces to reconnect with nature and with ourselves in moments of reflection and personal contemplation.

In an era when unlimited information access has brought down the Berlin wall of the 40 hour week, contemplation seems to have become the sacrificial lamb left at the alter of Workus Maximus, the god of productivity. Work has ridden the coattails of the information contagion and has spread into every aspect of our lives like the viruses that roam within the networks themselves. With cyber-space preempting personal space, contemplation is relegated to luxury status that no one can seem to afford.

Perhaps naively I reminisce for the rhythms of the bygone agricultural and industrial eras, where people at least had the benefit of seasonal and industrial production cycles to catch their breath. But information doesn’t breathe – much less need to eat, take a break or sleep – so we push onward, swept up in the current, driving to achieve greater efficiency and productivity by working our brains harder and longer, held hostage to video cell phones, beepers, blackberry email, and internet access at home, on the road, and even at wi-fi coffee shops – which were ironically created as places to get away and take a break from work in the first place.

Somewhere along the way we seem to have forgotten what the old farmers knew about rotating crops to keep the soil fertile. Instead we push harder and harder to harvest knowledge from the same plot of land with less time than ever before to actually think about what we are doing. In a knowledge based economy, thinking should be the focus not the distraction; yet at a time when we need it most, we do it the least.

For all the promise of conscious thought, it takes equally conscious effort to set aside time to use that gift and think about life’s important matters. I have never forgotten the tenet that a life unstudied is hardly a life worth living – yet in rushing to reach our professional summits, contemplative time has become lost beneath the storm surge of tasks that exhaust our energy from paddling like hell to stay afloat.

Talk about swimming against a rip tide. If fighting City Hall was hard try resisting the cultural phenomenon of the Information Age. Despite the benefit of thousand of years of evolution we don’t really seem to be faring any better than our ancestors who were helpless against the tectonic push of the Ice Age. Swimming in a sea of data, I have a new appreciation for the old adage, “ignorance is bliss.”

Yet still we paddle. And I guess that’s what bothers me. I can’t help but wonder whether we have really been assigned this fate or whether we have accepted this fate without giving it much thought. Worse yet, maybe we have paddled for so long we’ve forgotten how to float – and in an ironic way we may have manufactured our own fate.

Although I can’t prove it, I personally think that we are hardwired to hear the rivers song. From Homo Erectus to Homo Sapiens, the evolution of the human animal never seems to have strayed far from its river roots. Rivers occupy sacred spaces in our cultural mythology borne from a legacy of nurturing our physical, emotional and spiritual needs. Rivers fed the oceans that gave birth to our single celled ancestors and river water hydrates our multi-celled biology today. Rivers sustain us at many levels.

As rivers flow around and through us they keep us connected to our ecological heritage and re-affirm our seat at nature’s table. Rivers challenge civilized minds to see man as a natural and evolving outgrowth of everything that preceded him; another quantum in the trajectory of life; a conscious animal. Rivers offer hope that the price of consciousness did not include exile from nature’s garden, and despite our distance traveled, man remains a part of the river’s flow.

Rivers have always been there to take us places. Rivers transported settlers to the frontier, providing both a ways and a means to get through rugged mountainsides. Rivers became our first gathering places that supported farm communities that grew into the towns that eventually grew into America’s great cities thanks to the river’s ability to transport people and commerce. In time, commerce grew into manufacturing that harnessed the river’s power to turn turbines and fuel industry. When we let them, rivers still have the power to transport us today; as they take us away from our crazy world and help us find safe passage through our travails.

Meandering rivers represent the pinnacle of effective strategy. Rivers evidence the wisdom of knowing when to “go with the flow” to move around rocks while simultaneously moving mountains one grain of sand at a time. At a time when bigger, stronger, and tougher appear to be the formula for achieving success in our increasingly competitive world, the river suggests that adaptation and ability to change hold the keys to understanding the true meaning behind Darwin’s theory of survival of the fittest.

But rivers are more than adaptation – they are regenerative. Rivers invite us renew and refresh ourselves. River water baptizes, inspires and soothes.

I enlisted to serve on the good ship USS Kent with a thirst for adventure, excited by the prospect of seeing exotic locales where few cities had ventured, and to be a part of a place that was committed to be all that it could be. When I signed-up I knew the journey would be hard and would lead through unchartered waters but I thought it was a risk worth taking.

I came to Kent optimistic that the my energy would be better served when combined with the energy of the entire community and together we could move the ship forward in the name of progress rather than suffering an endless fate of bobbing up and down individually on the open sea.  After a year on the job I stiill believe.  And whenever I start to feel worn out I head down to the river and I am reminded that even when things look the same, they never are, the river changes every day and so does Kent.

Kent Riverfront Development

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Riverfront Development

Since our arrival in Kent my family and I always seem to end up down by the riverside. And we’re never alone down there.  We see a lot of fisherman, rock sitters, stone skippers, tree huggers, dam admirers and just old fashioned nature lovers.  As we walk the banks the river seems to bring out those deep philosophical discussions and because you can never turn a city manager’s brain off, we often end up talking about how underutilized the Kent riverfront is economically.

Everywhere we’ve lived, the cities have used the attraction of rivers to jump start their local economies.  And the truth is, it always worked really well.  We’ve got an enormous asset just waiting to be used — that’s why I was delighted to hear the plans of Riverside Wine and Cheese to extend a deck along the river’s edge for customers to sit and enjoy.  Let’s hope this is the start of something contagious.

It may be a start of something new in Kent but the fact is waterfront development has been hot and heavy in cities all over this country for decades.  Big cities have been working the river angle to their advantage for some time.  A few cities, like Providence and San Antonio have become destinations because of the opportunities created by their rivers.

For a sampling of these riverfront projects in big cities, check out the links below:

Indianapolis Waterfront Central Master Plan Indianapolis Parks and Canal

Detroit Civic Center Promenade New London Connecticut Riverfront

Providence RI Providence 2020 Plan Wheeling WV

Hudson River Park Boston Wharf Cleveland Waterfront

Columbus Riverfront Cincinnati Riverfront Park Portland East Riverbank Park

Henderson KY Iowa Illinois River Vision Knoxville TN Waterfront Plan

The pictures below are as follows:
1.&  2.  Indianapolis Indiana
3. RiverFire in Providence RI
4. Marina on the Potomac River in Alexandria VA
5. San Antonio RiverWalk
6. Columbus, Ohio
7. Alexandria VA, Potomac River
8. Cleveland Waterfront
9. Milwaukee Wisconsin
10. & 11. Louisville, Kentucky
12. & 13. Alexandria, VA
14. Tennessee River in Knoxville TN, “Volunteer Navy” before UT Football games
15. Tennessee River

But it’s not just big cities.  Even in the small village where I grew up, in Fairport NY (pop. 6,000), they’ve transformed the Erie Canal to become a genuine destination for people and businesses.  20 years ago the area was mostly blighted as the old manufacturing in the village had declined but today it’s a vibrant and trendy place to live and do business.

And even in my last city, Kingsport TN (pop. 42,000) they have a plan to create a revitalization district that they were calling the Kings Port on the Holston.  Interestingly, the idea grew out of a report prepared by local college students at East Tennessee State University.

Tech Based Economic Development and an Old Friend

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Tech Based Economic Development and an Old Friend

Because economic development is so fickle, typcially occurring in maddeningly unpredictible and often illogical sudden fits and stops, everyone competing in the game scrambles to find that elusive secret password that is sure to unlock the key for their city. It actually resembles those weekend youth soccer games where masses of 6 year olds flock around the ball kicking and flailing with eyes half closed and shins aching hoping to make contact with the ball before the next kid and then through some mix of luck and divine intervention have the ball actually inch closer towards their goal. Meanwhile kids, coaches and parents shout at one another, adding to the sense of melee on the field, with the certainty of their convictions and prescriptions for how they would do it, hoping to incite that miracle moment when a stumbling child will trip at just the right angle and at just the right time to send the errant ball past the mosquito distracted goal keeper and into the back of the net.

Economic development may be all about numbers but at the end of the day it feels more like playing in those soccer games than solving a math equation.  It is a field dominated by the polarities of  irrational exuberance and excessive desparation that leaves most of its suitors in a state of exhausted mania. I know, I’ve been there, and I’m a very stable person.

The trouble is we want to make economic development play by our rules but it comes from a stock of wild mustangs that choose the ranges they roam on their own terms.  Experts emerge like Dr. Doolittle offering their interpretations as professional  horse whisperers, and I am as fascinated as the next guy by their insights, but I’m also always left with a sense of tautological errors in their conclusions, e.g., the horse likes these kinds of fields because the horse is there, which typically leave me wondering which came first the field or the horse.

Still we go about the business of economic development with a dogged determination to tame that buck so we listen to experts and chase our dreams kicking and flailing as we go.  The funny thing is, as much as we try to turn science loose on economic development, studying its entymology and anthropology, I am more and more convinced that it descends from a different lineage altogether.  This is a people business and people rarely do predictible things, especially when it comes to mixing money, risk and reward.  Things go crazy quickly .  Its the gambler’s mentality that leaves us shaking our heads but back at the tables for the next hand.

I’ve rambled on a bit but these were thoughts that bubbled up as I (in my eternal search for the holy grail of economic development) Googled my way to powerpoint presentation offered from the great state of California where the mix of technology, storytellers and dreamers hold the promise of sure fire answers to this enigma of technological development.  And lo and behold, straight out of a Disney story, I discovered that the author of the presentation was an old friend from graduate school, Joe Raguso.  I will admit that I haven’t stayed in touch with Joe but he was, and obviously still is, a guy of unbelievable energy and intellect.  The guy always seemed to be working on another degree and as a result his credentials are amazing.  But lest you think he’s just a ivory tower academic, he’s quite the opposite.  Joe was always out starting things, doing things, making things happen.

So it was with great curiousity, interest and pride that I read Joe’s Technology Presentation.  It’s been 15 years since I last saw Joe but he’s still as smart as ever.  Not surprisingly one of Joe’s conclusions is that those cities with Universities hold a distinct advantage in our new era of innovation and technology economy.  This is no news flash but it should make us all feel good about where we can go with the Kent community in the years to come.

Interestingly, as the former Deputy Commissioner for Economic Development in California, Joe injects a number of northeast Ohio references in his report.  As we tend to hold California up on the technology pedestal as a model to borrow and steal from, it turns out that many smart people in California are watching what we’re doing right here, right now, for guiding where they’re going to go with their own practices to leverage the economic horsepower of their universities just like we’re doing with ours.

It can be exhausting to chase the ball around the field or trying to ride the bronco but it’s always nice to discover that we are admired for what we do by the very people we admire.

City Campus Revitalization

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City Campus Revitalization

Cities have to run like any business — they have to have enough revenues to cover expenses.  The difference for cities is that they don’t actually generate any revenues on their own; they rely on the economic success of local businesses.  That’s why smart cities pay attention to what’s happening to the major employers in town and they work hard to help their major industries grow and succeed.

Kent State University is the largest employer in Kent so I keep a close watch on what’s happening in the business of higher education.  I want to understand the economic trends in higher education so that I can make sure that the city is doing what we can to support our largest employer and position ourselves to take advantage of all the economic opportunities that the university creates in Kent.

The good news is that overall higher education is outperforming a lot of sectors in our economy.  As the US economy transitions from a traditional manufacturing base to more knowledge and technology based industries, universities are playing a critical role in leading this economic change.  In our rapid pace, globally connected markeplace, economic performance isn’t so much about being in the right place at the right time as it is anticipating where the next right place will be and getting there first — that’s a core function of universities and that’s why 9 out of the 10 top rated cities for business vitality are university cities.

It’s an exciting time for cities with universities as major employers because the universities also understand that their success is linked to the vitality of the town they call home.  More than ever before, universities are partnering with cities to revitalize campuses and downtowns to drive economic success.  The challenge is figuring out how to convert all this emerging economic potential into actual business activity in Kent.  A few examples are provided in an article that I downloaded from University Business magazine that provides a good example of the kinds of activities cities and universities are doing for mutual gain:

“It’s not enough to add shops. It’s not enough to build housing. As universities all over the country are discovering, university-led urban revitalization is all about creating an environment where an institution and its neighboring community cannot only coexist, but also benefit from one another.

The University of Pennsylvania has occupied several core blocks in West Philadelphia since 1870 and has steadily revitalized and expanded its 269-acre campus over the past 134 years. Until the 1950s and the advent of “urban renewal,” West Philadelphia had been a thriving neighborhood of Victorian homes and small businesses. Then, it gradually slid into decay in the 1970s becoming dilapidated and dangerous. As little as 15 years ago, it was not uncommon for students to be warned against venturing into certain parts of West Philadelphia. “The 1992-93 year was rock bottom,” recalls Omar Blaik, senior vice president for Facilities and Real Estate Services at Penn. A student was killed and a professor was stabbed. Local businesses were closing, and students had to be bused downtown just to grocery shop. “The neighborhood was empty,” Blaik recalls. About that time, Penn made the decision to engage in urban renewal in its pure sense, recreating a neighborhood of local shops and homes.

First, Penn had to address its campus issues. The Ivy League campus was designed to face inward toward the central tree-lined walkways and common areas and toward other campus buildings. “The buildings didn’t even have street addresses. We were saying ‘We’re not part of this neighborhood,'” Blaik explains. Existing buildings were re-designed to have their main entrances on the city streets. The campus turned itself around and looked out over the neighborhood instead of turning its back on the streets. “We realized we cannot exist in a desert and imagine we are not part of what surrounds us,” he says.

At the same time, the university put into effect its West Philadelphia Initiative, a five-pronged plan, developed with neighborhood input, to revitalize the struggling neighborhood and make it a livable, workable community. All five were implemented concurrently. The first issue was to make the environment cleaner and safer. The newly formed University City District, in partnership with other large entities like the University Hospital, began patrolling the neighborhood and organizing cleanup of graffiti and garbage.

To increase home ownership and decrease absentee landlordism, the university paid mortgage incentives of $15,000 to university employees who bought a house in the neighborhood, and $7,500 to homeowners who improved their existing property. By making ownership and beautification a priority, Penn hoped to increase the stability of the whole neighborhood and create a sense of pride in West Philadelphia instead of the perceived stigma. Penn also went out of its way to contract with local businesses for goods and services required by the university, such as laundry and catering. This policy of economic inclusion kept neighborhood money in the neighborhood, and went a long way toward convincing skeptics that Penn was sincere in its desire to do right by West Philadelphia.

“It took a lot of hard work to get the community to believe we weren’t pulling a fast one,” says Blaik. Building a new elementary school and turning it over to the public school district, while continuing to fund $1,000 per child helped, the cause. Creating a neighborhood where university employees would want to live goes a long way toward cementing the relationship between Penn and the neighborhood. “We live in the community. My kids go to the new public school. I am the community,” says Blaik.

Neighborhood census numbers may have had the annual average income of the surrounding neighborhood set at $15,000, but that was only because so many of the residents are students and technically have no income. That didn’t mean they didn’t have money to spend. Now there’s 24-hour activity. Hospital workers grocery shop after their shift, and students and residents come and go at all hours. This is a complete turnaround from the previous decade’s “don’t go out after dark” policy.

Revenue Generator
Penn worked with retail planners to recruit and maintain diverse and local retail tenants, and helped create a rich neighborhood tapestry by keeping unique buildings and creating new structures in harmony with the existing architecture. Despite all efforts, however, there are still mixed reactions to Penn’s policies. Joyce White, a 30-year resident of West Philadelphia and an employee of the university’s museum, is enjoying the benefits of increased property values and cleaner, safe streets. “I often feel I live in a heaven of some sort: sitting on the back deck of a home with three fireplaces and three sets of pocket doors, listening to the crickets and birds under old-growth trees, chatting with neighbors across adjoining yards, all within walking distance of my job at Penn,” White says. Though she admits that she couldn’t afford to buy in now that house prices are catching up with the rest of the city, she’s glad the university is creating greener, safer streets. Others question Penn’s right to “revitalize” a neighborhood that was in many ways already a vital and functioning community, and accuse Penn of co-opting the neighborhood and creating, in effect, a Penn colony. Those who can’t afford to buy into the neighborhood, like George Poulin, a Drexel University architecture student, criticize Penn for creating “a yuppie enclave. It’s great to see a neighborhood become so popular and well-maintained, but it’s disheartening to know that I’ll be left out of the picture because of my income level,” Poulin says.

Coffee for Credit?
Redding sees the real potential for campus retailing about five years out. At the rate Starbucks is growing, the need for employees is getting dire. Starbucks is “looking to take a more holistic approach” to coffee on campus by setting up reciprocal arrangements with a university to develop cross-programming with the school and make Starbucks an attractive place for students to work. The hope is, that by having Starbucks on campus, it will be a way to get students into a Starbucks management track and use Starbucks as more than a way to sell coffee but as a management training ground.

The Great Expansion
To that end, in 1995 UIC secured a master developer and created an overall plan for the purchase and development of the 80-acre area south of the existing campus. The redevelopment agreement was approved in 1997, and in January 2000 UIC started acquiring the property they did not yet own and began demolition and construction. Two 750-unit student apartment residences, a 750-unit dorm, 120,000 square feet of office space, and 80,000 square feet of retail space have all been built, as well as parking structures for hundreds of cars and 600-plus private for-sale housing units, all but 20 of which have already sold. As of now, the estimated $750 million project is currently 75 to 85 percent complete, with full completion, including the reservation of two land banks for future expansion, expected in 2008.

As a state university, UIC had to jump through several hoops and endure many rounds of approvals before the plan could go ahead. Permission had to be obtained before any land could be sold to a private developer. But UIC could clearly show that its expansion would help the city by increasing property tax revenue; the money from the taxes on the development would pay for the infrastructure of the entire project, while the housing and retail were funded by auxiliary bonds. The university took things one step at a time, meeting with neighborhood groups and making sure it was doing right by everyone involved.

To maintain the look and feel of the Chicago cityscape, eight unique old buildings had their facades adapted and restored instead of demolished. “They took them apart brick by brick and then put them back together on the face of the new building,” says Hamilton. Style elements like these helped give the whole development a pleasing appearance that blends nicely with the surrounding area.

UIC also planned to attract big retail and create a mix of shops. “It isn’t as if there weren’t retail outlets in Chicago. It’s not that we created a unique opportunity for shopping, it’s just that now people didn’t have to go and find it. It’s right here,” Hamilton says. And what’s here? Caribou Coffee, Jamba Juice, Cold Stone Creamery, Cingular Wireless, 7/11, Post Net, Wells Fargo Bank as well as MidAmerica Bank, restaurants, a dry cleaner, a haircut joint, a mattress store, and more. The faculty especially is thrilled that Barbara’s Bookstore, a Chicago institution, that holds author’s events and generates a lot of traffic, is in a key location.

“I took a potential tenant on a tour of the South Campus,” says Hamilton, “and took the risk of asking the tenants we met, ‘How do you like being on South Campus?’ I didn’t know what they were going to say. But they all said it’s great. It’s nice to see people out walking with their babies. One tenant said that it had been difficult being the first in a new neighborhood but now things were going very well.” It’s clear that the new development is good for the city, good for the university, and good for the students and faculty to have a lively, more well-rounded campus. As Hamilton puts it, “We’re proving we’re in this for the long term by creating a real live-learn campus.”


When the University of Illinois at Chicago was looking to expand its campus and increase its profile as a desirable place to go to college, they looked south to a dilapidated area of boarded-up buildings and warehouses. The university had been slowly acquiring property over the years, but there was no coherent plan for what to do with it. “We wanted to give people a reason to stay on campus,” says Ellen Hamilton, director of Real Estate at UIC. “The campus was virtually lifeless after 4 p.m. We wanted to populate it and create a 24-hour environment,” she says. The university needed to become a neighborhood instead of just a school.
It isn’t just the university benefiting from the retail boom on campus. Companies that set up shop on campus reap the rewards of not only the built-in foot traffic from students but from the neighborhood as well. Ken Redding, vice president of Business Development at Starbucks Coffee, says that Starbucks approaches a campus location as it would any other potential retail location. “It’s all about studying traffic patterns,” he says. “The two sources of traffic–student life and neighborhood–make them a good market.” There are roughly 100 Starbucks on college campuses nationwide.


The new grocery store is earning $750 per square foot and the gross sales per year from the two developments has topped $200 million. Retail rents have gone from $7 per square foot to $20 per square foot with Penn owning the majority of space. “We’ve proved the concept, and now [retailers] are flocking to us,” says Blaik, but it’s not like the neighborhood had suddenly gotten rich. It was the result of diverting the money that had previously been leaking out to the shopping centers downtown and outside the city.

But the cornerstone of the entire approach was retail. In the 10 years since the initiative began, almost 40 new businesses have opened on Penn property. One development is located on what used to be the university border on West 40th Street, and the other is along the north side of campus, an outdoor urban shopping center called University Square. It contains the Hilton Inn at Penn above and shops like Urban Outfitters, Ann Taylor Loft, and Barnes & Noble below. The university funded and built the $100 million project, which it now owns and operates. The latest addition, Cereality, a new food-service concept that touts “all cereal, all day, all ways,” is opening its first sit-down cafe in University Square in November. The university acquired money to construct the project by floating bonds, while acquiring debt. Fortunately, the revenue from the retail rent is helping to pay the debt service.

Contact

Contact me: Dave Ruller: RullerD@kent-ohio.org