February 27, 2004 - From the February, 2004 issue

General Growth Contests Caruso's Glendale Plans

Earlier this month, the public comment period for EIR for Caruso Affiliated Holdings' Glendale Town Center Proposal closed. One of the primary voices of opposition to the Caruoso proposal is General Growth Properties, the owners of the Glendale Galleria. TPR is pleased to present this interview with Carol Jacobs, group vice president for General Growth Properties, in which she explains General Growth's objections to the plan, and what they would like to see included in the redevelopment of downtown Glendale.


Carol Jacobs

Can we begin by having you give our readers a snapshot of General Growth and its real estate interests?

General Growth is the second largest shopping center developer in the country and is a publicly traded Real Estate Investment Trust (REIT) on the New York Stock Exchange. We own or manage over 170 malls in 41 states with 24 centers here in California. In Southern California, we own and manage several properties including the Glendale Galleria, Northridge Fashion Center, Fallbrook Center, the Bakersfield Valley Plaza, and in San Diego, the Chula Vista Center.

We own and operated several properties and we continue to reinvest millions of dollars into the centers to continually upgrade them to give the customers what they want in their communities. Even though the company is publicly traded, it is still very much family run business with our roots dating back over 50 years with the Bucksbaum Family. Our CEO is John Bucksbaum, who is the son of the founder Matthew Bucksbaum.

Rick Caruso's Glendale Town Center development appears to be advancing, as the EIR was released in December and the business terms will be released later this month. General Growth has been in the papers lately speaking about the need to carefully examine the design of the Town Center project. What aspect of the project draws most of your attention?

First, let me state clearly, that Caruso Affiliated is the developer that the city of Glendale has an exclusive right to negotiate with for the Town Center project. Second, General Growth welcomes a Town Center project for downtown Glendale that works for all of downtown, not just a portion of it. General Growth purchased the Glendale Galleria about 16 months ago in November 2002.

The project today is very different from the project that we saw when we were doing our due diligence to buy the Galleria. After we purchased the Galleria, we have been sitting down and talking with the city of Glendale and with the Caruso Affiliated team and our neighbors to discuss our real concerns that we had with the project. Some of the basic concerns that we had were with respect to the design and planning elements. For example, the Town Center project is internally focused and does not connect to existing downtown Glendale merchants on Brand Boulevard and the Galleria. As part of the lack of connectivity the proposed project would close down key downtown streets such as Harvard and Orange. This is unacceptable if we are to foster a mobile downtown Glendale. The proposed project walls itself off to its downtown neighbors with a wall along Central Ave. that goes all the way from the corner of Colorado and Central Avenue up to Harvard Street. And the wall varies in height anywhere from 50 to 75 feet tall with no openings.

As I mentioned earlier, we bought the Galleria in late-2002 and are currently working on plans to add shops and restaurants facing out on Central and to the office building on Broadway. Internally, we are looking at many renovations to improve the shopping experience for our customers. We're going to be opening up the mall and facing out to Central and we are concerned with having the Town Center project turning its back to the Galleria and the rest of downtown. We believe that street-level activity with cars and people is a key element that must be maintained. If it were designed properly, the Galleria and Brand Blvd merchants could work together synergistically with the Town Center rather than being walled off from it.

A huge concern is the closing off of Harvard and Orange Streets. Harvard is a connection between the merchants on Brand Boulevard and Central Avenue and the Glendale Galleria. The Caruso Affiliated plan closes off Harvard, and it also closes off Orange Street, which is a North-South street between Central and Brand. Orange is used to service some of our tenants in the Galleria 2 area such as the Nordstrom. So, if the traffic couldn't move south out of the Galleria 2, it would have to just go north because those arteries would be closed off.

Several Glendale traffic commissioners have said that the closing off of Harvard and Orange would have devastating results on traffic to the surrounding streets and have a ripple effect for the entire city grid. There are numerous problems with the DEIR, but we believe strongly in the public process and believe that Glendale residents will want the projects in downtown to thrive together. In summary, we believe that the city of Glendale has a unique opportunity to revitalize the downtown area, and we want to work with them to get it right.

What has led to General Growth's development of an alternative plan rather than trying to work with Caruso and the community through the public comment process associated with the EIR?

We actually were encouraged by a couple of the City Council members to prepare an alternative vision for a downtown that connects existing businesses. And that's when we went out and hired RTKL architects to design a town center. These included elements that the city's own downtown strategic plan-a study that was commissioned by the city in 1996-had called for. So we had RTKL design a plan that kept all the streets open and kept on-street parking on Harvard and Orange. RTKL's plan tried to maintain connectivity between Brand and Central and Colorado and then up to Broadway, so it kept all those streets open. This plan provided more of a true historic downtown and it also provided for the reuse of historic buildings on the site, including the oldest existing fire station in Glendale, Fire Station 21and the two Pac-Bell buildings – those buildings will be demolished in the current Caruso Affiliated plan. It also dispersed the parking throughout the project instead of having one large super-block of parking, as proposed in the Caruso plan.

Caruso is the developer of that site; General Growth is not. The project we've developed is in the EIR as Alternative 4. The city and the public are really looking at both projects concurrently, but there is no question as to who is going to build it. Caruso will have the rights to build whichever plan is chosen. It's more about making sure that the city has the right project.

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Some of the things that we thought were key in Alternative 4 are keeping the streets open, keeping more of an historic downtown and having more residential and less retail -a civic place with large park where you have people and cars and shopping-creating an 18-hour true downtown rather than having a walled-off, self contained shopping center.

Address if you could the economics of the retail environment in Glendale. As you noted, the Galleria was sold not too long ago. With this new development, hundreds of new retail stores along with the Galleria's existing hundreds of retail stores will congregate in a small area. Is the local economy in Glendale demanding that kind of retail expansion? Or, is there a risk of some store closures with the development of this project?

We've heard from Caruso Affiliated that we're just trying to kill the project, we don't want it because we don't want the competition. That's actually far from the truth. Having said that, the City's own commissioned report stated that there would be a loss of revenue to both the Galleria and Brand Blvd merchants if the current project were built. We think that if the Town Center is properly designed and integrated into the community to create a true downtown that really connects Brand and the Galleria that it could translate into success both for the Town Center, the Galleria and for the merchants on Brand Boulevard. However, our vision of what will succeed must include complementary uses and free-flowing traffic with active street-level storefronts. The current plan with fake store fronts and large walls with jumbo illuminated billboards as currently proposed by Caruso Affiliated falls short in our opinion. Downtown Glendale should look like more like the Gas Lamp District in San Diego and less like internal focused destination places like The Grove that Mr. Caruso talks about or Downtown Disney for that matter. Those projects might work for those areas, but we don't believe those projects would work for downtown Glendale.

How have subsidies from the city of Glendale muddied the waters here? How significantly do you think the city is investing in this project?

Based on the numbers the City has released to date, we believe the actual total public subsidy of the project is far greater than the $63 million the City has reported, we believe that when you take ALL the public taxpayer money into the equation, the real number is closer to $83 million. But, even if you take the $63 million the City has estimated, they then report that the project will generate only $49 million from taxes -- how is losing $14 million a good deal for the City and its taxpayers. The City and Caruso Affiliated speak about profit sharing after Mr. Caruso gets a preffered rate of return and the City has no gurantees they will ever see a dime from reveune sharing. We look forward to seeing the business terms with the terms of the Development Agreement in mid-March.

Let's switch gears and focus on shopping malls in general. There's been a lot of talk recently in the national press about the challenges that cities face with malls that are dying, and how to redevelop those big footprints. What's the current market for the traditional shopping mall? And, how has the demand for shopping malls changed over the last ten years?

I've read some of those stories, but the shopping malls are alive and doing well. Almost without exception, our malls continue to see increases in foot traffic, in sales, in tax dollars generated for cities, counties and states. The Glendale Galleria is still one of the top ten dominant centers in the whole United States and generates over $4 million a year to the Glendale General Fund. As an example, there are about 25 million people a year who go through the Galleria, which is about twice the number of people who go through Disneyland every year. The thought that malls are past their prime certainly doesn't prove out with our centers.

Are you seeing a difference in the way that shopping centers are planned today compared to what they looked like five or ten years ago? How has design changed? What do you see as emerging as the trend in shopping mall development?

It really depends on the community. One thing is certain, there no longer are cookie cutter malls being built-malls that look the same no matter where they are located. There definitely are more open-air shopping centers being built in moderate climate areas of the country. In general though, design depends on the community and what the community demands are. It's true, the same malls we planned five or ten years ago would certainly be different today. Our approach to developing and managing shopping centers malls continues to evolve with the communities we serve.

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Editors Note: since the taping of this interview, General Growth properties has been sued by Caruso Affiliated over the Glendale town Center project and the City of Glendale has approved Business Terms with Caruso Affiliated that will be included in the Development Agreement to be released on March 15 with Caruso Affiliated seeking final project approvals at a March 30th Glendale Redevlopment Meeting.

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