City Creek Center: Three for the Money 

As City Creek opens, Gateway & Trolley Square scramble to compete for shoppers

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GSK Realty’s Kaessner worked for three years finding tenants for Trolley before SKB went with another firm. His idea was to bring in “best of class” local retail, local designers and artists to mix with unique national stores.

“My objective was to create an active, pleasant shopping-community environment,” he says. “It’s unfortunate that model did not translate into a profitable investment for the owners.”

SKB’s executive vice president, Jay Fetherston, says attracting new tenants to Trolley’s “neighborhood feel” was challenging not only because national retailers had battened down the hatches in the face of recession, but also because local businesses were having “trouble obtaining financing” to open stores. Currently, Trolley is just 62 percent leased. “I can’t go back and change the recession,” Fetherston says, “I can only point at the [newly leased] successes,” such as vegan Super Natural Cafe, Prana Yoga, Weller Book Works and high-end natural grocer Whole Foods.

In order to make way for Whole Foods, Trolley Wing Company, originally housed in an old trolley car on the east side of the mall, was forced to move indoors.

Trolley Wing Company’s general manager, Beau Riddle, argues that the high-end grocer hasn’t added much to a mall that draws not only from the Avenues but also from the University of Utah. “The mall outpriced its demographic,” Riddle says, adding that Trolley is “like a Christmas mall, where you go for a cool trinket for your kitchen.”

SKB’s Portland-based Fetherston disagrees. He argues that he himself is an example of why Trolley’s core customers are much wider than such narrow stereotypes. He loves “super hot wings” and beer, while his girlfriend, a naturopathic doctor, shops at Whole Foods. That breadth of service at Trolley “resonates with me.”

But Riddle complains that such a perspective hasn’t been communicated to tenants by Trolley’s local management team. “If there’s a vision, I don’t discern it. If they have a direction, they don’t share it.”

Some critics argue that with so much money invested, SKB’s need for high rents were stymied by a recession-suffocated market. Fetherston says, however, “The business plan today on rents is different from the day we bought it in 2006.” Whether City Creek, Gateway or Trolley, “everyone’s trying to be responsive” to the recession, he adds.

“Construction-wise, they have everything done great,” Riddle says. “Now they have to figure out how to fill it up.”

Tumbleweed
Only one Trolley Square tenant, Restoration Hardware, is departing for City Creek. Gateway, on the other hand, has seen 13 stores leave or open duplicates in the Mormon mall, according to Gateway marketing director Heather Nash. That’s not a surprise, however, given that a Taubman executive told the Salt Lake City Council in 2005 that some of the retailers they were interested in for City Creek “do exist at Gateway.” That same year, the Boyer Company sold most of the retail space in The Gateway to Chicago-based Inland Western Real Estate Trust Inc. Boyer retained the northern and southern ends of the mall, along with office developments.

Downtown advocates aren’t shedding many tears for Gateway’s plight. Some see it as karma for the office and retail mall, which was built in the late 1990s with the help of public funds on 40 acres of land then owned by the railroad. Vasilios Priskos is director of downtown-based Internet Realty. He says Gateway, with its pedestrian imitation of a street of shops, “was a duplication of Main Street, a mimicking of what you have naturally here. It’s a very sterile version, but without the alleys and the odors. Young kids love it.” Priskos found the subsidizing of a development that was drawing retail from the struggling malls, Crossroads and ZCMI, and office rental income from downtown hard to swallow. “It was a little more offensive. I didn’t like it. Most of the rent roll of office tenants—including The Salt Lake Tribune—came from the core of the city.”

One long-established retailer who opened a store in Gateway was high-end haberdasher Dale Grant. Grant put in $250,000 worth of leasable improvements and fixtures, but the Olympics proved more of a curse than a blessing. Gateway’s long criticized labyrinth underground parking was given over to athletes, and Grant recalls the TV news urging people to stay away from downtown because of security concerns and congestion.

Gateway’s first-year policy of not permitting driving through the street also caused problems. “I’d walk out on the street and expected tumbleweed to blow by,” Grant says. “There was nobody on the street. It was scary.” Business picked up in the next few months.

City Creek was originally expected to open up late last year, but subsequently announced a March 2012 opening. Intentionally or not, that gave Taubman a larger window of opportunity to pursue retail businesses at Gateway, the 10-year leases of which expired in October. “Competition for tenants can be very fierce,” Egelanian says. “Many different forces are brought to bear, not the least of which is whoever is leasing one of the centers or multiple centers and has other centers that the stores want to be in.” Taubman has numerous upscale malls which to use as leverage to persuade a retailer into City Creek.

Priskos says the LDS Church’s financial clout and Taubman’s leasing experience is a potent combination. “I don’t think it was inappropriate pressure.” Unlike Gateway, City Creek was not subsidized, Priskos points out. The LDS Church and its partner paid “full bore for everything. So it’s all fair game.”

Downtown Alliance executive director Jason Mathis says he was more concerned six months ago than he is now. Inland, he says, “is really committed to [Gateway’s] long-term success. I am convinced they will continue to be viable, dynamic.” The loss of stores was “a handful,” and Gateway “will continue to thrive.”

On a Wing and a Prayer
Walk down the mall from north to south and the mix of bright, lively store fronts, such as Bastille and G-Star Raw, is mixed with empty stores with stock-photo posters in them advertising Gateway’s many supposed charms.

Gateway marketing director Nash says Gateway is 90 percent leased. One tenant that was expected to leave for City Creek that has instead signed a new lease with Gateway is Abercrombie & Fitch. Local realtors speculate its racy advertising was unacceptable to the LDS Church, although whether they had final say over which tenants they would not like to see in the mall isn’t clear. Nash points out that Gateway has also brought in new tenants recently, including hip fashion stores Bettie Page and Francesca.

Dale Grant left in October 2011, when his 10-year lease expired. “We could see sales going down,” he says. Taubman invited Dale Grant and his son Sky, who now owns the store, to look at City Creek. They liked a space by Nordstrom. But the rent structure was so high, Dale Grant says, he did not want to end up working for a landlord. “You had to go in there and be a huge success immediately or be in trouble.” Taubman’s arrogant attitude also irritated him. They acted, he says, as if “it were a privilege to go in there.”

Although Grant was forced to “walk away from a lot of money,” in terms of the $250,000 he had invested in building up the Gateway store, “I’m happy as hell” to get back to his original store in Foothill Village. “It will get ugly in there, I predict,” he says about Gateway.

Some businesses are betting on Gateway, but that’s not necessarily always a good thing. On Jan. 12, 2012, discount retailer Tuesday Morning opened in the Gateway, replacing a lease to a Halloween store. It’s at the north end of the development, which from the Apple store onward is still owned by developer Boyer. Retail consultant Egelanian doesn’t mince his words. “There could be no greater statement or harbinger of where that thing is going. That’s not a good direction.”

Nash disagrees. “It’s good to have that space leased and filled,” she says. “I don’t think it’s a negative for us.”

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Will Miller is more upbeat on Gateway’s future. After a year negotiating with Boyer, he has just opened the 15th branch of Wing Nutz at the south end of the mall. Wing Nutz was set up by Miller and Trolley Wing Company founder Will Owen five years after Owen was bought out of Trolley Wing Company.

Miller likes that Gateway has “the laid-back feel. It’s easier to spend time here. There’s plenty of places to eat, relax. There’s a good feel to it.” Despite being open only two-plus months, there are already a few dozen engraved mugs on the shelf representing VIP customers. It’s a practice Owen started at Trolley Wing Company. Each drinker gets a nickname engraved on their mug. Miller is “Wolf,” which stands for “wise old likeable fart,” he says with a grin.

The biggest question hanging over Gateway is the fate of key tenants like Anthropologie, a huge draw for young women shoppers, and Apple, which some argue is responsible for much of Gateway’s 6.5 million annually returning visitors. Nash says Anthropologie is “one of our tenants today. They have a lease with us.”

Whether Apple neighbor Forever 21, which has two floors leased from Boyer, will stay, given that it is opening a store in City Creek, isn’t clear.

Nash cites the new arrivals and says, “We have new energy coming in, we are not just standing still.”

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