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Feature Article, May 2005
Scoring Big
The Ellman Companies is mixing sports with retail at Westgate City Center, a new development that takes mixed-use to a new level.
Randall Shearin
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The Ellman Companies is mixing sports, retail and a number of other uses at its Westgate City Center in Glendale, Arizona.
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Mixing sports with retail and other commercial uses is a property type that came to the forefront in the 1990s with the redevelopment of many baseball and football stadiums in the nation's downtowns. Now, one developer is taking this urban mix to the next level by creating one of the nation's most prominent real estate developments. It will fuse sports, entertainment, marketing and outdoor spectacular media with retail, hospitality, a convention center and urban lofts, among many other uses. Moreover, this isn't a dream — this $1 billion project is approved and under construction. The Ellman Companies, Phoenix-based owners of the Phoenix Coyotes National Hockey League (NHL) franchise and the Arizona Sting National Lacrosse League (NLL) franchise, is planning a massive 450-acre mixed-use development adjacent to its new Glendale Arena, home of the NHL's Phoenix Coyotes that's located in Glendale, Arizona. Completed at the end of 2003, Glendale Arena is — even with the NHL lockout — one of the hottest venues in North America. The arena hosted 105 events in its first year of operation (the arena opened on December 27, 2003), and is projecting up to 160 events in 2005. Pollstar, the concert industry's top trade journal, recently named the Glendale Arena as North America's Top New Performance Venue for 2004. Currently under construction next to the arena is a new stadium for the Arizona Cardinals NFL team, slated to open in the fall of 2006.
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An open-air plaza will match the temperate Arizona climate at Westgate City Center.
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But besides creating a great sports complex, city officials in Glendale also want to create a great complex for residents and visitors alike. When The Ellman Companies proposed building a mixed-use development on 225 acres adjacent to the new arena, city officials welcomed the developer to town, even approving a design that includes Times Square-like advertising.
Shopping Center Business recently met with Steve Ellman, chairman of The Ellman Companies, Phoenix Coyotes, and Arizona Sting, in his suite at the Glendale Arena, to discuss the new Westgate City Center development and how it will elevate sports and retail to the next level.
Development Background
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Billboard advertising will play a major role at Westgate City Center.
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Since entering the real estate development business in the 1970s [see sidebar], The Ellman Companies has developed about 10 million square feet of real estate in Phoenix, Denver, Washington, D.C., Toronto, Winnipeg, and Edmonton, as well as in the Caribbean. The company is one of the larger U.S. real estate investors active in the Canadian real estate market. The Ellman Companies has been active in Canada since 1983. Ellman has also developed in The Bahamas and Jamaica. About 40 percent of the company's developments have been on foreign soil, though Ellman estimates that today, the company owns less than 2 million square feet outside the U.S. “Being active in foreign markets, we have been exposed to a lot more development opportunity and architectural designs,” says Ellman.
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Westgate City Center will have the largest collection of billboards west of Times Square.
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Since the Glendale Arena and the adjacent facility for the Cardinals are being developed on raw land in a growing area, The Ellman Companies is faced with the additional challenge of creating a destination in an area that 3 years ago was predominantly agricultural land. Residents are moving to the area in droves, and there is little retail within miles of the project. Ellman compares the predicted future growth of the West Valley area of Phoenix to Orange County, California, over the last 2 decades.
“Fifteen to 20 years ago people looked at you funny if you said you were moving to Irvine,” he says. “Today, Irvine is the heart of Orange County.”
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The mixed-use environment, including restaurants, retail and entertainment, at Westgate City Center will attract visitors year-round.
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Most new residents moving to the Phoenix area from other parts of the country are moving to the West Valley. The area is getting about 60 percent to 65 percent of the building permits issued in metropolitan Phoenix. Much of the West Valley consists of new neighborhoods with young, affluent families. In a 10-mile radius surrounding the Westgate site, there are over 1 million people. That's an area, says Ellman, larger than the population of metropolitan Salt Lake City. There are more than 346,000 homes that have an average household income of $62,000. With an average household income of $110,815, the Arrowhead Ranch area in Glendale is among the wealthiest zip codes in Arizona. The growth of the number of $1 million-plus households in Arrowhead Ranch exceeds that of Scottsdale. In 2030, the population of Phoenix is estimated to be 8.3 million. With growth limited to the north, south and east by mountain ranges and Indian reservations, there is only one direction for new growth: the West Valley. “We are developing a city center, a new skyline,” says Ellman. “We have moved the pendulum of entertainment for the Phoenix area to the West Valley, hosting 105 events in our first year.”
Developing A City Center
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An aerial photo of Westgate City Center with a site plan overlaid.
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The Westgate development will have 6.5 million square feet at full buildout in 7 to 10 years. The first phase of the development is a 505,000-square-foot open air center called The Village at Westgate City Center that will include 280,000 square feet of retail and 220,000 square feet of loft office space. Further phases will include a power center, 2 million square feet of garden and mid-rise office space, a neighborhood retail center, 378 apartments, 400 urban residential units, 25 restaurant pads, four hotel pads and an 80,000-square-foot convention center. Since Westgate City Center is the first super-regional center to be developed in the West Valley, Ellman anticipates it will draw from a 20-mile radius. By 2010, Ellman estimates that Westgate will draw 18 million visitors per year. For Westgate City Center, which broke ground in September 2004, the company is creating a mix of retail, restaurants and media that hasn't been created elsewhere. Designed by Baltimore-based Development Design Group, Westgate's retail entertainment component will be an open-air center that has attractions like a Bellagio-esque water show, Times Square-like billboards and top tier retailers and restaurants. To use the center as a medium, The Ellman Companies is creating marketing alliances with sports, outdoor media and retailers.
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A water feature will be incorporated into Westgate City Center.
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To create the idea for Westgate City Center, Ellman visited a number of town center projects, like The Irvine Spectrum and The Grove in Los Angeles, Reston Town Center in Virginia, Easton Town Center in Columbus, Ohio, and others. Ellman used the other developers' experience to figure out what would work in Phoenix, and what it could enhance from other projects. Strategic planning and marketing is being handled by Bethesda, Maryland-based Brix & Company, headed by former Mills Corp. senior executive Mark Rivers. “When you walk through Westgate City Center, you will see Easton Town Center, Reston Town Center, Atlantic Station in Atlanta, The Grove and Cityplace in Palm Beach,” says Ellman. “The ideas that we incorporated are the best of the best.”
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An aerial photo of the Westgate project as it was in March 2005, showing the completed Glendale Arena (center) along with the construction progress of Westgate City Center (foreground).
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Retail leasing is being handled by Coronado, California-based The McGarey Group. Anchors for the first phase include a 20-screen stadium seating Loews Cineplex Entertainment theater that will have 4,000 seats. Retail is currently over 30 percent signed in Phase I and letters of intent bring the center's leasing to just over 50 percent. Response from retailers to the project has been great because there is no other super regional location in the West Valley. He cites the example of Starbucks, whose nearest store is 6 miles away. “When we are talking to the retailers, all of them want to bring their top prototypes to Westgate since this will be a flagship location for them in the West Valley,” says Ellman.
Westgate City Center is scheduled to open in the first quarter of 2006, less than a year away. For example, some of the restaurants anticipated to open in the project include a branch of Los Angeles' hotspot Koi, Yard House, Scottsdale's popular Pasta Brioni, and three east coast concepts from Raving Brands: Moe's Southwest Grill, Mama Fu's Noodle House and Doc Green's Gourmet Salads.
Later this year, subsequent phases of the project will begin to develop. Restaurant and retail pads, totaling 250,000 square feet on the periphery of the project are selling for an average of $1 million or more. Many retailers will begin to build later this year. Nearly all of the pads are either in escrow or closed. There will be about 2 million square feet of Class A office space, in mid-rise, loft, and garden environments. There will be 778 multifamily units, including apartments and lofts. Four hotels will bring 1,100 rooms to Westgate. Office leasing is being led by CB Richard Ellis, residential is being developed by Trammell Crow, and the hotel consultant on the project is Warnick & Company.
“Along with Brix and McGarey, we have put together a tremendous group of talent,” says Ellman. The group meets every 15 days and has all day work sessions where they brainstorm and cross consult on areas of Westgate.
Signs of Success
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An aerial showing Westgate City Center under construction (foreground), the completed Glendale Arena (center) and the new stadium for the Arizona Cardinals (rear).
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Outdoor spectacular billboard advertising will play a major role in Westgate's success. The city of Glendale altered the signage restriction for the development. Billboards, which are all but outlawed in Arizona, will extend up to 150 feet tall. The billboards will be programmed with advertising that will drive revenue to the project. Advertisers are signing sponsorship agreements for programming. Additional sponsorships — such as street names and districts — are also being marketed. “We will have the largest collection of billboards west of Times Square,” says Ellman. The ideas for the signage alone were the basis of an article in the Wall Street Journal on the future of outdoor advertising.
The monument sign for Westgate is 100 feet tall — about 10 stories.
“This was a cotton field 3 years ago and we will transform Westgate into Times Square West,” says Ellman.
Ellman sold the adjacent property to the NFL's Arizona Cardinals to build the football team's new stadium and placed a 10-year no-build restriction on the property so the Cardinals wouldn't be able to develop a competing retail project. Ellman also placed a 30-year signage restriction on the Cardinals' property so that it wouldn't compete on that front as well. While the Cardinals' stadium won't compete with Westgate, it will draw crowds to the project. In addition to all Cardinals' home games, the facility has been selected to host the Fiesta Bowl annually beginning in 2007 and enter the BCS rotation, hosting the National Championship college football game every 4 years. The Glendale Arena will host the NHL All-Star Game in 2006, and the stadium will host the Super Bowl in 2008.
“This deal started as a sporting deal that very quickly turned into a real estate play,” says Ellman.
Public-Private Partnership
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Jerry France, publisher of Shopping Center Business; and Steve Ellman, chairman of The Ellman Companies, Phoenix Coyotes and Arizona Sting.
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As a growing community, the city of Glendale will benefit heavily from the Westgate project — estimated to the tune of an estimated $750 million over 30 years — so it has made a number of alterations in its zoning restrictions for the development. This is not to mention the improvement of the land value in the area and the resultant property taxes that will be derived from that. Local lawmakers have also opened up their coffers to make sure that what is built at Westgate is reflective of a project of the future. All in all, there is over $500 million in public funds invested, including $330 million that went to the football stadium and $180 million to the Glendale Arena. The subsidy is the largest in the history of professional sports. The project has no time limits on its zoning, so there are no constraints in development. Height restrictions are 150 feet, almost four times the area's average restriction. Since Glendale wanted Ellman to build a city center for the West Valley in its municipality, it has also altered the density restriction. Westgate now has an F.A.R. in excess of 0.6.
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Steve Ellman, chairman of The Ellman Companies, Phoenix Coyotes and Arizona Sting.
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“While we've set out to build an urban city center, we've ended up creating an engine,” says Ellman. “It is an economic engine made up of sports and entertainment, real estate development, media and sponsorship. There is over $500 million of public investment from the city and state, which makes it all possible.”
Ellman, both sports teams and the City of Glendale hope that Westgate will become the heart of Maricopa County. The development is only part and parcel of what will happen to the rest of Glendale. Already, land values have risen five- to ten-fold around the development, and for-sale signs are on nearly every vacant piece of land in the vicinity.
Making News Again
Before he was a developer, Steve Ellman owned a number of weekly newspapers in the West. After selling those businesses to Cox Newspapers and Freedom Newspapers in the late 1970s and 1980s, he started buying properties. In the early 1980s, The Ellman Companies was asked to manage a large real estate portfolio for a European investor, all of which were in foreign markets. Today, the privately-held company owns over 75 companies, and has more than 8 million square feet of real estate owned or under development. The company also owns 50 percent of Clear Channel Outdoor Canada; it is very active in the billboard market across Canada where Ellman serves as vice chairman. The Ellman Companies, along with Westgate partners Jerry Moyes and NHL Hall-Of-Famer Wayne Gretzky, also owns and operates the Phoenix Coyotes National Hockey League (NHL) franchise and the Arizona Sting National Lacrosse League (NLL) franchise. Together, they also control the Arena Management Group concert promotion business. The Ellman Companies also owns and operates Rick's Café in Negril, Jamaica, voted by Caribbean Travel and Life magazine as “one of the top ten bars in the world.”
— Randall Shearin |
©2005 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.
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