Article on Pension Funds a Useful Tool
I enjoyed the recent article by Stan Luxenberg entitled “Pension Funds Break with Tradition” in the March 2004 issue. I'm learning about pension fund investing and I found that the article provided useful explanations of the ideas behind the trends described. I appreciate NREI for just this type of article.
Hospitality & Leisure
Hollywood & Highland Doesn't Follow the Rules of Retail Development
The article “It's Showtime for CIM Group” (April 2004), covering the sale of Hollywood & Highland in Hollywood, Calif., by developer/owner Trizec Properties earlier this year has prompted me to comment on the subject of functional obsolescence and private financing. These two functions of real estate development ruined this project, in my view.
I am a native of Los Angeles. I'm old enough to recall the Hollywood Hotel that once graced the Northwest corner of Hollywood Boulevard and Highland Avenue until it was demolished in the 1950s for a proposed museum that never materialized. A parking lot did. The parking lot became the fixture of a declining Hollywood area until the Kodak Theatre and the Hollywood & Highland project became reality when it opened in late 2001.
I recall feeling extremely disappointed on how and where the retail sector was situated during my first visit in 2001. I thought many of the stores were in hidden areas, away from where the casual shopper would frequent. A tenant who leased one of these “secret” sites could starve to death before shoppers arrived. In my view, the developer exercised extreme lack of thought by placing retail tenants in areas in which they could only fail.
As a real estate broker on many projects, I recall chafing at the bit to close the deal while listening to lenders dictate on how a project must sit and where anchor tenant stores and parking must be located. After retching when I saw the Hollywood & Highland layout, my view is that private investment can screw up the profitability of a development and can result in a worse situation than lack of access and egress, a declining neighborhood, dismal parking facilities and a demanding lender. The three negatives may be corrected, and the lender eventually satisfied. Sadly, in my view Hollywood & Highland cannot be easily modified to produce retail success for its tenants.
The cardinal rule in retail development is to allow the task of shopping to become easier and enjoyable for the consumer/shopper. Most consumer/shoppers do not like to stroll in areas that appear ominous. Searching along a dark hallway no matter how upscale a center may be is a chore that many shoppers will avoid. Retailers must be easily accessible to all potential and repeat customers. In my view, if this basic rule is not followed by developers, projects similar to Hollywood & Highland will experience a shortened economic life, die a sad death and be revitalized with taxpayer assistance 20 or more years later as an office building with little retail and restaurant opportunities. Or, perhaps, another parking lot.
Real Estate Broker