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NEWS: Thinking Too Big?

In 1996, just after West Palm Beach okayed plans for what became CityPlace (right), a rival developer said the ambitious project probably wouldn't work because it called for three times the retail space of his plan — too much for the area. “I think the project is fraught with risk,” said Charles Siemon, whose group also included West Palm developers E. Llwyd Ecclestone, Jr., Murray Goodman and Milton Grey. “I don't see how they can make financial sense out of this.”

It sounded like sour grapes then. Now it seems that Siemon was on the money. CityPlace, built on a 72-acre downtown redevelopment site, has not met the financial expectations of its developer, The Related Cos. And, according to a report in the Palm Beach Post, it is losing $4 million to $4.5 million a quarter. (Related Senior Vice President James M. Selonick says that report is not accurate. He declined to disclose numbers.)

Why, in an area as wealthy as Palm Beach County on Florida's gold coast, is an attractive center featuring names like Anthropologie and Williams-Sonoma not a clear success? It's not the design. The center, which is modeled on an Italian village plaza complete with fountain, was named best big mixed-use development by the Urban Land Institute last year.

Related blames the poor economy. “A number of national and local/regional retailers are retrenching and have closed stores at CityPlace,” Related partner Kenneth A. Himmel wrote in a letter to West Palm Beach Mayor Joel Daves in December, when the developer was seeking approval to develop an adjoining parcel as office space. “CityPlace is incurring the substantial costs of releasing many spaces, and while the financial condition of the property and its owners are not at risk, financial results for the first two years of operation have been well below initial expectations.”

Related still has high hopes, despite losing Tommy Hilfiger, Cutter & Buck and shoe store Dolly Duz. Selonick says it plans to focus more on home furnishings tenants “to give CityPlace a slightly different identity.”

But the fact remains that Palm Beach County is a shopper's paradise. In his December letter, Himmel noted that there is “enormous competition in retail space in Palm Beach County precipitated by an overconfident developer/lender/investor environment.”

Back in 1996, a third bidder, Simon Property Group, also expressed concerns about the scale of CityPlace. “There's 5 million square feet of retail between the Boynton Beach Mall and The Gardens Mall,” said Co-Chairman Mel Simon, who was teaming with Gerald Hines to develop a much smaller project. “If you compete with them, you're going to get killed.”

Selonick remains upbeat. “There are pieces of the property that are working extraordinarily well,” he says. “The demographics of the area, the growth and the amount of new housing are all really working in our favor.”

TAGS: Development
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