“We just know from everyone we met with that there were no loans closing in 2009. If not for our ability to speak to what the city, state and county had done in terms of downtown investment, it translated in our ability to close that loan.
“There was a lot of disbelief. There have been so many stories of dense urban planned projects that have never actually happened so what we had to overcome more than anything was the negative downtown bias in the community.”
Pre-Rail Downtown Phoenix
Out the window of Red Development, where the CityScape project sits, when they first came down there in 2004 to seriously look at the site, there was a surface parking lot. And as Moloznik said it was barely a surface parking lot. “You would maybe park 100 cars on it. A lot of parking stalls were sunk in and unusable.” He explained, “That was the reality of having an existing land owner just demolish the structures that used to be on the site and just pave over the demolished structure.
“It was just a bad situation.”
Moloznik said they entered into an agreement with the city of Phoenix to repair and renovate the parking structure in the ability to build retail space above it.
For Red Development this is the only asset in its portfolio that isn’t purely retail. Most of their projects have been suburban and urban retail projects. And while Molznik said they do have redevelopment in their portfolio, they had never done anything like this.
“What attracted us to this site is the same thing that has attracted us in other sites and it’s the deficiency of retail space.” He explained, “We’ve always tried to find opportunistic sites and for us, what’s something that everyone else has overlooked.”
In the Valley, downtown Phoenix was the most overlooked submarket from a retail standpoint. As Moloznik said, “The area was woefully deficient.” Some numbers to illustrate the point were in the 90 blocks of downtown there was about 400,000 square feet of retail. In San Diego there was about 2.5 million and in Denver, about 1.8 million. Moloznik said, “There was not another city that had gone through a recent rebirth that had less than a million square feet of retail.”
The first mission, he said, was to squeeze retail into this project and use everything else to underwrite the retail. “We knew if we could deliver the urban experience people have in other cities to our hotel guests, officer workers, apartment residents, we would compete with any other development in downtown because they have access to all these shops.” He added, “That’s the beauty of it. You walk out your front door and stumble into something to do.
“The idea that you could build a project like this in the middle of both light rail lines is pretty unique and special and it happens to be in the center of Phoenix. A pretty special spot.”
Being on the light rail line it gives people living there the opportunity of never having to get in their car. “We’ve got parking below-grade here and on the other block,” he said. “it’s not an excessive amount of parking.”
CityScape has a 97 percent occupancy rate and while that’s important, Moloznik said the success rate is determined on the per square foot retail sales. And of the project, it has some of the highest per square foot retail sales in the state. One restaurant in particular that is part of a portfolio of 50 restaurants is the highest grossing of those 50. “There are huge-volume restaurants,” he stressed.
People are using CityScape and the light rail and Moloznik said it’s the demand of the younger generation. “These are the trend setters for us and everyone else will follow. This is where young people want to be.”