I will either be famous or infamous.
E arly most weekday mornings, Michael Ebert can be found walking around CityScape in downtown Phoenix. The managing partner of RED Development usually buys a cup of coffee at Chloe’s Corner or a meal at the Breakfast Club.
Then Ebert checks on the construction of apartments going up on top of the Kimpton Hotel Palomar and often steps into the hotel’s restaurant, Blue Hound Kitchen, to see what the lunch specials are. From there, he may walk past retailer Urban Outfitters and others, both window-shopping for his kids and mentally logging how many customers are out already.
Ebert then strolls past the Stand Up Live comedy theater and Lucky Strike to check out the development’s huge water fountain, where children and their parents often hang out. On his way back to his office in the tower anchored by Alliance Bank’s corporate headquarters, he’ll pass the popular restaurant Arrogant Butcher.
RED Development began plans to develop the 1.2 million-square-foot CityScape project on the Heritage Park site in 2005. Despite the recession and real-estate crash, the developer broke ground in 2008 and opened the first phase in 2010.
Now, Ebert walks through CityScape with a smile on his face. The development’s retail space is 100 percent leased. The office tower is 97 percent full. The hotel is becoming one of the most popular in Phoenix. The long-awaited apartments are under construction, and his firm just closed a deal to manage and revamp the block-size Collier Center office project next door.
“In 2008, I told everyone at RED it would be dark times for a while, but we would be a better and different company when the economy improved,” Ebert said. “CityScape is a perfect example of how we have been able to survive, evolve and succeed.”
Downtown proponents credit the nearly $1 billion CityScape development with ensuring downtown Phoenix’s continued redevelopment. RED Development spent five years building the urban restaurant, retail, entertainment and office project on two blocks sandwiched by Washington and Jefferson streets, First Avenue and Second Street.
“To date, CityScape is the most important and difficult private-sector project to be developed in downtown Phoenix,” said former Phoenix Mayor Phil Gordon. “The RED team kept their word and overcame many challenges to develop it, particularly when the bottom fell out of the real-estate market.”
RED built CityScape from scratch but is also garnering a reputation as a successful redeveloper of mixed-use projects in popular locations across metro Phoenix and Flagstaff.
The developer is currently working on revamping four high-profile projects in Arizona: the Shops at Town & Country at 20th Street and Camelback Road in Phoenix; the Hilton Village Shopping Center on Scottsdale Road south of Lincoln Drive; the Borgata near Scottsdale Road and McDonald Drive, and Aspen Place in downtown Flagstaff.
“Everywhere in the country, but especially in Phoenix, infill sites are the hottest for retail and restaurants,” said Scott Rehorn, RED’s managing partner for leasing. “It’s not just kids who want the urban experience. Everyone does now.”
The 50-year-old Town & Country is known for an eclectic mix of retailers and restaurants. RED Development is partnering with the center’s partner, James Shough, to revitalize and expand the project. Whole Foods will open a store there this fall. Nordstrom Rack opened a location at Town & Country late last year. And the new restaurants Grassroots Kitchen & Tap and Snooze will join Pizzeria Bianco/Italian Restaurant and several other recently added eateries.
RED bought Hilton Village for $25 million and is updating the center’s look with a Spanish colonial design and adding retailers CVS, Chico’s, Urbany and restaurants Tap House Kitchen and Nekter Juice Bar.
In Flagstaff, RED is bringing an REI store to Aspen Place at the Sawmill, a project that stalled with another owner during the downturn. More than 220 luxury apartments to be built above and next to the retail space are also planned.
Flagstaff City Manager Kevin Burke said RED is bringing stores to Flagstaff that match the community’s needs.
RED is also working with AV Homes on the redevelopment of the Borgata shopping center in Scottsdale to a condominium project with retail.
Steve Maun, managing partner and president of RED, said it has become too competitive to buy many urban shopping centers, so the developer is focusing on partnering with owners to redevelop older centers that are still popular with shoppers.
Built by retail brokers
RED was formed in 1995 and for several years built shopping centers primarily in the Midwest. Its two corporate offices are in Kansas City, Kan., and Phoenix.
Ebert and Rehorn started the company. The two veteran retail brokers drew the investment of a pension fund through Dallas-based CDK Realty Advisors. At the end of 2010, as the commercial-real-estate market tanked, RED Development consolidated its shopping-center holdings with CDK and began operating like a private real-estate investment trust.
The move helped the developer attract more investors and Wall Street money, Ebert said.
Currently, RED has 33 projects with more than 15 million square feet of space in 11 states. The company has built a team to manage all its projects, including offices.
RED is still private and doesn’t disclose all of its partners. The developer does have a complex public-private partnership with the city of Phoenix for CityScape. The deal includes a Government Property Lease Excise Tax break and a $57 million reimbursement for public improvements.
RED had to readjust its plans for CityScape as the project was developed. Originally, plans called for 1,000 condominiums, but several other condo projects also were planned to go up in downtown Phoenix at the same time. The first residential towers struggled to attract buyers during the housing crash. But those towers, including 44 Monroe, have attracted renters, and most are nearly full.
Last fall, RED began building 224 high-end apartments above the Palomar and plans to begin leasing the units this fall. Rents are expected to start at $1,800. Tenants will be able to use the hotel’s amenities, including room service.
RED is expanding its presence downtown. Last month, the company closed a deal with Collier Center owner GE U.S. Pension Trust to revamp and market the 600,000-square-foot project, a block from CityScape. RED’s first move was to sign law firm Lewis and Roca to lease 70,000 square feet in the office tower. The next phase of the project is to update the outside and tie it into CityScape’s amenities.
Downtown Phoenix had long been a daytime hub for workers that emptied at night as people drove home. But the area is not only drawing new residents, including Arizona State University students, it’s drawing nighttime visitors.
Ebert said Arrogant Butcher owner Sam Fox thought his restaurant would be busiest during lunch hour, but the dinner rush has been even busier.
When Arrogant Butcher opened in 2011, Fox, who owns several restaurants in metro Phoenix including Culinary Dropout and True Food Kitchen, said RED’s vision for CityScape gave his group the opportunity to create a “big city” restaurant concept.
“The changes going on downtown are pretty remarkable,” Maun said. “People are living down here. Just look at the number of joggers in the morning.”
RED Development’s Arizona footprint
Projects the developer is currently working on:
Aspen Place at the Sawmill: 128,000 square feet, Flagstaff.
Chandler Festival: 495,000 square feet, Chandler.
Chandler Village Center: 297,000 square feet, Chandler.
CityScape: 1.2 million square feet, Phoenix.
Fulton Ranch Towne Center: 327,000 square feet, Chandler.
Paseo Lindo: 275,000 square feet, Chandler.
Prasada: 2 million square feet, Surprise.
San Tan Village Marketplace: 285,000 square feet, Gilbert.
The Promenade at Fulton Ranch: 110,000 square feet, Chandler.
The Shops at Hilton Village: 93,000 square feet, Scottsdale.
The Shops at Norterra: 353,000 square feet, Phoenix.
The Shops at Prescott Gateway: 35,000 square feet, Prescott.
Town & Country: 314,000 square feet, Phoenix.
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