The Magic Touch

The Magic Touch

RETAIL by Mark Gordon | Managing Editor

The Forbes Co. uses a four-legged stool to develop centers that get shoppers to stay longer and spend more.

Nathan Forbes' job title might be managing partner of an upscale Michigan mall development company with a growing presence in Florida, but he could just as easily answer to the call of executive producer.

"The stars of our show are the retailers," Forbes says. "We have to put consumers into a great position to shop."

The latest stars for Forbes' family-run production firm, Southfield, Mich.-based The Forbes Co., will be the retailers leasing space in a new 1.7-million-square-foot mall in Sarasota. Specifically, Forbes' firm is building the mall component of University Town Center, a massive mixed-use project planned for 276 acres on the Sarasota-Manatee county line, in the southwest quadrant of University Parkway and Interstate 75. Construction could begin as early as next summer; stores are expected to open by 2010.

The Forbes Co. is building the mall, and Sarasota-based Benderson Development is building the rest, which is projected to include three hotels, a movie theater, 1,500 homes, 250,000-plus square feet of office space and even a trolley system to connect residents from other communities, such as those in nearby Lakewood Ranch. The new urbanism-style project has gone through several revisions over the past 10 years, as developers tried to meet the demands of resident groups and government officials.

Forbes declines to name names when it comes to retailers he is going after for the mall, only to say the final store roster will follow the company's internal guidelines of quality and exclusivity. The only store to have signed a commitment letter so far is a big one: Nordstrom, the upscale department chain, plans to open a 138,000-square-foot store.

The entry into Sarasota marks the fourth Florida market for the Forbes Co., joining Palm Beach, Orlando and Naples, where it runs the popular and tony Waterside Shops. The company has been in the state since 1986, when it won a bid to build what is now the Gardens Mall in Palm Beach Gardens, an upscale development with a Nordstrom, a Saks and a Bloomingdale's, among other stores.

But The Forbes Co. has been methodically slow in expanding, both in Florida and in Michigan.

Forbes, whose company doesn't disclose revenues, says the company's strategy demands patience. To begin with, the company relies heavily on its in-house research, focusing on three main areas: average time shoppers spend in a mall; the average drive time shoppers spend to get to the mall; and most important, how much each shopper ultimately spends at the mall.

The company's ratios in those categories are two to three times better than the national average, says Forbes, and he intends to keep it that way. His mantra: "Stay longer and spend more."

To reach those goals, Forbes leans on his producer skills, since essentially, just like a Hollywood or Broadway producer, Forbes' role involves piecing together a string of interchangeable parts. If there's a breakdown, says Forbes, the project runs the risk of becoming a bust.

Forbes, who splits his time between suburban Detroit and the Gulf Coast, calls the strategy the four-legged stool:

• The first component is department store exclusivity, meaning all of the anchor stores must be new to the market.

• The second leg, specialty store exclusivity, is a cousin of the first component. Forbes goes by the 40% rule, whereby that's the minimum number of smaller stores that must be exclusive to the market. In Orlando, for example, where the company owns the Mall at Millenia with Taubman, another national mall developer, Forbes says the company has a 45% exclusivity rate.

• Top-shelf restaurants with a diversity of menus make up the third leg. The restaurants must be sitdown and nationally recognized, too. Forbes says this helps draw people from a larger market and keeps them at the mall longer.

• The last leg of the stool is the design and structure of the actual property. Or in Forbes' words, the mall's "architectural ingenuity." That's not just the buildings and stores themselves, but also the areas in and around them. There are no carts, no kiosks and no temporary leasing signs. The overall goal, says Forbes, is to be kings and queens of anti-clutter.

The stool is an all-or-nothing proposition: Says Forbes: "All four of them have to be successful for us to make it work."

The unnamed fifth leg of the strategy could be the investing component. While Forbes declined to go into specifics about what the company spends on each project, he acknowledged it's in the "many, many, millions."

The Waterside Shops, for instance, is one property where the company invested heavily, in excess of $5 million. The Forbes Co. bought the 370,000-square-foot, open-air mall in 2003, when it was composed of a Jacobson's, a Saks and 35 specialty stores. The company has since brought in several new stores, including Tiffany & Co., Gucci and Burberry, which now occupy the spot where Jacobson's was. Also, Saks recently completed a makeover, adding 50% more space and an 80,000-square-foot Nordstrom is expected to open later this year.

What's more, the company upgraded the facade of many of the stores, added 30,000 tropical plants and shrubs for the walkways and built footbridges, fountains and a rock wall with a reflecting pool.

The result is Waterside has become a who's who Naples destination. "We have positioned the center as the Bal Harbour of the West Coast," says Forbes, referring to the well-known Miami shopping center.

But the investments don't end with the stores. The company spends a significant amount of money on benchmarking, studies and research.

And The Forbes Co., which has about 500 employees, also keeps many basic tasks in-house, an unusual move in the thin-margin universe of mall development. The security guards at its malls, for example, are Forbes employees - and they aren't the stereotypical mall cops. The guards go through intensive customer service training, so when they are at the malls, they help customers load packages, find a store - or their car - and are all-around mall ambassadors.

Forbes realizes all of the investing, strategizing and developing will be moot if he can't maintain the company's high marks in generating traffic. He's always seeking ways to hold people's attention longer and get them to spend more - without diluting The Forbes Co. brand.

"Every mall developer's challenge," says Forbes, "is people's time."

THE FAMILY BUSINESS

The Forbes Co. is an anomaly in the mall development game: The family-run company is privately held.

Considering 85% of the top 150 malls in the country are run by public companies, it's quite a minority. The big players in the industry are names such as Bloomfield Hills, Mich.-based Taubman Centers Inc., Chicago-based General Growth Properties, Indianapolis-based Simon Property Group and Westfield, an Australian-based development firm that runs several Gulf Coast malls.

Sidney Forbes, a well-known suburban Detroit entrepreneur and developer, founded The Forbes Co. in 1965. It originally focused on creating middle-market centers in blue-collar Michigan cities, such as Kalamazoo and Warren. By the mid-1990s, it had sold many of those properties (General Growth was one buyer) to focus on the more upscale centers it had and was planning.

Those now include three Florida properties, in Orlando, Palm Beach Gardens and Naples, as well as the 1.5-million-square-foot Somerset Collection in Troy, Mich. It is also planning to build a 1.7-million-square-foot mall in Sarasota.

Sidney Forbes is still active with the company, serving as chairman. His son David Forbes runs the leasing division, and Nathan Forbes serves as managing partner. Nathan Forbes says the company has been approached about selling to another firm, and people have also asked him if he would ever take the company public.

In both cases, Forbes says, the answer is no.

THE FORBES CO.

The Southfield, Mich.-based Forbes Co. currently has four major mall projects it either owns or is a partner in, with three of those projects in Florida. The company is also partnering with Sarasota-based Benderson Development to build a projected 1.7 million-square-foot mixed-use retail complex in Sarasota, near the University Parkway exit of Interstate 75.

Here's a look at the company's completed projects:

The Somerset Collection

Where: Troy, Mich.

Size: 1.4 million square feet

Opened: 1969 (Renovated in 1992, 1996 and 2004)

Notable stores, restaurants: Crate & Barrel, Neiman Marcus, Ralph Lauren and The Capital Grille.

Notable features: A 700-foot enclosed and climate-controlled skywalk connects the north and south ends of the mall. The mall also has a Sorvikivi Floating Stone, made in Finland and featuring a 2-ton ball that rests over a black granite trough.

The Gardens Mall

Where: Palm Beach Gardens

Size: 1.4 million square feet

Opened: 1988

Notable stores, restaurants: Apple, Bose, Cole Haan, Lacoste, Louis Vuitton, P.F. Chang's, Pottery Barn Kids and Williams Sonoma.

Notable features: The mall has more than 2,600 palm trees, 60,000 annual flowers, six ponds and 15 fountains. The mall is also near the PGA National Resort & Spa in Palm Beach Gardens.

The Mall at Millenia

Where: Orlando

Size: 1.2 million square feet

Opened: 2002

Notable stores, restaurants: Apple, Anthropologie, Banana Republic, Bloomingdale's, Chanel, Dior, Hugo Boss, McCormick & Schmick's, Neiman Marcus, The Cheesecake Factory and Tommy Bahama.

Notable features: The mall was built in an 'S' shape, with 60-foot high, end-to-end skylights designed to give it a conservatory feel. The mall's eight-story high Grand Court has 12 35-foot high masts, each of which has a 10-foot LED screen displaying worldwide fashion videos. Nathan Forbes, managing partner of the Forbes Co., says the mall is admired nationwide as the pinnacle of mall design. (Taubman Centers Inc., a publicly traded real estate investment trust, is a partner with the Forbes Co. on the Mall at Millenia.)

Waterside Shops

Where: Pelican Bay, Naples

Size: 370,000 square feet

Opened: 1992 (The Forbes company bought its stake in the mall in 2003).

Notable stores, restaurants: Brio Tuscan Grille, Brooks Brothers, Burberry, Cartier, Gucci, Hermes and Tiffany & Co.

Notable features: The open-air mall has gone through a major transformation over the past few years, beginning with turning a Jacobson's department store into several new stores, including the Burberry, Gucci and Tiffany & Co. An 80,000-square-foot Nordstrom is expected to open later this year. (Taubman Centers Inc. and ING Clarion, a real estate advisory firm, are partners with the Forbes Co. in the Waterside Shops).

REVIEW SUMMARY

Business: The Forbes Co.

Industry: Retail Development

Key: The privately held mall developer has four components of success, including an ability to invest significantly in a project.