The Old Neighborhood

The Old Neighborhood

Greg Sembler took the helm of The Sembler Company at a tough time

and is steering it back to what it does well: neighborhood shopping centers.

DEVELOPERS by Dave Szymanski | Tampa Bay Editor

A St. Petersburg company entered a bid with Pinellas County for the right to build a large mixed-use development on the former Toytown landfill site in Pinellas. It wasn't selected.

That bidder was The Sembler Company, a well-established, nationally known, successful retail developer. Sembler has developed more than 100 major shopping center projects and more than 140 freestanding retail stores since its inception in 1962.

Yet it viewed the 240-acre Toytown decision as a positive. Sembler was proposing Toytown Park: shops, homes, a hotel and a community center.

"It was a mixed blessing," says Greg Sembler, 47, chief executive officer and son of founder Mel Sembler, former U.S. Ambassador to Italy and chairman of the board.

The non-selection suits Greg Sembler just fine. That's because he is steering the company closer to what it does best: neighborhood shopping centers. It still has a number of larger developments in the Southeast it is still working on, plus a housing development, Duval Park, in St. Petersburg. But Sembler knows the company has been hit by the decline in residential real estate.

"I inherited a tough market," Sembler says. "In the real estate economy, it's a severe slowdown. Retail follows residential. Residential is not leading well right now."

So Sembler wants to reduce its exposure while capitalizing on what it has done well.

"We have contracted, with market conditions the way they are," he says. "Neighborhood centers have worked well for us."

Former CEO Craig Sher is still on the company board, as executive chairman. Like other Sembler executives, he is active in the community and is also part of the ownership of the Tampa Bay Lightning hockey team.

Sembler, a graduate of the Wharton School of Finance and Commerce at the University of Pennsylvania, stepped up from vice chairman and became CEO Jan. 1. He has been working at the company for 25 years, mainly in the leasing department. So he understands how to work with tenants in setting rents, attracting them and retaining them.

"My father was a retailer before becoming a developer," Sembler says. "We think like retailers. We are very good retail developers. The retailers' success is our success."

That retail knowledge, plus relationships with retailers like Publix and Walgreens, help set the company apart.

"But for a very brief stint in residential, 99% of the company is retail," Sembler says. "We think like retailers. We know they can only pay the rent based on sales and margins. We're very in tune with access, signage, tenant mix, merchandise and who needs to be near whom. That's what sets us apart."

Other projects

Getting back to being solely a neighborhood shopping center builder won't be entirely possible. The Sembler Company is still involved in other projects.

For example, in Okatie, S.C., near Hilton Head, it is building a mall-size 1.2 million square foot regional shopping center. It is also working on an 800,000-square-foot center in Dawsonville, Ga. and will continue to finish up projects it started in the last couple of years in Atlanta, north Georgia and Florida.

Many of these are regional shopping centers with big-box tenants, such as Kohl's, Target, Dick's, Best Buy and Bed Bath & Beyond.

In a move to diversify the company, and in response to the success of homes near its stores, Sembler this year debuted Duval Park, a Key West-style new urbanist housing development in St. Petersburg with homes and townhomes.

The three-phase project will include 79 two-story homes. Each of the four floor plans has a front porch and optional second-floor balcony. The units, all with three bedrooms, range from 1,211 to 1,699 square feet. The community is gated and pedestrian-friendly and has a pool and landscape maintenance. Prices range from $189,000 to $264,900.

Despite their price point, the homes are selling "very slow," Sembler says.

Ironically, the state it built its reputation with is now the hardest place to do business.

"The toughest state to do for a new deal in is Florida," Sembler says. "It is the hardest hit by the residential pull back. There are edges of growth. Greenfield sites. But with growth not happening as fast, deals are difficult to lease up and get finished."

Sembler closed its office in Sterling, Va., which had two employees. It has 133 employees, down from 162.

This year it also sold BayWalk for a little more than break even to entrepreneur Fred Bullard, who owned half of the development and operated two restaurants in the shopping and entertainment center near downtown St. Petersburg.

BayWalk, which cost about $50 million to build, opened with great fanfare and drew crowds, but some of the tenants eventually struggled. Despite calls and emails, Bullard could not be reached for comment on its plans for BayWalk.

Sembler placed BayWalk up for sale for close to a year. "We worked out an acceptable deal," Sembler says.

Sembler, which was used to dealing with Publix or Target in anchoring neighborhood centers, found itself dealing with different kinds of national retailers at BayWalk.

"We want to get back to basics," Sembler says. "These were good projects. We're proud of our efforts. It's time to move on. Mr. Bullard is taking over the rest of the center. We wish him the best and we're moving on."

The future

The main challenge for The Sembler Company these days is long-range planning. A lot of our retailers are pushing back plans until 2010 or 2011. Developers need a couple of years to get things into the building pipeline.

"Most are pulling back on the number of stores they are doing," Sembler says. "We're managing that development pipeline."

So the future for the company includes finishing the regional centers, concentrating on neighborhood projects and working with individual retailers.

It has done a lot of work for Publix and Walgreens and will explore more work with those successful retailers. It is also talking to a bank and a fast-food restaurant chain about developing facilities for them.

"We're going back to a more conservative type of development," Sembler says. "Not as speculative."

If there is interest from anchor tenants, the company is not ruling out building regional retail centers. But it is getting "tougher and tougher to make the numbers work" on those projects, Sembler says. It will continue to concentrate mainly in the Southeast, but not entirely.

One continuing bright spot for Sembler has been Puerto Rico. Sembler himself mined that island as a business location since 1996. Sembler has three Walgreens under construction there and seven to eight in the pipeline.

"Puerto Rico continues to be an active market," Sembler says.

Despite the struggles with BayWalk, Sembler will also look for more urban infill locations. It is getting more difficult to find open acreage for shopping centers.

And Sembler is also looking for other international opportunities.

"We're looking in the western hemisphere, possibly South America, in 2010 or later," he says.

International markets present different challenges and can be more expensive, but Puerto Rico is a success story for the company.

REVIEW SUMMARY

Company: The Sembler Company

Industry: Shopping center development

Key: Building retail in the right locations, setting rents retailers can afford.

Looking back at BayWalk

Despite being about a quarter vacant, The Sembler Company is proud of the work it did in building BayWalk, a two-level retail, restaurant and entertainment catalyst for urban redevelopment in St. Petersburg, its hometown.

BayWalk accomplished that. It did help bring urban redevelopment to St. Petersburg. But it was a victim of its own success in that regard, as competition grew downtown and pulled some customers away.

This year, Sembler sold BayWalk to entrepreneur Fred Bullard, who owns two BayWalk restaurants and developed Feather Sound, ran Durango Steak House and owned the former USFL Jacksonville Bulls pro football franchise.

Bullard is evaluating the center. His son, Fred Bullard III, will direct leasing. It is unclear what his specific plans are.

But this is clear: Urban retail projects like BayWalk are a unique business animal.

Their success is dependent on the number of shoppers that will frequent the development during the workday, on weekday evenings and on weekends.

The most critical component, especially in Florida, is proximity to residential neighborhoods because the daytime workforce in Florida downtowns, other than maybe Miami, isn't strong enough to add significant sales other than to fast or casual restaurants, says David Conn, retail broker with CB Richard Ellis in Tampa.

In the case of two similar local urban retail centers, Centro Ybor and Channelside in Tampa, neither have a strong residential base close by, nor are the retail offerings strong enough to pull from extended areas.

In addition, both are largely dependent on entertainment and restaurants, which are vulnerable to economic slowdowns such as the current one.

"BayWalk is unique," Conn says. "It was clearly a major catalyst in the rejuvenation of downtown St. Petersburg, but I think the subsequent success of other downtown properties has brought additional competition."

In addition, the BayWalk movie theater attracted a lot of youths, and with them, some unwanted publicity.