-----------------------------------------------The E.S.P. Interview

 

Welcome to our second E.S.P. Interview.  For May we talk shop with Andrew J. Groveman of Belz Enterprises. Mr. Groveman has been with Belz Enterprises for 20 years.  He is Senior Vice President  of Marketing and Administration, as well as President of Belz Factory   Mall Division.  Mr. Groveman is a member of the Executive Management Committee of Belz Enterprises, which is charged with overseeing and managing all of the company‘s holdings  and  investments.  In this position, he has the unique opportunity of being  intricately involved in all levels of project development from concept to fruition.  

 

Founded by patriarch Philip Belz in the early 1940s in North Memphis, the company’s first project was the construction of the city’s first large industrial buildings. Today, Belz Enterprises is one of the nation’s leading multi-faceted real estate development and management firms.  The company has more than 25 million square feet of developed property, including industrial developments, office buildings, more than 35  shopping  complexes (ranging from regional malls and urban  mixed-use  developments  to  factory outlet malls and community shopping centers),  apartment  complexes, residential developments, recreational facilities, and multi-purpose developments in Memphis and throughout the United States.  Belz is one of the nation’s largest factory outlet mall developers, a field which it pioneered.  The company has been involved in the development and management of more than 3 million square feet of leasable space with more than 200 manufacturers.  The company also owns and manages convention centers and hotels. The most famous Belz hotels are the two world-renowned Peabody Hotels, located in Memphis, Tennessee, and Orlando, Florida.

 

Mr. Groveman is the past president and ex-officio board member of Baron Hirsch Congregation  and  Memphis Hebrew Academy/Yeshiva of the South, and he serves on the Board of Trustees of United Israel Appeal and United Jewish Appeal.  He is a member of the Board of Directors of Yeshiva College, Yeshiva University.

 

Mr. Groveman is married to Jan Belz Groveman, and they have two children: Ariel, 19, and Adam, 16.  It is a pleasure to add Mr. Groveman’s vision to the pages of E.S.P. Magazine.

 

 

E.S.P.    Your company, Belz Enterprises, is the creator of enclosed, factory outlet malls.  Why did you decide to put the company’s development efforts in entertainment specialty centers, rather than merely to build more outlet projects?  What were some of the defining factors in your decision?

 

Groveman:    Our approach to retail development has always been multi-faceted.  We continue to develop within all segments of the shopping center and retail industry.  Through our partnership  in Belz/Burrow we continue to develop single-tenant, big box stores for the likes of Wal*Mart. Loew’s, and J.C. Penney, to name a few, and we also continue to develop community strip centers and conventional retail, along with factory outlet developments.

 

Belz, as a pioneer in the factory outlet industry since 1979 when we opened the first enclosed factory outlet mall in Lakeland (Memphis), Tennessee, has continued over the last 20 years to develop destination factory outlet locations.  Belz Factory Outlet World developments in Orlando, Florida; Pigeon Forge and Memphis, Tennessee attract over 30 million visitors annually.   This segment of retail development continues to be an important niche in our development strategy as we look to the future.

 

Currently, we have new factory outlet developments under construction in St. Augustine, Florida and Canovanas, Puerto Rico, east of San Juan.  There will always be a need for manufacturers to have a controlled means for distributing their product.  In addition to factory...

 

“At Belz, we have always been sensitive to the relationship between shopping and entertainment because shopping is a form of entertainment.  It fulfills a very real need, and it is a social activity”

 

E.S.P.   That raises an interesting point about the most effective methods for product distribution.  Lee Wagman of TrizecHahn says he saw the competition from the Internet affecting traditional malls, and that’s one of the reasons his company sold their portfolio and put $600 million toward the development of entertainment specialty projects.

 

Groveman:    E-retailing is a segment of retailing that is in its infancy.  I do not see this form of retailing displacing in any way the need for factory outlet malls, traditional malls, or retail and entertainment complexes.

 

E.S.P.    What do you see as your corporate role in the industry as it evolves from traditional retail real estate toward entertainment specialty retail concepts?

 

Groveman:    At Belz, we have always been sensitive to the relationship between shopping and entertainment because shopping is a form of entertainment.  It fulfills a very real need, and it is a social activity. There are still some experiences you just can’t get on the Internet. We believe that there are exciting retailers that bring retailing to a new level, that heighten the experience of shopping, that offer unique entertainment environments that stimulate all the senses.  The evolution in our industry to retail entertainment is something we believe is a natural development that will be important to consumers as we move into the new millennium.

 

“Clearly, the magnitude and scope of a retail entertainment development
is far greater and far more complex than most traditional mall concepts.  This is true from conceptualization to design, to leasing, to construction, right through management and marketing”

 

For evidence of tenants that invite shoppers to participate in activities that express and define their lifestyles, look at our anchors in the Festival Bay project in Orlando, Florida, and the Peabody Place project in Memphis, Tennessee. Peabody Place, which will be anchored by  Muvico Theatres and Jillian’s, is bringing an entertainment experience that will further ignite the already explosive redevelopment activity in downtown Memphis.  And we believe there is no more powerful lineup of lifestyle entertainment anchors in the country than in Orlando’s Festival Bay.  There you’ll find the 150,000 square feet Bass Pro Shops Outdoor World, an 85,000 square feet Cinemark multiplex movie theater, a 50,000 square feet Ron Jon Surf Shop, and a 55,000 square feet Van’s Skate Park.

 

 

 

Belz Enterprises’ Festival Bay in Orlando will have 1.1 million square feet of entertainment

retail designed to reflect an upscale, active Florida lifestyle

 

“Entertainment retail development has a role
to play in certain markets.  By no means will it be a panacea or the next generation of shopping center developments.  We see it as another segment of the overall picture”

 

E.S.P.   How is the structuring of the finance and equity, development and leasing activities different in an entertainment specialty project from that of an outlet center project?  How are these differences affecting your strategies and timing?

 

Groveman:    Given our expertise in the development business, we believe the principles for developing the retail entertainment concept really are no different from that of an outlet center.  All the ingredients required to have a successful development are similar: 1) solid, cutting- edge, creditworthy tenants; 2) a dynamite location; 3) the ability to execute your vision.  By  the last ingredient, I mean the credibility and financial wherewithal to execute the development and a dedicated team of individuals, professionals, and companies to make it all happen.

 

About timing-- there are two basic principles in the development business to factor in ahead of time:

                  #1-Usually it takes longer to lease space than the leasing people say it will; and

                  #2-Usually it will cost more than what the designers say it will cost.

 

Over the years, we believe we have exhibited the ability to understand these principles well.  We give ourselves enough time to achieve our project goals, and we are prudent and cost conscious in our design and development.

 

“E-retailing is a segment of retailing that is in its infancy.  I do not see this form of retailing displacing in any way the need for factory outlet malls, traditional malls, or retail and entertainment complexes”

 

E.S.P.    Do you think there will be synergy between the two strategies?  Many traditional malls are trying to add some entertainment attractions, usually full-service restaurants and multiplex theaters.  I note that J. Paul DeMyer, the lecturer and consultant on entertainment real estate, said in our April E.S.P. Interview that these additions do not really do the job.  What do you see as the future of entertainment specialty projects?  And what do you envision as the future of pure outlet centers?

 

Groveman:    As I said earlier, the outlet industry emerged into a significant, but small niche in the overall retail development field.  Likewise, we believe the retail entertainment concept will be similar in nature.  This type of development has a role to play in certain markets.  By no means will it be a panacea or the next generation of shopping center developments.  But rather, we see it as another segment of the overall picture.

 

Clearly, the magnitude and scope of a retail entertainment development is far greater and far more complex than most traditional mall concepts.  This is true from conceptualization to design, to leasing, to construction, right through management and marketing.  Peabody Place in downtown Memphis has presented exciting challenges and great opportunities in dealing with an urban location.  In Orlando, with Festival Bay, we are developing 1,100,000 square feet that ultimately will have the impact of a regional mall, but the warmth and feel and excitement that only a retail and entertainment complex can bring. 

 

 

 

This rendering of the interior of Festival Bay reveals the inviting promenade
environment that promotes a shopping experience you just can’t get on the Internet.

 

“Usually it takes longer to lease space than the leasing people say it will;
and usually it will cost more than what the designers say it will cost”

 

E.S.P.    Are you considering the co-development of entertainment specialty projects?  Or are you looking to go
strictly solo?

 

Groveman:    We consider ourselves opportunity-driven, and we evaluate opportunities as they arise.  Predominantly, we develop for our own account and typically we end up owning our projects.  However, we do have partners in some projects where they clearly add value to the project. 

 

E.S.P.    How vital to your strategy for an entertainment specialty retail project is a strong tourist base?  Would you build such a project without a tourist base?  If so, what kind of demographics would you look for in such a city or suburban market?

 

Groveman:    Clearly, having the added purchasing power of tourists in particular markets is a great benefit.  It is important to any project.  However, these entertainment specialty projects are not exclusively limited to tourist markets.

 

E.S.P.    What are your plans after Peabody and Festival Bay?  Any new projects on the horizon?

 

Groveman:    Currently we are concentrating our efforts on properly executing Memphis’ Peabody Place project and Orlando’s Festival Bay project.  At this time we are not looking at any other project that we can talk about.

 

E.S.P.    Thank you so much for sharing your thoughts and your time with us.

 

Groveman:    You’re very welcome.  It’s been very interesting.