Auburn's retail boom | After a slow start, Auburn's new retail options give shoppers a choice and public coffers a boost
What a difference a decade makes.
By the end of 2007, the Auburn Mall was nearly fully leased, and new stores were going up along Route 4 — the city’s designated growth area. Even today, amidst a chill in commercial construction nationwide, a new 100-room hotel is being built. In all, Auburn has added $91 million in retail valuation over the past nine years, and $61 million in just the last four.
These events are a remarkable turnaround from the late 1990s, when retail sales were sagging and Auburn’s traditional third place ranking in sales tax collections — after South Portland and Bangor — had been eclipsed by a boom of big box stores in Augusta.
In fact, it was Auburn residents’ perception that the city was missing out on the retail boom that led to subsequent changes in land-use and economic development policy.
Roland Miller, the city’s longtime economic development director, said the city council got a clear message: “How did this happen? Why are so many stores leap-frogging over us?” New retail growth was burgeoning not only in Augusta, but in Brunswick and Topsham as well.
The city’s answer was a new strategy, Miller said. The council approved a retail tax increment financing agreement that designated new tax revenues for infrastructure improvements around the mall. Voters approved a $5 million bond issue to get things started. “There was no federal or state money in that bond,” Miller said. “It was all ours.”
An equally important element was a partnership with George Schott, who owned a successful Harley-Davidson dealership in the area that had been started by his father. The younger Schott hadn’t previously envisioned himself a developer, but that changed dramatically 10 years ago.
As Schott tells it, he got into real estate almost by accident. A huge fire in 1998 had leveled his dealership on outer Main Street in Lewiston, and he was trying to rebuild quickly. The Auburn Plaza, whose anchor tenant, Service Merchandise, was defunct, seemed a good choice, and he bought the property.
But the tenant retained rights to the property for a year, so Schott ended up rebuilding his dealership at the original Main Street site and owning a shopping center. He fixed the plaza up, signed on tenants and watched the new stores succeed.
Next, Schott agreed to partner with the city to attract national retail chains, throwing his money in with the city’s to extend utilities and improve often-clogged roads.
“We had the plan,” Miller said, “but it wouldn’t have worked without investors, and George was one of the first to step forward.”
Schott has since parlayed each new project into a more ambitious one. When Wal-Mart, one of the few chains that built in Auburn during the 1990s, ran into site limitations on its existing lot, it moved across Route 4 to build a new Supercenter. Schott ended up redeveloping the old lot, now home to Kohl’s department store.
In 2005, he sold his Harley dealership and bought the Auburn Mall, which was in poor shape and only 60 percent occupied.
“The mall hadn’t had any significant investment since it was built in 1979,” Miller said. Schott replaced the roof, retrofitted a lot of the existing space, and landed a tenant to fill the gaping hole at one end, a 60,000-square-foot store that had been vacant since Porteous closed in 2002; the other mall anchor is J.C. Penney, with nearly 100,000 square feet.
The new store was a trendy retail chain called Steve & Barry’s, which sold everything for under $10. But its tenure was brief. Opened in December 2007, it announced it would close in September after the chain filed for bankruptcy and reorganization.
Schott isn’t sure exactly when the space will be vacated — probably by February — but he doesn’t seem worried about finding new tenants. “The time when I didn’t hear anything was last summer,” he said of his recruitment efforts. “Lately, I’ve been getting calls again” — though he admits that “it usually takes 20 calls to get one tenant.”
Miller points out that the newly renovated mall space is a big improvement from what existed just a few years ago, and far more marketable. And Schott is adaptable to the needs of different clients. “If we needed to break up the (Steve & Barry’s) space, we would,” he said.
Ready sites, faster deals
Flexibility and having ready sites have become a big part of the retail world, said Miller. “The days when there was some loyalty to a place because you’d been there and done well — that’s gone,” he said. “Now, it’s all about the numbers, and only about the numbers.” He explains that the site selection firms who work for the national chains have plenty of places to build, so the competition often comes down to where the fewest obstacles are.
That scenario played out step-by-step in Auburn’s search for a Kohl’s store. Years ago, Miller worked in Wisconsin as an urban planner, and admired the department store chain’s savvy. When it began its eastward expansion five years ago, Miller made a pitch for a store in Auburn. The answer was no.
But two years ago, Kohl’s was expanding again, and running into permitting trouble for a store intended for New York. Auburn suddenly was a possibility.
With the old Wal-Mart site available, the deal was quickly signed. The original Wal-Mart store, built in 1992, was demolished and “the whole (Kohl’s) deal was completed in less than 60 days,” Miller said, with some wonderment.
While the emphasis on national chains can have its downside, it’s also where most of the retail action is. It’s certainly paid off for Auburn.
In addition to Steve & Barry’s and Kohl’s, in the last four years the city has added Best Buy, Lowe’s, Ruby Tuesday, Longhorn Steakhouse, TGIF, Famous Footwear, Petco and the Marriott Suites Hotel, expected to open by the spring of 2009. New Maine-owned operations have included a Lamey-Wellehan’s and Androscoggin Bank. The $91 million in new construction has not only arrested Auburn’s slide, but put the city in the running for the next wave of retail expansion, when it occurs. “To call this business cyclical is an understatement,” said Miller.
Schott is moving forward by adding more amenities to the mall area, including the hotel. While he likes to cruise mall stores incognito, making sure everything is up to snuff, when he decided it was time for a hotel to attract travelers, he turned over the project to Portsmouth, N.H.-based Ocean Properties Ltd. Schott remains part owner and is involved in its construction.
The hotel is expected to give the area a boost, enhancing a revival that was far from a sure thing, Miller said. The mall’s location is unusual in that most shopping plazas are located squarely alongside an interstate highway. The Auburn Mall is at the end of Veterans Memorial Bridge, built in the 1960s, because plans showed then that Auburn’s principal market area lay in the towns to the north and west — through Bethel, Rumford-Mexico, and even farther away. Its lack of direct highway access meant the city had to work harder to get back in the retail game.
Making a name for itself
Paul Badeau, marketing director for the Lewiston-Auburn Economic Growth Council, was pleasantly surprised to find that the Auburn Mall is holding up well among its peers. He attended the recent annual convention of the International Council of Shopping Centers in Boston, where he found that “a lot of people showed interest in and awareness of the mall. We were heartened by the response.”
Having construction-ready sites, he agrees, is pivotal to the site selection firms making the calls about new locations. Equally important is what he calls “critical mass,” the presence of anchors and other brand-name tenants that showcase the area’s attractiveness to other retailers.
The latter concept, he said, is probably why Lewiston has not been able to jump-start its new designated retail area near the Maine Turnpike. After Wal-Mart abandoned its plans to build a Supercenter there, the complex lost its intended anchor and development has stalled.
Other retail projects haven’t gone exactly as planned. Three buildings at 600 Turner Street, a new strip mall at the corner of Mount Auburn Avenue, have signed few tenants since being completed last summer.
Kevin Fletcher, agent for the owner, Dan Thompson, said that construction was delayed by road projects and other permitting delays.
“It turned out to be a four-year project, and by the time we were done, the slump had started,” he said. There are scant retailers trying to expand now, Fletcher said, so he’s had to be creative. Among the tenants at 600 Turner Street are Heidi’s Brooklyn Deli, a regional Social Security office and a Planet Fitness gym. Occupancy is about 40 percent.
“It’s a project designed for retail that has had to adapt,” he said. “In this business, timing is everything.”
Fletcher does not, however, believe that developers have over-expanded in the Auburn area. If anything, the city is still under-retailed, he said. “The demographic surveys don’t really reflect the size of our market area, which is unusually large, even for Maine,” he said.
Miller points out that recent traffic and utility upgrades, plus “pad ready” subdivided sites, should be adequate for another 500,000 square feet of retail development.
Fletcher thinks that when the current building slump is over, retailing may take a different direction. Businesses like Wal-Mart and Olympia Sports may do better than those purveying luxury goods. “Everyone still needs winter boots, coats and hockey equipment.” What may not sell “is the $200 handbag from Coach,” he said.
Badeau said he expects newer stores to be smaller, “a lot more 2,000-square-foot retail spaces,” he said. “The big boxes may not dominate any more.”
Schott worries that future retail development might be hampered by a shift in municipal support. After a decade of full-fledged backing for retail expansion, the current city council seems more skeptical about things like TIFs.
“There’s a feeling that there’s always a lot of money in retail, that they can build anywhere they want and that they don’t need any help,” he said. While he says there’s a grain of truth in that, city governments can forget how competitive the market is.
Still, at this point, Auburn is well-positioned for new retail business, Miller said. “We are still on the low side for the lease-price-per-foot to sales ratio,” he said of the market. “We have lower costs than most of our competitors, and that will help us next time around.”
Douglas Rooks, a writer in West Gardiner, can be reached at editorial@mainebiz.biz.
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