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Q&A: Mark Toro Talks About Retail's Next Big Thing

Experiences Are No Longer Enough. 'We're Creating Community.'
May 21, 2018
Experiential retail remains one of the hottest trends in real estate development, and Cincinnati-based North American Properties helped make it that way with landmark mixed-use projects such as Avalon north of Atlanta. Despite the national retail and mixed-use developer's success, its chief experience maker refuses to rest or stand pat. Mark Toro is working to create retail’s next movement.

Toro is managing partner and Atlanta office co-founder of North American Properties. Its top executives are Joe Williams, also chairman of the Cincinnati Reds, and his brother Tom Williams. NAP, once known for developing so-called retail power centers, now focuses on retail-centric mixed-use and multifamily developments from Georgia, Florida and Texas to its home state of Ohio.

However, it’s in Toro’s native New Jersey where NAP is working on the next generation of retail development. While NAP will incorporate the key aspects of experiential retail, at Riverton in Sayreville, NJ, the developer plans to create “America’s next great hometown.”

Toro and NAP have a reputation for creating new and improving existing retail concepts. Then, at just the right time, they get in, get out and move on to the next idea. NAP did it with power centers in the 2000s before selling nearly its entire portfolio of them just before the Great Recession strangled some of its competitors.

North American re-emerged in 2011 when it teamed with CBRE Global Investors to buy the Town Center at Atlantic Station in Midtown Atlanta. When the pair acquired the 586,000-square-foot retail heart of Atlantic Station, it was in disarray. The seller, AIG, had become a shell of its former gigantic self, still smarting from the recession. Several tenants were paying well-below market rents and some nothing at all. At Atlantic Station, NAP aggressively re-tenanted the center. It kicked out those behind on their rent and moved on others that did not mesh with the new focus--experiential retail.

NAP implemented a new dress code, banned smoking and added concerts, fireworks and yoga to Atlantic Station in Atlanta. The formula worked, drawing praise from trade and local media. NAP had succeeded on bringing something new to the East Coast - an urbanism development in the suburbs centered on experiences, as in experiential retail.

The center's sales jumped 20, 30 and 40 percent. The experiences it created at Atlantic Station, including July 4th fireworks shows, major concerts, tennis tournaments, Cirque du Soleil and Central Park yoga made Atlantic Station once again a good, safe place to go for fun and experiences.

NAP’s success at Atlantic Station got Toro notice. Commercial real estate trade publication National Real Estate Investor dubbed him "The Turnaround Artist." Just when Atlantic Station was reaching a new high, NAP and CBRE Global Investors sold its retail heart to Hines and Morgan Stanley for $200 million.

They already had plans for another center, called Avalon, 35 miles to the north. Avalon would become the exempla for the ultimate experiential retail in the country. Just this month, The New York Times spotlighted Avalon’s success in a story about how developers are adding a key missing piece - hotels - to mixed-use development. NAP’s Hotel Avalon added yet another experiential aspect to the project.

Before embarking on Avalon, situated 35 miles north of Atlanta, Toro and his top executives went on a cross-country tour of innovative mixed-use developments, including Caruso’s Grove in Los Angeles. Team Toro worked to persuade slow-growth Alpharettans to embrace a mixed-use concept that would provide an experienced-based mixed-use development with cool eateries, first-to-market restaurants and apartments.

With experiential retail nailed, Toro and his team already have moved on to creating community, as in a state of mind of belonging and fitting in. Granted the community is filled with experiences, but it’s much more than that, Toro says. NAP says its community-centric developments, such as the $2.5 billion community it is creating at Riverton, places "heart share over market share."

These developments evoke a feeling of belonging and a feeling you’re right at home while there. Shoppers crave to be at community centers, not merely for the experiences offered, but because they feel as comfortable and content at the mixed-use development as they do at home or in their neighborhoods.

As Riverton unfolds on the eve of the ICSC RECon show, Toro once again is national news, with Riverton featured in The Wall Street Journal, and CNN working on a story about NAP’s re-imagining of Colony Square in Midtown Atlanta.

Toro recently talked with CoStar News about the future of retail, community, mixed-use development and more, and has been edited for brevity and clarity.

CoStar News: Experiential retail still seems to be the buzzword in retail development. Where do you see it now?

Toro:» We’ve gone beyond the focus on products and experiential to creating community. We’re going back to the future. By that I mean, if you’re a neighbor who lives close to Colony Square, Avalon or even Atlantic Station, we give you an opportunity to engage on a human level the same way your grandparents did in the communities where they grew up.

CoStar News: In this ultra-connected world, why do retailers need to create community?

Toro:» Ironically, the millions of smart devices that connect millions of people across the world seem to have the reverse effect. As a result, true interaction is missing in today’s society. And that’s having a major impact and has led to epidemics including rises in obesity, diabetes. Many of us are suffering from isolation and loneliness. These smart devices have separated us. We’re now getting back to providing an opportunity to commune.

CoStar News: Be more specific about how creating community differs from creating experiences.

Toro:» We found that people just wanted to be together. They want to go to parties, events and meetings. We get them out of the cul-de-sac, out of traffic, out from behind their computers. That enables us to create community, not just experiences. The fact we can provide a place for people to feel comfortable and create that third place in addition to home and work is huge. The community we create centers on high-touch hospitality and resort-infused services at a shopping center. It’s a place for people to come who don’t have a place to go.

We amplified the best parts of experiential with a luxury hotel that’s already a destination, office and food and beverage. We’ve fully amenitized the experiential aspects of Avalon.

CoStar News: Won’t developers and competitors try to replicate what NAP created at Avalon?

Toro:» Yes, but it’s extremely difficult to do. Only a handful of us have done it - Rick Caruso with The Grove in Los Angeles and America at Brand in Glendale to name one. We all know people will knock you off. We see a dozen tours a month at Avalon by competitors, municipalities and others, which is exactly what you saw at The Grove five years ago. Now, we’re staying ahead of the game with community.

CoStar News: But how does this community translate to sales per square foot for your retailers?

Toro:» Take this year’s Kentucky Derby [held May 5 in Louisville, KY]. We had 5,000 people at Avalon, in their seersucker dresses and bow ties, who came to a shopping center and stayed from 10 a.m. to 11 p.m. to watch a race that lasted two minutes. We held them there all day, and our retailers benefited from that built-in audience. Developers need to create places where people come to sit in the little cafes and have a drink, play Frisbee, play soccer.

CoStar News: How does this new style of community-centric retail stand up against traditional retail and fortress malls?

Toro:» At Avalon, we took 18 retailers from North Point Mall, and those retailers are doing 40 percent more in sales on average at Avalon. We took on a viable regional mall, and they got their clock cleaned.

My wife and I love Plaza de Santa Ana [in Madrid]. These plazas have become a community’s living room. At Avalon, we created areas where groups of two or three or of 2,000 to 3,000 can meet and gather. And yes, what we’re creating with community at our developments is very European - back to the future.

CoStar News: Speaking of the future. Does standalone retail development have one?

Toro:» Large-scale retail does not have a bright future. We’ve obviously abandoned it as a viable model. Retail really is almost a loss-leader for mixed-use.

Tony Wilbert, Atlanta Market Reporter  CoStar Group   
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