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RESTORATION

Commercial Development

by Vladimir Tchikrizov

The Rouse Company pioneered the development of suburban enclosed shopping malls in the 1950’s, and of the urban “festival marketplaces”, city malls in historic locations, in the 1970’s. The latter used creation of retail space as a way to revitalize declining neighborhoods. Rouse’s first two urban renewal efforts set in underdeveloped areas in Boston and Philadelphia ended in resounding success. In Baltimore, too, the company managed to make more than double the profit of a typical suburban mall. The key to the marketplaces’ success was tasteful fitting into the urban settings. Instead of department stores, they offered a local-flavored shopping, dining, and entertainment experience. After the company’s involvement in the revival of the Faneuil Hall in Boston, the new shopping center drew 15 million visitors in its first year, and the number of tourists visiting Boston nearly doubled. Having seen this transformation, New York City’s Mayor Ed Koch met with Jim Rouse in January of 1978, requesting a similar project for New York. The design of the marketplace and its facilities was delegated to the architecture firm of the renowned Benjamin Thompson, who received the 1992 American Institute of Architects Medal1. Tishman Construction Corporation was the construction manager, and the Eggers Group was the consulting architectural firm2. The completion of the first phase of development, the construction of the Fulton Market, was set for 1983.

When opened on July 28, 1983, the Fulton marketplace was not quite finished. Cartons were piled in the corners, many shelves were half empty, floors unpainted, and construction workers’ tools and equipment could be seen everywhere3. The night before the day of the opening, an invitation-only preview - including a tour of the waterfront, performances by mimes, clowns, and a barbershop quartet - and a benefit dinner for 650 people were organized on Pier 16. On the opening day, the ceremony included a noontime parade from the World Trade Center and speeches by Governor Cuomo and Mayor Koch4 . Confetti came down the roofs, and thousands of green and orange balloons were released into the sky. The streets were filled with push-carts selling food and souvenirs.

The second stage, The Pier 17 complex, opened on September 11, 1985. Its opening was greeted with trumpets, dancers, cheerleaders, musicians, colorful confetti pouring from the air compressors, 20,000 balloons floating off, and fireworks erupting in the sky. The celebration was attended by Mayor Koch who stated that the construction of the mall was “ one of the most important developments to have taken place over the last eight years of this administration”5. Among the goods offered to shoppers pouring into the complex on the first day was the usual assortment of clothes, trinkets, and souvenirs for tourists, along with novelties such as gold-covered alligators and $2000 shells. With restaurants and designer clothing stores Pier 17 offered a more upscale dining and shopping experiences than the Fulton Marketplace dominated by fast food5. But by that time festival marketplaces were falling out of fashion. Shopping tastes changed, and, as a part of a general slowing trend in mall-construction after a boom in the 1980’s6, Rouse has not built an urban marketplace since 19887.

The Rouse Company itself invested more than a $100 million into the development project which cost over $350 million to build, as projections for profits were high. However, as the 1970’s and 80’s were a time of high interest rates and inflation, many of the expectations were not achieved. The building of the World Financial Center and the 1987 stock market crash contributed to profits falling short of those anticipated. Rouse and the museum were supposed to prosper from an interlocking system of leases and subleases, but by 1990’s the system began to crumble. Roughly, the museum leased the land from the city for $2.4 / sq. ft, while Rouse leased its space from the South Street Seaport Corporation for $3.5 / sq. ft, renting it out at $50 – $200 / sq ft to its commercial tenants. The difference in leases was supposed to cover the museum’s expenses, but the profit margin was barely wide enough to cover the Seaport Corporation’s operation, as Rouse struggled to turn a profit7. According to James F. Dauch, the company’s vice president at the time, a year after Fulton market’s opening a number of tenants were not even able to pay the rent8. The Seaport’s identity crisis contributed to the financial problems. Vice president of the Rouse corporate public affairs in 1985, Scott Ditch ,stated in an interview that it was impossible to promote the seaport as a shopping spot, as it would be simply overwhelmed by competition in a city as large and commercially developed as New York9. His hopes were that people attracted to the historical significance and maritime atmosphere of the seaport would be tempted to buy something while relaxing there. However, as the further commercial development led to less and less nautically-themed activity around seaport, such appeal diminished.

Because of financial strains, tensions between the museum and the company mounted over financing and marketing. Museum’s leadership tried to convince Rouse that a strong cultural attraction would draw in more visitors, but the company refused to invest more than $75 000 in the museum, of the promised $150 000. The museum’s former president Peter Neill would not even pose for pictures with pier 17 shopping pavilion in the background10. Once, Mr. Neill actually got into a public “shouting match”10 with a former seaport manager in an argument over docking space for the ships. The hostility has been long-standing, as even in the early 1980’s Peter Stanford recalls a Rouse official commenting that by involving themselves with the seaport, the company was “…waltzing with a corpse”10.

In attempts to turn things around financially, the Rouse Company replaced some of its original tenants in the Fulton Marketplace with chain stores and restaurants. By mid-nineties only the fish market, a seashell store, and Captain Hook’s remained to fulfill the city’s requirement of a maritime atmosphere in the seaport. Rouse eventually attempted to empty the Fulton Market building completely and give it to one of the big names, such as Warner Brothers and Strand, both of which found better deals somewhere else7. In 1997 it attempted to draw winter customers by placing a 60-by-120-foot skating rink outside the Pier 17 mall11. Towards the end of it suzerainty of the seaport, Rouse even considered the possibility of knocking down the Pier 17 shopping pavilion and replacing it with a building for the Cirque du Soleil12.

As profits were not being made, the levels of maintenance and promotional efforts at the mall were slumping. Many of the tenants complained of underdevelopment, overbilling, and misappropriation of funds meant for promotion, eventually filing an $80 million lawsuit12. The suing tenants also claimed they were never informed of plans for pavilion’s reconstruction. Some commercial residents left voluntarily, others were evicted or forced out by increasingly high leases. In 1993, the owner of Captain Hook’s – a small nautical curiosities shop - sued the company for depriving the mall of its maritime atmosphere by forcing him off his spot by increasing the rent from $2000 to $1978013. In 1998, nearly a quarter of the mall’s retail space was empty7. The mall’s population came to mostly consist of small short-term stores with no interest for the mall’s future - “fleamarkets”, as Gerry Nally, owner of the Seaport Watch Company, referred to them - selling cheap goods14 . Many of these shops, like the bonsai store, were seasonal tenants on short leases, never planning to stay. The situation became so dire that space was rented out for single-day events 14.

In 2004, in the largest property deal in U.S. to date, General Growth Properties, the second-largest shopping mall owner after Simon Property Group, also known for reviving failing malls, acquired the Rouse Company for $12.6 billion : $67.50 per share, and $5.4 billion in transferred debt6. In 2005 the mall topped $100 million in sales, its best performance since 1989, and Michael Piazzola, the general manager, reported that everything was on the upswing15. Recently, GGP has considered tearing down the Pier 17 building and replacing it with a new development project designed by the Beyer Blinder Belle architectural firm. Ironically, the shopping pavilion, often regarded as an architectural equivalent of a sore thumb sticking out among the historic facades of the seaport, seems to have become an indelible part of the area in the minds of many, as Ms. Chindemy of Rockland County, a long-time patron of the seaport, stated that: “ For them to take it down, it would be so disheartening”16. GGP also inherited the $80 million lawsuit, and proceeded with evicting several of the suing merchants, citing expiration of leases and unpaid rents12.

Endnotes:

1New York Times, 1991 “Gold Medal Is Awarded To Seaport’s Architect”. 12 December
2 Alan S. Oser “Perspectives; Weighing Anchor for a Major Downtown Attraction”, New York Times, 6 February 1983
3 Deirdre Carmody “Cheering Throng Jams Fulton Street For Opening”, New York Times, 29 July 1983 Lexis Nexis
4 Richard F. Shepard, “Seaport Site Opens Today With Fanfare”, New York Times, 28 July 1983
5 Crystal Nix, “Pier 17 Opens at Seaport With Fanfare Of Trumpets and Fireworks”. New York Times, 12 September 1985. Proquest
6 James Politi, “General Growth to buy Rouse for $12.6-billion: Sale ranks as largest U.S. property deal in history”. National Post’s Financial Post & FP Investing (Canada), 21 August 2004. Lexis Nexis
7 Bernard Stamler, “Rough Sailing for South Street Seaport [Chronology]”. New York Times, 29 March 1998. Proquest
8 Deirdre Carmody, “Seaport Museum In Dispute On Goals”. New York Times, 1 April 1985 Lexis Nexis
9 Elizabeth Kolbert, “Merchants Complain South Street Seaport has Yet To Establish Its Identity”. New York Times, 22 December 1985
10 William Grimes, “As Museum and Mall, A Seaport Lives On”. New York Times, 1 May 1992 Lexis Nexis
11 David M. Halfbinger, “Metro Business; South Street Seaport To Get Skating Rink”, 5 November 1997
12 William Neuman, “A Mall in Decline Eyes Fish-Market Space”, New York Times, 3 July 2005
13 Martin Douglas, “New Yorkers a& Co.; South Street Seaport: Just Another Mall?”. New York Times, 17 October 1993. Proquest
14 Alex Mindlin, “Stores Come, Stores Go, and Other Stores Simmer”. New York Times, 26 December 2004. nytimes.com
15 Elizabeth Butler, “South St. Seaport shored up; New owner turning around struggling mall; local residents coming to shop”. Crain’s New York Business, 5 December 2005, Lexis Nexis
16 Celeste Katz, “Seaport’s Mall Going South? Plan to Replace Pier 17 Building Meets Resistance”. Daily News (New York), 24 February 2007 Lexis Nexis
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