CityPlace’s struggles over its 17-year history include a revolving door of tenants, mortgage woes and the closing of the department store in the middle of the project.
Now the property’s developer and long-time owner says it has bought back the Macy’s space, has resolved its issues with its lender and is positioning the mixed-use project for “CityPlace 2.0.”
New York-based Related Cos. says it plans a major makeover of CityPlace that could include office space. Meanwhile, Related bought out the lease of the empty Macy’s at the center of the project.
That store closed in January as part of the nationwide downsizing of Macy’s. Related paid $7 million to buy out Macy’s lease, according to a public record filed in June.
“Talk about commitment,” Related Urban President and Chief Executive Kenneth Himmel said Friday during an interview with the Palm Beach Post’s editorial board. “We’re going to make sure the middle of our project doesn’t go into somebody else’s hands, and we’ll be proposing something very exciting for that site.”
Related owns the land under the 186,000-square-foot Macy’s building.
Meanwhile, Himmel said Related has worked out CityPlace’s ongoing mortgage problems. Proving that bustling activity doesn’t always translate to a profitable property, CityPlace was hit with a foreclosure filing on its $150 million mortgage in 2011, and in 2016 a rating agency warned that CityPlace was in danger of defaulting on its loan.
Without providing details, Himmel said it has resolved all of its issues with its lender.
“We are now in 100 percent control of everything that’s going on there,” Himmel said.
Himmel didn’t lay out specifics for a makeover of CityPlace, but he did say he’s considering office space in addition to the offices at CityPlace Tower. He predicted rents of $35 to $40 a square foot, below the premium prices of $45 or so charged at West Palm Beach’s trophy towers.
“CityPlace 2.0 is about pivoting from the design as a lifestyle center to one of the country’s most exciting urban districts,” said Gopal Rajegowda, a senior vice president at Related. “We’re thinking about what that means.”
Over the past two decades, Himmel and partner Stephen Ross have developed projects in Manhattan, Boston, Chicago and Seattle. He called CityPlace the toughest project the pair has tackled.
“Without any question, this is the most challenging,” Himmel said. “We overreached, certainly, when we began the project. There’s been a lot of turnover of tenants.”
While CityPlace packs in the crowds on weekends, the comings and goings of its tenants are legion. The roster of eateries that have left over the years includes Bacio, Brewzzi, Carousel Can Can Cafe, Cheeburger Cheeburger, CityPlace Tap House, Columbia, Field of Greens, Italian Oven Cafe, Jinja Bar, Kona Grill, La Salsa, Legal Sea Foods, Mark’s CityPlace, McCormick & Schmick’s, Original Steakhouse, Taco Vida, Taverna Opa, Tsunami and Wild Olives.
Even when restaurants are open at CityPlace, some don’t pay full rent. During the recession, CityPlace often slashed rent because the landlord wanted to keep spaces filled; dark storefronts would have created the impression of a ghost town.
FAO Schwarz and Macy’s were among the original tenants that have closed.
“When we opened the project, we had an incredible array of tenants, some of whom went out of business, some of whom just couldn’t sustain the sales level required,” Himmel said.
“Part of it was a little bit naivete on our part,” Himmel said. “First project we’d ever done in Florida, and we got caught up in the same thing a lot of people do who don’t know the market well enough: They don’t spend any time here in the offseason.”
In addition to the summer slowdown, Himmel said CityPlace needed urban density that was slow to arrive. Now, he says, the construction of apartments, condos, office space and a convention center hotel have made CityPlace more viable.
Himmel also boasted that he was able to persuade Restoration Hardware to build its four-story store in the middle of Okeechobee Boulevard after the company had all but settled on PGA Boulevard in Palm Beach Gardens as a destination.
“That was a coup for all of us for West Palm Beach,” Himmel said.