In the News 2004
Taking Retail Outside the Box Builder Bets Urban Centers Connect With Consumers
June 7, 2004
Accustomed to building large shopping centers on sprawling landscapes, principals at San Diego-based Sudberry Properties Inc. know they will have to change the way they develop real estate in order to stay focused on San Diego County.
Tom Sudberry, founder and president of Sudberry Properties, said the real estate development and asset management company is moving from its suburban shopping center format to more urban projects.
"We want to take our retail centers to the next level," he said.
In EastLake Village Marketplace, the company's most recently completed project, the next level meant building public gathering places, such as a fireplace and a water feature at the $50 million, 410,000-square-foot property.
The idea is that shoppers will grab a cup of coffee at Starbucks and sit by the fire on a cool night, contemplating which of the shopping center's other stores to visit.
Colton Sudberry, vice president of development, said it is important for shopping centers to connect with residents in the surrounding community. In some of its future projects, residential or office development may be mixed with the shops and restaurants.
"In the future we see residential as a component of mixed-use centers," Tom Sudberry said. "Big-box centers are going to be fewer and fewer."
Instead of single-story shopping centers across several acres, Sudberry's future developments may be constructed on more compact sites, with shopping in multiple levels over underground parking. Or like the Whole Foods grocery store in Hillcrest, projects may be designed with the parking on top.
"It's an energizing time to be in real estate in San Diego. It's a good time to be in a position to do some unique projects," Tom Sudberry said.
What Shoppers Want
According to George Whalin of San Marcos-based Retail Management Consultants, few million-square-foot regional malls the caliber of Fashion Valley or Horton Plaza in Downtown San Diego are being built in the United States anymore. Whalin said today's shoppers want the convenience of parking right in front of the stores they need to visit.
That's why "power centers" - like EastLake Village Marketplace and several other Sudberry developments - and lifestyle centers are the most popular shopping centers today.
Power centers usually have at least four big-box tenants, such as discount department stores like Target and Wal-Mart, or home improvement retailers like Lowe's and Home Depot. Lifestyle centers have some of the same tenants, but usually include upscale shops such as a Talbot's clothing store or furniture retailer Pottery Barn.
"There is a lot of capital chasing new deals," Colton Sudberry said.
However, Sudberry Properties' next project won't begin construction until later this year or the beginning of 2005. It is a 130,000-square-foot shopping center in Riverside County.
While construction is further off in Mission Valley, Sudberry Properties is working on plans for a second big project on Friars Road near Fenton Marketplace, where the company built the 560,000-square-foot home of Ikea, Lowe's, Costco, and several other retailers. The new 230-acre project, currently named Quarry Falls, will include housing and shopping on former rock quarry land.
Shift In Game Plan
While Sudberry Properties may be best known for its shopping centers, the company developed 1.2 million square feet of office and industrial projects during the 1980s and early '90s, as well as a 172-unit apartment complex. Rich Simons, who worked for the company in the 1980s, is returning to Sudberry Properties to work on new office projects.
"We don't own any office and industrial anymore," Tom Sudberry said. "Our game plan was always to sell it."
However, Sudberry Properties still owns many of the shopping centers it has built during the last two decades.
The company felt its industrial projects were riskier because they were leased to a few large tenants rather than a lot of smaller tenants with long-term leases - if one tenant left, the industrial property had a big vacancy, Tom Sudberry explained.
Besides, he personally favors retail over industrial. Shopping centers, which have a focus on families and children, tend to be livelier than manufacturing facilities, he noted.
Close Ties
Family and long-time friends are a big part of Sudberry Properties' 25-year history.
Colton Sudberry, Tom Sudberry's son, worked for another local developer, the Corti-Gilchrist Partnership, before joining Sudberry Properties five years ago.
"About the time I left for grad school (at the University of Southern California in the mid-'90s), the company started getting more active," Colton Sudberry said.
After eight years in construction and engineering, Marco Sessa, Tom Sudberry's son-in-law, was recruited two years ago.
"It's energizing when your son and son-in-law come into the business," Tom Sudberry said. "If (these) guys weren't interested in real estate, I don't think we would have stayed in the business."
Colton Sudberry noted that his dad and business partner Jeff Bradley were pondering retirement when he was in graduate school.
Two of Tom Sudberry's partners over the years were Navy fighter pilots with him in the Vietnam War. He and John Tanner founded Sudberry Properties in 1979. Bradley has been his partner and an executive vice president at Sudberry since 1986.
With a long history here, the company intends to stay in San Diego County for many years to come. However, Sudberry Properties has built a few shopping centers in Las Vegas and Riverside County, as well.
"On the right project with the right partners, we will look at other places," Colton Sudberry said. "If we have a relationship in place, we will do it, but we're not out looking for sites (outside of San Diego County)."
Sudberry Properties arranges its own project financing - the last three developments involved loans from Bank of America. Other projects have involved joint venture partners and landowners.
Tom and Colton Sudberry, Sessa, Bradley, and chief operating officer Christine Evans have equity in each of Sudberry Properties' developments.
Colton Sudberry attributed the company's success to his dad's good reputation and ability to build strong teams.
When people know that he's working with Tom Sudberry, Sessa said, it's easier to win the trust of potential business partners.
"Reputation is important in this business," Tom Sudberry said. "I want the family to be proud of what we've built.
By Mandy Jackson
San Diego Business Journal