Sunday, November 23, 2003

Levee's owners want more adult shoppers

Grownups dine and go to the movies, but they skip teen-oriented retail stores

By Ken Alltucker
The Cincinnati Enquirer

[IMAGE] Newport on the Levee has become one of Cincinnati's premiere nightspots, especially on Friday and Saturday nights, but retail businesses don't do as well.
(Jeff Swinger photo)
NEWPORT - From the pulsating rhythms at the Empire club to the gut-busting laughter of Shadowbox Cabaret, few dispute that Newport on the Levee has emerged as one of Greater Cincinnati's most popular weekend spots.

The evidence is the long line of cars snaking to the riverfront project every Friday and Saturday night en route to the AMC Theater or Jeff Ruby's gangster-themed Tropicana restaurant.

The $215 million project has pumped new life into surrounding blocks, too. Beer-chugging yuppies flock across the street to Hofbrauhaus, and developers are building million-dollar homes near the Levee's neon red glow.

"From the city's point of view, it has been a tremendous success," said Phil Ciafardini, Newport city manager.

But despite the glamour and crowds, both Ciafardini and Columbus-based developer Steiner + Associates acknowledge the Levee's 340,000 square feet of entertainment, dining and retail hasn't met all financial expectations.

Sales tax and parking revenue have trickled in slower than projected. National retail chains catering to adults have been slow to join a shopping mix dominated by teen stores. And Newport's signature development has the third-lowest occupancy rate among 34 retail centers controlled by the Levee's majority owner, San Diego-based Legacy Properties.

Nevertheless, Steiner, which leases and owns a minority share of the Levee, says the themed restaurants, Barnes & Noble and the theater consistently rank among the best performers in Greater Cincinnati. And Steiner says changes are in play to the center's retail mix that should improve the center's long-term shopping prospects.

And Legacy, which owns 65 percent of the Levee, says it has no plans to sell the Levee even as it sheds other shopping centers following a recent management purge.

"We have been a little disappointed by the resistance of national retailers to locate stores there," said Jay Miller, Steiner's senior vice president who oversees the Levee.

Newport, which issued bonds to help fund the development, is as anxious as anyone to ensure the riverfront project succeeds financially.

The complex financial structure calls for the developer to pay the city $875,000 each year in lieu of property taxes. But the developer immediately pays that money to the city only if the Levee generates enough money from parking and sales tax revenue to make debt payments.

So far, that hasn't happened.

In 2002, the Levee was projected to clear nearly $3 million in parking fees, but it made just over $1 million.

Parking revenue again will fall short of projections this year, according to Gregory Engelman, Newport's chief financial officer.

Ciafardini said a major reason parking fees have fallen short is timing. The financial projections were made during rosier economic times and projected a fully leased center, including a hotel.

The Levee opened weeks after the Sept. 11 terrorist attacks. A soft economy and Cincinnati's post-riot troubles also contributed to the Levee's slow start, Ciafardini said.

"The original projections turned out to be wrong," Engelman said.

Among those frustrated by the Levee's tax shortfall are Newport Independent School Board members. The district, funded largely through property taxes, counted on a portion of the $875,000-a-year payment in lieu of taxes to help pay basic expenses.

"I don't think the school district is receiving its fair share due to the abatement of taxes," said school board member Jim Hesch. "We're just waiting for the money to come in."

Even though some school board members have complained about the lack of property taxes, Ciafardini said the Levee in fact has been a boon for the schools. Other taxes on items such as equipment and inventory will generate nearly $129,000 for the district this year, which quadrupled the amount of tax revenue the schools received from the area before the Levee was built. The schools have also benefited from extra taxes generated by spin-off development such as Hofbrauhaus. And the city's total assessed property value has surged from $283.8 million in 1997 to $423 million this year.

Empty storefronts

With about one-fifth of the Levee's retail space empty, Steiner aims to aggressively lease the available storefronts with an emphasis on a different shopping mix. At the same time, Miller wants to keep intact what has worked well - dining and entertainment.

The changing retail strategy includes more upscale stores that appeal to adults. In the past, the leasing effort put too much emphasis on teen-oriented stores, Miller said. As Steiner officials discovered, that store mix and theaters don't always go hand in hand.

Teens tend to spend more when they visit the Levee with their parents than when they catch a movie with other friends. Other than Barnes & Noble, the Levee offers few shopping outlets for adults.

Steiner recently hired a research firm that determined the Levee's typical restaurant customer is about 42 years old, more likely to be a women than a man, with an above-average income.

Having a mix of upscale restaurants and shops that cater to adolescents could "create a disconnect between who goes to the restaurants and who goes to the rest of the mall," said Lois Huff, senior vice president of Retail Forward, a Columbus-based retail strategy and research firm.

In other words, the adults dining at the pricey restaurants have little interest visiting skater shops.

What makes Steiner's Easton development in Columbus work is its breadth of entertainment and shopping options, according to Huff. While kids are hanging out at their favorite stores, their parents can browse for home furnishings at Pottery Barn or Z Gallerie. "It's not targeting any one group," Huff said. "It's targeting people of all ages." But as a "leisure" center, Miller said the Levee's foremost offering will always be dining and entertainment - segments that have worked well with the exception of the Imax theater's closing in June.

"I think there are a few tenants who thought this would be more like Easton," Miller said. "This is a leisure-time center. The shopping is usually more of an impulse buy."

Big weekends, slow weekdays

Newport merchants such as Bulent Uysal, who runs a small jewelry stand at the Levee, hopes Steiner's strategy generates more shoppers.

Some weekends he doesn't think he can make enough necklaces to keep up with the demand of families and teens pouring out of the Aquarium or the AMC Theater. On weekdays, though, few shoppers browse Uysal's Magic Rice stand. "It's not like a regular mall," Uysal said. "There are no big stores here."

But Uysal also is able to avoid big mall rents by operating a stand at Newport. He said it would cost $10,000 to rent a similar size space at Tri-County Mall during the holiday shopping months of November and December. Kenwood's rent table is even more expensive.

At the Levee, though, the 28-year-old businessman pays just $1,000 each month.

He believes the Levee would thrive at all hours if it were able to sign up more shops that appeal to a wider audience.


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