ATLANTA—There are times when it’s best for a company to reposition itself in the market (when a recession occurs, perhaps). That’s what North American Properties did, and now it’s tacking on hotel development.
“The company has grown to respond to market conditions and trends,” said Mark Toro, managing partner at North American Properties, a retail, multifamily, mixed-use and office developer. “We’ve sought to innovate, reimagine and reposition the organization as those trends evolve.”
The recession triggered one of the more notable shifts within the company. Before the recession, North American Properties’ portfolio consisted of mainly two types of development: suburban shopping center and apartment. After the recession hit, the development firm examined other possibilities. It asked James H. Gilmore, who authored The Experience Economy with B. Joseph Pine II, to create a “workshop for us to create an experience in an apartment community, an office building, a hotel or a shopping center,” Toro explained. The company then shaped itself around the experience economy’s demands.
“Everything we do is now tailored toward that guest experience; we no longer talk in terms of shopping centers, office buildings, apartment buildings and hotels—we talk in terms of a community and whatever the makeup of the uses are,” the firm’s managing partner said.
For example, Colony Square, a mixed-use property here that’s owned by North American Properties, has condominium, retail, office and hotel. “The idea was to draw on the energy that the community provides to drive the commerce that’s necessary to make the project viable,” he said. “The street-level experience is what is driving the value of all the uses above and beside it.” Mixed-use gives the development firm control of the entire experience.
The idea behind mixed-use is to generate energy from different sources to the property at various times of the day. While retail alone can be a challenging venture for a developer, “retail in an experiential, mixed-use property thrives,” Toro explained. North American Properties examined this particular theory in the summer of 2011, when it went on a tour to review 15 mixed-use projects nationwide. The firm’s goal at the time was to determine which of the properties generated the most in retail sales, had the most footfall, created the best experience and drove the most evaluation in their insular uses. The firm then used what it learned to drive the experience at Atlantic Station, a property the development company acquired in 2010.
North American Properties applied the same concepts when it developed Avalon, a mixed-use development project that’s now open in Alpharetta, GA.
The biggest takeaway from the tour for the firm: The street is everything. “Once we get the street right, the rest of it takes care of itself,” Toro said.
This ties into the theory of mixed-use development being about community. “The true test is whether [the project]becomes the community’s third place after home and after work,” he said. “Is this where they go to hang out?”
North American Properties conducts an “exhaustive study of the community” to understand the needs. The development firm uses a variety of methods—including data mining, in-person interviews and polling—to learn more about what a particular community is about and what specifically defines it.
The thought process behind every mixed-use project the firm develops is as follows: “What’s the personal brand of the community member?” he said. “What is the brand of the community that we’re building? How can we align that brand with the brands of the offering, the retailers and restaurateurs?”
North American Properties is developing its first hotel ever, and that’s for the Avalon project. Slated to open in January 2018, The Hotel at Avalon will have 330 guestrooms; 44,000 sq. ft. of event space; 10,000 sq. ft. of exhibit space; resort-style amenities; and provide direct access to the Alpharetta Conference Center. “We’re developing [the hotel]in a joint venture with a local hotel developer called Stormont Hospitality [Group], and we’re doing so because it’s a very unique business (it’s more an operating business than a real estate venture) and because of the familiarity of this particular group and Jim Stormont, who runs this group, with public-private partnerships,” Toro said. The city of Alpharetta is involved in the building of the conference center.
“[Jim] didn’t have a lot of experience—he had no experience, actually—in blending a hospitality experience into the Avalon experience, which has been the learning curve, but it’s been very, very effective,” Toro explained.
North American Properties had originally reached out to The Valencia Group, the developer behind the Hotel Valencia Santana Row, which opened in San Jose, CA, in June 2003, about the project. “They had a thorough understanding of how to operate in that environment,” Toro said. “Santana Row is one of the most impactful models that we studied on that 15-visit tour. They really set the bar. Valencia was our first choice, but they passed on the market, and I don’t know that they would make that same decision today, given where we are.” That’s when the company took a different approach and decided to consider Stormont Hospitality Group because of its experience with public-private partnerships.
“Then it was just a matter of understanding how the various parties correspond with each other: the brand, the operator—in this case HEI Hotels & Resorts—and the developer, in this case Avalon Hotel Associates, a partnership between North American Properties and Stormont Hospitality Group,” Toro said.
North American Properties isn’t shying away from future hotel developments. It’s pursuing a project with Concord Hospitality Enterprises Company in Gwinnett County. “They’ve operated in these environments before,” Toro said.
North American Properties isn’t part of the hotel venture; however, the hotel will be closely affiliated with the firm’s mixed-use property on that site. Almost all of the projects the company is pursuing would consider a hotel component.
The development firm’s portfolio currently includes properties in Georgia, Texas, Florida, Ohio and Tennessee. There are plans to expand geographically, specifically in the Northeast. A specific mixed-use project in this region will be announced in November; it will have a hotel component. HB