Bloomindale's coming to CityNorth development

Bloomindale's coming to CityNorth development
By Cathryn Creno The Arizona Republic


The announcement Thursday that Bloomingdale's would open its first department store in Phoenix, Arizona is not just about having another place to buy Burberry, Fendi or Michael Kors.

The deal speaks volumes about the faith that developers and retailers have placed in the future of Arizona 's luxury-goods market — even as the current downturn has cut consumer spending dramatically.

The store is set to open in fall 2009. It will be an anchor at the CityNorth project, which will feature department stores, luxury condos and offices.

By then, officials are banking on an economic recovery being under way along with a continuation of the population boom and the insatiable shopping appetite of well-heeled consumers.

That appears to be a relatively safe bet.

Local and national experts say the Desert Ridge section of northeast Phoenix surrounding CityNorth and nearby north Scottsdale are among the most desirable places in the nation for retail.

“In the Southwest and California , retailers are not in peril of overexpanding even in the down market because of immigration to those areas,” said Steven Hoch, who heads the retailing department at the University of Pennsylvania 's Wharton School .

“And it may be that the economy is slowed down, but Phoenix is a place where visitors who arrive every winter bring in a whole bunch of money.”

Mark Winkleman, commissioner of the Arizona State Land Department, predicts that retail development in northeast Phoenix will surpass that at 24th Street and Camelback Road in both offerings and tax revenue.

CityNorth is expected to generate $1 billion in sales-tax revenue over its lifetime.

“It's very exciting,” said Phoenix Vice Mayor Peggy Neely, who represents the council district containing CityNorth. “It is good to have a variety of options. That just brings a bigger draw.”

In the eyes of developers, Bloomingdale's will sit atop the apex of a luxury-shopping triangle.

Biltmore Fashion Park at 24th Street and Camelback Road in Phoenix and Scottsdale Fashion Square at 70th Street and Camelback will be the base.

CityNorth also has signed Nordstrom, which is expected to open at the same time as Bloomingdale's.

And Macy's is said to be the third department store in the development.

Sealing the deal

“No matter how good your master plan or architecture is, there is nothing more important than a Nordstrom or a Bloomingdale's brand in a project,” said Kenneth Himmel, president and chief executive officer of New York-based Related Urban Development, which is co-developing CityNorth.

“It seals it.”

Still, longtime Valley leasing agent John Corritore, president of the Corritore Co. in Scottsdale , is skeptical that CityNorth will ever really rival Scottsdale Fashion Square , which is home to a Neiman Marcus and has a Barneys of New York under construction.

“When you look at Tiffany, Gucci, Ferragamo and kate spade, they are going to have one store in the entire market and it is going to be at Fashion Square,” said Corritore, who signs tenants for Tempe Marketplace, Dana Park Village Square in Mesa and several other Valley developments.

“The true elite shopper in north Scottsdale will still go to Fashion Square for the full selection of international shopping that is there.”

Nevertheless, CityNorth and not Fashion Square signed Bloomingdale's, which is one of the few luxury department stores without a presence in the market.

Macy's Inc., which owns the upscale store founded in 1872, says this Bloomingdale's is its 10th in the western United States .

“We are going to bring some of the buzz of New York to the Valley,” Michael Gould, Bloomingdale's chairman and chief executive officer, told The Arizona Republic.

Gould said his store recently began to compete with luxury department stores at the level of Neiman Marcus and Saks Fifth Avenue by selling higher-end merchandise and providing more one-on-one customer service.

One result, he said, was a “spectacular holiday season that ran counter to the market.”

Bloomingdale's will have three floors and a contemporary, Frank Lloyd Wright-inspired décor, Related Urban's CEO Himmel said.

There also will be an elegant, open-air restaurant on the top floor that will allow diners to look out over CityNorth's tree-lined High Street, he said.

Lawsuit not an issue

Although CityNorth is engaged in a lawsuit against the city of Phoenix , Himmel said the suit would not affect Bloomingdale's or other retailers.

“The first 70 acres of the development are being done without public funding,” Himmel said. “There is nothing, absolutely nothing, that is going to stop Bloomingdale's from going forward.”

The lawsuit, filed by the Goldwater Institute, argues that a $97.4 million agreement between the city and the developer is illegal.

The agreement allows the developer to retain half of all sales taxes CityNorth generates for 11 years or until the $97.4million mark is reached.

In exchange, it will build parking garages, allowing more of CityNorth's land to be used for tax-generating purposes.

Phoenix officials say the deal is not a gift to the developer but an economic-development deal, aimed at boosting sales-tax revenues to the city.