Provo's East Bay to get $80M retail, office project

• SOUTH PROVO IS ABOUT TO UNDERGO major economic revitalization with The Boyer Co.'s Southgate Center, a new 59-acre mixed-use project anchored by Target Corp.

Valued at between $75 million and $80 million, the project, to be built at the intersection of 1860 South and University Avenue, will include 459,550 square feet of retail space and 225,000 square feet of office space, said Mark Pace, senior partner with The Boyer Co. at a conference with Provo city officials on Thursday. The project will also result in a $2.5 million redesign of the 18-hole Reserve at East Bay Golf Course.

City officials say the project is expected to generate around $125 million in annual sales and about $1 million in sales tax revenues for Provo's coffers.

"The land was generating no property taxes for the Provo school district, the county or the city. But this new project will bring hundreds of thousands of dollars in property tax revenues to the school district, and tens of thousands of dollars to the county and the city," said George Stewart, chairman of the Provo City Council.

Target, PetSmart and Sports Authority are among retailers that have signed letters of intent to open at the new East Bay shopping center in Provo. Pace said his company is currently in talks with Circuit City and other potential tenants.

Construction of the 45-acre, $45 million retail project is expected to start in spring 2008 and will be completed by July 2009, with Target scheduled to open a 138,000-square-foot store by May 2009. Another 13 acres to 14 acres of office space will be added to the project sometime after October 2009, and those buildout costs are estimated at between $30 million and $40 million, Boyer said.

"This is a hole-in-one day for economic development in Provo," said Mayor Lewis Billings. "This area was a landfill (until the mid-'70s) and is only now being brought back to functional use."

Provo City owns the 59-acre parcel and will sell its interest in the property to Boyer under the terms of a developer agreement, according to a statement issued on the city's Web site. As a part of the purchase agreement, the city will be responsible for preparing the site for development, removing the golf course lakes and building replacement wetlands in the area.

"Downtown Provo is gentrifying, old space is making way for new products. Developers are starting to realize the potential in that central business district and the city is aggressive in gentrifying the area," said Eric Gustafson, vice president and investment specialist with CB Richard Ellis in Provo. "With south Provo's industrial center, the MountainVista Business Park, starting to ramp up, it's a great time to put service retail there."

About 50 acres of the golf course will go to the mixed-use project. Several holes of the current Reserve at East Bay golf course are located on this parcel, which necessitates redesign of the golf course. This project will be done by William Howard Neff, the original golf course architect.

According to the city's statement, the development of Southgate will require the elimination of the current executive nine-hole golf course. The remaining portion of the course will be reconfigured in two phases -- with construction starting on Nov. 21 -- to continue to allow 18 holes of play at all times during and after construction. A first phase will involve moving four holes to the location of the existing executive course -- expected to be completed by next March. A second phase, to be completed by Fall 2009, will build four new holes on the former Kuhni property with a new signature island hole.

What the experts say

Real estate analysts say some of the East Bay property's advantages include good arterial access from University Avenue and Interstate 15. Existing retailers at the Provo Towne Centre and near the East Bay Business Center can capitalize on the synergy of having new retailers there, Gustafson said. "As long as there's growth, there's new development and that forces everyone to step up their game, service or product offering."

Some analysts call Southgate a power center, a development that's typically anchored by a major retail anchor or multiple large anchors.

"It'll be like the Meadows at American Fork, where you have Home Depot, Wal-Mart, Kohl's, Target, Costco, and Lowe's," said Jon Anderson, partner and principal broker with Commerce CRG in Utah County. "The East Bay project sits near the center of a lot of roof tops. People coming up from Springville, Spanish Fork, Payson, Provo, Orem and other areas will feed it."

Gustafson said he expects to see more of these mixed-use developments in Utah County especially with the state's strong job growth, a rapidly growing population and low retail and office vacancies.

"Retail vacancies in Utah County are in the 5-6 percent range. That's optimal since anything lower than 5 percent means tenants will be paying significantly more rent. Because we're not overbuilt, vacancy rates are low and our job growth is good, that's why commercial property here is seen as a solid investment by national developers."