COVER STORY

After a rocky start, Gulfstream Park sees a new way to move beyond racing

 

cteproff@MiamiHerald.com

Gulfstream Park has seen its share of financial adversity, so perhaps it’s no surprise that the racetrack and retail center’s latest bid for reinvention looks so epic.

Next year, the owners plan to install a giant Pegasus statue 11 stories tall, with the bronze-and-steel winged horse trampling an equally massive dragon at its feet. Stretching 220 feet long and shipped in 60 packing containers from China, the $30 million statue represents Gulfstream’s boldest venture yet: the centerpiece of a planned destination called Pegasus Park, which eventually could bring in Ferris wheels and water slides to beef up the current draws of dining, shopping, slot machines and horse racing.

“This will be the biggest attraction south of Orlando,” said Gulfstream general manager Tim Ritvo.

Renderings of the 110-foot-tall statue — where automobiles look like Matchbox cars below the horse’s feet — capture Gulfstream’s ambition in creating a landmark that Ritvo says will be striking even for airline passengers above.

The statue also represents a sharp turnaround from Gulfstream’s recent plans to be the region’s next great shopping center. Now, Gulfstream wants to emphasize fun more than fashion and beef up its entertainment options. The summer of 2013 was the first to have weekend races, ending Gulfstream’s seasonal schedule in hopes of creating more traffic for the property. The park plans to expand its spectator grandstand with the goal of winning back the prestigious Breeder’s Cup.

“There is a lot more to come,” Ritvo said.

The past several years may be some of the toughest ever for the nearly 75-year-old racetrack, which got its start during World War II and still hasn’t fully found its footing after horse racing lost its allure with many gamblers.

Gulfstream’s slot machines pull in the least amount of revenue among its competitors, according to state records, and the racetrack filed for bankruptcy protection during the recession. A long-delayed launch of a new mall and office complex in 2010, the Village at Gulfstream Park, brought disappointing sales and an abrupt departure of a national operator that warned before it left that the center might not be sustainable.

And while retail sales have been growing by double digits, revenue remains soft, according to financial reports, and the shopping center still has about 20 percent of its space to rent. Original plans called for Gulfstream by now to have added a 250-room hotel and 500 condominium units on its way to becoming a mixed-used destination with the added attraction of gambling.

Instead, the delays and management turmoil have left Gulfstream somewhat on the sidelines of South Florida’s rebound in retail properties.

“I think the perception now is it’s going through changes. The owner is trying to bring that area up to the level where it should be. I think a lot of tenants are taking a wait-and-see attitude,” said Mickey Finkle, a retail broker at Koniver Stern, a Miami Beach firm that represented many of the home retailers that were Gulfstream’s first retail tenants in 2010. Finkle said that clients generally tell him they feel comfortable in malls targeting the high-end of the market, the low-end and the middle, but “what we don’t like to do is go into a market that’s in a state of flux.”

But Gulfstream executives describe a solid pace that will have their property out front in due time.

They blame past weak sales on poor management by the Village at Gulfstream’s former manager and co-owner, Forest City. With both the casino and the shopping center now under the same management, Gulfstream owner Frank Stronach is rolling out a strategy that leverages its unique offering — horse racing — into a family destination, with enough entertainment options to satisfy all tastes.

In 2010, Stronach’s company bought out Forest City’s 50 percent share of the Village for $14 million, according to securities filings. At the time, Stronach’s deputies acknowledged the mall’s retailers were struggling and said they wanted to shift the property into more of an entertainment focus with added night-life offerings and kid-friendly entertainment options.

Stronach’s team sees the Pegasus statue as an apt symbol for the park’s aim to become an entertainment destination for South Florida. Executives recently revealed the coming arrival of the Strike 10 bowling alley and said a movie-theater announcement will be made in the coming days or weeks. (An earlier deal for a high-end cinema, announced in early 2012, apparently fell through.)

The family-friendly atmosphere is what draws Heather Anderson and her family to Gulfstream almost every weekend. On a recent afternoon, she and her husband, brother and sister-in-law sat at a table near the fountain.

“There are so many thing for the kids to do,” she said, saying the open atmosphere helps. “It’s just very comfortable.” Added her brother, Keith Penziner: “They have done a very good job of keeping the gambling and adult world separate from family time.”

Shoppers with kids in tow now can dine at Cool-de-Sac, a full-service restaurant that also features building-block stations, play beauty salons, and a jungle gym for children to enjoy while their parents have a nice meal.

“We think Gulfstream is a perfect fit for us,” said Francisco D’Arcy, manager of Cool-de-Sac. “We see a lot of potential here.”

With nearly 300 acres of land well situated east of I-95 and nearly midway between Miami and Fort Lauderdale, Gulfstream boasts an enviable location in one of the country’s most sought-after markets. Its open-air design offers a more affordable and roomier alternative for retailers to the nearby Aventura Mall, and Gulfstream actually snagged one of its anchor tenants from that popular shopping destination for the Village’s 2010 opening.

“It’s a gorgeous product,” said Arthur Milston, a managing director at Savills, a real estate services firm. “It is in a dynamic location. It’s phenomenal real estate.”

Technically termed a “lifestyle center” for its village-style layout (shoppers walk in the open air from store to store, rather than in an enclosed complex), Gulfstream wants to fill its land with enough uses to sustain each other. The $245 million Village project included a 125,000-square- foot office complex, whose high-profile tenants include the headquarters of the Zumba fitness empire. The original plans also call for an additional 300,000 square feet of retail to add to the nearly 400,000 square feet already open. While the original plan called for a 1,500-unit residential complex, Gulfstream executives say they’re close to launching a 200-unit condominium project on the property.

“Gulfstream is in its infancy,” Ritvo said during a recent tour of the property. Ritvo said that the owner’s plan for Gulfstream is to reinvent racing so “it’s no longer your grandfather’s sport.” While racing will remain the focus, he said the idea is to make Gulfstream a mini-city where people come to live, work and play.

“There is a lot more to come,” he said.

Should Florida agree to allow Las Vegas-style casinos outside of Indian lands, Gulfstream could enjoy a major windfall. After Malaysia-based Genting Group upended the gambling industry in 2011 buy purchasing large chunks of land in downtown Miami, including what was then the waterfront headquarters of The Miami Herald, Caesar’s Palace reportedly linked up with Gulfstream as a partner for a future casino resort if the law ever allowed it.

For now, Gulfstream enjoys its status as a slots casino. With 900 slot machines, Gulfstream generated about $49 million in slot revenue last year, according to state records. That’s down 6 percent from the prior year but still about 16 percent higher than receipts from the year before the shopping center’s 2010 opening.

South Florida’s other slot casinos at race tracks and jai-alai frontons bring in more money: the nearby Mardis Gras casino, at the former Hollywood Greyhound Track, recorded $51 million in slots revenue last year. The Isle of Capri slots casino, at a harness racing track in Pompano Beach, brought in more than both combined, with slots generating $126 million. Gulfstream has its slots on two floors but hopes to eventually build a stand-alone spot for the gambling facility.

The casino and racetrack filed for Chapter 11 bankruptcy protection in 2009 as part of a wider filing by Stronach’s Magna Entertainment, which owned tracks across the country. A 2010 court filing for the Gulfstream track and casino showed it recording about $2 million a month at the time. This was during construction of the Village, and executives pointed out their gambling traffic was disrupted.

Stronach eventually reorganized the company and exited bankruptcy protection still in control of Gulfstream. But he faced a new shopping center saddled with a rough economy and a strategy that Gulfstream executives now see as too reliant on shopping.

The 410,000-square-foot shopping center opened in early 2010, a time when spending was just beginning to rebound from a sharp downturn in South Florida. Premier tenants Crate & Barrel, the Container Store and Pottery Barn thrived, but Forest said its soft-goods retailers — such as clothing stores and boutiques — struggled. One problem: the heat as shoppers walked open-air sidewalks from one location to the other. Restaurants came and went in the opening months, as well.

Securities filings by publicly traded Forest City told a grim story: when the center opened in early 2010, Forest City valued its 50 percent share of the venture at $102 million. Within a year, it had dropped that value by almost 70 percent, knocking $70 million off its balance sheet as it dealt with what it described as “a longer lease up period than originally anticipated and increased rent concession to the existing tenant base.”

By the spring of 2012, Forest City wrote down the value to zero, warned investors the shopping center was not generating enough cash to make debt payments and that foreclosure was a possibility.

In July 2012, Stronach’s group bought out Forest City’s 50-percent share of the shopping center, paying the company $15 million, according to Forest City filings. Stronach recently negotiated an extension on their debt, and has reported no overdue payments in quarterly disclosure statements to investors.

Gulfstream does not disclose sales figures, but publicly available financial reports suggest revenue figures far below industry norms. Hallandale Beach allowed Gulfstream to create its own taxing district to build the shopping center. Along with retaining some property taxes, the district charges customers a .05 percent tax on all shopping-center sales to fund the center’s parking garage, roads, landscaping and sewage system. Gulfstream borrowed $106 million for the effort, and special property tax and sales tax go toward the project’s yearly $4 million debt service payments.

In the 12 months that ended Oct. 1, 2012, the Gulfstream Park Community Development District reported about $365,000 from the sales tax — meaning it would have recorded $71 million in sales.

That’s 12 percent higher than the prior year’s $64 million tally. But even with the growth, the sales figure falls below industry averages. In its most recent report, Forest City reported average sales of $480 a foot for its portfolio of 44 retail centers and the International Council on Shopping Center reports average sales-per-foot of $460 in a recent report.

In a 2012 analysis, the Bal Harbour Shops ranked No. 1 in that category, generating $2,555 in sales per square foot. Gulfstream’s nearby competitor, Aventura Mall, was listed at $1,100 per foot.

Gulfstream executives would not confirm or deny the sales figure imputed by the fee revenue.

But Lesllie Vasquez, assistant general manager at Village of Gulfstream Park, noted that the mall was under Forest City’s control during the time of the report. “There was very poor management in the past,’’ she said.

A Forest City spokesman declined to comment.

The next steps for Gulfstream aren’t firm. While the Pegasus statue components are set to make their journey from China early next year, it’s unclear whether a full amusement park will follow. Gulfstream’s owners temporarily dropped plans for an amusement park from their zoning application when they hit resistance from the city’s planning department, and the retail complex has notified lenders it will stretch its final construction plan five years into 2022.

But with an addition of about 250 horse stalls, the track’s larger stables have allowed it this year to expand its racing offerings. Already, weekend races are on the schedule — bringing in more foot traffic that Gulfstream executives hope will boost sales at shops and restaurants. While the racing season typically ends in April, 2014 will be the first with a summer schedule, too.

The added activity means an optimistic outlook for Herb Barker. He owns the Barker Animation Art Gallery in the Village, where a life-sized statue from The Simpsons out on the sidewalk helps draw customers into his store. He called signing his Gulfstream lease “a smart decision” that is looking smarter.

“I have a lot of faith,” he said, “that it is only going to get better.”

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