Slightly more than two years ago, a naked seven acres sat just below the northeast corner of the Prescott Mall. Highly visible from highway 69, the then rock-strewn and weedy patch of unmanicured dirt was, in the eyes of many, “…just plain ugly.”
Today, those passing the same area see an attractive contemporary destination marketplace with 11 diversified stores that attract shoppers from throughout Central and Northern Arizona.
Most the time, in fact, those going to what is now known as the “Shops at Gateway” have to circle the parking lot once or twice to find a prime parking spot.
The prime attraction for shoppers? The anchor, Trader Joe’s, is a South Pacific-themed specialty grocery store that began in California but now is located across the country. The store is the exclusive source for the popular Charles Shaw wine, affectionately known as “Two Buck Chuck.”
Customers come from all directions to shop at the franchise store. It is one of 14 in Arizona. What makes it unique is that it is the only one not located in a metropolitan area.
In contrast, the Valley of the Sun has nine Trader Joe’s locations, and the greater Tucson area has four.
In Prescott, consensus among management from adjacent businesses is that Trader Joe’s is the magnet that attracted other stores to the location.
All but two of the 11 total stores function as regional or national-international corporate franchise properties. The two – Cuppers Coffee Bistro and Colt’s Dry Cleaning – are locally owned by area residents. And both were sited at the Shops at Gateway for one big reason: location.
Why the Shops at Gateway?
Creation of the popular destination marketplace just a few hundred yards downhill from the Prescott Gateway Mall did not come easy.
In fact, Prescott Mayor Marlin Kuykendall says he and some other city officials were “…hammered pretty hard” when the creation of a site for Trader Joe’s (and ultimately, the other stores) was initially conceived.
“But our attitude then was – and still is today – that a primary role of local government is to help the community sustain and improve its economy,” he said.
Kuykendall explained, “Back in 2011, when the City first began considering buying and improving the land, some thought it was unwarranted. But we had a vision that a carefully thought-out plan for a public-private partnership would work. And it did.”
The City did its due diligence. In 2011, it bought the property at the corner of Highway 69 and Lee Boulevard at below the appraised value for $2 million. The City then invested in installing the infrastructure to make the bare dirt marketable.
Through an innovative lease purchase agreement with a Phoenix-based firm, RED Development Co., the property was developed, with the first tenant being Trader Joe’s.
Other nationally franchised stores soon followed, among them, Five Guys Burgers and Fries and Mattress Firm, both major retailers whose businesses rank among the top in the nation for quality of product and service.
And in the past year, still other national brands became players at the Shops. Among them were Fresh Vitamins, Pet Club, Great Clips Haircuts and Hair Care, Verizon Wireless and AT & T Wireless. House of Bread opened in June 2012. It since has closed.
Locally owned Colt’s Dry Cleaning opened a shop in early 2012, and Cuppers Coffee Bistro opened its expansion store only three months ago.
So far, the retailers occupy about 34,000 square feet.
Jeff Burt, economic development director for the City of Prescott, has praised the way the development has surpassed expectations.
“The Shops at Gateway typify a good deal, especially in this highly competitive economic environment. I wasn’t here when the original negotiations began, but I can tell you from 20 years of experience that getting something like this project going is truly challenging.”
Burt joined the City staff about three months ago, having come to Prescott from his previous job as president of the Hamilton County Alliance, a private-public development firm in Indiana.
“What I admire is that the investment has paid off both directly and indirectly for the City and the developer,” he said. ”The developer was able to attract new kinds of retailers, and they, in turn, attracted new customers from throughout the region, not just Prescott. “
Bert said that records indicate some people are coming 100 or 150 miles just to shop in Prescott.
Some of the retailers corroborated Burt’s comments about customers coming long distances. Some travel from as far away as Lake Havasu City and Kingman, and others from Page, Winslow and Flagstaff.
“An indirect benefit of having new customers from throughout Central and Northern Arizona come to these retailers is that they often stay longer, eat at restaurants, buy gas, shop at other stores and sometimes enjoy local entertainment and lodging,” Burt explained.
A Winner for All Involved
Mayor Kuykendall is emphatic in his belief that having a major business like Trader Joe’s come to Prescott is a strong signal to other economic developers that the Quad Cities area has a strong economy.
“We plan to continue our aggressive public-private partnerships when we have those kinds of opportunities,“ he said. “For instance, we think the potential for strong business development is especially strong out near the airport, particularly in a high-tech field like aerospace. And you know what? I think Embry Riddle Aeronautical University is a key player. Its reputation in aviation, aerospace, engineering and scientific excellence will attract sophisticated business partners.”
Kuykendall’s opinion is echoed by Mark Woodfill, City of Prescott finance director.
“What we’ve seen with these new retailers like Trader Joe’s and Five Guys and the others just proves that when we bring new business to the area, it’s great for everyone. Strong sales from new businesses mean more local jobs, more consumer spending and more retail sales tax revenues.”
Woodfill explained that increased sales taxes makes possible better and enhanced City municipal services, which benefit citizens, especially in public safety, parks and recreation and the library.
Perhaps the greatest pleasure the success of the Shops at Gateway has provided the City is that the City already has recouped its $2 million investment in just two years.
The original lease purchase agreement was for 20 years.
However, the City announced in October that RED Development Co. has executed its option to purchase the property where the Shops are located. It has paid back in full the amount of the City’s investment. Beyond that, the City has received 20 months of lease payment, which totals a $207,327 return on the initial investment, says Pet Wertheim, communications and public affairs manager for Prescott.
The payback to the City by RED Development occurred two weeks before RED Development sold the shops at Gateway to another development firm, Cole Real Estate Investments Inc., also from Phoenix.
“I think what we are seeing here is the wave of the future,” Kuykendall said. “Finding a solid economic development opportunity that brings new businesses, attracts news customers from other areas, creates jobs for local people and benefits the entire Quad Cities area – that’s what makes us a destination marketplace for Central and Northern Arizona.” QCBN
By Ray Newton
Quad Cities Business News
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