EXCLUSIVE: IM Properties On How U.S.-Style Lifestyle Centres Can Save Retail And Build Homes

Can you unblock the housing crisis and rescue the retail sector in one superhero move?

It's a big ask — but according to Midlands-based developer IM Properties, it could be done if the U.K. could learn from the approach to mixed retail-residential development in its growing U.S. portfolio.

Ahead of the Future of Beds in Birmingham event on 20 September, Bisnow asked IM Properties Managing Director Tim Wooldridge to explain how.

With the Blythe Valley and Peddimore developments powering ahead, IM Properties are ubiquitious in the Midlands. But the Coleshill-based developer is also growing fast in the Chicago hinterland and their experience in the Midwest could open new development prospects in the U.K.

IM decided to diversify into the U.S. in the heady pre-crash days of the early 2000s. “We’d done work in Europe, and bought some good investments, but we felt culturally it wasn’t working. There were significant differences and we were more culturally aligned with the U.S. than with Europe,” Wooldridge said.

Starting in the unglamorous world of bulky goods retail they formed a partnership with Chicago-based Kensington Developments, and by 2009 they had branched out into developing the banking portfolio of JP Morgan.

“Nobody wanted to touch banks, immediately after the financial crisis, but we provided prepared sites, with 30 year leases, and rents rising by 10% every five years, and we thought to ourselves, what’s not to like?”

They sold out of the bank-site business in 2012 with a healthy profit and, still partnering Kensington, headed from Chicago into the Midwest hinterland following in the wagon-train of supermarket group Roundy’s who had more or less exhausted the opportunities for new outlets in their home markets of Ohio and Wisconsin, and wanted to break into metropolitan Chicago. IM Properties were involved in nine supermarket developments as a result for Roundy’s and sister brand Mariano’s Fresh Market with further stores planned, culminating in 675K SF of new floorspace.

It was in the course of this (still continuing) supermarket adventure that IM Properties alighted on an opportunity on the Milwaukee interstate highway 90 minutes from Chicago. This turned out to be the Corners of Brookfield mall, and after forming a joint venture with the existing owners, it has now been redeveloped as “a premium lifestyle centre.”

The Corners of Brookfield represents the company’s largest single investment in the U.S. to date: the 750K SF scheme offers open-air, premier retail and dining across its 19 acres, as well as 200 luxury residences.

Not Cutting Corners

So what is special about Corners of Brookfield, and what could it mean for the English Midlands?

At Corners IM Properties has taken what was a shopping mall and turned it into a mixed-use centre including residential.

“There’s lots of older malls anchored by struggling department stores: basically those covered malls feel not like the future of retail, but how retail used to be. At Brookfield we’ve mixed leisure, retail and living together, and taken the retail element of occupancy down to about 40%,” Wooldridge said.

“There are opportunities for these tired malls to become redevelopment opportunities, perhaps building on some of the parking space, adding cinemas, bowling, comedy clubs and residential.”

IM and Kensington have formed a joint venture acquisition fund that is now scouting for further opportunities for Corners of Brookfield-type developments. They are targeting urban and downtown retail with residential components on upper floors and new or stalled retail/mixed-use projects which require the confidence of equity to kick-start them from 25K SF to 750K SF.

According to Wooldridge this mixed-use, residential-themed redevelopment of shopping malls could and should find its way into the U.K. market.

“It’s becoming clear that many locations need to add residential to retail in order to support the retail, and that in turn supports the residential," he said. "I think we’ll find there’s a spectrum of residential occupiers — from students, through young professionals, to retirement living, and they all want to be living near amenities. That’s why BTR appeals, there’s lots of scope, in both the U.S. and U.K. markets.”

Steady As She Goes

But it won't be all plain sailing. Not only do local authorities have powerful financial reasons for maintaining existing income with as little disruption as possible, but the government's attitude to build-to-rent development is vulnerable to policy shifts.

"We need to see some willingness from local councils to accommodate their ambitions to the requirements of viability. That will mean changes in planning policy and changes at a national level too because it’s all very well talking about the BTR-housing sector growing exponentially, when it would only take more government regulation to kill it. That’s why we won’t go into the sector feet first.”

IM Properties will be cautious about new residential development, Wooldridge said.

“We have a diverse business, and we’re not going to go feet first into any one sector. So four residential schemes at any one time, each of 200-250 units, would be fine for us.”

Shopping meets living meets leisure has always been at the heart of towns and cities. Perhaps in the future it will be at the heart of Midlands shopping centres, too.

To join the discussion at the Bisnow Future of Beds in Birmingham event on 20 September register here.