Thursday, February 14, 2008

Industry Insight: Armond Spikell of Roadside Development


Armond Spikell started Roadside Development more than 11 years ago, after taking the reigns on a retail center development in what he likes to call "Sleepy Hollow." His projects caught many a retailer's eye, and Spikell found himself soon on his way to abandoning the brokerage business, and taking on the development world head-on. With real estate experience aplenty, and a collection of neighborhood-altering projects along the way, Spikell agreed to talk about his new projects, architecture and the pitfalls of developing in DC.

DC MUD: What made you enter the real estate development business and how has it changed since then?

Spikell: I had been developing some smaller projects on the side while being a broker, and found one project that my partner Richard Lake had been working on for several years, a piece of land in Virginia owned by a family that was very involved in real estate, but not retail. Someone had brought them an offer to lease the land and develop something we thought was an awful project. Richard showed it to me and I said, ‘don’t let them do that, that would really be a shame. Maybe we ought to develop something for them.’ So we put together a development plan and a pro forma and brought in a fellow that had been one of Richard’s first clients in the leasing business, Todd Weiss. The three of us met with the land owners and showed them our plan and they liked it. We said, 'we’ll joint venture this and build it.' So we built this shopping center, and one of the anchors was a CVS drug store. CVS started talking about having a preferred developer program and asked if we would be interested in participating. So we met with CVS, helped them fashion a preferred developer program, and we started building drugstores. That’s when we named ourselves Roadside Development; since we were building small strip shopping centers and drugstores, we thought it was a perfect name.

DC MUD: Have things changed much since then?

Spikell: I guess in ten years a lot changes. One thing that changed is that the shopping center development business became a lot more competitive than it was when we started. It was a couple of companies that were driven by large investment funds that seemed to dominate that business. That wasn’t us. We’re different – some developers, their goal is to put money to work. When they look at a potential project the goal is how much can we get invested, and how much return can we get? We’re a little different. Every one of our projects that we’ve done so far, we’ve done with a different partner, and they’ve all been good partners, but we pick the partner to match the deal, not the deal to match the partner. It gives us a lot more flexibility.

DC MUD: So would it be fair to say that you try to see where you can have the greatest impact?

Spikell: I think our approach is more of creative problem solving. Starting with the needs of a land owner or retailer, and sometimes an investor, but in the case of our Potomac Town Center project, there an investor was anxious to make an investment in that market, bought the land along with a development plan and then brought us in to modify the plan to make it work more profitably, then carry it out. So our approach is more problem solving.

DC MUD: So how do you make decisions on what’s worth developing and what’s not?

Spikell: We look at sites and we think ‘Is there something we can do that’s creative and productive?’ The other thing is, since we don’t have a particular product type that we feel we have to build, a lot of it is looking for opportunities to build projects that are in tune with the community. What we find is, when you go into a community, they’re your customers, and if you want to bring retail, you want to bring retail that your customers want and will patronize. And so there’s a certain synergy there that makes a lot of sense. Purcellville (one of Roadside's retail center projects, pictured at right) is a great example. Maybe it would have been more productive for that land to build fast foods and gas stations, but it’s really not what people wanted. What they needed, what there was demand for, was some upscale retail, so that everyone didn’t have to get in their car and drive out to Leesburg. So, it worked out great for us

DC MUD: Let’s talk about some of your projects; they always seem to be near or around Metro stations, that’s not a coincidence is it?

Spikell: No, we’re big believers in Smart Growth. Since we work in the greater metropolitan area, we work in Howard County, Prince William County, Loudon County, Fairfax, Arlington and Alexandria. And when you have a regional perspective, it becomes all the more clear that for our quality of life and our ecology in general, Smart Growth is very important. It’s very important to have clustered growth where we have the infrastructure in place already. Sprawl is something that should be discouraged. And if you look at retailers that serve urban communities, oftentimes they’re in locations that they secured years ago, and then everything filled in around them. Now when they need a modern facility, they don’t have the space to put their typical prototype, so you have to be very creative. And if you’re near a Metro Stop, it allows you then to build valuable residential that’ll pay for some of the outrageous costs. Like in the case of our O street project, we’re putting all of the truck loading underground. Now a retailer, by itself, could not afford to pay for that. But the fact that there’s residential in a fabulous location within walking distance to gallery place and downtown and has the metro, the residential is paying for that. It’s great synergy. Everybody wins.

DC MUD: Back to O Street Market, we got some questions from some of our readers about whether the Giant Market will be closed during the time construction. Will it?

Spikell: You know, we figured out this very clever phasing plan for Giant, where we could work around them, and then open the new store and close the old one. And they looked at the plan, and they said given the size of this project, where we’re going to be digging this very deep hole and taking out tons and tons of mud out of the ground right in front of our store, it’s not a great environment for our customers, and it’s not a great environment to sell food. So they decided that it probably would make a lot more sense to close down. So the deal we have is that we must complete the store in no greater than two years from the date they close the doors. So in the meantime, we’ll be running shuttle buses to the nearest Giant.

DC MUD: How about architecture, when you’re seeking an architect, what do you look for most?

Spikell: It depends; sometimes we look for an architect who has a lot of retail experience, who kind of gets it and understands the needs of the retailers because retail is a function of business, and the buildings have to function properly, otherwise it’s very expensive and has a significant impact on the bottom line. The other thing is having somebody who designs interesting and high quality projects. It’s a little different; some developers may look more at cost effectiveness and productivity. Those are important, but they’re not the most important things for us.

DC MUD: Are there any architects that you particularly like?

Spikell: The team that we work with most is Shalom Baranes and Rounds VanDuzer. Rounds VanDuzer is, I think, one of the best retail architecture firms in the area. They are very creative, they do attractive buildings and they are very, very experienced with retail.

DC MUD: What about the current market conditions. Do they have an affect on your operations?

Spikell: I mean if you’re talking about the Washington market on a general basis, it’s a terrific place. The local economy is healthy, it’s still producing jobs and the oversupply of housing will get absorbed, and the demand will create a market for new housing. It’s a matter of time. Now we see something very interesting happen in retail. Whenever there’s a slowdown nationally, we get more interest in Washington for retail. The reason is, retailers are driven to expand, and public companies always want to show growth. Now if you have to open stores, where do you look? Well you say, ‘what are the strongest markets, and who’s doing best?’ Washington’s always on that list, and so all of a sudden they always focus more on Washington. Retail can be a little counter-cyclical here, that’s why we get more interest when the rest of the nation is ‘soft.’

DC MUD: Why Shaw, and do you think your timing is good there?

Spikell: Yeah I think our timing is excellent. Even with the current softness of the market, I wish our building was done already – it’s a fabulous location. Already some of the great restaurants are moving in, and I think there will be a lot of new shops opening, and there will be the best grocery store in the entire eastern United States, I think. It’s going to be the biggest grocery store in the city. That being said, if you walk a block, east or west, from our location, you’re on beautiful streets that have wonderful bones. You know, Shaw had its problems with crime, but I think the way you get rid of crime is to get rid of blight. Unfortunately our market building caved in, but we’re going to fix that and I think it will have a real positive effect on the neighborhood.

DC MUD: If you could change one element of the development approval process, what would it be?

Spikell: I think it would be better if we could get the scope and density of a project entitled, separately from having to provide all of the detail and design. In a P.U.D. you’re really answering a lot more questions than I would like to answer before you know whether or not you’ve got something that’s viable. What would be best is if you could go in to a zoning commission, or whichever agency, and say ‘here’s the concept of what we want to do, here are the major elements, here’s the amount of density, here’s how tall the buildings are going to be, and here are the benefits.’ And get them to entitle that before you have to design it and show where every window and every door is, because that’s a different level of design. And I think it’s a detriment to have to go to that extent of design, just to find out whether or not the density and the height is going to be acceptable. And after spending all of that time and money and getting guidance from the Office of Planning, you could go to the Zoning Commission and then get shot down, and I think it would be better of this staged it.

DC MUD: Stage one for functionality and stage two for the design details.

Spikell: Yeah. And in suburban life they have a site planning process, and you do that first. And once you’ve gone through the site planning process and you get entitled, then you go and you do the rest of the design. That I think would be an advantage. If it could proceed quickly and allowed for reasonable flexibility.

DC MUD: What do you think is the most important aspect in developing a successful project?

Spikell: I think it’s producing something that the market will accept. That’s got to be the most important.

DC MUD: If you had to pick one area in DC with the most economic potential, which would it be?

Spikell: Oh Shaw. Although I will say, you know Shaw is realizing its potential now, but I think there are areas in DC that are just, just beginning. I mean everywhere there’s a metro station, you look at Rhode Island Avenue and Fort Totten. Rhode Island Avenue is a good example; you’ve got industrial uses clustered around metro stations close to downtown. You know that’s not going to last. Fort Totten has major projects already underway. Same thing with Petworth is already underway, and along the green line. No question that those are the places where the greatest opportunities are. And I hope they all develop as good walking neighborhoods.

DC MUD: Your next generation of buildings, will they all be green?

Spikell: Yes. They’re going to be green to the greatest extent that we can make them green. We’re looking at doing a couple of things that are unusual, we’re trying to study new ways that we can do mixed-use. We learned something interesting with Cityline, we never took advantage of it, but I wish we had. We had a retailer there, Best Buy, who never turns on the heat. In the coldest days of the winter, they don’t need heat because they have all these electronics in the store that create heat. And I wish we had a way of utilizing that. So what we’re doing in both our Glebe project and our O street project is: the grocery stores have refrigeration systems that take heat out of the freezers and coolers. What do you do with that heat? In a typical suburban grocery store, they take it up to a unit on the roof that blows it out into the air. We’re looking at ways that we can reclaim that heat that’ll make a difference. The other things that we’re planning on doing are out there already, you know, green roofs and energy efficient appliances and lighting. Both of those grocery stores are very likely to be LEED certified, and we can’t take all of the credit for that because both of those companies, a lot of retailers, are getting on the bandwagon, because its smart. Its smart business.

7 comments:

Anonymous said...

cityline is one of my favorite projects. hands down.

IMGoph on Feb 14, 2008, 8:14:00 PM said...

if roadside doesn't get hamstrung by the city and the whole 'process', their shaw project will kick ass. major ass.

DG-rad on Feb 15, 2008, 9:55:00 AM said...

i love these interviews. keep it up.

otavio on Feb 17, 2008, 4:02:00 PM said...

I have also enjoyed the interviews! Great work!

:-)

Anonymous said...

me too. whos next?

Marcus on Feb 22, 2008, 12:26:00 AM said...

Great Interview

Anonymous said...

Yeah right about them running shuttles to the nearest Giant

 

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