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Date: September 18, 1991

Location: Plainsboro

Title: Real Estate/How the Big Decision Was Made at Forrestal Village

Author: George M. Taber

Subject: After eight months of study and four options, Sammis decides on a factory-direct outlet

The gestation period for an elephant is 20 months. The gestation period for a human is nine months. The gestation period for the new Princeton Forrestal Village was eight months. Just before Labor Day, the Sammis Co., a Parsippany-based real estate development firm that manages the Village, announced that next spring the mixed-use development would change its retail focus to become a factory-direct, outlet mall.

Forrestal Village opened in September 1987, and although it won design awards, the mixed-use facility that included top office space together with expensive, tony stores has been a commercial flop. After opening with 85 stores, the Village now has less than 50 retail tenants.

Early this year, and shortly before the Bank of New York took over the Village from Scott Toombs, the original developer, Sammis was brought in to direct the project. Before the real estate depression, Sammis had developed its own properties like The Offices and Village at Bedminster. These days, like many other developers, it also manages other people”s projects.

Sammis senior vice president Mark Yeager led a team that figuratively tore the Village down to its foundation and then re-built it. It was cold and snowy in January, when the new group set to work. Their first task was to take an inventory of what they had on their hands. They found a project that consisted of four parts: the Marriott hotel, 200,000 sq. ft. of office space, a child-care center and a retail complex. Three of the four–the hotel, offices and child-care–were more or less successful, but the retail was a disaster, which had created a widespread perception that the Village was a flop.

The Sammis group then spent six months collecting a small mountain of information about demographics, traffic, commuters and the competition. By early spring the snow was gone, and Sammis had hired Hopewell”s Dana Communications to handle marketing and Montgomery”s Response Analysis to conduct a telephone survey of 500 people within a 60-mile radius of the Village.

The survey, which was completed in May, was not encouraging. The Village had a poor reputation among those who knew it, and a lot did not. Says Robert Prewitt of Dana: “Thirty miles away 80% of the people didn”t know about it.” Village shoppers said that prices were too high and selection was poor.

The Sammis planners soon concluded that they had basically four options:

* Revive the current Village with high-end shops and no anchor store.

* Turn the Village over entirely to offices.

* Develop a town center type of project by adding a few anchor stores and more shops.

* Maintain the current structure but change the mix of stores.

Quickly the more-of-the-same option and the town center one were eliminated. More-of-the-same had not worked for four years, and no one expected it would work now. The town center concept was also a non-starter since it would involve new planning board approvals and also large capital investments.

The weather was getting warmer in June, when Yeager and company began concentrating on the last two options. They talked with retail industry experts about manufacturers” outlets, which is a very popular branch of retailing (see box), but a manufacturers” outlet already existed at Liberty Village in Flemington, which is only 20 miles away.

The survey had shown that the buying public would be willing to make a long trip to a manufacturers” outlet. Moreover, there seemed to be a market opening to the south and east, which do not appear to be currently served by Flemington.

The office-only option also looked good. Although the commercial real estate market has largely been dead for months, there was still a need for Class A space along Route 1. This would have been the faster and cheaper option.

Pressure for some decision was mounting. The current Village tenants wanted some sense of direction, and the Bank of New York also wanted to get things moving.

A project as big as the Village, though, has many constituencies that had to be consulted. One group was town officials in Plainsboro. Another was Princeton University, which owns the land on which the Village rests as well as the Forrestal Center across Route 1. Conversations with both groups revealed that while they were leaving the decision to Sammis, they leaned to keeping some retail in the Village. Says Plainsboro Mayor Pete Cantu: “Our main concern was to see it continued as a high-quality facility. I also think that retail continues to make sense there.” Says Randall Hack, who manages the Princeton endowment: “We like the fact that retail will stay at the heart of the project. That”s a useful amenity to that point on Route 1.”

By the end of July the humidity was up, and it was time for a decision. Sammis officials recommended to Bank of New York officials that the Village be turned into a factory outlet mall. Three still-unnamed manufacturers had indicated that they were ready to sign up to take a total of 9,000 sq. ft. The decision was go.

Now, however, the tough work begins. A factory outlet mall needs a critical mass of 12 to 15 stores, if it hopes to become a destination shopping center that can draw people from 60 miles around. Yeager predicts that by next spring he will have 50,000 sq. ft. of factory outlets filled. The future of the new Forrestal Village will rest on his success in finding those tenants. u

BOX: Hot Part of a Cold Market

One of the few hot segments of the retail industry these days is factory outlets (see Interview). Orlando, Fla. has theme parks and outlets cheek by jowl. In New Jersey there are outlets in Flemington and Secaucus.

Stores like Simms, the clothing outlet, have been selling manufacturers” overruns for years, but in the late 1970s manufacturers started running their own stores, primarily in older shopping centers in need of a new look. Since the mid-1980s manufacturers have been building totally new outlets. The factory stores do not sell seconds, but the same products that are for sale in regular stores.

The big question is how many factory outlets an area will support. Even a successful idea can be overdone.