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C+CT

Turning an Almost Vacant Corner Parcel into a Sought-After Restaurant Destination

September 9, 2024

The corner parcel, in towns large and small, is a highly coveted retail location: high visibility, great traffic count, easily accessible. But those advantages alone don’t always translate to success for the property. Such was the case with Heritage Square, roughly 30 miles west of Chicago in Naperville, Illinois.

Brixmor is redeveloping the property, at the intersection of Route 59 and the bustling Aurora Avenue, into a restaurant district called Block 59. The $53 million project will demolish 190,700 square feet, said Brixmor vice president of re/development Rich Dippolito. In its place will be 90,900 square feet: 70,400 square feet of new construction for restaurants, an 8,200-square-foot Lazy Dog bar and restaurant that opened in 2020 and a 12,300-square-foot furniture store that will be renovated. Separately, a 50,000-square-foot Hollywood Palms cinema, bar and eatery also will remain. Demolition began in July, and restaurants will begin opening next year. Brixmor expects to complete the project in 2026.

Block 59

Heritage Square sits within Brixmor’s larger, 555,000-square-foot Westridge Court, where in 2021, the REIT completed updates on the facade, lighting, parking lot, sidewalks, landscaping and signage. The Fresh Market and Ulta Beauty anchor Westridge Court, and a Wayfair Outlet is coming. The fragmented Westridge Court had an excess of big-box space in a 6 million-square-foot retail market that had high big-box vacancy, and Heritage Square had become nearly fully vacant. Here is Brixmor's plan to eliminate more than half the gross leasable area of Heritage Square to make the project work within Westridge Court.

Demand for Restaurants and for Walkability

As the company brainstormed, something to the east caught its attention: downtown Naperville. Downtown Naperville has evolved into a retail and restaurant mecca. Brixmor’s team heard rumblings that numerous restaurants were eager to enter the Naperville market but were unable to find space downtown, especially for large outlets. Brixmor began a deep dive and discovered that Naperville has led the Chicago suburbs in restaurant sales for nine of the past 10 years. Lazy Dog has performed well since it opened on a Heritage Square pad in 2020.

Brixmor continued its due diligence by exploring other restaurant-centric projects in Naperville and Chicago, taking note of the combination of elements that made these destinations work: restaurants, retail and more. The “more” for Block 59 is what would connect the retail buildings and the far-flung Hollywood Palms theater.

“The idea of having a central green started to make a whole lot of sense because we could connect the theater to the project,” Dippolito explained. “We have plenty of opportunities for people to shop and then catch a meal, and we thought if we could add an entertainment component for that, then we would really give this part of Naperville something that would supplement what’s already happening in downtown Naperville.”

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That is Brixmor’s goal: not to compete with downtown Naperville but to complement. The walkable green space at Block 59 will serve not only as a bridge to the theater but also as a space for entertainment, programs and gathering, giving the project the identity its previous incarnation sorely lacked. “That ability to create a nexus of engagement with a village green that creates space to look into and look around from is important,” said Mark Lawrence, regional design leader at Block 59 architecture firm and master planner Nelson. “So if you’re in a restaurant, you see other people walking by. That’s a great part of the urban and suburban condition that we need.”

Block 59’s walkable green space

What the Community Wants

Brixmor had thought it all out and had a well-researched plan, but would it be successful? It took its Block 59 concept to the market, querying brokers and industry leaders about the viability. “The response we got was an overwhelming feeling of success,” Dippolito said. “It just felt this would be really great not only for Naperville, but restaurants would really like this kind of a product and [the brokers] either had existing clients who had locations in Chicago or wanted to come to Chicago and Naperville.”

Despite the flood of interest, the Block 59 team knew the importance of bringing the right dining experiences like Lazy Dog to the project. Brixmor looked to the brokerage community again to determine what customers in Naperville desire most in their dining experiences. It landed on a class called polished casual. “It’s not quick-serve restaurants, not fast-casual necessarily, but something that’s a really good-quality restaurant but not at the very high end of restaurants,” Dippolito explained. “That really seemed to be a good fit, so we started marketing around that.” Brixmor partnered with Mid-America and CBRE on leasing.

Intent on creating an inviting environment throughout the project, Brixmor and the architects also have been working with those committed tenants to ensure a variety of covered patios, terraces and veranda-like spaces to accommodate visitors year-round. The property will be chock-full of assembly zones for all four seasons, including an ice rink. Lawrence added: “We have those fantastic wintertime engagement spaces that not every facility has, so we’ve kind of future-proofed a lot of these things from the get-go.”

A view of Block 59 facing east

Will It Make Money?

Brixmor was sanguine about Block 59’s prospects, but the development team had to prove that the project would make money. After all, Brixmor is a publicly traded company, and it has to provide its investors with evidence that a project can generate a favorable return. “We felt the project could be successful but it needed to be successful financially, as well, so we ran our numbers on it,” Dippolito said. “We realized we had a gap.”

That’s when Brixmor went to the city of Naperville, which helped figure out a way to fill that financial gap. City officials weren’t interested in tax increment financing for the project, but they had another idea, a business district. Illinois is among a bevy of states that have this financial tool. It enables a local government to fund improvements, from infrastructure to redevelopment, by netting sales tax from the entirety of a defined business district and reinvesting those funds back into the district. “We realized: If we placed an additional 1% sales tax across just our property, over time it would generate enough sales tax to provide that gap that we were looking for,” Dippolito explained. “It’s a terrific tool, and what’s great for the municipality is it doesn’t come out of their tax coffers because it’s an additional amount that’s being collected as part of sales taxes.”

Now, Brixmor had the backing of the retail community, the brokerage community and the city, as well as a plan to fill an anticipated financial void. Dippolito was keen to note that Brixmor “could not have done this without support from the city of Naperville, both their support for the project but also financial support.” For Block 59, the team provided Brixmor’s investment committee with 10-year cash flows, data on restaurant demand and a promise not to move forward without 60% pre-leasing in place.

That turned out not to be a concern, as the project is 80% pre-leased, including to The Cheesecake Factory, Yard House, Ruth’s Chris Steak House, Piccolo Buco by Cooper’s Hawk, Lazy Dog, Shake Shack, Stan’s Donuts & Coffee, First Watch, FreshFin, Crisp & Green and Velvet Taco.

A view of Block 59 facing west

By Barbra Murray

Contributor, Commerce + Communities Today

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