Nearly nine years ago, El Paso energy magnate Paul Foster purchased the old Farah manufacturing plant and announced plans to demolish the sprawling eyesore and build a shopping center in its place.
Once a major economic driver that employed thousands of El Pasoans, the 50-acre plant along Interstate 10 on the Eastside by Cielo Vista Mall had long been vacant.
But Foster had made his fortune in the oil refining business and the project would be his first foray into retail development, so he needed a partner who knew the business.
He chose West Miller, a Dallas-based retail developer with more than 20 years of experience in the industry. The partners aimed high, promising to build an upscale lifestyle center and to recruit new retailers to El Paso.
With Foster, one of the richest and most successful businesspeople in El Paso, and Miller, who has probably developed more grocery-anchored centers in Texas than anybody else over the last 15 years, behind the project, many hoped it would attract the upscale brands El Paso had long lacked.
The Fountains at Farah quickly became the most- hyped retail venture in El Paso.
The project started in 2008 with a drawn-out battle over city and county tax breaks and a bitter skirmish with mall operators worried the center would pirate their tenants.
Before the outdoor mall would open, there would be a great recession. El Pasoans would send tweets, emails and Facebook messages to Miller asking for stores like Trader Joe’s, Cheesecake Factory and Pottery Barn.
Locals posted receipts and selfies on the “Bring IKEA to El Paso” Facebook group to show the distances they were willing to go to buy Swedish furniture they might have to assemble themselves.
The Fountains at Farah officially opened last November, after more than 3,000 workers built the outdoor mall in a year. Now, it is 80-percent leased and many tenants are beating their opening sales expectations.
Miller, 52, grew up in Corpus Christi, where his father worked as an ad valorem tax consultant.
Miller earned an accounting degree from the University of Texas at Austin and worked in the accounting business for a year before he was picked up by retail development company Lincoln Property.
Fifteen years later, Miller and some of his colleagues left Lincoln and started a private real estate investment trust, or REIT, called Pacific Retail Trust, with the help of El Paso businessman Bill Sanders.
The Dallas-based REIT later merged with retail giant Regency Centers where Miller was a senior vice president from 1998 to 2009.
Back then, real estate was booming and Miller developed about 20 shopping centers totaling about $300-million for Regency Centers. But Regency began downsizing its operations when the market went bust in 2008 and Miller left. He founded Centergy Retail in Dallas, developing The Fountains project with Foster.
El Pasoans will have to wait on IKEA, Miller said, but West Elm, a home furnishings store operated by Williams-Sonoma, will open a 22,000-square-foot store at The Fountains. It will be the first West Elm in the region and one of the company’s largest when it opens this fall.
The Fountains can be thought of as two shopping centers. The top level has big stores like T.J. Maxx and Nordstrom Rack. Below is the promenade – the higher-end, lifestyle portion of the shopping center with fountains, pedestrian walkways and a small amphitheater. A 1,100-car parking garage connects the two levels.
Besides The Fountains, Centergy Retail is also working with Foster on plans for a retail development at Interstate 10 and Artcraft on the Westside. The company is also developing a 35-acre project in Fort Worth called Left Bank that will have a mix of residences, retail, hotels and offices.
Miller sat down with El Paso Inc. at La Madeleine Country French Café at The Fountains and talked about El Paso’s hidden purchasing power, selling the city to upscale retailers and why West Elm is in but IKEA is not – for now.
Q: In general, how is the El Paso economy doing?
It is a very active, vibrant market. But unlike Dallas or Houston or Austin or Los Angeles, where you see the purchasing power, there is a hidden purchasing power in El Paso. Most of the retailers and restaurants here are experiencing that almost half their business is a cash business. That’s just the culture here on the border, so you really can’t get a handle on how much wealth is really out there.
The banks don’t even know how much wealth is out there, because so much of the business is done by cash, which is not a bad thing. I believe this market has less debt because of that and is a more solid market potentially than a Houston or Dallas.
And that’s great for retailers. Retailers would rather have somebody walk in with cash than a maxed-out credit card, and that’s what happens here more so than any other city in the United States.
Q: How is the foot traffic at The Fountains so far?
We started out with higher traffic than expected. As with all new shopping centers, it takes a little while for people to find out that it is there and who the tenants are. It will continue to grow.
Q: What kind of feedback are you getting from retailers?
Almost all of our retailers and restaurants are doing better than expected. Most of them were new to the market and had never been to a borderplex much less El Paso, so they really didn’t have a good idea of what to expect. It may be that they underestimated their pro formas, but the good news is they are outperforming their expectations.
It has been announced that La Madeleine is one of the top performers in the chain. They had no idea it would perform this well, which is a good indication of what our future restaurants are going to do.
Q: But some did not meet expectations?
Like all shopping centers, we have a few that are not meeting expectations. We have a few soft goods retailers in the promenade that could be doing better, but that’s because we are being very selective. We have passed on probably enough tenants to lease completely the entire promenade level, because we want the higher-end restaurants and retail.
They didn’t start out at their expectations primarily because we had just opened and most of the general public didn’t know there was a promenade level here. But the sales are growing every month for the retailers that didn’t start out as well as they would have liked to.
I can tell you the traffic in the promenade level has probably increased 25 percent just from adding La Madeleine.
Q: Right now, The Fountains is the city’s ‘latest and greatest.’ Is it going to stay busy?
This center is not only the state-of-the-art in El Paso; it is the latest and greatest in the entire country, because there were effectively no shopping centers being built from 2008 until now.
Because of the poor economy, you couldn’t get financing, tenants weren’t expanding and everybody shut down. However, we kept marching forward and stayed with our plan and luckily we had an owner who was willing and able…
Q: Paul Foster?
That’s right. Who was willing and able to continue to move forward from a financial standpoint.
Q: How much was invested in The Fountains?
I can’t disclose our costs, but it is a very considerable investment.
Q: How involved is Foster in recruiting retailers? Is he on the phone with them?
That’s my job. Paul is involved where he wants to be involved. He and his wife Alejandra, who is in the operations business in Juárez and on the U.S. side, have been helpful.
Q: She’s a longtime franchisee with Domino’s Pizza.
She met with us when we brought in the West Elm brand to give them a flavor of how to operate in a borderplex market. Her comments and suggestions were very well taken and most likely helped to bring them to El Paso.
Q: How did you recruit West Elm?
It’s relationship driven. Although this is my first West Elm deal, West Elm is a Williams-Sonoma company and I’ve made several Williams-Sonoma and Pottery Barn deals in the past.
You first have to get the tenant interested in what they consider to be a secondary market. They consider El Paso a lower-income market versus a Los Angeles or Dallas, and it’s not on their radar screen.
Q: But are they right? El Paso is home to one of the poorest zip codes in the nation.
Overall, it is a lower-income market than some retailers are prioritizing.
However, there are some very wealthy pockets in the borderplex, and we’ve seen El Paso lose some of that market share as those shoppers go to Phoenix or Dallas because El Paso didn’t really have this type of shopping venue, but now you do.
It may take us a few years to get the tenant mix we want, but in 20 years, this will be one of the premier outdoor shopping centers in the state of Texas and probably the country because of the purchasing power it offers.
Q: How have you gotten higher-end retailers like West Elm to look at El Paso?
We pointed out to them some of the sales volumes retailers are experiencing at Cielo Vista Mall next door – it is some of the top in the country. You have 52 enclosed malls in Texas, and we understand that Cielo Vista Mall is in the top five from a sales-per-square-foot standpoint.
But, more importantly, more retailers are selling over the Internet, and they can see where the customer is buying from. That was part of West Elm’s decision; they had online sales from the El Paso/Juárez area.
Q: That said, what do you think is keeping stores like IKEA from jumping in?
It’s not necessarily income related. It’s that you have retailers, like an IKEA, who have a lot of what they consider low hanging fruit – major markets that they can go to first before an El Paso.
But, I will tell you, there’s not anybody you can mention that we don’t believe we haven’t contacted, including IKEA, and that is our job – to expose retailers to the purchasing power of the borderplex. I do believe someday we will have an IKEA in this market.
Q: At peak shopping hours, the traffic has been bad. There’s a lot of covered parking, but it seems like many people haven’t found it tucked away as it is. Are you doing anything to fix the traffic problem?
Absolutely, you’ve seen that we’ve put up some temporary wayfinding parking signs, and we’re working on a major wayfinding and sign package now.
We wanted to wait until we knew what the retail/tenant mix was going to be and we could see the traffic patterns to know how to address it.
In the summertime, when it gets a bit warmer, the parking garage is going to be well known. This is the only shopping center in El Paso that has that format of covered parking.
Q: Is wayfinding enough or is the problem with the design of the center and its location next to a big mall?
It probably has the best ingress/egress of any shopping center I have ever built. We have five entrances off of Gateway, and in time consumers will find which one they can come in and out of the easiest. We even have an ingress/egress that a lot of people don’t know about off of Viscount.
Q: Any new tenant announcements you can share?
We’ve signed several tenants recently: Kona Grill, La Madeleine, Grimaldi’s. Grimaldi’s will be El Paso’s very first coal-fired pizza.
We are negotiating with several retailers that are in high demand who like to follow West Elm.
West Elm signed a 22,000-square-foot lease, which is larger than 90 percent of their stores around the country. West Elm is a very key tenant and will bring retailers that like to follow it around.
You can go on the Internet and look at any shopping centers that have West Elm and you will see a consistency of the type of retailers that will follow those around.
Q: Can you name some?
I don’t want to name any and infer that we are negotiating with them, but we are in negotiations with very good retailers that like to follow the West Elms, the La Madeleines, the Kona Grills and the Grimaldi’s.
Q: During the grand opening celebration for The Fountains, Foster said, ‘We’ve only just touched the surface.’ What did he mean?
This center will get better and better over time, just by the nature of the design and the style and the tenant mix. We really haven’t brought the type of retailers yet that we anticipate being in this shopping center and it will evolve over time.
Email El Paso Inc. reporter Robert Gray at firstname.lastname@example.org or call (915) 534-4422 ext. 105.