The Thing That Ate Downtown

Downtown’s real estate barons are terrified that Perot-Hicks’ slick Victory project could wreak havoc on their own tax-funded plans to fix the city’s core

One of the other developments in the mix, the renovation of a north-south block between Main and Elm, is under way. "Mine was funded a year ago," says owner Thomas Taylor, who expects to draw restaurants and stores to the pedestrian-only stretch of historic, two-story buildings dubbed Stone Street Gardens. So far, Taylor says he has one new restaurant signed and a few more interested. "For the four or five weeks after September 11 there wasn't much activity," he says, but he hopes to see more interest once construction is further along. The city is providing $876,000 in incentives to attract Taylor's $2.6 million private investment--meaning a public investment of roughly 30 percent.


Although the relative scales are different, West Palm Beach holds a few lessons about the steep hill traditional downtowns face in competing with a single, well-capitalized developer.

Signs of life: A one-block stretch between Main and Elm streets is being redeveloped into a quaint row of restaurants and shops called Stone Street Gardens. All it needs now is tenants.
Peter Calvin
Signs of life: A one-block stretch between Main and Elm streets is being redeveloped into a quaint row of restaurants and shops called Stone Street Gardens. All it needs now is tenants.
Ross Perot Jr. and Tom Hicks hired Palladium to develop their land at the arena. The company's Victory development, displayed above in an artist's drawing, would arrive as an instant cityscape--except one landlord would run it all.
Mark Graham
Ross Perot Jr. and Tom Hicks hired Palladium to develop their land at the arena. The company's Victory development, displayed above in an artist's drawing, would arrive as an instant cityscape--except one landlord would run it all.

Palladium's CityPlace, which was built with more than $80 million in city help, roughly doubled the size of West Palm Beach's downtown. In the remaining part, centered on a 100-year-old stretch of Clematis Street, smaller local developers had been working since the early 1990s, with about $2.5 million in tax help, on renovating what was there.

One of the most vigorous was Andrew Aiken. "We began back in 1993 trying to bring this place back to life," he says. Buying small, two-story and three-story buildings along a five-block stretch, Aiken and a partner put in clubs and a few stores, and thanks to a Thursday-night pub-crawl, they drew people in the door. "We made live/work lofts and tried to make it a cool, happening neighborhood," he says. "We got the first Starbucks in Florida and then some other big retailers. We got a Gap, a Tommy Bahama, a Banana Republic.

"Then our mayor decides she wants to redevelop this huge 70-acre site, and they bring in CityPlace. They passed municipal bonds. All along they're telling us, 'Don't worry. Our market is gonna expand yours, too.'

"Don't get me wrong. Palladium does a great job. They worked very positively with the city, and they achieved something pretty close to Disney World. They poured a ton of dough into it. But lo and behold, the market didn't grow 100 to 200 percent. It grew by 1 or 2 percent, and we're all competing wildly for customers. A lot of cool businesses on Clematis, they're shuttered."

Because CityPlace brought in its own Gap and Banana Republic, Aiken says the outlets on his street are likely to close when their leases are up. "We're over-retailed. The way it works here is all their tax increment goes to them, and jobs are being lost downtown."

One of the biggest problems on Clematis Street, Aiken says, is that it never developed its own big draw to compete with Palladium's movie house and theater, a made-over Spanish-style church at the center of the restaurants and stores.

Some people suspect Palladium, through its meddling in a key building on their side of town, helped it turn out that way.

While CityPlace was still in the planning stage in 1997, Aiken says he learned a former Burdines department store had gone up for sale. The vacant and deteriorating three-story building takes up a whole block of Clematis.

Aiken says he and other local developers were interested in the building. "We had a lot of interest for a movie theater to go in there."

When he went to make a bid, though, the owners' agent told him a New York high-rise developer had come into town and within a week or two put a sales contract on the building.

The developer, David Edelstein, told the Fort Lauderdale Sun-Sentinel in a July 12, 1997, story that he planned to tear down the entire block to make room for a movie theater, a 250-room hotel, 100,000 square feet of office space, a multilevel parking garage and "other entertainment venues." It sounded so grand, a city planner wondered aloud how that much building could be stuffed onto a single block. The story's headline: "Downtown Restoration At Hand."

It turned out that the company Edelstein contracted to do the development was none other than The Related Cos., Palladium's parent. A spokesman for the company confirmed that Related had signed such a deal, and stories in New York newspapers show that Edelstein and Related had real estate dealings in the past.

The timing was more than useful to Palladium, which was lining up tenants for CityPlace--including a multiscreen movie theater--and months behind a city-set schedule.

"It's hard to prove intent, but when you're on both sides of a competitive situation, you control the game," says Woodrow Melvin, a Miami attorney who is representing one of the building's former owners in a lawsuit against Related. He says there were plans drawn up for the Clematis building, wining and dining, and nothing but delays.

"It all seemed a little funny at the time. It was just hardball real estate," agrees Jeff Koons, a former West Palm Beach city commissioner, who nevertheless says Palladium did "an excellent job" on CityPlace.

In April 1998, Related's chairman, Stephen Ross, made known his interest in the Burdines building and talked up some plans to the local press. Two weeks earlier, though, Edelstein had put the shell company he set up to buy the property into bankruptcy, setting up more delays. His filing in the U.S. Bankruptcy Court in Manhattan claimed he had a dispute with one of the building's owners, who tried to cut himself in on the deal. The filing was later thrown out.

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