August 31, 2015
River Oaks Properties, one of the largest retail developers in El Paso, has big expansion plans. In an interview with El Paso Inc. last week, River Oaks president Adam Frank announced the company’s plans to invest $200 million in shopping centers in El Paso over the next five years. River Oaks, founded in El Paso in 1968, will add more than 2 million square feet to its portfolio, Frank says, building shopping centers mostly on the Eastside but also in Northeast El Paso. He is particularly bullish on Far East El Paso where the company has purchased a lot of land, having sold much of its undeveloped land on the Westside. Frank, 36, was raised in New York by his mother. It was the September 11 attacks that would bring him to El Paso to work for his father-in-law. Frank met his wife, Dana, who is from El Paso, while attending the University of Michigan. He graduated with a bachelor’s degree in liberal arts unsure of what he wanted to do. He landed an internship trading stocks in New York, which eventually became a job trading stocks for a hedge fund at the start of the dot-com boom. “I really loved Wall Street,” Frank says. “It was a really fascinating time.” On the morning of September 11, 2001, Frank was at Citigroup’s headquarters less than six miles from the World Trade Center, and he was on the phone with a broker who was in one of the twin towers when the first plane struck. “It was really, really traumatizing,” Frank said.
His father-in-law, Gerald Rubin, offered him a position with the family business in El Paso. So Frank worked briefly for Helen of Troy – the publicly traded company founded by Rubin. It’s better known by the brands of its products such as Vidal Sassoon, Braun and Dr. Scholl’s. Frank joined Rubin’s other company, River Oaks, in 2003 and was promoted to president in 2006. River Oaks only invests in El Paso, and manages about 150 shopping centers, including El Paseo Marketplace in Far East El Paso and the Shops on Mesa on the Westside. Frank and his wife have three boys ages 6, 9 and 11. He serves on the boards of the El Paso Downtown Management District and El Paso Chamber of Commerce. He is also involved with the Sun Bowl Football Selection Committee and El Paso Jewish Federation. Frank sat down with El Paso Inc. and shared the ins and outs of the retail business, the company’s big growth plans and what it might do with two busy Downtown corners.
Q: The September 11 attacks brought you to El Paso? Would you share with us your experience?
I was sitting at my desk at the top of the Citigroup headquarters, at 53rd and Park, when 9/11 happened. It was about 8:45 a.m. and the planes started hitting. It was really, really traumatizing. I was on the phone with a broker at Lehman Brothers for the morning stock briefing, and he says, “Oh my gosh! Something just happened in the building. It felt like a bomb or something. I gotta go.” He hangs up the phone, and he was in the World Trade Center. I don’t hear from him. The story ends OK. He got out safely on a ferry. Unfortunately, I had good friends who didn’t make it out. I get down to the street, and if you look from midtown towards downtown on Park Avenue, you see billowing smoke. There were police on every corner, people crying, sirens and bumper-to-bumper traffic. I call (my wife) Dana to tell her to turn on the TV and to see if she knows what’s going on. Later, Jerry (Rubin), my father-in-law in El Paso, called and said, “You have no kids. You’re young and married. Are you sure you want to spend the rest of your life in Manhattan?” We said we didn’t know. He said, “Why don’t you come work for me in El Paso at Helen of Troy and learn the business?”
Q: How has River Oaks changed since you joined the company 11 years ago? We’ve grown dramatically. One of River Oaks’ early properties was the Promenade shopping center on Mesa and Remcon. Jerry always tells the story of how, when he bought the land and built the center in the early 1980s, it was really the end of town. The city didn’t really stretch into the Upper Valley yet. People thought Jerry was a big risk taker wanting to build that shopping center. We still lease it today. That’s part of why River Oaks has been successful over the years. We like to take risks and go into areas that are new.
Q: You said the company has grown dramatically? How? The biggest game changer for River Oaks was we owned a large amount of land on the far Westside for future development, but we saw a big opportunity on the Eastside. We knew that there was going to be a lot of housing development out there, and we piggybacked on that. We sold all the Westside land and purchased a lot of land in Far East and that has been our trajectory. Today, we are the busiest we’ve been in 10 years and have a lot of projects on the horizon.
Q: What did you guys see that spurred you to look east? We saw master plans for future residential and the potential for dramatic growth at Fort Bliss after the 2005 Base Realignment and Closure process. The land at Montana and Joe Battle, which you know as the old El Cruzero project, it will be a huge project over the next couple of years and will feed off of Fort Bliss, the new hospital and all the other growth going on in Far East. We’re calling it Montana Commons. It is probably about two years away.
Q: What is your plan for Montana Commons? The previous owner of the 114 acres, Cesar Viramontes, planned to build a large mixed-use “urban village” there.
River Oaks does retail. We are not going to get into the residential business, but we will work with other developers to create a cohesive mixed-use development.
Q: Will the land be zoned Smart Code? It may be. “Smart growth” works in certain areas. I think Montecillo on the Westside is a good example of that. It looks great and I eat there all the time. Young people are moving there. There’s demand for it. Will that work on Zaragoza in Far East El Paso? I don’t know. I think people like their backyards, their garages, their houses. Would you like to walk to a Super Target and carry bundles and bundles of things home? You want to get in your car and drive.
Q: It seems like the Eastside has become the destination lately for “fast casual” restaurant chains like Mama Fu’s or La Madeleine that are new to El Paso.
I think what happened was as those different businesses started to come, sales were very, very good. El Paso sales for a lot of fast casual dining and discount retailers are pretty much off the charts.
Q: How much property does River Oaks manage? We have a few million square feet of retail with close to a million square feet in design and development. We’re in this huge growth cycle. River Oaks is growing faster than we ever have before.
Q: What’s the plan? Basically, we are going to be in a 10-year development cycle along Joe Battle and along Zaragoza. In addition, we just broke ground on a large Northeast project called North Hills Crossing, which would be the first major power center to open in Northeast.
Q: Many Northeast residents will be excited to hear that since it has long been said that the Northeast is underserved by retail. How big is it? It’s a 30-acre site. It will have a 200,000-square foot retail center with a grocery anchor.
Q: Have you announced any of the tenants yet? No, we haven’t.
Q: When you talk of investing $200 million in retail construction over the next five years, are you talking about strip malls with dollar stores, dry cleaners and fast food joints or is demand increasing in El Paso for higher-end retail development? There are certain retailers that are very successful in El Paso and want to open additional locations because of that, and discount retail is huge. At the same time, we’re seeing a shift. You’re seeing the demographics improve in a great way, which is attracting new retailers that are definitely a step up.
Q: A lot of retail has opened in El Paso over the past couple years – the most notable being the big Fountains at Farah center. Can the market sustain it all?
When you say “a lot,” it’s actually not when you compare it to other metroplexes. If you look up Dallas, Austin or Houston, they build in excess of a couple of million square feet a year. We’re a very entrepreneurial-based society here in El Paso. There are a lot of mom and pops. You could say I’m in the service business as well. I’ll build a 20,000-square foot strip center and we’ll have an insurance agent, the dog groomer, the dentist and those are not necessarily all retail, right? Somebody will call me and say, “I just passed my test for State Farm. I got my license and I have my clients.” And for $20,000 a year they get to rent a space and open their own business.
Q: How do you evaluate tenants? What might be a red flag? Somebody who calls and says, “I make the best tacos. I’ve never had a restaurant – I’ve never had a business – but I know my tacos are going to sell.” You can’t just call up and say you want a space, write a check and we’ll give you the keys. We look for experience and financial performance.
Q: As you’re building all these new centers, what is happening to the old ones? Have they remained occupied? We continue to reinvest in our properties, freshen them up, put up a new facade, and put on a new roof. At Mesa and Executive, we have an old center – the one with Firestone, Coney Island and Fast Signs. We decided to redo the entire facade. It looks fantastic.
Q: Do you have any concerns about the El Paso economy? El Paso is pretty stable. The economy is very military and public sector dependent though. They are talking about another Base Closure and Realignment round in 2017, and there is the potential to lose some troops at Fort Bliss. We need to bring in more private sector job growth, which I think the mayor is doing a great job of.
Q: What kind of return on investment do you expect from a center? That’s probably not something that I want to disclose.
Q: Does the El Paso retail market pose unique challenges for retailers? Being on the border, we do get a significant portion of our retail sales from the Mexican consumer. El Paso also has a large cash-based economy. That poses challenges in tracking how certain retailers are doing because a lot of their research is based on credit card receipts and zip codes.
Q: When you go to trade shows to recruit retailers, do you still have to show people where El Paso is on the map, or has the reaction changed? It has. Absolutely. You have this big metroplex here that people have been trying to talk up, which has been under the radar. But more retailers are hearing about the success of the chains that are here. They perform well and then want to open multiple locations. We brought Dunkin Donuts, and we did three with the new franchise concept. I think we had the first Chipotle. El Paso may not be the first choice, but once they get here they see the results and they’re happy.
Q: What is the vacancy rate for retail centers here? It’s very, very low in El Paso. For River Oaks, I’d say it’s probably less than 7 percent.
Q: The business community is fired up about property valuations. Some have reported wild swings in their valuations. Has River Oaks experienced anything like that?
We have, and the challenge is that the property taxes get passed on to the tenant. A JC Penney or a Conn’s can withstand that to a certain degree, but it really eats into the bottom line of mom and pops. We have a huge staff here that handles property taxes and valuations, and it’s getting very high. Part of the problem is that there seems to be no method to the madness. A consultant handles our property taxes. We pay him, and he’s the one benefitting.
Q: How often do you have to protest the valuation? Every year we have to protest the valuations on just about every single property.
Q: Is there a solution? Do you back proposals put forward by the Greater El Paso Chamber of Commerce? I do. I’m involved in the chamber and was involved in the process. The Appraisal Review Board (ARB) process is the part that I have the biggest problem with. I was just out there a couple of weeks ago protesting the valuation of a certain property. It doesn’t feel like the ARB members are knowledgeable about real estate.
Q: Over the past two years, River Oaks has demolished a handful of buildings in Downtown, sparking opposition from historic preservation groups. You now have two busy corners mostly cleared for development – one across the street from the Plaza Theater. What are your plans? We’ve stayed actively involved with the city and their consultants as they’ve discussed plans for the bond issue and Downtown. The corner by the Plaza Theater I think it’s a perfect site for a children’s museum, potentially. The corridor could also use more parking. It’s very close to the ballpark. The other corner is at San Antonio, Mesa and Oregon streets. Downtown retail over the years has weakened and weakened, so I had this half square block Downtown that was 100 percent vacant. There weren’t any tenants out there, so there was no return; and it was too cost prohibitive to redevelop the existing structures.
Q: Are there buildings worth preserving in Downtown? Yes, absolutely. I’m a retail shopping center developer. We did have large historic buildings in Downtown. We had the Martin Building, Newberry Building and the Banner Building, and we sold those to Lane Gaddy who is restoring them. So in some ways, you could say we played a big role in starting this hipster Downtown redevelopment growth. I’d love to see a great Downtown. The ballpark is fantastic; it is one of the best things to happen to the city in the past 11 years I’ve been here.
Q: Would River Oaks consider growing outside of El Paso and building centers in other markets? El Paso is what we know, and there are still significant opportunities here. Maybe talk to me in another 10 years when there’s no more land for me to build on on Zaragoza. Right now, there’s so much to do here.
Email El Paso Inc. reporter Robert Gray at rsgray@elpasoinc.com or call (915) 534-4422 ext. 105.