Entertainment Districts: The Business Behind the Fun

Food Court at Tempe Marketplace. © Michael Baxter

It’s far from fun and games when it comes to developing entertainment districts in the Valley. Filled with movie theaters and arcades — part of a category called “amusements” by tax collectors — as well as restaurants and bars, the districts contributed a growing share of the nearly $551.7 million that the Arizona Department of Revenue collected from these categories in the fiscal year ending June 30, 2012. Based on a 6.6-percent tax rate, that means Arizona restaurants/bars and amusements had combined revenue of more than $8.3 billion for the year.

To make them work, it’s all about the planning. That’s best demonstrated at The District at Desert Ridge Marketplace and Tempe Marketplace, properties developed by Phoenix-based Vestar. “It starts with a community having a need,” says David Malin, Vestar’s director of acquisitions & development.

For Vestar, additional factors needed to come into play. Each property had to find the right site — ideally, a “super-regional” site, as Malin calls it — that offers enough space. “It has to be a venue for thousands of people,” he says. In the case of Tempe and Desert Ridge parcels, that’s 130 acres and 120 acres, respectively. And part of that space must meet daily needs such as grocers and retail as well as entertainment venues such as Dave & Buster’s if people are to be expected to drive up to 20 minutes to get there, as is the case with the two properties. “It’s important to put together the critical mass,” he says.

Public space on the campus of Mesa Arts Center.
© Downtown Mesa Association

To make sure the shops, movies theaters and other businesses stay put so patrons keep coming back, relationships are important. “Unless you have relationships with tenants, they don’t form partnerships that last,” Malin says. Plus, “as they say: location, location, location,” Malin adds, noting there needed to be convenient access to major freeways. Both destinations are near stretches of the Loop 101 and Tempe has the extra advantage of being adjacent to the Loop 202.

Specifically for each entertainment district, which Malin calls “a mall without a roof,” its position was partially dictated by the shape of the sites — square in Desert Ridge and more rectangular in Tempe. That resulted in Desert Ridge’s district being placed in the middle and ringed by a road. For Tempe — remember the 202? After Vestar learned it carries 650,000 cars by the property each day, the result was the district and its mini Times Square of lighted signs being built on the north side of the property, alongside the freeway.

Sometimes, the luxury of building from scratch just isn’t there. But when the right combination of outside forces comes together, it can’t be ignored. That’s what’s happening in Mesa. Consider: The Mesa Arts Center is already established, colleges have announced plans to locate campuses in the city, the light rail is coming — and even a brewery has opened its doors. “All are pieces of the puzzle to make [an entertainment district] successful,” says David Short, executive director of the Downtown Mesa Association.

He explains that a district presents more opportunities for different uses of existing buildings. It “adds more vibrancy” to the scene, he says. Although Mesa still carries an image of a place where everything stops when the sun goes down, there are no complaints arising over bars and restaurants with late-night hours, Short says. In fact, with more people coming downtown at night, “more people on the street actually make it safer,” he says.

There have been concerns about cleanliness expressed by people no doubt well aware of the outrage expressed by neighbors of Old Town Scottsdale who complain about what happens in their own front yards when bar patrons descend on area. Since the entertainment district will take shape over time, “we’ll be able to monitor it as it grows,” Short says.

Sometimes, an existing entertainment center gets a second chance at success, as is the case with Westgate City Center in Glendale. New York-based iStar Financial, Inc., the new owners of the floundering complex adjacent to the Jobing Arena, have turned to Vestar to manage the property that is being renamed Westgate Entertainment District and tap into its potential. Malin says his company’s marketing department already is planning projects and events to increase traffic. “We’re trying to recreate everything that we’ve created in Tempe and Desert Ridge,” such as tree lighting ceremonies and ice skating rinks that are draws in the holidays.

In some cases, success never has a chance because plans never get off the drawing board. Such was the case with the Jackson Street entertainment district proposed on parcels adjacent to the sports centers in downtown Phoenix. But trying to do it all at once was part of the problem, says Don Keuth, president of the Phoenix Community Alliance.Plus, it was“on a bridge too far” from the action already underway, he observes. “Once we hit the economic downturn, it was not going to happen,” Keuth says. The end result was the partnership that owned it filed for Chapter 11 bankruptcy protection. Part of the land has now been purchased by a San Francisco real estate investment firm that has announced plans to build apartments in the area.

But the party isn’t necessarily over for downtown Phoenix. Enter CityScape Phoenix, the complex of restaurants, bars and clubs that filled a void for entertainment seekers downtown. On any given weekend night there can be as many as 5,000 people at the venues in the complex, Keuth says. “It’s just going to continue to grow,” he says. To the tax man’s delight, results so far show the same can be said for entertainment district development.