City Creek

Niagara Falls, the Hollywood Walk of Fame and the Great Smoky Mountains will all share one thing in common with City Creek when the 23-acre outdoor center opens on March 22, 2012. Namely, City Creek will join a handful of locations that draw more than 10 million people each year.

That’s more than 27,000 visitors every day, nearly double the number of people that currently visit Utah’s five national parks combined, according to Jim Buchanan, research coordinator for the Utah Office of Tourism.

City Creek’s visitor numbers may be hard to swallow, but not for Nicolai Schultz, development manager for Michigan-based Taubman Centers Inc., one of the development partners of City Creek. In an interview with Salt Lake REALTOR Magazine, Schultz said City Creek will be one of the nation’s largest mixed-use redevelopment projects. And he points to Temple Square – the state’s No. 1 tourist attraction and the nation’s 16th most visited tourist destination, according to Forbes Magazine. About 5 million people each year make a visit to Temple Square, more people than visit the Grand Canyon.

Besides, shopping is the No. 1 tourist activity, according to Schultz. “When you put together the ski hills, the attractions that Salt Lake has to offer as well as Temple Square, the 10 million figure doesn’t seem so big.”

This is City Creek, a high-density residential mixed-use development, where no expense has been spared. In fact, some estimates place the new development at $1.5 billion to $3 billion. According to government building permit records, the project is valued at $491 million (cost of buildings, not land).

Mark Gibbons, president of City Creek Reserve Inc. (the downtown Salt Lake City real estate development arm of The Church of Jesus Christ of Latter-Day Saints) won’t confirm any figures, but he does acknowledge that hundreds of millions of dollars are being spent on an extensive framework of storefronts, residential towers and a labyrinth of underground parking stalls.

City Creek has not only changed Salt Lake City’s skyline, it is in the right position for how future people will live, work and dine, according to Chris Nelson, presidential professor of City & Metropolitan Planning at the University of Utah and director of the Metropolitan Research Center.

Nelson has spent a career in planning management. Downtown Salt Lake City, he believes, will easily attract 20,000 new households by 2040. With City Creek and other amenities, downtown Salt Lake could easily attract 40,000 households or roughly 80,000 people. “The future of downtowns everywhere is residential,” Nelson said. “The City, Chamber, Board of REALTORS®, and others need to take a hard look at the future demand nationally for downtown living and commence a long-term marketing plan targeting those prospects.”

City Creek’s outdoor setting is in striking contrast to the former in-door malls that once occupied the area. The new mall will feature retractable roofs (providing a climate controlled shopping experience), a pedestrian sky bridge over Main Street and a massive water feature that will include elements of fire (designed by WET Design – the same company that designed the Fountains at Bellagio in Las Vegas). Even a man-made creek, complete with waterfalls, will run through the middle of the mall, a representation of the historic City Creek stream which was the primary water source to the Mormon pioneers and continues to be a water source today.

Page 2 of 3

For Salt Lake’s economy, the timing couldn’t be better. The project has employed up to 2,000 direct workers. “City Creek will be a massive draw and a powerful tool for the revitalization of downtown Salt Lake,” according to J.R. Moore, a retail specialist with CB Richard Ellis in Salt Lake City. “We should all be thanking the LDS Church and Taubman for doing this project. If this project wasn’t occurring right now, we would all be in a worse economic state than we are now. It’s supplying a lot of jobs.”

Taubman Centers, one of the nation’s leading commercial real estate investment developers, places City Creek in the category of super regional shopping centers. Taubman’s list of operating properties extends across the globe, with pre-development plans in the works for giant retail spots in places like Waikiki, Las Vegas, New York City and Incheon, South Korea. However, most of those plans are on hold while the world continues to recover from a recession that has devastated most commercial markets. Here in Utah, retailers are still reeling from rising vacancy rates and falling lease rates, Moore said. Except for fast-food restaurants, you won’t find many new retail projects under construction. And the same holds true across the country.

“City Creek Center is the only regional shopping center actively in development in the nation,” Schultz said. “We are bringing in not only names that are recognized, but new tenants to the area. That is one of our hallmarks of our centers.”

The economic downturn has done little to deter the LDS Church from moving forward. No debt financing is funding the project. Faithful Mormons need not worry that their tithing dollars are being used. All Utahns can be assured that no public funds are going into the development, according to Dale Bills, director of communications and marketing for City Creek Reserve Inc. “Some costs of the project will be recouped from sales of residential units and leasing revenues generated from retail and office space,” Bills added. “Other funding comes from church-affiliated businesses.”

When it is completed, 80 new retail stores – anchored by Nordstrom and Macy’s – will be surrounded by 425 residential condominiums, 111 rental units and a Harmons grocery store. A 1,000-seat, 11-kitchen food court is already open. A children’s play area is in the works and the center will offer Wi-Fi. Roughly 30 to 40 percent of the expected 80 retail tenants will be new to the Utah market.

The surge of people expected to visit City Creek Center will be complemented by hundreds of more people that will live at three residential centers: Richards Court, The Regent and Promontory. Roughly 700 new households will be added to the downtown area. Yet City Creek condos will largely appeal to so-called empty nesters, particularly wealthy retired couples. Asking prices range from $200,000 to $2.5 million (roughly $200 to $1,000 per square foot).

But the competition for well-heeled buyers could be fierce. The median price of all condos sold in Salt Lake County in the first six months of 2010 was $150,000, down 6 percent compared to a median sales price of $159,000 during the same period in 2009.

Add to a tough economy a 99-year (plus) airspace lease on condos sold at Richards Court and some buyers may hesitate. No decision has been made on whether units at The Regent or Promontory will be sold as long-term leases.

Page 3 of 3

Housing prices across the Salt Lake area have lagged over the past three years. Since the second quarter of 2007, the median sales price of all residential properties has fallen 13 percent compared to the second quarter of 2010. In the first six months of 2010, more than two-thirds of all homes sold in Salt Lake County were priced under $250,000. Only 5 percent of closings were for homes or condos above the half-million dollar mark.

Yet compared to other U.S. cities, Salt Lake’s housing downturn has been mild, according to Gary Cannon, co-owner of Salt Lake-based RE/MAX Associates. “The Wasatch Front has been insulated compared to the rest of the country,” Cannon said. “We’re in a much better position because of our job and population growth.”

Celeste Council, a REALTOR with Urban Utah Homes and Estates, said many people are interested in City Creek’s condos, until they hear the price.

“Many buyers don’t understand how the church intends to sell them at the price they are asking,” Council said. “This is not San Diego. This is not San Francisco.”

This past summer City Creek announced it had lowered prices to the mid-$100,000s on The Regent, a 20-story tower at 35 East 100 South. A local newspaper article on the price reduction generated enormous interest, according to Christopher Corroon, director of sales for City Creek. To date, 91 of the tower’s 150 units have been reserved ($7,500 reservation deposit), including the tower’s four exclusive penthouse suites. In nearby Richards Court 13 condos of the 90-unit Richards Court have sold. Another 14 are under contract. Sales have not yet started on the 30-story Promontory tower (185 units).

“Most of my buyers are buying under $250,000, especially if they are looking at condos, and a majority of them are looking under $200,000,” Council said. “At the higher price ranges they are generally looking for a home.”

None of that may matter if wealthy out-of-state Mormons are willing to pay a premium for a view of Temple Square, according to Craig Lelis, broker with Coldwell Banker’s Sugar House office. Lelis believes there are enough out-of-state Mormons who have the means to buy a City Creek condo. “This is the only residential development right across from Temple Square,” Lelis said. “There is a growing downtown community. A lot of these warehouse type condos and lofts have been selling.”

Still, Jim Wood, director of the University of Utah’s Bureau of Economic and Business Research, believes high-end condos are a tough sell, especially in the likelihood of a double-dip recession.

“City Creek’s advantage is it is the nicest mixed-use project ever done in Utah,” Wood said. “Their disadvantage is they’ve come on the market in the worst real estate climate we’ve seen in 50 years.”

But with no debt, City Creek is one of the few projects that could ride out any recession. Time, it appears, is on City Creek’s side.

Dave Anderton was a newspaper journalist for more than 10 years and is the communications director for the Salt Lake Board of REALTORS®.