The “Right” Tenant?

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// WEEKEND

When Claudia Merson drove down Chapel Street in 1995, the city seemed asleep.

By the time Merson had finished dinner and was driving back to her room at the Colony Inn, the patchwork of service stores that lined Chapel Street were closed, and the neighborhood was pitch black. From her window at the aging inn, the same spot where the posh Study at Yale now sits, Merson could see littered streets, abandoned store fronts, and — right across the road — a community center with broken windows.

“It was a pretty run-down place,” said Merson, who directs public school partnerships for the Office of New Haven and State Affairs (ONHSA). “Everything just used to get so dark.”

But today, when Merson drives through downtown late at night, she sees a bright and vibrant city bustling with students and New Haven residents alike. What was once a neglected area known first and foremost for violence and high crime rates is now a shopping district filled with big-ticket retailers like the Apple Store and J. Crew, and popular restaurants like Chipotle and Panera Bread.

It’s a transformation for which Yale is largely to thank. Founded as a part of ONHSA two decades ago, University Properties (UP) manages Yale’s commercial and residential properties in New Haven. Its primary mission is to attract a diverse mix of “high-quality retailers” that will increase traffic downtown. Since its founding in 1996, UP has accumulated over 80 retail tenants and 500 apartment units in the areas surrounding campus, including on Broadway, Chapel, Whalley Avenue and in the Audubon district. Although Yale is exempt from paying taxes on its educational buildings, it pays nearly $4 million on its commercial real estate property each year — making it one of the city’s highest taxpayers.

According to ONHSA Director Bruce Alexander ’65, this investment has changed New Haven into “a vastly different place” from what it was two decades ago. He said that the notion that tenants like J. Crew or Maison Mathis would choose to operate in New Haven would have been “unthinkable” in the ’80s. And in surveys about impressions of downtown, Alexander noted that visitors have expressed increasingly positive sentiments, reporting that they like the retail mix and feel safer at night.

But even though UP has undeniably turned the downtown district around, its presence has made some residents question the University’s motives when it comes to engaging with the city. Many residents, including some Yale students, see UP’s retail mix of upscale tenants as catering to the wealthy and excluding a significant segment of the New Haven population who cannot afford to shop at high-end stores like L’Occitane en Provence and Jack Wills. And recently, when the owner of Gourmet Heaven — Yale’s tenant at 15 Broadway — was arrested for wage theft and other offenses, city leaders and community activists criticized the Ivy for not taking a stand on social justice.

At the end of the day, although University officials label UP a “town-gown partnership,” others wonder whether the investments are a marker of Yale’s expanding influence in New Haven.

 

A NEW IMAGE

Armed with a proposal that he hoped would change the course o f New Haven’s economic development, Alexander headed to a meeting at the Rose Alumni House, walking past an array of liquor stores, barber shops and vacancies on Broadway Ave. It was 1987, and Alexander was the chair of the Urban Advisory Committee, a group charged with giving then University President Benno Schmidt ’63 LAW ’66 advice on how to revitalize the deteriorating city. Schmidt had just announced that the University would invest $50 million from its endowment into developing New Haven. And after hearing students and community members report that they felt unsafe in downtown New Haven, Alexander knew exactly where the money should go: Broadway.

Alexander pledged that the revitalization would “set the image of New Haven” for many visitors and serve as a catalyst for development in the rest of the city. The Yale Investment Office took up Alexander’s proposal. The office began to purchase properties and, in 1996, created UP to focus exclusively on New Haven real estate.

Today, the office continues to strive for a particular image around campus — one characterized by high-quality and aesthetically pleasing tenants. The University keeps high standards for its tenants, such as requiring them to lengthen their businesses’ operating hours and create an elegant façade for their storefronts. With its vast financial resources, UP can afford to keep its properties vacant — sometimes for over five years — until the “right” tenant makes an offer.

“You could fill all of Broadway with fast-food chains, but that’s clearly not something that we want to do,” Alexander said. “One reason we have been able to maintain the quality [of UP] is by not compromising on the quality of the tenant.”

To maintain its pristine image, UP works with Elm Campus Partners, a New Haven-based property management company that coordinates UP’s maintenance efforts such as planting flowers and cleaning the streets and sidewalks. UP also requires that its tenants live up to high aesthetic standards, mandating, for example, that Gourmet Heaven display flowers on the sidewalk on Broadway. And, to draw more customers who might otherwise turn to shopping malls, UP requires its Broadway tenants to remain open until 9:00 at night.

According to University officials, these rules have been instrumental in driving foot traffic to downtown, and in maintaining a safe and pleasant environment. And many New Haven residents support these efforts. Sheila Masterson, Executive Director of Whalley Avenue Special Services District, who has been in New Haven since 1979, said she “could not say enough good things about UP.”

“More than 20 years ago that place was a pretty scary place to go,” she said. “The gardens were all overgrown. It was so overgrown that most of us had no idea that there was a War Memorial at that triangle that’s near Ivy Noodle.” She added that Yale’s “sprucing up” has made the area a great place to shop and grab a cup of coffee.

The new face of New Haven has had the added effect of making the University more competitive among other institutions located in urban settings. Whereas the decision between Cambridge and New Haven was once a no-brainer, the work of UP has made deciding between the two cities a much tougher call. Both of the parents of Sarah Landau ’17 graduated from Harvard College, but she decided to apply early to Yale in part because she found the retail options on Chapel Street and Broadway attractive. She liked Cambridge better overall, but the work of UP made New Haven “good enough” to compete.

“If the stores and restaurants brought in by UP weren’t there, I would have had to really consider it,” Landau said. “I don’t know how it would have impacted my decision, but location would have then played a bigger role in my decision and it would have been a point in favor of Harvard.”

Students like Landau are a testament to UP’s progress in making New Haven a much more attractive place to study and live. But for Julia Calagiovanni ’15, their work was nowhere near a factor in her decision to come to Yale. If anything, UP left her feeling uneasy.

When Calagiovanni participated in the ONHSA-sponsored President’s Public Service Fellowship the summer after her freshman year, Alexander gave a presentation to the summer interns, describing ONHSA’s work to bridge the town-gown divide. She remembered that the presentation included pictures showcasing the aesthetic changes of Broadway between the 1980s and 2000s. In spite of the overwhelming differences between the two, she felt that the University focused too much on marketing its own image of New Haven, rather than helping the city to improve.

She said that the presentation seemed to depict J. Crew as “the best thing that Yale has done.”

“Sometimes we all need to buy our business casual clothing,” she joked, “but I don’t think a city is better because it has a J. Crew. I think a city is better because it is a humane place to live.”

 

SCRUTINIZING A LANDLORD’S ACCOUNTABILITY

“Humanity” and “social justice” have been buzzwords lately in conversations about one of UP’s most popular tenants: Gourmet Heaven. The grocery store garnered media attention last August when the Connecticut Department of Labor discovered that manager Chung Cho was paying employees well under the minimum wage — as one employee told the News in November, as low as $4.44 per hour. In an exclusive interview with the News, several employees said that Cho imposed threats on their housing and job security and forced some to work up to 72 hours a week. The scandal has spurred student protests against unjust worker treatment   and raised the question of how much accountability Yale shoulders for its tenants’ actions.

The DOL arrested Cho on Feb. 20 and charged him with 21 felony counts of violation of wage payments greater than $2,000, 20 misdemeanor charges of defrauding alien workers and one first degree larceny charge, according to online records. Although UP released a statement last fall condemning the injustice allegedly happening on its property, the University failed to take any action until March, said Evelyn Nuñez ’15, president of Yale’s social justice group MEChA de Yale.

Students in MEChA wrote a letter to UP last fall requesting a meeting with University officials  to discuss the issue. Nuñez and Community Action Chair Cathleen Calderon ’17 met with Alexander and two of his coworkers and asked that they take action. ONHSA said that there was nothing they could do until they verified that the allegations against Gourmet Heaven were accurate, Nuñez recalled.

When Nuñez and Calderón met with Alexander again in March, ONHSA was receptive to taking steps to prevent an incident like this from  happening again.

“They are looking into ways that they can change how they approach their contracts with tenants so they can ensure that they don’t have to worry about tenants being involved in wage theft,” Nuñez said.

Still, she said that the University has not yet taken any concrete action — something she would have liked to see last August, when the DOL first found that Cho was mistreating employees.

City officials, including Mayor Toni Harp, also criticized the University for failing to oversee its tenants and monitor wage theft. In response to Cho’s arrest, Harp called on Yale to protect the wages of workers in University-owned properties.

“They probably could exercise more oversight. They have very strong contracts with their business owners,” Harp told the News following the arrest in February. “We would just hope they would oversee those so that this embarrassing condition doesn’t exist anymore there or at any of their other facilities.”

Nuñez expressed the same sentiment, noting that UP’s stipulation to have flowers on display suggests that they certainly have the ability to enforce proper wages.

The future of Gourmet Heaven’s relationship with Yale remains unknown. Following the arrest, University Spokesperson Tom Conroy said that the University had not decided whether it would renew the grocery store’s lease in 2016. And this week, Associate Vice President for ONHSA Lauren Zucker said in an email that Yale is focusing on “getting employees treated according to the law” as opposed to determining the future of the space.

 

FIELDING CANDIDATES FOR 1 BROADWAY

While national issues of workers’ rights play out at Gourmet Heaven, a different set of concerns about college students’ dining and retail preferences are the focus just steps away at 1 Broadway. The building has sat empty since UP refused to renew Au Bon Pan’s lease last May, triggering speculation and debate among students and community members about what tenant University Properties will choose.

In talks with potential tenants, UP must consider practical issues  like what brands the 10,000 square feet space could accommodate. Stores like Target, which average 126,000 square feet, cannot be considered as potential candidates. It also faces some broader questions with bigger consequences. Should the eventual shop cater mainly to Yale students, or should it bridge the gap between town and gown? Should the shop be specialized and high-end, like much of the retail on Broadway, or should it offer a wide range of affordable products? Ultimately, what should be the goals of UP now that New Haven is safer and more vibrant than it has been in decades?

In late March, Alexander said UP would likely announce a deal within 30 days. Because a contract has not yet been signed, Alexander would not comment on which tenant may greet the Class of 2018.

One potentially controversial tenant has already been ruled out; Alexander said in March that Brooks Brothers, a high-end men’s clothing store, will not be coming to 1 Broadway. Abdul-Razak Zachariah ’17, who grew up in West Haven, 15 minutes from downtown, expressed relief. A store like Brooks Brothers, he said, would be financially accessible only to a small segment of Yale’s student body.

James Doss-Gollin ’15, a native of New Haven, finds the shops not only unaffordable, but also functionally useless.

“The upscale stores and boutiques, they are pretty to walk past but as a student it’s not something I’d ever shop at,” Doss-Gollin said. “I feel that it’s a wasted opportunity to bring in stores like that.”

Doss-Gollin wants to see a drugstore or office supply store at 1 Broadway, while Zachariah thinks a branch of locally owned soul food restaurant Mama Mary’s could offer a community gathering spot for college students and New Haven residents alike. He believes the current mix of shops on Broadway further removes campus from the city because the collection of chain stores lacks local color. Moreover, their existence discourages Yale students from venturing further into New Haven.

“Students and visitors think that they’re experiencing something by going to a shopping center in New Haven, but they’re really going to a shopping center in Yale,” Zachariah said.

Because of the high rent at 1 Broadway and the strict contractual obligations UP imposes on tenants, the property is likely to be leased to a national chain. Alexander said UP has reached out to “virtually every retailer in America,” including Express, H&M and Banana Republic. But UP’s options are often more limited than students complaining about high prices might imagine.

Despite the resurgence of downtown New Haven in recent decades, many retailers do not want to open branches here, Alexander said. Space restrictions limit potential sales volume, and well-established malls with convenient parking and more predictable customer bases hold more appeal for major retailers. In the search for a 1 Broadway tenant, UP has had to actively pursue retailers in order to overcome their initial reluctance. Alexander said patience is key: ONHSA was in talks with Apple for three years before the company agreed to open a store in the Elm City.

The painstaking approach UP has taken to selecting a tenant is indicative of its philosophy that finding the right tenant is more important than finding a tenant quickly. Alexander cited the corner of Chapel and Temple as an example of what Broadway might look like without careful UP management, a cluster of fast-food chains including Dunkin’ Donuts and Subway.

“If you have a lot of individual property owners, they will often take the most expedient lease that comes along rather than trying to create a mix of merchandise,” Alexander said.

Zachariah understands why most retailers on Broadway are national chains with high prices. But he said he thinks another version of the “right” tenant could not only do well in the area, but also create a more positive living experience for Yale students. For now, he knows that his dream of a Mama Mary’s at 1 Broadway is just that. But he believes Yale could pursue a different strategy of involvement in New Haven’s economy — one based less on control of property and more on support of existing small businesses.

 

AN ALTERNATIVE TO THE UP MODEL

Just steps from the UP mainstays of Apple and Panera Bread, a version of that model is already in place.

Adjacent to the UP holdings on Chapel and Broadway are two separate Special Services Districts — groupings of businesses that agree to pay higher taxes in return for street cleaning, security, promotional events, business advice and other benefits. In short, the SSDs provide many of the same benefits to their communities as UP, but landlords keep ownership of properties and have the final say when it comes to choosing tenants and signing leases. Ultimately, SSD administrators have a fully cooperative partnership with tenants and landlords, rather than the more hierarchical relationship that exists between UP and its tenants.

The Whalley Avenue SSD, headed by Sheila Masterson, begins at Popeye’s and extends a mile up Whalley to Pendleton Street, encompassing a number of restaurants, automobile service shops and retailers. Beyond UP-owned Atticus, the Chapel West SSD stretches from York Street to Sherman Avenue, linking Yale’s campus to the  Yale-New Haven Hospital St. Raphael Campus. Like UP, the SSDs are credited with revitalizing downtown New Haven.

Vincent Romei, President of the Chapel West SSD, believes his organization has played a major role in making Chapel beyond York Street a pleasant place to shop, dine and live.

“We’ve gone from an area of destitution almost to an area where rents are rising, property values are rising, the streets are clean, people are happy and the students like to live here,” Romei said, referring to the large number of students who rent apartments and homes in his district.

Though the similarities between the goals of the SSDs and UP create some inherent competition for high-quality tenants and paying customers, Masterson and Romei both view UP as a positive force in the city’s business community. They feel that UP’s primary impact is to increase visits to shops and restaurants all over downtown New Haven.

“The national chains help,” Romei said. “They bring walking traffic.”

But George Zito, owner of Rubber Match, a furniture store and head shop outside of UP’s domain, disagrees. In his view, Yale’s expansion into commercial real estate is self-interested and aggressive. To Zito, the Whalley SSD is a group where business owners can work together to make decisions for the area—he serves as marketing director for the organization, planning ad campaigns and promotional events to draw customers to the district. He sees UP, on the other hand,  as a behemoth that dominates its tenants and treats the Elm City like a giant fixer-upper.

“They’re buying New Haven,” he said.

Zito blames Yale’s tax-exempt status for increasing the tax burden of small business owners, mitigating any benefits of greater traffic to the city’s commercial areas. And though Masterson thinks UP’s tenants help draw customers to shops across the city, Zito, whose shop is just a block from Popeye’s, hasn’t seen any uptick in sales or profits since UP’s founding. Whalley Avenue has transformed since Rubber Match first opened in 1973 — a time when the street was violent, dirty and “looked like Beirut,” according to Zito. But Yale students remain reluctant to walk beyond Popeye’s, he said.

Zito gives credit for Whalley’s transformation not to UP, but to the Whalley SSD.

The SSD model, however, comes with its own drawbacks. Romei acknowledged that the lack of unified ownership can create problems with negligent landlords and undesirable tenants. The Chapel West SSD has no immediate recourse to address empty storefronts and blighted properties. With its enormous resources and clout, UP does not face those issues and has greater flexibility in addressing challenges that arise.

Outside of the SSDs, local business owners have felt the benefits of urban revitalization, but disagree on the role Yale has played in the process. To many merchants beyond the tight radius of Yale’s campus, UP has little impact because its stores are targeted at a completely different customer base. Jay Brown, floor manager of Rendezvous, a clothing shop on Chapel past Orange Street, said Yale students hardly come to his store. Though Brown eats at Educated Burgher and has shopped at Denali, he thinks the UP-owned properties are targeted mainly at Yale students and out-of-town visitors. To Brown, UP’s actions are not immoral but amoral, driven by concerns about profit and security — just like the actions of any small business.

A Special Services District in place of UP ownership might offer greater freedom to tenants, but it’s not clear that an SSD would create the same level of coordination and stability UP has brought to its holdings. For now, the UP model is here to stay, and UP’s decisions over the next few months and years—what to put at 1 Broadway, how to deal with Gourmet Heaven’s wage theft, whether and where to expand — will impact the entirety of New Haven.

And for residents like Brown, this reality is a catch-22.

“I like it to be there because it might bring more to New Haven, a little attention to New Haven period,” Brown reflects. “But at the same time, is it being fair to me and my employees? Is that fair to us?”

 

Correction, 4/11/14: An earlier version of this story incorrectly stated that the building that houses Panera Bread on Chapel is a UP holding. Further, UP was not responsible for not renewing News Haven’s lease.

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