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FERTILE SPOT: In its nearly
50-year history, the center has yielded hundreds
of millions of dollars for the University.
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beyond the rhodes scholars and
Sears Cups and admission rates, beyond the U.S.
News rankings and Nobel Prizes and basketball polls,
there is another major, but less often mentioned, Cardinal
bragging point. Stanford University, goes the one-liner,
is home to the world’s only on-campus Neiman Marcus.
That’s a true statement, more or less, and it
has been since the Dallas-based department store chain
opened its Palo Alto outpost in 1985. (Technically speaking,
the Shopping Center isn’t on campus, but just
across the street in the “academic reserve.”)
These days, it’s also more or less accurate to
say that Stanford boasts the world’s only on-campus
Bloomingdale’s, the only on-campus Nordstrom,
and the only on-campus Tiffany & Co.
If shopping malls typically sprouted on university
grounds, it might be reasonable to expect them to include
a Gap, a Banana Republic, an Abercrombie & Fitch,
or even a J.Crew—all of which have branches at
Stanford. But the University is also home to a Brooks
Brothers, an A|X Armani Exchange and an enormous, ornate
Polo store. Need high-end stereo equipment? There is
a Bose shop and a Bang & Olufsen within Stanford’s
borders. Furniture? You’ll have to travel off
campus for a futon, but at Stanford you can select cherrywood
dining tables and leather club chairs from Crate &
Barrel’s first West Coast home store. And if you’re
hungry, yes, there are the amped-up offerings of the
newly redesigned Tresidder Memorial Union, but you also
can choose from countless gourmet selections at the
cavernous high-end supermarket Andronico’s, the
mouthwatering specialty foods at one of only three branches
of Napa Valley’s legendary Oakville Grocery or
those more pedestrian bonbons at Godiva.
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DRIVING FORCE: Brandin championed
the center, which opened with Roos Brothers.
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The Stanford Shopping Center—about 1.5 million
square feet of selling space on 70 acres at the northwest
edge of the campus—is home to all these stores
and about 130 others. Since the University broke ground
50 years ago on what had once been Sen. Stanford’s
vineyards, the Stanford Shopping Center has grown into
one of the nation’s very top-tier malls. Until
last year, it was built and managed directly by the
University, and, over the decades, it has produced hundreds
of millions in unrestricted endowment income. “There
has been no other single investment in the endowment
with returns as consistently high,” reports Bill
Phillips, managing director of Stanford Management Company,
the University’s investment arm.
The center is respected throughout the industry for
its elite tenant mix, its top-notch management and,
most important, its financial success. In 2003, the
average regional mall in the United States reported
$345 in sales per square foot, according to the International
Council of Shopping Centers. The Hillsdale Shopping
Center in San Mateo posted $480 per square foot, according
to the Directory of Major Malls. At the Stanford Shopping
Center, the number was $600. And that’s a post-dot-com-bubble
figure. The all-time high—$780 per square foot—came
in 2000, when the national average was $341.
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FOOD AND DRINK: Shoppers seeking
a java boost often head for the center of the
mall, near Palo Alto Brewing Co. and La Baguette.
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The Stanford Shopping Center is also unusually attractive:
it boasts original artwork and pleasant, open-air walkways;
it spends more than $80,000 each year on new plantings—in
arrangements reconceived semiannually by an outside
consultant—and employs three full-time gardeners
to maintain them. With its exclusivity, its prestige,
its expansive physical beauty and—yes—its
priciness, the Stanford Shopping Center is, well, the
Stanford of shopping centers.
None of Stanford’s competitor schools—nor
any other schools, for that matter—own regional
shopping centers. Why exactly, and how exactly, did
Stanford end up in the shopping-mall business?
“What makes people decide about almost anything?”
replies Rosemary McAndrews. “Money. Or the lack
of it.” McAndrews ran the Shopping Center for
most of her 24-year tenure at Stanford, and, as president
of the Stanford Historical Society, she has studied
the early days of the center and of the larger postwar
land-use initiatives on campus. When she came to the
University in 1968, she worked for Alf Brandin, ’36,
the vice president for business affairs who arrived
at Stanford just after World War II and was the driving
force behind the creation of the center.
As McAndrews noted in a 1995 essay for Sandstone
& Tile, the Historical Society’s magazine,
the student population at Stanford had dropped from
about 3,200 to 1,500 during the war, with a concomitant
decline in tuition revenues, then the University’s
main source of income. As enrollment ballooned after
the war—it passed 8,000 in 1948—all the
physical-plant maintenance and expansion that had been
deferred in wartime suddenly became pressing. It was
Brandin’s problem to figure out how to pay for
it. And he saw a big opportunity in real-estate development.
Stanford University was endowed by its creators with
certain inalienable sites—and, in real-estate
terms, “inalienable” means that the University
can never sell any of Leland and Jane’s original
6,500 acres. “[T]hey can never be alienated and
will, therefore, be an unfailing support to the institution
they are designed to benefit,” the Founding Grant
states. (Stanford’s land holdings have grown over
the years to 8,180 acres, the balance of which is also
treated as inalienable.) So when Brandin’s eye
turned to this huge—and increasingly valuable—patrimony,
it was clear the University would have to become its
own developer.
“One of the things Brandin told me,” McAndrews
says, “was that the trustees’ wives in particular
had said to him, ‘Why don’t you have some
stores down here?’” At the time—back
before the Bayshore Freeway had become the 101 superhighway,
before Interstate 280 was even a twinkle in Caltrans’s
eye—the only major shopping destination was San
Francisco, and getting to San Francisco was a challenge.
Shopping centers were popping up across the country
in the postwar period, both because the shift to car
culture made shopping areas designed with plenty of
parking more attractive than traditional downtowns and
also because a 1954 tax-law change—accelerating
the depreciation on new construction—made shopping
centers fabulously good investments. Stanford’s
real-estate adviser, Coldwell, Banker, produced a 23-page
study in May 1952 that recommended undeveloped land
bordering El Camino Real as an ideal spot for such a
center.
The message of the study: if you build it, they will
come. “Of the 1,380,000 people living in San Francisco,
San Mateo, Santa Clara, and Santa Cruz counties, 40
per cent live south of Millbrae,” it reported.
Of those, 425,000 lived within a 17-mile radius of the
Stanford location, and they spent $75.5 million—this
is in 1952 dollars—on retail purchases outside
the area. Thus, “if a modern shopping center were
created at a central population point in the area south
of Millbrae, it would offer an assortment of merchandise
much larger than any of the local business districts
could afford to offer,” and would capture a good
chunk of that lost revenue. Located halfway between
San Francisco and San Jose, the Stanford spot was “not
only one of the few large parcels of land located at
a central point in this trading area, but is more ideally
located for this project than any other site,”
Coldwell, Banker determined.
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TAKING A BREAK: A shopper rests
outside La Baguette. |
Within a year, plans were in the works. “Stanford
is currently launching the most ambitious land development
program ever undertaken by a private school or university,”
noted the Stanford Daily on May 7, 1953. The
University had by then proposed a $15 million shopping
center, and prospective tenants were lining up. The
San Francisco papers—and even the Wall Street
Journal—reported that same week that three
major San Francisco retailers had already agreed to
take up residence at the nascent Stanford Shopping Center:
The Emporium, one of San Francisco’s biggest stores,
would have a full branch at Stanford, with 250,000 square
feet; I. Magnin, the City’s high-end women’s
clothing store, would have a 50,000 square-foot store;
and Roos Brothers, a men’s and women’s clothing
store, would take 25,000 square feet.
The good omens continued. Excavators broke ground on
the hayfields at El Camino Real and San Francisquito
Creek at the start of October 1954, and construction
began about a month later. Unlike the center’s
most recent expansion, which accompanied the Sand Hill
Road extension and faced local protest for several years
before the project finally got under way, there was
no organized opposition to the original development.
Some 92 percent of the half-million square feet of retail
space was leased before construction began.
Ultimately, nine buildings were built, housing 45 businesses.
The first retailer, the Roos Brothers clothing store,
opened in September 1955, and the completion of the
center was marked by the opening of Blum’s restaurant
on October 22, 1956. Board of Trustees chair Lloyd Dinkelspiel,
’20, and University President J.E. Wallace Sterling,
PhD ’38, presided at the opening; Shirley Temple
Black cut the first slice of a nine-tiered cake.
It’s not every mall that’s opened by a
former child star/future diplomat. But this was not
any mall. “It was a very different type of shopping
center than any we had seen previously,” says
Phillips, who oversaw the center before its sale last
year. “The typical shopping center—and there
weren’t many back then—usually had a Wards
or Sears or a JCPenney, pretty much routine stuff. This
was the first attempt I had ever seen, on the West Coast
certainly, to do a shopping center that duplicated a
number of shops in Union Square,” San Francisco’s
prime shopping district. From the beginning, Phillips
says, the Stanford center argued, “‘We’re
here as an alternative to downtown,’” which
was a new way of looking at shopping centers.
“It was just a wonderful new concept,”
says Beth Bunnenberg, who arrived in Palo Alto with
her late husband, chemistry professor Edward Bunnenberg,
shortly after the center opened and today is active
in local historical organizations. “It was fun
to go shopping. You could find most anything you wanted
right there in one setting, and that was quite novel.
It was the place.”
It took off. The center’s income in its first
full year, 1957, was close to $1 million, recalls Rosemary
McAndrews. “And it grew almost exponentially after
that,” she says. A major expansion in the late
’70s brought the number of stores in the center
to 140, and, when McAndrews retired as director of the
center in 1990, it was producing about $5 million of
pure profit for the University each year. (If that amount
had been directly spent, it would have covered about
half the cost of Kimball Hall, the $11 million undergraduate
residence completed in 1991.) “The Shopping Center
was the second-largest source of unrestricted income
after tuition,” McAndrews notes proudly. According
to Mark Taborsky, CFO of the Stanford Management Company,
the center has been considered an asset of the merged
endowment pool since 1956, which means the money it
produces is commingled with other endowment returns,
which are partly contributed to the University budget
in the annual endowment payout and partly reinvested.
In the summer of 2003, Stanford sold the Shopping Center—
sort of—to the Simon Property Group, one of the
nation’s largest shopping center owners and developers.
Of course, Stanford lands can’t be sold, but Simon
paid $333 million for a 51-year lease on the Shopping
Center lands and for ownership of the buildings sitting
on it. The company also will pay the University annual
rent equal to 25 percent of the center’s net profits
each year. McAndrews’s successor, David Longbine,
estimates the first year’s rent will be about
$5 million, which suggests that in the University’s
last year of direct management of the center, it produced
about a $20 million profit.
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OUT FOR A WALK: Some come to
the Shopping Center just to enjoy the fountains
and the flowers that are redesigned twice a year. |
Beyond just the money, though, there always seemed
to be something exciting going on at the Shopping Center.
Macy’s joined the tenant roster in 1961, and the
chain’s president was presented with a key to
the city by Palo Alto Mayor David B. Haight. When Saks
Fifth Avenue arrived in 1963, news of the opening made
the New York Times.
By the late ’60s, the center had become “dowdy,”
McAndrews says, but a four-phase facelift and expansion
in the late ’70s and early ’80s brought
in Nordstrom, Neiman Marcus and major aesthetic upgrades.
“The new architecture needed something to make
it beautiful, so we put the flowers in,” McAndrews
recalls. A newly hired landscape architect installed
fountains and surrounded them with blooms. “We
concentrated on colors and masses of flowers,”
McAndrews says. “And we had a lot of red and white,
for Stanford.” In 1981, she went to Washington
to accept a landscaping award from Nancy Reagan.
Today, the gardens are overseen by Palo Alto-based
landscape designer Jackie Gray. She has moved away from
the reds and whites into the ever-changing, vibrant
colors you see today. “I’ve tended over
the years to soft peaches, soft yellows, blues,”
says Gray, who concocts an entirely new design twice
a year, often using custom-grown plants. “Right
now, I’m feeling very red and purple. It depends
what mood I’m in.” One planter recently
featured lacecap hydrangeas, lavender pansies, and purple
campagnolas and heliotrope. Gray is careful to build
lasting arrangements containing plants that will bloom
at different times. “Rather than just buying everything
when it’s at its prime and then just taking them
out,” she says, “we start with reasonably
small plants that will grow into their pots. Things
grow into this bouquet of different heights and levels
and colors.”
In 1996, Stanford became home to the first Bloomingdale’s
west of Chicago. Liza Minnelli performed at the opening.
“The Bloomingdale’s reputation was just
very strong,” says Longbine. “Based on that,
we were able to make a very significant deal with Tiffany,
in the center of the mall, and I think once we had that
it really started changing what the Shopping Center’s
tenant mix was all about.” The Stanford Shopping
Center had always been an upscale mall, but in the mid-’90s
it took a turn for the super-high-end. “I always
called that center ‘casually elegant,’”
says Longbine, who, left without a center to manage
thanks to the Simon deal, is leaving Stanford Management
Company this year after a 14-year tenure. “The
demographics around the Shopping Center—in Palo
Alto, Menlo Park, Atherton, Woodside, Portola Valley—are
just top-drawer. And Stanford Shopping Center was very
successful in aligning its tenant mix to what the people
wanted.”
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DOG DAYS: Some visitors bring
their pets along on spending sprees. |
Conspicuously missing in that list of local shoppers
is any mention of those 14,000 students just a half-mile
or so across Campus Drive—and students have often
seemed well aware of their invisibility to the Shopping
Center. “When most Stanford students need to go
shopping, the common names that come up include Safeway,
Target, Costco and Old Navy. Bloomingdale’s, Tiffany
& Co., Ralph Lauren and Williams-Sonoma rarely make
the list,” wrote Amy L. Kovac, ’99, MA ’00,
in a 2000 Daily story. “Many students
on campus complain that the Stanford Shopping Center,
which houses the latter stores, does not cater to students.”
An article by Alice Kim, ’05, in the September
2002 orientation issue of the Daily was much
more blunt: “I swear, if you shop at the Stanford
Shopping Center, you are one sorry sucka.”
Brendan Marten, the current Daily editor-
in-chief, says that although the Shopping Center doesn’t
seem geared toward students, students don’t expend
a lot of energy worrying about that. “People tend
to see it as a bastion of shops that are very upper
class, a place for wealthy Palo Alto people, and they
think it’s kind of sad that there isn’t
a shopping center that caters more to students,”
he says. (The University does offer a Shopping Express
shuttle on weekends, which trundles down El Camino Real
to the San Antonio Center, providing access to Wal-Mart,
Sears, Target, Mervyn’s, four grocery stores and
several restaurants.) And while students may perceive
Stanford Shopping Center as hoity-toity, adds Marten,
’05, “they still go.”
And that’s sort of the point. While some students
do shop there—it’s hard to argue that a
mall that includes Gap, Banana Republic, J.Crew and
Abercrombie stores doesn’t offer any merchandise
attractive to the college crowd—the truth is that,
no, the Shopping Center isn’t administered with
them in mind. The student body simply isn’t large
enough to register as a significant demographic block.
“In our trading area, we were looking at 1.1 or
1.2 million people from Belmont to Mountain View,”
Longbine says. “We’d do general market research,
basically by ZIP code, and the ZIP code 94305”—the
Stanford campus, including the faculty housing area—“didn’t
even show up as a blip on the radar screen.”
The Shopping Center is not, after all, the student
union. It wasn’t conceived as something that would
directly serve the University community; it always was
intended as something that would benefit Stanford indirectly,
by producing income. “While the Shopping Center
does not cater to students, it does help to finance
their education, and I think that’s more important,”
Rosemary McAndrews once told the Daily. “If
it is going to be a successful shopping center, they
can’t have students as first on their list, because
they would go broke.”
Of course, the Shopping Center has done just about
the opposite of going broke. As of 2003, when it was
sold to the Simon Property Group, the Shopping Center
was producing more than $500 million each year in annual
sales, according to Stanford Management Company’s
Phillips. That amount had grown by about 5 1⁄2
percent each year since he arrived at Stanford in 1987.
“Usually you try and keep pace with inflation
and maybe beat it by a little bit,” he says. “But
that’s almost twice the growth.” So why
sell to Simon?
After more than four decades of robust growth, conditions
at the beginning of 2002 suggested, for the first time,
that the University would profit more by selling the
center than by holding it. First, shopping centers were
selling at some of the highest prices they ever had.
And, second, Phillips says, “we felt that we had
achieved about as much as we could in terms of leasing,
tenant-mix improvement and, particularly, expansion.”
A late-’90s redevelopment had added about 50,000
square feet to the center, but the permits for that
expansion also essentially prevent further growth. Future
improvements to the center will come around the edges—better
deals with tenants, better ways of attracting retailers.
That’s a place where Simon’s heft, as the
nation’s largest publicly held shopping-center
company, with 247 properties across the United States
and Canada, can make a difference.
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PEDESTRIAN ZONE: One of the
center's murals evokes a European feel.
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“We wouldn’t have bought it if we didn’t
think we could increase the value of the center and
increase its cash flow,” says David Simon, CEO
of the Indianapolis-based company his family founded
in 1960—four years after the Stanford
Shopping Center opened its doors, one might note. Simon
is unspecific about what will change at the center,
but he promises “you’ll see very significant
changes in ’05 in terms of the merchandising mix.”
As tenants turn over, he suggests, you’ll likely
see more restaurants and an additional “sprinkling”
of luxury retailers.
Despite the not-quite-heartfelt student complaints
about the ever-escalating luxury, there’s quite
a bit to be said for having this landscaped oasis just
across Campus Drive. “Ah,” sighed Marni
Leff Kottle, ’99, when told STANFORD
was writing about the Shopping Center. “I love
that place.” Ellen Donahoe, ’01, has fond
memories of using the center as a place to unwind. “I
remember so well going there in the spring and just
appreciating all of the flower boxes they had,”
she says. “You could just linger around and get
a coffee and escape—and I’m not even a person
who likes to shop.” Others are more partial to
a late-afternoon stop at Häagen-Dazs, but the point’s
the same: so what if the place is aimed at rich locals?
Their shopping helps fund the University—and finances
$80,000 worth of flowers, just steps away. What’s
not to like about that?
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