Beyond the rhodes scholarsand 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 &s; 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.
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.
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.
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.
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.”
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.
“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?
JESSE OXFELD, ’98, is editor-in-chief of mediabistro.com in New York City.
