Whole Foods Market Is
A Metropolitan Magnet

The sheer size and glamour of the 74-story Met 3 condo tower in Miami should be enough to bring in buyers. But with more than 50,000 condos in development in the city right now, what really sets Met 3 apart is the Whole Foods Market that fills its ground floor.

A Whole Foods will open at the base of the Met 3 tower in Miami.

With the resurgence of urban living, Whole Foods Market Inc. has found a sweet spot serving the sophisticated tastes of these new city dwellers. The fast-growing chain, based in Austin, Texas, not only alleviates the dearth of supermarkets in many downtowns but does so with style.

Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors Inc., the Miami-based company selling units in the three-building complex that includes the Met 3, says the developers sought out Whole Foods. "This is a huge draw for people to buy in these buildings," he says. "We hear it every day from our buyers." About a third of the pricey condos in the 650-unit building are already sold -- three years before the building is scheduled for completion.

Mr. Shuffield recently visited the Whole Foods in the Time Warner Center in Manhattan. "It's like a, oh my gosh -- it's an event. I promise you in 20-something checkout lines there were probably 150 people in line."

Ron Bond, president of real-estate developer Bond Cos., says the Whole Foods in a 160-unit apartment complex that he built in San Francisco has helped push occupancy higher than the rest of the market. "Their stores are happenings," Mr. Bond says. "They're having cooking stations, prepared foods, tastings. They're making the shopping experience an event."

On a recent Friday afternoon at the crowded new Whole Foods outlet in New York's busy Union Square, supermodel Carol Alt spoke to customers about her book, "Eating in the Raw." Upstairs, the lunchtime crowd was choosing between pizza, salad and sushi from a station manned by seven chefs.

Whole Foods Market has grown exponentially in the past decade. The company now has 168 stores throughout the country and expects to increase its square footage by 57% by 2008. Twelve of the 59 stores in the pipeline are part of mixed-use developments, including those in Seattle, New York, Washington, San Francisco and Chicago, and others are in urban settings such as office buildings and retail complexes.

The chain's profit has soared in tandem with its growth. Last week, it defied analysts who had predicted a slowdown in growth and posted another strong quarter, sending its shares up more than 7% the next day. Whole Foods' stock has quadrupled in the past four years. Its shares were $109.38, up 89 cents, at 4 p.m. in Nasdaq Stock Market composite trading yesterday.

The Aurora at Yerba Buena, a San Francisco apartment complex, sits atop a Whole Foods store.

Whole Foods says it does not get a break on the rent in these projects, but it often gets a say in issues such as parking and access for customers and deliveries.

Living above a grocery store may raise the specter of bugs, mice and stench, but Whole Foods' upstairs neighbors needn't worry, says Jim Wozny, president of Brook-Ridge Development, which broke ground last week on a complex in Northwest Chicago with condos above a Whole Foods. "They police their own area," he says of the chain. "I'm sure if a problem arises they'll be the first ones to see to it."

Mr. Bond, whose San Francisco complex is known as Aurora at Yerba Buena, notes the cleanliness of the stores, but says urbanites are used to a little grit, anyway. "People who live in the city are used to the noise and other things that are part of the urban experience," he says.

Indeed, cities trying to improve their downtowns are seeking out grocery stores. "Many cities, particularly the densest parts, have been dramatically underserved by grocery stores for the past couple of decades," says Michael Beyard, a senior resident fellow at the Urban Land Institute." They're a major factor in stabilizing neighborhoods and rising property values."

In Sarasota, Fla., Whole Foods recently opened in a downtown retail and condo complex developed by Casto Lifestyle Properties LLP. Sarasota helped finance Casto Lifestyle's mixed-use project because one of its priorities in downtown redevelopment was a full-service grocery, says Brett Hutchens, Casto's president and chief executive. Whole Foods is also going into downtown Oakland, Calif., where condos have been sprouting in an area with no supermarket.

The bread department in the Whole Foods Market at Time Warner Center in New York City; the 59,000-square-foot store is the largest supermarket in Manhattan.

All of the Sarasota project's 95 condos presold at prices from $280,000 to $1.7 million. "No question about it, that was a compelling point for a lot of these people," Mr. Hutchens says. "A real-estate broker for Whole Foods in Chicago called me and wanted to buy one of these units. He said, 'I know what happens to real-estate values when Whole Foods goes in.' "

Other developers have taken notice of the impact. A builder who was thinking of developing across the street from the Sarasota mixed-use complex was keenly interested in the project's status. "He wanted to know if the Whole Foods thing was going forward, because it was going to impact his decision," Mr. Hutchens says.

Erika Brigham, who bought a condo in Met 1, the first in the three-tower project, says the Whole Foods sealed the purchase for her. "It was extremely important to me," she says. "I think it's going to be an enormous generator of downtown activity."

While it creates jobs and adds life to a neighborhood, a Whole Foods store, known for its higher prices, doesn't do much else for lower-income residents. In San Francisco's South of Market district, which encompasses the Aurora at Yerba Buena complex, neighborhood groups have been lobbying for a supermarket for 20 years, but some say the Aurora at Yerba Buena's Whole Foods wasn't the right choice for the area's lower-income residents.

Still, bringing in Whole Foods was "the smartest business decision we've ever made," says Mr. Bond, the developer. He says his company is now in the early stages of development on several Whole Foods, including ones with residential components in Los Angeles and Chicago.

Other developers are including Whole Foods in projects in Chevy Chase, Md., a Washington, D.C., suburb; Vancouver, British Columbia; and Seattle, where Paul Allen's Vulcan Inc. is redeveloping a neighborhood north of downtown.

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