Walking on Water

The conference table in Fred Unger's office is cheap. The walls are papered with photos and magazine spreads tacked into drywall — there's none of the mahogany and marble typical of multimillion-dollar developers.

Unger has spent the past 10 years obsessing over these thumb-tacked pictures. One shows a table next to a Venice canal, another a storefront on Rodeo Drive in Beverly Hills, another a cafe in Paris. They are reminiscent of what he's now building along the sometimes stinky, green-brown canal that splits downtown Scottsdale.

Unger, 58, sits cross-legged in conservative dress slacks and a short-sleeve button-up shirt. He talks with his hands and occasionally adjusts his signature rimless glasses. He's gabbing about shopping — particularly about the Galleria, the most colorful disaster in Scottsdale's retail history: a 600,000-square-foot pink chunk plopped so awkwardly in downtown that the city repaved Scottsdale Road to curve around it.

Unger's new development sits just one block away. Two of its seven restaurants are open, and a string of boutiques premièred just last weekend. So far, Unger's SouthBridge is looking swank, sparkling chandeliers mixing with cutting-edge contemporary design and a waterfall. The Galleria never looked this good. Unger says he knows why the Galleria was such a colossal failure.

"The Galleria was built as an anchorless shopping mall," he states with authority. "There's a reason shopping malls have anchors. So the Galleria started off with a flawed concept.

"Second, [Galleria developers] plopped themselves down next to Fashion Square, the most successful mall in Arizona."

Similarly, Unger's $250 million vision now rising along the banks of the Arizona Canal in Scottsdale, will have no chain store to anchor it and will sit in the shadow of Fashion Square.

And why will SouthBridge work when the Galleria failed? Unger's too polite to say, but his answer is clear: Fred Unger.

When the Galleria opened in 1991, high-end spenders could fork over $300 for a pair of socks, but a few years later, the Scottsdale Police Department's SWAT team was using the empty mall's carcass as a training warehouse.

Before the Galleria opened, Unger, then 38 and broke, had driven his family of six from Long Beach, California, to Scottsdale, looking for a fresh start. He found it — and the financial backing to turn the Hermosa Inn and the Royal Palms into two of the finest resorts in the Southwest.

Then one day in 1997, Unger walked behind a tattered art gallery in downtown Scottsdale. He wandered the gravel lip of the Arizona Canal and noticed that the backs of nearby shops were facing the water, not the other way around.

He had an idea: Venice in Arizona.

Unger soon sold his baby, the Royal Palms resort. The Canals of Scottsdale was his next vision, a $653 million behemoth that would include a Smithsonian museum (utilizing the aforementioned empty Galleria), canal-side restaurants, a movie theater, and gondolas floating tourists through a Venice of canals in downtown Scottsdale.

It stayed just that — a vision, mired in the murky waters of Scottsdale politics.

After two years and hundreds of thousands of dollars, Unger's Canals of Scottsdale project sank, but Unger continued buying the land around the canal — visiting shop owners to offer cash for their property. It was 1999, and sellers still considered the waterway a smelly concrete ditch.

Today, Fred Unger and his investors own most the property around the canal, a hot core of growth that pulses even as real estate elsewhere in the Valley stabilizes. Anyone who's driven around downtown Scottsdale should know Unger is in a good position.

"It's easy now for people to say downtown Scottsdale's hot — and cool," says Jason Rose, a former publicist of Unger's, now officing at SouthBridge. "Well, it wasn't that way five years ago. Unger is the one who was always there."

Ten years since his initial walk along the canal, Unger won't settle for just commercial success. He wants his new venture to be a cultural revolution. Now he's polishing his first four buildings, one block away from the flunked Galleria and even closer to Scottsdale Fashion Square.

"We're hoping," Unger says of the biggest ground-up development he's ever created. "There's no guarantee it will work."

It's this kind of barefaced risk-taking that's so typical of Fred Unger — a developer who talks, thinks, and creates more like a Hollywood screenwriter or Nashville musician than a bottom-line businessman. Visions of a canal project have kept him awake for a decade. Now their incarnation — smaller and more refined than his first plan — could mean a cultural rebirth for Scottsdale and a model for failed walking districts across the Valley.

It could also seal or spoil Unger's legacy as the developer with the best taste in town.

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John Dickerson
Contact: John Dickerson