How a private company rejuvenates old downtowns

Stockbrokers, shoppers, sightseers, and just plain idlers shuffle along the brick walkways of the newly opened South Street Seaport in Lower Manhattan, enjoying one of the few people-scale complexes on this island of skyscrapers.

Lobster or bratwurst, croissants or burgers can be found in the eateries. The smell of yesterday's catch wafts over from Fulton Fish Market. An antique four-masted bark, the Peking, bobs at dockside. To the north, the arches and spans of the Brooklyn Bridge gird the sky; to the south loom the glass towers of Fortress Wall Street.

It is a splendid setting, a splash of color and charm in otherwise austere Lower Manhattan. Open since July 25, the $351 million South Street Seaport already seems to be succeeding in bringing retail merchants back to Lower Manhattan. Forty shops are open; eventually 200 will be in business.

That is what usually happens when a Rouse Company project opens for business. By now the Columbia, Md., company's magic formula has become familiar to most Americans: Take a handful of dilapidated city-owned buildings - an old market, wharf, train station - renovate, limit motor traffic, stock the complex with quaint street lights, snack shops, interesting nooks, crannies, boutiques, strolling musicians, and keep the premises clean.

Along Schermerhorn Row will be antique stores, craft shops, book stalls, and clothing stores. In the new Fulton Market building will be food markets and restaurants. A complex of 14 buildings will house the Seaport Museum, and the Pier 17 Pavilion will provide an arcade of retail and restaurant areas in the East River. With these amenities come middle-class customers and a boom in Lower Manhattan real estate prices.

''Americans are rediscovering their cities,'' W. Scott Ditch, Rouse Company vice-president, said in an interview on a comfortable barge/office in the East River. Much of the redevelopment of the past 20 years, he said, has been wrong in that it has put too much emphasis on huge office buildings, ''which are really the factories of the late 20th century. They don't offer much to the life of the city after the first 10 feet off the street.''

The key to a livable inner city, Mr. Ditch says, is retailing: ''Cities are formed because they serve as a fortress or as a marketplace or both. From the marketplace springs up theater, fine arts, and services like dentistry. When you don't give enough attention to retail merchants, a city begins to have problems attracting a mixture of people and uses.''

The Rouse Company has made a profitable business out of developing these neat , clean inner-city arcades throughout the country. There are 58 Rouse retail projects, a combination of suburban malls and downtown developments, in 19 states and Canada. The most widely acclaimed Rouse inner-city developments are Fanueil Hall in Boston and Harborplace in Baltimore.

Typically, a city will lease vacant buildings and land to Rouse for a nominal fee. The city also uses its municipal finance advantage, its power of eminent domain, its planning boards and departments, and its authority over traffic and transit to help the project.

Spared from having to acquire expensive inner-city land, Rouse invests in the development in partnership with city, state, and federal governments. Rouse then redevelops the area, going heavy on bricks and glass and greenery. It looks, essentially, like a suburban shopping mall in the heart of downtown, Mr. Ditch admits, ''but it's much improved - not just ficus trees and Muzak from sea to shining sea.''

The Rouse Company sublets space to merchants in exchange for a minimum rent, the merchant's pro-rata share of common expenses, and a percentage of merchants' revenues above a negotiated level. In 1982, Rouse says, 5,500 small merchants produced $2.3 billion in retail sales. Benefits to a city come in the form of an improved tax base, inner-city employment, and a cut of revenues.

In the works are St. Louis Station in St. Louis, Grand Avenue in Milwaukee, The Gallery at Market East in Philadelphia, National Place in Washington, D.C., Tabor Center in Denver, Navy Pier in Chicago, Yerba Buena Gardens in San Francisco, Marson Street in Portland, Ore., Westlake in Seattle, Riverfront in New Orleans, Heart of Atlanta in Atlanta, and projects in New Haven, Conn., Miami, and Jacksonville, Fla. Rouse also buys a share of mediocre suburban malls and gives them the Rouse treatment and management to attract new customers.

The company's net earnings in 1982 amounted to $8.1 million on revenue of $ 163.6 million. Rouse's 1982 earnings before non-cash charges (including net depreciation) were $23.7 million. Revenues in the first six months of 1983 were

Rouse's biggest project was the development, in a joint venture with CIGNA insurance, of Columbia, Md., now 15 years old with 60,000 residents, 1,100 businesses, and assorted schools, colleges, hospitals. Rouse also operates one of the nation's largest mortgage banking companies.

Rouse downtown rehabilitations have the side effect of boosting nearby real estate prices. In Lower Manhattan, rejuvenation of the South Street Seaport has caused a boom in the real estate market. Jack Resnick & Son have developed a 437-foot office tower adjoining the Seaport. MJR Development Corporation has been a leader in condominium and cooperative apartment conversions in the vicinity. Officials at both companies praise the Seaport for making the area attractive to office workers and residents.

A problem this presents in New York, however, is that Lower Manhattan now tends to draw only the upper middle class and above. As in other parts of this city, Manhattanites of modest means simply cannot afford to live in the south end of the island. But despite the exclusivity of ''gentrification'' that redevelopment of Lower Manhattan is bringing, there seems little doubt that the area will be better for the retail merchants and the residents now moving in.

''Inaction was not an alternative,'' says Rouse's Scott Ditch. ''The pressure from Wall Street to build here was tremendous, and in a few years the area would have been lost. In the process we've given the city something it needed: a pedestrian precinct.''